Supporting Statement Mutual Fund Interactive Data

SUPPORTING STATEMENT
Registered Investment Company Interactive Data
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Open-end management investment companies (“open-end funds” or “funds”), such as
mutual funds and exchange-traded funds, are required to submit to the Commission information
included in their registration statements, or information included in or amended by posteffective amendments thereto, in response to Items 2, 3, and 4 (“risk/return summary
information”) of Form N-1A (OMB Control No. 3235-0307) 1 in interactive data format and to
post it on their websites, if any, in interactive data form. In addition, funds are required to
submit an Interactive Data File 2 to the Commission for any form of prospectus filed pursuant to
rule 497(c) or (e) 3 under the Securities Act of 1933 (“Securities Act”) 4 that includes risk/return
summary information that varies from the registration statement and to post the interactive data
file on their websites, if any. The specified risk/return summary information is also required to
be submitted to the Commission as part of the registration statement, post-effective amendment,
or form of prospectus filing itself.
The current title for the collection of information for submitting certain information that
is included in fund registration statements (or post-effective amendments thereto, or forms of
prospectus filed as discussed above) in interactive data format is “Mutual Fund Interactive Data”
1

17 CFR 239.15A and 274.11A.

2

Regulation S-T defines the term “Interactive Data File” to mean the machine-readable computer
code that presents information in XBRL electronic format pursuant to rule 405 of Regulation S-T
and as specified by the EDGAR Filer Manual. 17 CFR 232.11; 17 CFR 232.405. The EDGAR
Filer Manual sets forth the technical formatting requirements for the presentation and submission
of electronic filings through the EDGAR system.

3

17 CFR 230.497.

4

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

(OMB Control No. 3235-0642). The Commission proposes to re-title this collection of
information as “Registered Investment Company Interactive Data.” This collection of
information relates to regulations and forms adopted under the Securities Act, the Securities
Exchange Act of 1934, 5 and the Investment Company Act of 1940 (“Investment Company
Act”) 6 that set forth disclosure requirements for funds and other issuers.
Form N-1A is used by funds to register under the Investment Company Act and to offer
their securities under the Securities Act. The information required by this collection of
information corresponds to the risk/return summary information required by Form N-1A and is
required to appear in exhibits to registration statements on Form N-1A and rule 497 submissions,
and on fund websites. 7 Although the interactive data filing requirements are included in Form
N-1A, the Commission has separately reflected the burden for these requirements in the burden
estimate for the re-titled Registered Investment Company Interactive Data, and not in the burden
for Form N-1A.
On October 30, 2018, the Commission issued a release proposing rule and form
amendments designed to update and enhance disclosures to investors in variable annuity and

5

15 U.S.C. 78a et seq.

6

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

7

In 2009, the Commission adopted rules requiring operating companies and open-end funds to
submit certain disclosures in the XBRL format. See Interactive Data for Mutual Fund Risk/Return
Summary, Investment Company Act Release No. 28617 (Feb. 11, 2009) [74 FR 7748 (Feb. 19,
2009)].
In June 2018, the Commission amended its rules to require operating companies, and open-end
funds to submit the required information in Inline XBRL. See Inline XBRL Filing of Tagged
Data, Investment Company Act Release No. 33139 (June 28, 2018) [83 FR 40846 (Aug. 16,
2018)] (“Inline XBRL Adopting Release”). The adopted amendments require open-end funds to
use the “Inline XBRL” format for the submission of fund risk/return summary information using
the machine-readable (i.e., interactive) eXtensible Business Reporting Language (XBRL) format
in interactive data files. These amendments require filers, on a phased in basis, to embed part of
the interactive data file within an HTML document using Inline XBRL and include the rest in an
exhibit to that document.

