Final PRA supporting statement 02-04-2019

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR CONDITIONAL SMALL ISSUES
EXEMPTION UNDER THE SECURITIES ACT OF 1933 (REGULATION A)
This supporting statement is part of a submission under the Paperwork Reduction Act of
1995, 44 U.S.C. §3501, et seq.
A. JUSTIFICATION
1. CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY
The Securities Act of 1933,1 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. 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 offers and sales of securities up to $20 million in a
12-month period, for Tier 1 offerings, or up to $50 million in a 12-month period, for Tier 2
offerings. Both Tier 1 and Tier 2 offerings require a Form 1-A filing.
On December 19, 2018, in Securities Act Release No. 10591 (the “Adopting Release”),
the Commission adopted amendments to Regulation A and Form 1-A to permit companies
subject to the ongoing reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the “Exchange Act”) to use the exemption provided by Regulation A. The
amendments also provide that entities meeting the reporting requirements of the Exchange Act
will be deemed to have met the reporting requirements of Regulation A. The amendments are
mandated by Section 508 of the Economic Growth, Regulatory Relief, and Consumer Protection
Act (“Economic Growth Act”).
The amendments contain a “collection of information” requirement within the meaning
of the Paperwork Reduction Act of 1995. The title of this requirement is “Regulation A (Form
1-A)” (OMB Control No. 3235-0286).
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 the
purpose of 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.

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15 U.S.C. §77a et seq.

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.
5. REDUCING THE BURDEN ON SMALL ENTITIES
Regulation A is an exemption from Securities Act registration relating to small issues and
small issuers. Under the adopted amendments, Regulation A continues to provide an exemption
to small issuers allowing them to conduct offerings that are exempt from Securities Act
registration, including issuers that are subject to the reporting requirements of the Exchange Act.
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 is intended to be used by public investors and
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. The exemption from Securities
Act registration made in reliance on the amendments would not be available without these
collections of information.
7. SPECIAL CIRCUMSTANCES
Not applicable.
8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
Not applicable.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.

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10. CONFIDENTIALITY
Rule 251(e) (§ 230.251(e)) of Regulation A 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 are public documents. The
amendments did not affect any of these provisions.
11. SENSITIVE QUESTIONS
No information of a sensitive nature, including social security numbers, will be required
under these collections of information. The information collections collect basic Personally
Identifiable Information (PII) that may include name and job title. However, the agency has
determined that the information collections do 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.
12/13. BURDEN OF INFORMATION COLLECTION AND COSTS TO
RESPONDENTS
The estimated burden hours and cost burden are made solely for the purposes of the
Paperwork Reduction Act and represent the average burden for all issuers. The cost burden is
not derived from a comprehensive or even a representative survey of the costs of Commission
rules and forms.
Form 1-A is currently estimated to take approximately 750 hours per response to prepare
with 112 responses per year. In addition, one administrative burden hour is associated with the
review of Regulation A. Table 1 illustrates the current total annual compliance burden, in hours
and in costs, of the collection of information pursuant to Form 1-A. For purposes of the
Paperwork Reduction Act, we estimate that 75% of the burden of preparation is carried by the
issuer internally and that 25% of the burden is carried by outside professionals retained by the
issuer at an average cost of $400 per hour.2 The one hour administrative Paperwork Reduction
Act burden that is attributable to Regulation A is reflected in the analysis of the Form 1-A.

2

We recognize that the costs of retaining outside professionals may vary depending on the nature of the
professional services, but for purposes of this PRA analysis we estimate that such costs would be an
average of $400 per hour. This estimate is based on consultations with several issuers, law firms and other
persons who regularly assist issuers in preparing and filing reports with the Commission.

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Table 1.

Form 1-A
Regulation A
Total

Estimated paperwork burden under Form 1-A, before amendments relating
to Form 1-A
Number of
responses
(A)

Burden
hours/form
(B)

Total burden
hours
(C)=(A)*(B)

Internal issuer
time
(D) = (.75%)

