Form N-14 Supporting Statement

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-14
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 5(c) of the Securities Act of 1933 (“Securities Act”) 1 requires a company to have
filed a registration statement with the Commission before it offers securities to the public by use
of the mails or other channels of interstate commerce. 2 Section 5(b) requires that a prospectus
containing the pertinent information set forth in the registration statement be furnished to the
purchaser of a security prior to or with the confirmation of sale or delivery of the security after
sale, whichever comes first. 3 Investment companies are required to register under Section 8(a)
of the Investment Company Act of 1940 (“Investment Company Act”) 4 and to file a registration
statement under Section 8(b) of the Investment Company Act containing such information as the
Commission has determined to be necessary or appropriate in the public interest or for the
protection of investors. 5
Form N-14 6 is the form for registration under the Securities Act of securities to be issued
by management investment companies registered under the Investment Company Act and
business development companies as defined by Section 2(a)(48) of the Investment Company Act

1

15 U.S.C. 77a et seq.

2

15 U.S.C. 77e(c).

3

See Securities Act Release No. 8591 (July 19, 2005) (70 FR 44722, 44782 (Aug. 3, 2005)).

4

15 U.S.C. 80a-1 et seq.

5

15 U.S.C. 80a-8.

6

17 CFR 239.23.

in: (1) a transaction of the type specified in rule 145(a) under the Securities Act; 7 (2) a merger in
which a vote or consent of the security holders of the company being acquired is not required
pursuant to applicable state law; (3) an exchange offer for securities of the issuer or another
person; (4) a public reoffering or resale of any securities acquired in an offering registered on
Form N-14; or (5) two or more of the transactions listed in (1) through (4) registered on one
registration statement. Rule 145(a) provides that submitting a proposal for certain
reclassification of securities, mergers, consolidations, or transfers of assets for the vote or
consent of security holders, is deemed to involve an “offer,” “offer to sell,” “offer for sale,” or
“sale” of the securities to be issued in the transaction. The effect of the rule is to require
registration of the securities to be issued in connection with such transactions, unless an
exemption from registration is available.
2.

Purpose and Use of the Information Collection

The principal purpose of Form N-14 is to make material information regarding securities
to be issued in connection with business combination transactions available to investors. The
information required to be filed with the Commission permits verification of compliance with
securities law requirements and assures the public availability and dissemination of such
information. Without the registration statement requirement, material information may not
necessarily be available to investors.
3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) automates the filing, processing, and dissemination of full disclosure filings. This

7

17 CFR 230.145(a).

2

automation has increased the speed, accuracy, and availability of information, generating
benefits to investors and financial markets. Registration statements on Form N-14 are required
to be filed electronically on EDGAR. 8 The public may access filings on EDGAR through the
Commission’s website (http://www.sec.gov) or at EDGAR terminals located at the
Commission’s public reference rooms. Prospectuses may be sent to investors by electronic
means so long as certain requirements are met. 9
4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication and reevaluates them whenever it proposes a rule or a change in a
rule. The information in Form N-14 is not generally duplicated elsewhere.
5.

Effect on Small Entities

With respect to registering securities to be offered in a merger or other business
combination, Form N-14 applies equally to all registrants, regardless of size. The burden on
smaller investment companies may be greater than for larger investment companies. This
burden includes the cost of producing, printing, filing, and disseminating prospectuses. The
Commission believes, however, that imposing different requirements on smaller investment
companies would not be consistent with investor protection and the purposes of the registration
statements. 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.
8

See 17 CFR 232.101(a)(1)(i).

9

See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233 (Oct. 6,
1995) [60 FR 53458 (Oct. 13, 1995)].

3

6.

Consequences of Not Conducting Collection

The purpose of Form N-14 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors with
information necessary to evaluate an investment in the security. Less frequent filing would be
inconsistent with the filing and disclosure requirements of the Securities Act and the Investment
Company Act. In addition, if the form were to be filed less frequently, investors may not be
provided with the information necessary to evaluate an investment in the security.
7.

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

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

Consultation Outside the Agency

The Commission and the staff of the Division of Investment Management 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 confronting the
industry. The Commission requested public comment on the collection of information
requirements of Form N-14 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
4

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, job title, work address, and telephone number. 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.