2

variable life insurance contract (“variable contracts”). The proposed amendments would permit
a person to satisfy its prospectus delivery obligations under the Securities Act for a variable
contract by sending or giving a summary prospectus to investors, with access to more detailed
information available online and electronically or in paper format on request. In addition, the
proposed amendments would update the registration forms for variable contracts, including Form
N-3, N-4, and N-6, to update and enhance the disclosures to investors in these contracts, and to
implement the proposed summary prospectus framework. 8 The Commission also proposed
amendments to certain rules and forms that would require variable contract issuers to use the
Inline eXtensible Business Reporting Language (“Inline XBRL”) format for the submission of
certain required disclosures in the variable contract prospectus. Specifically, the Commission
proposed amendments to the General Instructions of Forms N-3, N-4, and N-6, 9 rules 485 and
497 under the Securities Act, and rules under Regulation S-T, to require the use of Inline XBRL
format for submitting these required disclosures to the Commission.
2.

Purpose and Use of the Information Collection

The purpose of the “Registered Investment Company Interactive Data” requirements is to
make certain prospectus disclosure information easier for investors to analyze, and to assist in
automating regulatory filings and business information processing. The purpose of the proposed
amendments requiring variable contract issuers to tag certain disclosures in Inline XBRL format
8

Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable
Life Insurance Contracts, Investment Company Act Release No. 33286 (Oct. 30, 2016)
(“Proposing Release”), available at https://www.sec.gov/rules/proposed/2018/33-10569.pdf.

9

Specifically, registrants would submit the following information in Inline XBRL format in
registration statements or post effective amendments, as well as in forms of prospectuses filed
pursuant to rule 497(c) or 497(e) under the Securities Act that include information that varies
from the registration statement: 1) Form N-3 registrants: information provided in response to
proposed Items 3, 4, 5, 12, 19, and 20 of Form N 3; 2) Form N-4 registrants: information
provided in response to proposed Items 3, 4, 5, 11, and 18 of Form N-4; and 3) Form N-6
registrants: information provided in response to proposed Items 3, 4, 5, 11, and 18 of Form N-6.

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is to improve this data’s usefulness, timeliness, and quality, benefiting investors and other market
participants, and to decrease, over time, the cost of preparing the data for submission to the
Commission.
3.

Consideration Given to Information Technology

Responses under the interactive data file requirements are submitted to the Commission
electronically on its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The
public may access submissions on EDGAR through the Commission’s Internet website
(http://www.sec.gov).
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 “Registered Investment Company Interactive Data” requirements generally are not
duplicated elsewhere.
Like fund risk/ summary prospectus disclosures, the variable contract prospectus
disclosures that would be required to be tagged using Inline XBRL format would also be
required to be submitted to the Commission on EDGAR in HTML format as part of a registration
statement, post-effective amendment, or form of prospectus filing. The information in that
format, however, cannot be utilized as effectively as when filed in an interactive data format that
a variety of software applications can recognize and process. The interactive data format would
therefore make it easier for investors to analyze an investment company’s disclosures, and assist
issuers in automating regulatory filings and business information processing.

4

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. 10
Approximately 54 funds registered on Form N-1A are considered small entities. 11 The
“Registered Investment Company Interactive Data” requirements do not distinguish between
small entities and other registrants. The burden on small entities, however, to prepare and then
submit interactive data may be greater than for larger registrants. This burden may include the
cost of software designed to prepare risk/return summary information in interactive data format
and hiring a consultant/filing agent to prepare and/or file risk/return summary information in
interactive data format. The Commission believes, however, that imposing different
requirements on smaller funds would not be consistent with investor protection and the purposes
of the “Registered Investment Company Interactive Data” requirements.
No small entities currently file registration statements on Forms N-3, N-4, or N-6.
Therefore, the proposed interactive data amendments for variable contract issuers registering on
these forms would not affect any small entities.
6.

Consequences of Not Conducting Collection

If the specified information were not required in interactive data format, the information
would be available through the Commission only as part of a registration statement, posteffective amendment, or form of prospectus filing itself. The use of interactive data format
assists issuers in automating regulatory filings and business information processing. If interactive

10

5 U.S.C. 601 et seq.

11

This estimate is based on analysis by the Division of Investment Management staff of publicly
available data (as of June 2018).

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data format information were required less frequently, less information would appear in that
format and, as a result, the interactive data file requirement would be less likely to facilitate its
intended purposes and achieve its expected benefits. Failure to conduct the collection of
information required by the proposed amendments could frustrate the Commission’s intent to
improve the quality of data on variable contracts (benefiting investors in variable contracts, other
market participants, and other data users) and to decrease, over time, the cost of preparing the
data for submission to the Commission.
7.

