Rule 155.Supporting Statement.2016

SUPPORTING STATEMENT
FOR THE PAPERWORK REDUCTION ACT INFORMATION COLLECTION
FOR SECURITIES ACT RULE 155

A.

JUSTIFICATION
1.

Circumstances Making the Collection of Information Necessary

Under the Securities Act, an integration analysis often is made to determine whether
multiple securities offerings should be considered part of the same offering. This analysis helps
to determine whether registration is required under Section 5 of the Securities Act, or an
exemption from registration is available. The concept of integration prevents an issuer from
improperly avoiding registration by artificially dividing a single offering so that exemptions
appear to apply to the various parts where no exemption would be available for the transaction as
a whole. Improper reliance on an exemption can harm investors by depriving them of the
disclosure benefits and legal remedies that flow from registration.
Securities Act Rule 155 provides safe harbors from integration in two circumstances: (1)
a registered offering that follows an abandoned private offering; and (2) a private offering that
follows a withdrawn registered offering. Each of the rule’s safe harbors imposes conditions
designed to assure that there is a clean break between the abandoned offering and the later
offering. In each safe harbor, these conditions include specified disclosure designed to assure
that investors understand this break as they consider an investment decision in the later offering.
2.

Purpose and Use of the Information Collection

Rule 155(b) provides a safe harbor from integration where an abandoned private offering
is followed by a registered offering if specified conditions are satisfied. One of these conditions
is that the Section 10(a) final prospectus and any Section 10 preliminary prospectus used in the
registered offering disclose certain information about the abandoned private offering, so that the
registered offering is not confused with the private offering. Specifically, any prospectus filed as
part of the registration statement discloses information about the abandoned private offering,
including: the size and nature of the private offering; the date on which the issuer terminated all
offering activity in the private offering; that any offers to buy or indications of interest in the
private offering were rejected or otherwise not accepted; and that the prospectus delivered in the
registered offering supersedes any selling material used in the private offering.
Rule 155(c) provides a safe harbor from integration where an abandoned registered
offering is followed by a private offering. The conditions for this safe harbor include that the
issuer notify each offeree in the private offering that the registration statement for the abandoned
offering was withdrawn, specifying the effective date of the withdrawal. The issuer also must
notify each offeree in the private offering that the private offering is not registered, the securities
are “restricted,” and purchasers do not have the protection of Securities Act Section 11. These
conditions are designed to assure that the private offering is not confused with the registered
offering. For the same reason, Rule 155(c) also requires any disclosure document used in the

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private offering to disclose any changes in the issuer’s business or financial condition that
occurred after the issuer filed the registration statement that are material to the investment
decision in the private offering. Unlike the other Rule 155 requirements described above, which
always apply, this requirement will not necessarily apply to all private offerings that rely on Rule
155(c) and may require more disclosure in some cases than others where it does apply.
With respect to both Rule 155(b) and Rule 155(c), failure to satisfy the applicable information
collection conditions will result in unavailability of the safe harbor provided by the rule.
However, compliance with the rule is not the exclusive test for avoiding integration of the
registered and private offerings. Alternative tests that were available before the rule’s adoption
will remain available.
3. Consideration Given to Information Technology
Submissions made pursuant to Rule 155 are filed using the Electronic Data
Gathering, Analysis and Retrieval System (EDGAR).
4. Duplication of Information
We are not aware of any forms or rules that conflict with or substantially duplicate the
requirements of Rule 155.
5. Reducing the Burden on Small Entities
Rule 155 will be available to all issuers, including small entities. The rule will enable
issuers more easily to avoid incurring the expense of filing a registration statement, only to
discover later that a registered offering cannot be completed. This flexibility should be
particularly beneficial to small entities, for which the costs of a registered offering typically
represent a greater proportion of resources.
6.

Consequences of Not Conducting Collection
Not applicable.

7.

Special Circumstances
Not applicable.

8.

Consultations with Persons Outside the Agency

Rule 155 was proposed for public comment. No comments were received during the
60-day comment period prior to OMB’s review of this submission.
9.

Payment or Gift to Respondents
Not applicable.

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10. Confidentiality
Not applicable.
11. Sensitive Questions
This collection does not contain any personal identifiable Information (PII). The Privacy
Impact Assessment (PIA) is provided as a supplemental document.
12. Estimate of Respondent Reporting Burden
For purposes of the Paperwork Reduction Act (“PRA”), we estimate that Rule 155 takes
approximately 4 hours per response to comply with the collection of information requirements
and is filed by 600 respondents. We derived our burden hour estimates by estimating the
average number of hours it would take an issuer to compile the necessary information and data,
prepare and review disclosure, file documents and retain records. In connection with rule
amendments to the form, we occasionally receive PRA estimates from public commenters about
incremental burdens that are used in our burden estimates. We believe that the actual burdens
will likely vary among individual issuers based on their size and the nature of their operations.
We further estimate that 50% of the collection of information burden is carried by the issuer
internally and that 50% of the burden of preparation is carried by outside professionals retained
by the issuer. Based on our estimates, we calculated the total reporting burden to be 1,200 hours
((0.50x 4 hours per response) x 600 responses). For administrative convenience, the presentation
of the total related to the paperwork burden hours has been rounded to the nearest whole number.
13. Estimate of Total Annualized Cost Burden
We estimate that 50% of the 4 hours per response (2 hours) are prepared by outside
counsel. We estimate that it will cost $400 per hour ($400 x 2 hours per response x 600
responses) for a total cost of $480,000. We estimate an hourly cost of $400 for outside legal and
accounting services used in connection with public company reporting. This estimate is based
on our consultations with registrants and professional firms who regularly assist issuers in
preparing and filing disclosure documents with the Commission. Our estimates reflect average
burdens, and therefore, some issuers may experience costs in excess of our estimates and some
issuers may experience costs that are lower than our estimates. For administrative convenience,
the presentation of the total related to the paperwork cost burden has been rounded to the nearest
dollar.
14. Costs to Federal Government
The estimated cost to the federal government to administer Rule 155 is approximately
$50,000.

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15. Reason for Change in Burden
There is no change in the burden at this time.
16. Information Collection Planned for Statistical Purposes
Not applicable.
17. Approval to Omit OMB Expiration Date
We request authorization to omit the expiration date on the electronic version of the form.
Including the expiration date on the electronic version of the form will result in increased
costs, because the need to make changes to the form may not follow the application’s
scheduled version release dates. The OMB control number will be displayed.
18. Exceptions to Certification for Paperwork Reduction Act Submissions
Not applicable.

B. STATISTICAL METHODS
Not applicable.