PRA Form N-54A - Supporting Statement

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for

FORM N-54A
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Certain investment companies can elect to be regulated as business development
companies, as defined in Section 2(a)(48) of the Investment Company Act of 1940
(“Investment Company Act”), under Sections 55 through 65 of the Investment Company
Act. Under Section 54(a) of the Investment Company Act, 1 any company defined in
Section 2(a)(48)(A) and (B) may elect to be subject to the provisions of Sections 55
through 65 by filing with the Commission a notification of election, if such company has:
(1) a class of equity securities registered under Section 12 of the Securities Exchange Act
of 1934 (“Exchange Act); or (2) filed a registration statement pursuant to Section 12 of
the Exchange Act for a class of equity securities. The Commission has adopted Form N54A as the form for notification of election to be regulated as business development
companies.
2.

Purpose and Use of the Information Collection

The purpose of Form N-54A is to notify the Commission that the investment
company making the notification elects to be subject to Sections 55 through 65 of the
Investment Company Act, enabling the Commission to administer those provisions of the
Investment Company Act to such companies.
3.

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Consideration Given to Information Technology

15 U.S.C. 80a-53(a).

The Commission’s electronic filing system (Electronic Data Gathering, Analysis
and Retrieval or “EDGAR”) automates the filing, processing and dissemination of full
disclosure filings. The system permits public companies to transmit their filings to the
Commission electronically. This automation has increased the speed, accuracy and
availability of information, generating benefits to investors and financial markets.
4.

Duplication

The Commission periodically evaluates reporting and recordkeeping requirements
for duplication and reevaluates them whenever it proposes a rule or form or a change in a
rule or form. The information required by Form N-54A is not generally duplicated
elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, to identify methods to minimize recordkeeping or reporting requirements
affecting small businesses. The current disclosure requirements for Form N-54A do not
distinguish between small entities and other business development companies. Although
the burden on small business development companies may be greater than those of larger
ones, the Commission believes the burden imposed on any business development
company is small due to the extent and type of information required by the form.
6.

Consequences of Not Conducting Collection

Investment companies electing to be regulated as business development
companies are required to file the notification of election on Form N-54A only once, and
therefore the filing of Form N-54A is not a recurring event requiring periodic collection.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

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This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

The Commission and the Division of Investment Management staff participate in
an ongoing dialogue with representatives of the investment company industry through
public conferences, meetings, and informal exchanges. These various forums provide the
Commission and the staff with a means of ascertaining and acting upon paperwork
burdens that may confront the industry. The Commission requested public comment on
the collection of information requirements in Form N-54A before it submitted this
request for extension and approval to the Office of Management and Budget. The
Commission received no comments in response to its request.
9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

The information collection collects basic personally identifiable information (PII)
that may include a name and job title. However, the agency has determined that the
information collection does not constitute a system of records for purposes of the Privacy
Act because information is not retrieved by a personal identifier. In accordance with
Section 208 of the E-Government Act of 2002, the agency has conducted a Privacy
Impact Assessment (PIA) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on 1/29/2016, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy.

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12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 (“PRA”) 2 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission rules
and forms. Compliance with Form N-54A is mandatory for companies electing to be
regulated as business development companies. Responses to the disclosure requirements
will not be kept confidential.
The Commission estimates that on average approximately 12 companies file
notifications on Form N-54A each year. Each of those business development companies
need only make a single filing of Form N-54A. The Commission further estimates that
this information collection imposes burden of 0.5 hours, resulting in a total annual PRA
burden of 6 hours. Based on the estimated wage rate, the total cost to the business
development company industry of the hour burden for complying with Form N-54A
would be approximately $2,070. 3
13.

Cost to Respondents

Cost burden is the cost of services purchased to prepare and update Form N-54A,
such as for the services of outside counsel. The Commission estimates that 12
investment companies elect each year to be regulated as business development companies
2

44 U.S.C. 3501 et seq.

3

The industry burden is calculated by multiplying the total annual hour burden to prepare
Form N-54A (6) by the estimated hourly wage rate of $345. The estimated wage figure
is based on published rates for compliance attorneys from the Securities Industry and
Financial Markets Association’s Report on Management & Professional Earnings in the
Securities Industry 2013, modified by Commission staff to account for an 1800 hour
work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits,
overhead, and adjusted to account for the effects of inflation, yielding an effective hourly
rate of $345.

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and must file Form N-54A. 4 The form must be filed only once. As a result, the total
annualized cost burden for Form N-54A, other than the cost burden outlined in Item 12
above, is minimal.
14.

Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including new
registration statements, post-effective amendments, proxy statements, and shareholder
reports of investment companies amounted to approximately $22.9 million in fiscal year
2016, based on the Commission’s computation of the value of staff time devoted to this
activity and related overhead.
15.

Change in Burden

The decrease in burden hours for Form N-54A is attributable to a decrease in the
number of respondents from 14 to 12, resulting in a decrease of 1 hour. There are no
changes to the total annual cost burden which the Commission estimates to be minimal.
16.

Information Collection Planned for Statistical Purposes

The results of any information collection will not be published.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to not display the expiration date for
OMB approval.
18.

Exceptions to Certification Statement for Paperwork Reduction Act

Submission
The Commission is not seeking an exception to the certification statement.

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This estimate is based on the average number of Form N-54A filings made with the Commission
in the prior three-year period.

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B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL
METHODS
The collection of information will not employ statistical methods.

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