REVISED Rule 204-5 Supporting Statement 7-15-19

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 204-5 under the Investment Advisers Act of 1940
A.

JUSTIFICATION
1.

Necessity for the Information Collection

On June 5, 2019, the Securities and Exchange Commission (the “Commission” or
“SEC”) adopted amendments to Form ADV 1, and related rules, including, new rule 204-5
under the Investment Advisers Act of 1940. 2 The new rule will require registered
investment advisers to provide a brief relationship summary to retail investors to inform
them about certain aspects of the relationships and services the firm offers (the
“relationship summary). New rule 204-5 will require an investment adviser to deliver an
electronic or paper version of the relationship summary to each retail investor before or at
the time the adviser enters into an investment advisory contract with the retail investor.
The adviser also will make a onetime initial delivery of the relationship summary to all
existing clients within a specified time period after the effective date of the rule. Also
with respect to existing clients, the adviser will deliver the most recent relationship
summary before or at the time of (i) opening any new account that is different from the
retail investor’s existing account(s); (ii) recommending that the retail investor roll over
assets from a retirement account into a new or existing account or investment; or (iii)

1

17 CFR 279.1.

2

Form CRS Relationship Summary; Amendments to Form ADV, Release Nos. IA-5247; 34-86032
(June 5, 2019) [84 FR 33492 (Jul. 12, 2019]. The amendments to Form ADV were proposed in
Form CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail
Communications and Restrictions on use of Certain Names or Titles, Investment Advisers Act
Release No. 4888. Exchange Act Release No. 83063 (Apr. 18, 2018) [83 FR 23848 (May 23,
2018)].

1

recommending or providing a new brokerage or investment advisory service or
investment that does not necessarily involve the opening of a new account and would not
be held in the existing account. The adviser will be required to post a current version of
its relationship summary prominently on its public website (if it has one), and will be
required to communicate any changes in an amended relationship summary to retail
investors who are existing clients within 60 days, after the amendments are required to be
made and without charge. The investment adviser also must deliver a current relationship
summary to each retail investor within 30 days upon request and make a copy of the
relationship summary available upon request without charge. Where a relationship
summary is delivered in paper format, the adviser may link to additional information by
including URL addresses, QR codes, or other means of facilitating access to such
information. The adviser must also include a telephone number where retail investors
can request up-to-date information and a copy of the relationship summary.
New rule 204-5 contains a “collection of information” within the meaning of the
Paperwork Reduction Act of 1995 (“Paperwork Reduction Act”). 3 The collection of
information is necessary to provide advisory clients, prospective clients and the
Commission with information about the investment adviser and its business, conflicts of
interest, and personnel. The title for the collection of information is: “Rule 204-5 under
the Investment Advisers Act of 1940” and the Commission submitted this collection to
the Office of Management and Budget (“OMB”) for review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays a currently valid
3

44 U.S.C. 3501 et seq.

2

OMB control number. This collection of information will be found at 17 CFR 275.204-5
and will be mandatory. Responses will not be kept confidential.
2.

Purpose and Use of the Information Collection

The purpose of Form CRS is to assist retail investors in making an informed
choice when choosing an investment firm and professional, and type of account. Retail
investors can use the information required in Form CRS to determine whether to hire or
retain an investment adviser, as well as what types of accounts and services are
appropriate for their needs. The Commission also will use the information to manage its
regulatory and examination programs.
3.

Consideration Given to Information Technology

A firm will be permitted to deliver the relationship summary (including updates)
electronically, consistent with the Commission’s guidance regarding electronic delivery. 4
New rule 204-5 will also require that a firm that maintains a public website to post their
relationship summaries on their websites in a way that is easy for retail investors to find.
Where a relationship summary is delivered in paper format, the adviser may link to
additional information by including URL addresses, QR codes, or other means of
facilitating access to such information. Firms also must include in their relationship
summaries a telephone number for investors to call to obtain documents.

4

See Use of Electronic Media by Broker-Dealers, Transfer Agents, and Investment Advisers for
Delivery of Information; Additional Examples Under the Securities Act of 1933, Securities Exchange
Act of 1934, and Investment Company Act of 1940, Exchange Act Release No. 37182 (May 9, 1996)
[61 FR 24644 (May 15, 1996)]. See also Use of Electronic Media, Exchange Act Release No. 42728
(Apr. 28, 2000) [65 FR 25843 (May 4, 2000)]; and Use of Electronic Media for Delivery Purposes,
Exchange Act Release No. 36345 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)].

3

4.