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

Not applicable.
8.

Consultation Outside the Agency

In the Proposing Release, the Commission requested public comment on the Investment
Company Interactive Data collection of information requirements associated with its proposal to
require variable contract issuers to use Inline XBRL format to tag certain disclosures.
Comments on the Commission’s releases are generally received from filers, investors and other
market participants. In addition, the Commission and 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 that may confront the industry. The Commission will consider all comments received
and address them in any adopting release.
9.

Payment or Gift

Not applicable.

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10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be required
under this collection of information. The information collection does not collect personally
identifiable information (PII). The agency has determined that a system of records notice
(SORN) and privacy impact assessment (PIA) are not required in connection with the collection
of information.
12.

Burden of Information Collection

The paperwork burden estimates associated with the proposed amendments include the
internal burdens attributable to collecting, preparing, reviewing and retaining records. The
following estimates of average burden hours and costs are made solely for purposes of the
Paperwork Reduction Act of 1995 12 and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms. Compliance with the
“Registered Investment Company Interactive Data” requirements is mandatory for all open-end
funds that file on Form N-1A, and, if the proposed amendments are adopted, would be
mandatory for all variable contract issuers that register on Form N-3, N-4, or N-6, as applicable.
Responses to the disclosure requirements will not be kept confidential.
Current Estimates. In its most recent Paperwork Reduction Act submission for Mutual
Fund Interactive Data (to be re-titled “Registered Investment Company Interactive Data”),
Commission staff estimated the total cost to the fund industry to comply with this collection of
information requirement to be 178,803 internal burden hours annually, with an estimated cost of

12

44 U.S.C. 3501 et seq.

7

$52.5 million per year. 13
New Burdens. The proposed amendments would generally impose two types of reporting
burdens on variable contract issuers: (1) the burden of submitting certain information in Inline
XBRL to the Commission in registration statements or post-effective amendments filed on Form
N-3, Form N-4, and Form N-6; and (2) the burden of submitting certain information in Inline
XBRL to the Commission in forms of prospectuses filed pursuant to rule 497 under the
Securities Act that include information that varies from the registration statement.
As a threshold matter, we estimate that registrants on Forms N-3, N-4, and N-6 would
require approximately 14 burden hours of in-house personnel time to tag and submit the required
disclosure information in Inline XBRL format for each post-effective amendment annually. 14
We further estimate that the burden for each rule 497 filing would be 25% of that, or 3.5 hours
per response. 15 With respect to Form N-3 registrants, we estimate an additional burden of 2
hours per investment option to tag and submit the required disclosure information for each posteffective amendment. We also estimate a weighted burden average of approximately 3 responses
per year per registrant to file initial and post-effective registration statements and rule 497
filings. 16

13

These estimates are referenced in the Commission staff’s most-recent information collection
submission, reflecting the Commission’s 2018 adoption of amendments to require the use of
Inline XBRL format for the submission of fund risk/return summary information. The PRA was
approved on Oct. 31, 2018.

14

18 hours for the first submission + 12 hours for the second submission + 12 hours for the third
submission) / 3 years = 14 hours.

15

Because rule 497 filings are typically 1-3 pages in length, we are estimating that the burden
would be only 25% of the burden associated with tagging the relevant disclosures in a full
registration statement filing.

16

This estimate is derived by weighting the burden for each rule 497 filing as one quarter of the
burden of a post-effective amendment filing, averaging the burden for each form equally, and
estimating (based on a survey by Commission staff of filings made pursuant to rule 497) that 75%