112
112
112

750
1
751

84,000
112
84,112

63,000
84
63,084

External
professional
time
(E) =(.25%)
21,000
0
21,000

Professional
costs
(F)=(E)*$400
$8,400,000
$0
$8,400,000

We believe that the adopted amendments relating to Form 1-A will decrease the burden
to prepare and file Form 1-A per response, but will increase the overall paperwork burden of the
form because we expect that permitting Exchange Act reporting companies to use the exemption
will result in a greater number of responses. For purposes of the Paperwork Reduction Act, we
estimate 67 additional offering statements will be filed per year as a result of the amendments for
a total of 179 responses. We base this estimate on: (i) the current approximate number of annual
Form 1-A filings under the existing rules (112), plus (ii) 25 percent of the estimated number of
registered offerings of securities in 2017 by reporting companies that were not exchange listed
that would have been eligible to be conducted under Regulation A (67).
As discussed in the Adopting Release, the amendments are anticipated to affect U.S. and
Canadian reporting companies seeking to conduct a public offering within the Regulation A
offering limits. Among such issuers, we expect the amendments will likely have the most impact
on issuers in offerings of securities that fall within Regulation A offering limits and that are not
listed on a national securities exchange. During calendar year 2017, there were approximately
584 reporting companies with registered securities offerings of up to $50 million that may be
eligible for Regulation A under the amendments, including approximately 267 of those that were
not exchange-listed.3 While it is not possible to predict with certainty the number of offering
statements that will be filed by issuers relating to offerings made in reliance on amended
Regulation A, we estimate that approximately 25 percent of offerings by this type of issuers may
be conducted in reliance on Regulation A instead of a registered offering (267 offerings x
0.25=67).
For purposes of the Paperwork Reduction Act, we estimate that the total burden to
prepare and file Form 1-A, as amended (including one administrative burden hour associated
with the review of Regulation A) is 732.28 hours. The basis for this decrease in the burden is
because an Exchange Act reporting company that is preparing a Form 1-A is likely to have
already prepared much of the information required to respond to Form 1-A for its Exchange Act
reporting purposes. We therefore estimate that for an Exchange Act reporting company, the
burden to prepare and file Form 1-A, as amended, will be approximately 701 hours, including
one administrative burden hour associated with the review of Regulation A, while the burden for
3

The estimate is based on the number of unique issuers with registration statements on Forms S-1, S-3, S-4,
S-11, F-1, F-3, F-4, and F-10, excluding amendments, declared effective during calendar year 2017 with
registration size up to $50 million. Issuers incorporated outside the U.S. and Canada and issuers with SIC
code 6770 (denoting blank checks) are excluded. Data is obtained from Intelligize.

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an issuer that is not an Exchange Act reporting company would continue to be 751 hours,
including one administrative burden hour associated with the review of Regulation A. Assuming
that the 67 additional offering statements filed per year are filed by Exchange Act reporting
companies, the burden on average across all issuers would therefore be 732.28 ([(112 responses
x 751) + (67 responses x 701)]/179 total responses = 732.28.)
We estimate that compliance with the requirements of Form 1-A will require
approximately 131,078.12 burden hours (179 offering statements x 732.28 hours/offering
statement) in aggregate each year, which corresponds to approximately 98,308.59 aggregated
hours carried by the issuer internally (179 offering statements x 732.28 hours/offering statement
x 0.75) and aggregated costs of $13,107,812 (179 offering statements x 732.28 hours/offering
statement x 0.25 x $400) for the services of outside professionals.
Table 2 illustrates the estimated total annual compliance burden, in hours and in costs, of
the collection of information pursuant to Form 1-A following these amendments.
Table 2.

Regulation
A/Form 1-A
Total

Estimated paperwork burden under Form 1-A, after amendments relating to
Form 1-A
Number of
responses
(A)

Burden
hours/form
(B)

Total burden
hours
(C)=(A)*(B)

Internal issuer
time
(D)

Professional
costs
(F)=(E)*$400

98,308.59

External
professional
time
(E)
32,769.53

179

732.28

131,078.12

179

732.28

131,078.12

98,308.59

32,769.53

$13,107,812

$13,107,812

14. COSTS TO FEDERAL GOVERNMENT
We estimate that the cost of preparing the amendments would be approximately $50,000.
15. REASON FOR CHANGE IN BURDEN
Table 3.

Summary of Revised Annual Responses, Burden Hours, and Burden Hour
Cost Estimates for Each Information Collection

Annual No. of Responses
Previously
Requested Change
Approved

IC Title
Regulation
A(Form 1-A

112

179

67

Annual Time Burden (Hours)
Previously
Requested
Change
Approved
63,084

98,308.59

35,224.59

Annual Burden Cost Burden ($)
Previously
Requested
Change
Approved
$8,400,000

$13,107,812

As explained in further detail in Items 12 and 13 above, the change in burden for
Form 1-A corresponds to an estimated decrease in the existing paperwork burden of the form per
response because Exchange Act reporting companies are likely to have already prepared much of
the information required to respond to Form 1-A for other purposes, and an increase in the
overall paperwork burden of the form because we expect that permitting Exchange Act reporting
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$4,707,812

companies to use the exemption will result in a greater number of responses. The approximately
67 additional issuers we estimate will rely on amended Regulation A and file Form 1-A annually
would increase the overall current paperwork burden under Form 1-A from 84,112 hours to
131,078.12 hours, an increase of 46,966.12 hours.4 This corresponds to an increase in the total
internal burden hours from 63,084 to 98,308.59, an increase of 35,224.59, and an increase in
total outside costs from $8,400,000 to $13,107,812 an increase of $4,707,812.
16. INFORMATION COLLECTION PLANNED FOR STATISTICAL PURPOSES
Not applicable.
17. APPROVAL TO OMIT EXPIRATION DATE
We request authorization to omit the expiration date on the electronic version of the
forms. 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.
18. EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION ACT
SUBMISSIONS
Not applicable.
B. STATISTICAL METHODS
Not applicable.

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The adopted amendments to Regulation A do not change the one administrative burden hour per form associated
with reviewing Regulation A.

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