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 10 and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms. Compliance with the
disclosure requirements of Form N-14 is mandatory. Responses to the disclosure requirements
will not be kept confidential.
We estimate that approximately 156 funds each file one new registration statement on
Form N-14 annually, and that 97 funds each file one amendment to a registration statement on
Form N-14 annually. 11 Based on conversations with fund representatives and the Commission’s
experience with the filing and amending of Form N-14 and with disclosure documents generally,
we estimate that the reporting burden of compliance with Form N-14 is approximately 620 hours

10

44 U.S.C. 3501 et seq.

5

per respondent for a new Form N-14 registration statement, and 300 hours per respondent for
amending the Form N-14 registration statement. This time is spent, for example, preparing and
reviewing the registration statements. Accordingly, we calculate the total estimated annual
internal burden of responding to Form N-14 to be approximately 125,820 hours. 12 The average
burden per response is 497.31 hours (125,820 burden hours ÷ 253 responses).
Of the 125,820 hours spent annually to comply with Form N-14, the Commission
estimates that:
•

Fifty percent (62,910 hours) are spent by in-house attorneys at an estimated hourly wage
of $401, 13 for a total of approximately $25,226,910 per year; 14

•

Forty percent (50,328 hours) are spent by senior accountants at an estimated hourly wage
of $209, for a total of approximately $10,518,552 per year; 15 and

•

Ten percent (12,582 hours) are spent by in-house paralegals at an estimated hourly wage
of $210, for a total of approximately $2,642,220 per year. 16

11

These estimates are based on a staff analysis of the average number of filings submitted over the years
2015, 2016, and 2017.

12

(156 new Form N-14 registration statements x 620 hours per new N-14 registration statement) +
(97 amendments to Form N-14 registration statements x 300 hours per amendment) = 125,820
hours.

13

The Commission’s estimates concerning the allocation of burden hours are based on consultations
with industry representatives. Estimates of the relevant wage rates are based on salary
information for the securities industry compiled by the Securities Industry and Financial Markets
Association’s Office Salaries in the Securities Industry 2013. The estimated wage figures are
modified by Commission staff to account for an 1800-hour work-year and multiplied by 2.93 to
account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the
effects of inflation. See Securities Industry and Financial Markets Association, Report on
Management & Professional Earnings in the Securities Industry 2013.

14

62,910 hours x $401 per hour = $25,226,910.

15

50,328 hours x $209 per hour = $10,518,552.

16

12,582 hours x $210 per hour = $2,642,220.

6

Based on these estimated wage rates, the total cost to the industry of the hour burden for
complying with Form N-14 filings is approximately $38,387,682. 17
Table 1: Summary of Revised Annual Responses, Burden Hours, and Burden Hour Costs
Estimates for Each Information Collection
IC
IC1

IC Title

No. of
Responses

Form N-14
Totals for all ICs

13.

253
253

Burden
Hours
125,820
125,820

Burden
Hour Costs
$38,387,682
$38,387,682

Cost to Respondents

The cost of compliance will vary considerably depending on factors such as whether a
filing is a new registration statement or an amendment to a previously filed Form N-14; whether
the contemplated merger or business combination presents novel or complex legal issues or is
similar to other mergers; and whether amendments are required in response to staff comments.
Based on conversations with fund representatives, we estimate that the total cost burden
of compliance with the information collection requirements of Form N-14 is approximately
$27,500 for preparing and filing an initial registration statement on Form N-14 and
approximately $16,000 for preparing and filing an amendment to a registration statement on
Form N-14. This includes, for example, the cost of goods and services purchased to prepare and
update registration statements on Form N-14, such as for the services of outside counsel.
Accordingly, we calculate the total estimated annual cost burden of responding to Form N-14 to

17

$25,226,910 + $10,518,552 + $2,642,220 = $38,387,682.

7

be approximately $5,842,000. 18 The cost burden does not include the cost of the hour burden
discussed in Item 12 above.
14.

Cost to the Federal Government

The annual cost of reviewing and processing registration statements, post-effective
amendments, proxy statements, shareholder reports, and other filings of investment companies
amounted to approximately $22.2 million in fiscal year 2017, based on the Commission’s
computation of the value of staff time devoted to these activities and related overhead.
15.

Changes in Burden

The estimates represent an increase of 28,540 hours in internal burden and an increase of
$1,344,000 in external costs per year. These changes are due to an increase in the estimated
number of annual responses on Form N-14.
16.

Information Collection Planned for Statistical Purposes

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

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of the form
for design and IT project scheduling reasons. The OMB control number will be displayed.
18.
Submission

Exceptions to Certification Statement for Paperwork Reduction Act

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

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

18

(156 new Form N-14 registration statements x $27,500 per new N-14 registration statement) +
(97 amendments to Form N-14 registration statements x $16,000 per amendment) = $5,842,000.

8