8

Form N-3 Registrants. Based on a review of Form N-3 filings made with the
Commission, Commission staff estimates there would be no initial filings each year, eight
post-effective amendments, and 19 rule 497 filings made on Form N-3 per year. 17 Accordingly,
we estimate that, in the aggregate, adoption of the proposed Inline XBRL requirements would
result in 300 burden hours annually for Form N-3 registrants. 18
Form N-4 Registrants. Commission staff estimates there would be 35 initial filings each
year, 1,326 post-effective amendments, and 3,555 rule 497 filings made on Form N-4 per year. 19
Accordingly, we estimate that, in the aggregate, adoption of the proposed Inline XBRL
requirements would result in 18,270 burden hours annually for Form N-4 registrants. 20
Form N-6 Registrants. Commission staff estimates there would be 8 initial filings each
year, 380 post-effective amendments, and 1,115 rule 497 filings made on Form N-6 per year. 21
We estimate that, in the aggregate, adoption of the proposed Inline XBRL requirements would
result in 9,996 burden hours annually for Form N-6 registrants. 22

of rule 497 filings by registrants on each form would contain data that would be required to be
submitting in Inline XBRL format.
17

These figures are derived from the Commission staff’s review of initial registration statements,
post-effective amendments and rule 497 filings on form N-3 filed with the Commission from
January 1, 2015 to December 31, 2017. Commission staff further estimates these filings would
include an average of three investment options per registration statement or post-effective
amendment filing.

18

5 Form N-3 registrants x 3 responses per year per registrant x (14 hours per registrant + (2 hours
per investment option x 3 investment options per registrant)) = 300 burden hours/year.

19

These figures are derived from the Commission staff’s review of initial filings, post-effective
amendments, and rule 497 filings on Form N-4 filed with the Commission from January 1, 2015
to December 31, 2017.

20

435 Form N-4 registrants x 3 responses per year per registrant x 14 hours per registrant = 18,270
burden hours/year.

21

These figures are derived from the Commission staff’s review of initial filings, post-effective
amendments, and rule 497 filings on Form N-6 filed with the Commission from January 1, 2015
to December 31, 2017.

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Aggregate Internal Hours Burden for Form N-3, N-4, and N-6 Registrants. In the
aggregate, we estimate that the adoption of the proposed Inline XBRL requirements would result
in 28,566 burden hours for each of the first three years for Form N-3, N-4, and N-6 registrants. 23
Converted into dollars, this amounts to a collective internal cost burden of approximately
$9,598,176 to tag and submit the required Form N-3, N-4, and N-6 disclosure information in
Inline XBRL format. 24
We therefore estimate the aggregate total hour burden for the re-titled “Registered
Investment Company Interactive Data” collection of information (inclusive of requirements for
issuers who register on Forms N-1A, N-3, N-4, and N-6) would be 207,369 hours 25 as a result of
the proposed amendments, with an associated cost of $62,098,176, as follows.

22

238 Form N-6 registrants x 3 responses per year per registrant x 14 hours per registrant = 9,996
hours per year.

23

300 burden hours for Form N-3 registrants + 18,270 burden hours for Form N-4 registrants +
9,996 burden hours for Form N-6 registrants = 28,566 hours.

24

The internal time cost equivalent is calculated by multiplying the total hour burden by the
estimated hourly wage of $336. 28,566 burden hours x $336 = $9,598,176.
The estimated wage figure of $336 is based on published rates for Compliance Attorneys ($352)
and Senior Programmers ($319). These hourly figures are from SIFMA’s Management &
Professional Earnings in the Securities Industry 2013, modified to account for an 1,800 hour work
year; multiplied by 5.35 to account for bonuses, firm size, employee benefits and overheard, and
adjusted for inflation. The estimated wage rate was further based on the estimate that
Compliance Attorneys and Senior Programmers would divide time equally, resulting in a
weighted wage rate of $336 (($352 + $319) / 2 = 335.5), or approximately $336.

25

178,803 annual burden hours (current estimated annual hour burden for funds) + 28,566 new
burden hours (due to proposed amendments for variable contracts) = 207,369.