Duplication

The collection of information requirements of the form, including the
amendments to the form, are not duplicated elsewhere. 5 While Form ADV Part 3
requires firms to summarize topics also required to be discussed in Form ADV Part 1 or
Part 2, the Part 3 has a distinct purpose to help retail investors select or determine
whether to remain with a firm or financial professional by providing better transparency
and summarizing in one place selected information about a particular investment adviser.
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. .
5.

Effect on Small Entities

The information collection requirements of rule 204-5 do not distinguish between
investment advisers that are small entities and other investment advisers. Because the
protections of the Advisers Act are intended to apply equally to retail investor clients and
customers of both large and small firms, it will be inconsistent with the purposes of the
Advisers Act to specify differences for small entities under the proposed rules and rule
amendments. We believe that rule 204-5 and the relationship summary will result in
multiple benefits to all retail investors, including alerting retail investors to certain
information to consider when choosing a firm and a financial professional and prompting
retail investors to ask informed questions. In addition, the content of the relationship
summary will facilitate comparisons across firms. The Commission believes that these
5

Firms will be required to include cross-references to where investors could find additional information,
such as in the Form ADV Part 2 brochure and brochure supplement for investment advisers or on the
firm’s website or in the account opening agreement for broker-dealers. For electronic versions of the
relationship summary, we would require firms to use hyperlinks to the cross-referenced document if it
is available online.

4

benefits should apply to retail investors of smaller firms as well as retail investors of
larger firms. To establish different disclosure requirements for small entities will
diminish this investor protection for clients of small advisers. 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.
6.

Consequences of Not Conducting Collection

The collection of information required by the form is necessary to protect
investors and deter potentially misleading sales practices by providing retail investors and
potential retail investors, as well as the Commission, with information about the
investment adviser, the services it offers to retail investors, applicable standard of
conduct, fees, conflict of interests, and disciplinary events. Providing this information
before or at the time the adviser enters into an investment advisory agreement with a
retail investor, as well as at certain points during the relationship (e.g., switching or
adding account types) will help retail investors to make a more informed choice among
the types of firms and services available to them. The consequences of not collecting this
information include continued retail investor confusion about the services and fees
advisers offer and the differences among broker-dealers, investment advisers, and firms
registered with the Commission as both broker-dealers and investment advisers. In
addition, if the information is either not collected or is collected less frequently, the
Commission’s ability to protect investors would be reduced.
7.

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

Not applicable.

5

8.

Consultation With Persons Outside the Agency

In its release proposing, among other things, new rule 204-5, the Commission
requested public comment on the effect of information collections under the proposed
new rules and rule amendments. The Commission received several comments that our
estimated burdens for delivery of the relationship summary were too low, including the
administrative and operational burdens related to monitoring for changes that would
“materially change” the nature and scope of the relationship and thereby require delivery
to existing clients and customers. Other comments focused on the recordkeeping burdens
related to the requirement to deliver the relationship summary to a new or prospective
retail investor. We have considered these comments and made changes to the proposal to
require more specific triggers for initial delivery and additional delivery to existing
customers. We also adjusted some of the burden estimates. The Commission and the
staff of the Division of Investment Management also continue to participate in an
ongoing dialogue with representatives of the investment adviser 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 facing the industry.
9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Assurance of Confidentiality

Not Applicable.

6

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.

Estimate of Hour Burden

We estimate the total collection of information burden for new rule 204-5 to be
983,945 annual aggregate hours per year, 6 or 120 hours per respondent, 7 for a total
annual aggregate monetized cost of $61,003,406, 8 or $7,408 9 per adviser.
The likely respondents to this information collection will be the approximately
8,235 investment advisers registered with the Commission that will be required to deliver

6

4,072 annual hours for posting initial relationship summaries to adviser websites + 236,204 annual
hours for initial delivery to existing clients + 142,256 hours for additional delivery to existing clients
based on material changes to accounts or scope of relationship + 6,487 annual hours to post amended
relationship summary to website + 561,162 hours for delivery to existing clients to communicate
updated information in amended relationship summaries + 29,646 hours for delivery to new or
prospective clients + 4,118 hours to make paper copies of the relationship summary available upon
demand = 983,945 annual total hours for investment advisers to post and deliver the relationship
summary under proposed rule 204-5.

7

983,945 hours (initial and other deliveries) / 8,235 advisers = 120 hours per adviser.

