Regulation A supportingstatement(06.25.2018)

SUPPORTING STATEMENT
FOR THE PAPERWORK REDUCTION ACT INFORMATION COLLECTION
SUBMISSION FOR REGULATION A AND FORM 1-A

A.

JUSTIFICATION
1.

Circumstances Making the Collection of Information Necessary

The Securities Act of 1933, as amended (the “Securities Act”), generally requires
that a registration statement be filed with the Securities and Exchange Commission (the
“Commission”) disclosing prescribed information before securities may be offered for
sale to the public. While the Securities Act already authorizes the Commission to exempt
certain securities and transactions from registration, Section 401 of the Jumpstart Our
Business Startups Act added Section 3(b)(2) to the Securities Act, creating a new
exemption from registration. The Commission has adopted various rules (collectively,
“Regulation A”) establishing a limited offering exemption from the registration
requirements of the Securities Act. Regulation A provides an exemption for offerings
that satisfy certain conditions, such as filing an offering statement with the Commission,
limiting the dollar amount of the offering and, in certain instances, filing ongoing reports
with the Commission. Forms 1-A is filed with the Commission under Regulation A.
2.

Purpose and Use of the Information Collection

Form 1-A is an offering statement filed under Regulation A. The information
collected is primarily intended to ensure the adequacy of information available to
investors, while Part I of Form 1-A is also to collect empirical data for the Commission.
The empirical data will provide a continuing basis for action by the Commission either in
terms of amending existing rules and regulations or proposing new ones. Other than the
information in Part I, the Commission will use very little of the collected information
itself, except on an occasional basis in the enforcement of the securities laws.
3.

Consideration Given to Information Technology

Form 1-A is filed electronically using the Commission’s Electronic Data
Gathering, Analysis and Retrieval System (“EDGAR”). Part I of Form 1-A is an online
fillable form.
4.

Duplication of Information

The Commission makes every effort to coordinate with other regulatory entities
when necessary or appropriate in the public’s interest and for the protection of investors
and to streamline regulations to enhance the production of capital. We are not aware of
any forms or rules that conflict with or substantially duplicate the requirements of Form
1-A.

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5.

Reducing the Burden on Small Entities

Regulation A is an exemption from Securities Act registration relating to small
issues and small issuers. Regulation A provides an exemption to small issuers while
allowing them to conduct larger offerings that are exempt from Securities Act
registration. We believe that many of the issuers in Regulation A offerings are small
entities, but we currently do not collect information on total assets of companies that use
Regulation A to determine if they are small entities.
6.

Consequences of Not Conducting Collection

The information required by Regulation A and its offering statement are used by
public investors and serve the purpose of protecting our financial markets from fraud,
which helps to instill investor confidence. The information required by Regulation A is
also intended to ensure the adequacy of information to investors regarding offerings
pursuant to that exemption. The information required by Part I of Form 1-A is also
designed to collect empirical data for the Commission, which will provide a continuing
basis for action by the Commission for amending existing rules and regulations or
proposing new ones. This exemption from Securities Act registration would not be
available without this collection of information.
7.

Special Circumstances
Not applicable.

8.

Consultations with Persons Outside the Agency

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.

10.

Confidentiality

Rule 251(e) (§ 230.251(e)) allows for requests for confidential treatment to be
made under existing Rule 406 (§ 230.406) for information required to be filed with the
Commission and existing Rule 83 (§ 230.86) for information not required to be filed with
the Commission. Rule 252(d) (§ 230.252(d)) also allows for a draft Form 1-A to be
submitted for non-public review by the Commission’s staff. Form 1-A must be filed
publicly at least 21 days prior to the offering statement being qualified if the non-public
submission option is used. Otherwise, the collections of information required by
Regulation A and its offering statement are public documents.

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11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be
required under this collection of information. The information collection collects basic
Personally Identifiable Information (PII) that may include: name, address and zip code.
However, the agency has determined that the information collection does not constitute a
system of record for purposes of the Privacy Act. 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 January
29, 2016, is provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
12.

Estimate of Respondent Reporting Burden

We estimate that approximately 112 issuers annually file Form 1-A. We estimate
that Form 1-A takes approximately 750 hours to prepare and Regulation A takes one
administrative hour to review for a total of 751 hours per response. We estimate that
75% of the 751 hours per response (563.25 hours) is prepared by the company for a total
annual burden of 63,084 hours (563.25 hours per response x 112 responses). 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. We believe that the actual burdens will likely vary among
individual issuers based on the nature of their operations. For administrative
convenience, the presentation of the totals related to the paperwork burden hours have
been rounded to the nearest whole number. The burden estimate for the hours is made
solely for the purpose of the Paperwork Reduction Act.
13.

Estimate of Total Annualized Cost Burden

We estimate that 25% of the 750 hours per response (187.5 hours) is prepared by
outside counsel for Form 1-A. We estimate that it will cost $400 per hour ($400 x 187.5
hours per response x 112 responses) for a total cost burden of $8,400,000. There is no
cost associated with Regulation A. 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 registrants in preparing and filing disclosure documents with the
Commission. Our estimates reflect average burdens, and therefore, some companies may
experience costs in excess of our estimates and some companies may experience costs
that are lower than our estimates. For administrative convenience, the presentation of the
totals related to the paperwork cost totals have been rounded to the nearest dollar. The
cost estimate is made solely for the purpose of the Paperwork Reduction Act.

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14.

Costs to Federal Government

The estimated cost to the government is approximately $100,000 a year to review
and process Form 1-A under Regulation A.
15.

Reason for Change in Burden

This decrease of 77,729 reporting burden hours and the decrease of ($10,375,200)
in cost burden is due to an adjustment. The decrease in both the burden hours and cost
burden reflect a decrease in number of respondents filing Form 1-A under Regulation A.
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 1-A. 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 EDGAR application’s scheduled version release dates. The OMB control number
will be displayed.
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Exceptions to Certification for Paperwork Reduction Act Submissions
Not applicable.

B.

STATISTICAL METHODS
Not applicable.