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Table 1: Summary of Annual Responses, Burden Hours, and Burden Hour Costs
Estimates for the Information Collection Associated with “Registered Investment
Company Interactive Data”
Reg. Inv. Co.
No. of Responses
Total Burden Hours
Total Burden Hour
Interactive
(annual)
(annual)
Costs (annual)
Data
Currently Approved
Form N-1A
15,206
178,803
$52,500,000
New Burdens for Variable Contracts Associated with Proposed Rulemaking
Form N-3
12
300
$100,800
Form N-4
667
18,270
$6,138,720
Form N-6
545
9,996
$3,358,656
Subtotal:
1,224
28,566
$9,598,176
Total Burden As a Result of Proposed Rulemaking
Currently
$52,500,000
15,206
178,803
Approved
New Burden
1,224
28,566
$9,598,176
TOTAL:
16,430
207,369
$62,098,176
13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to comply with the “Registered
Investment Company Interactive Data” requirements, such as for software and/or the services of
consultants/filing agents. The cost burden does not include the cost of the hour burden discussed
in Item 12 above. The Commission previously estimated an external aggregate annual cost
burden of $10,000,647 for the cost of services purchased to comply with the current interactive
data requirements, based on an estimate of 11,106 funds.
For Form N-4 and Form N-6 registrants, we estimate an external cost burden of $900 per
registrant for the cost of goods and services purchased to comply with the proposed Inline XBRL
requirements, which is based on the estimated average external cost burden associated with the
Inline XBRL preparation expenses for funds. 26 We understand that annual software licensing
costs generally would be included in the cost of hiring external professionals, in which case
26

See Inline XBRL Adopting Release.

11

registrants may receive tagging software at no cost, while others may create their own software
in-house. For Form N-3 registrants, we estimate an additional cost of $300 per investment
option for the cost of goods and services purchased to comply with the proposed Inline XBRL
requirements for an estimated external cost burden of $1,800 per registrant. 27
Based on the estimate of 5 Form N-3 registrants, 435 Form N-4 registrants, and 238 Form
N-6 registrants, we estimate that, in the aggregate, the total external costs to variable contract
issuers associated with the proposed requirements to tag and submit certain information in Inline
XBRL format would be approximately $614,700. 28 We therefore estimate the aggregate total
external cost burden for the re-titled “Registered Investment Company Interactive Data”
collection of information would be $10,615,347 as a result of the proposed amendments. 29
Table 2: Summary of Annual Responses and Total External Cost Estimates for the
Information Collection Associated with “Registered Investment Company
Interactive Data”
Reg. Inv. Co.
No. of Registrants
Cost (per filer)
Total Costs
Interactive Data
(annual)
(annual)
Currently Approved
Form N-1A
11,181
$10,000,647
New Burdens for Variable Contracts Associated with Proposed Rulemaking
Form N-3
5
$1,800
$9,000
Form N-4
435
$900
$391,500
Form N-6
238
$900
$214,200
Subtotal:
678
$614,700
Total Burden As a Result of Proposed Rulemaking
Currently Approved
11,181
$10,000,647
New Burden
678
$614,700
TOTAL:
11,859
$10,615,347

27

$900 per registrant + (3 investment options per registrant x $300 per investment option) = $1,800
per Form N-3 registrant.

28

(5 Form N-3 registrants + 435 Form N-4 registrants + 238 Form N-6 registrants) x $900 per
registrant = 610,200) + (5 Form N-3 registrants x 3 investment options per registrant x $300 per
investment option) = $614,700.

29

$10,000,647 (current estimated external cost burden) + additional $614,700 = $10,615,347.

12

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 $22.2 million in fiscal year 2017, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15.

Changes in Burden

Currently, the approved annual hour burden for complying with the newly-retitled
“Registered Investment Company Interactive Data” requirements is 178,803 internal burden
hours to use Inline XBRL format to tag fund risk/return summary items. The new estimate is
207,369 hours, representing an increase of 28,566 burden hours as a result of the proposal to
require variable contract issuers to use Inline XBRL to tag certain disclosures. The increase in
hourly burdens is due to an increase in the number of registrants that would be required to use
Inline XBRL format to tag certain disclosures, and an increase in the number of filings to be
tagged.
Currently, the total external cost burden for software and/or consulting services is
$10,000,647. The new estimate is $10,615,347, representing an increase of $614,700 due to the
increase in the number of registrants that would incur the cost of goods and services purchased to
comply with the proposed Inline XBRL requirements.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to not Display Expiration Date

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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 the Paperwork Reduction Act

Not applicable.
B.

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

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