8

$252,469 for posting initial relationship summaries to adviser websites + $14,643,477 for initial
delivery to existing clients + $8,819,872 for delivery to existing clients based on material changes to
accounts or scope of relationship + $402,207 to post amended relationship summary to website +
$34,792,044 for delivery to existing clients to communicate updated information in amended
relationship summaries + $1,838,052 for delivery to new or prospective clients + $255,285 for making
paper copies of the relationship summary available upon demand = $61,003,406 in total annual
aggregate monetized cost for investment advisers to post and deliver the relationship summary under
proposed rule 204-5.

9

$61,003,406 / 8,235 advisers = $7,408 per adviser.

7

a relationship summary to retail investors pursuant to new rule 204-5. 10 We also note
that these figures include the 318 registered broker-dealers that are dually registered as
investment advisers.
A. Posting of the Relationship Summary to Website
Under new rule 204-5, advisers will be required to post a current version of their
relationship summary prominently on their public website (if they have one). We now
estimate that each adviser will incur 1.5 hours to prepare the relationship summary, such
as to ensure proper electronic formatting, and to post the disclosure to the adviser’s
website, if the adviser has one, instead of 0.5 hours as proposed based on the staff’s
experience. 11 Based on IARD system data, 91.6% of investment advisers with individual
clients report at least one public website. Therefore, we estimate that 91.6% of the 8,235
existing and 656 newly-registered investment advisers with relationship summary
obligations will incur a total of 12,216 aggregate burden hours to post relationship
summaries to their websites, 12 with a monetized cost of $757,407. 13 We amortize the
estimated initial burden associated with posting the relationship summary over a three10

This figure includes the 318 registered broker-dealers that are dually registered as investment advisers
as of December 31, 2018.

11

This estimate is based upon staff experience. See e.g., Optional Internet Availability of Investment
Company Shareholder Reports, Investment Company Act Release No. 33115 (June 5, 2018) [83 FR
29158 (Jun. 22, 2018)] (estimating that funds that already post shareholder reports on their websites
will require a half hour burden per fund to comply with the annual compliance and posting
requirements of rule 30e-3, and funds that do not already post shareholder reports to their websites will
require one and half hours to post the required documents online). Posting of the relationship summary
under rule 204-5 pertains to one document, which is similar to the shareholder report posting to which
rule 30e-3 applies.

12

1.5 hours to prepare and post the relationship summary x 91.6% x (8,235 existing advisers + 656
newly-registered advisers with relationship summary obligations) = 12,216 hours.

13

Based on data from the SIFMA Office Salaries Report, we expect that requirement for investment
advisers to post their relationship summaries to their websites will most likely be performed by a
general clerk at an estimated cost of $62 per hour. 1.5 hours per adviser x $62 = $93 in monetized
costs per adviser. $93 per adviser x 91.6% x (8,235 existing advisers + 656 newly registered advisers)
= $757,407 total aggregate monetized cost.

8

year period. 14 Therefore, the total annual aggregate hourly burden related to the initial
posting of the relationship summary is estimated to be 4,072 hours, with a monetized cost
of $252,469. 15
B. Delivery to Existing Clients
i. One-Time Initial Delivery to Existing Clients
The burden for this rule is based on each adviser with retail investors having, on
average, an estimated 3,985 clients who are retail investors. 16 Although advisers may
either deliver the relationship summary separately, in a “bulk delivery” to clients, or as
part of the delivery of information that advisers already provide, such as the annual Form
ADV update, account statements or other periodic reports, we base our estimates here on
a “bulk delivery” to existing clients. This is similar to the approach we took in estimating
the delivery costs for amendments to rule 204-3 under the Advisers Act, which requires
investment advisers to deliver their Form ADV Part 2A brochures and brochure
supplements to their clients. 17 As with the estimates for rule 204-3, we estimate that
advisers will require approximately 0.02 hours to deliver the relationship summary to
each client. 18 We estimate the total burden hours for 8,235 advisers for initial delivery of
14

See the separate collection of information associated with the amendment to Form ADV to add a new
Part 3: Form CRS under the Advisers Act. See also Form ADV and Investment Advisers Act Rules,
Final Rule, Investment Advisers Act Release No. 4509 (Aug. 25, 2016) [81 FR 60418 (Sep. 1, 2016)]
(“2016 Form ADV Paperwork Reduction Analysis”).

15

12,216 hours / 3 years = 4,072 hours annually. $757,407/ 3 years = $252,469 in annualized monetized
costs.

16

Based on IARD system data as of December 31, 2018.

17

See Amendments to Form ADV, Investment Advisers Act Release No. 3060 (Jul. 28, 2010) [75 FR
49233 (Aug. 12, 2010)], at 22–27 (“Brochure Adopting Release”).

18

This is the same estimate we made in the Form ADV Part 2 proposal and for which we received no
comment. See Brochure Adopting Release, at 75 FR at 49259. The burden for preparing relationship
summaries is already incorporated into the burden estimate for Form ADV discussed above.

9

the relationship summary to existing clients to be 79.7 hours per adviser, or 708,613 total
aggregate hours, for the first year after the rule is in effect, 19 with a monetized cost of
$4,941 20 per adviser or $43,930,431 in aggregate. 21 Amortized over three years, the total
annual hourly burden is estimated to be 26.57 hours per adviser, or 236,204 annual hours
in aggregate, 22 with annual monetized costs of $1,647 per adviser, or $14,643,477 in
aggregate. 23
ii.

Additional Delivery to Existing Clients

Investment advisers will be required to deliver the relationship summary to
existing clients before or at the time they open a new account that is different from the
retail investor’s existing account(s). In addition, delivery will be required before or at the
time the adviser (i) recommends that the retail investor roll over assets from a retirement
account into a new or existing account or investment, or (ii) recommends or provides a
new brokerage or investment advisory service or investment that does not necessarily

19

(0.02 hours per client x 3,985 retail clients per adviser) = 79.7 hours per adviser. 79.7 hours per
adviser x (8,235 existing advisers + 656 newly registered advisers) = 708,613 total aggregate hours.

20

Based on data from the SIFMA Office Salaries Report, we expect that initial delivery requirement to
existing clients of rule 204-5 will most likely be performed by a general clerk at an estimated cost of
$62 per hour. 79.7 hours per adviser x $62 = $4,941 in monetized costs per adviser. We estimate that
advisers will not incur any incremental postage costs because we estimate that they will make such
deliveries with another mailing the adviser was already delivering to clients, such as interim or annual
updates to the Form ADV, or will deliver the relationship summary electronically.

21

$4,941 in monetized costs per adviser x (8,235 existing advisers + 656 newly registered advisers) =
$43,930,431 in total aggregate costs.

22

79.7 initial hours per adviser / 3 = 26.57 total annual hours per adviser. 708,613 initial aggregate hours
/ 3 = 236,204 total annual aggregate hours.

23

$4,941 in monetized costs per adviser / 3 = $1,647 annualized monetized cost per adviser.
$43,930,431 initial aggregate monetized cost / 3 = $14,643,477 in total annual aggregate monetized
cost.

10

involve the opening of a new account and would not be held in the existing account. We
replaced the “materially change” requirement in the proposal with more specific triggers
to be clearer about when a relationship summary must be delivered.
While these specific triggers will still impose operational and supervisory burdens
on firms, we believe that they are more easily identified and monitored, such that firms
will not incur significant burdens as described by commenters to implement entirely new
supervisory, administrative, and operational processes needed to monitor events that
cause a material change. However, recognizing that some additional processes will be
necessary to implement these delivery triggers, we are increasing our burden estimate
from 0.02 to 0.04 hours. We expect that such delivery will take place among 10% of an
adviser’s retail investors annually and we estimate each adviser will incur 16 hours per
year to deliver the relationship summary in these situations. We therefore estimate a total
annual aggregate hours of 142,256, 24 with a monetized cost of $992 per adviser 25 and
$8,818,872 in aggregate. 26
iii.

Posting of Amended Relationship Summaries to Websites and

Communicating Changes to Amended Relationship Summaries, Including by Delivery

24

16 hours x (8,235 existing advisers + 656 new advisers) = 142,256 total aggregate hours.

25

Based on data from the SIFMA Office Salaries Report, we expect that delivery requirements of rule
204-5 will most likely be performed by a general clerk at an estimated cost of $62 per hour. 16 hours
per adviser x $62 = $992 per adviser. We estimate that advisers will not incur any incremental postage
costs in the delivery of the relationship summary to existing clients for changes in accounts, because
we estimate that advisers will make such deliveries with another mailing the adviser was already
delivering to clients, such as new account agreements and other documentation normally required in
such circumstances.

26

$992 in monetized costs per adviser x (8,235 existing advisers + 656 newly registered advisers) =
$8,819,872 in total aggregate costs.

11

Investment advisers will be required to amend their relationship summaries within
30 days when any of the information becomes materially inaccurate. Investment advisers
also will be required to communicate any changes in an amended relationship summary
to existing clients who are retail investors within 60 days after the updates are required to
be made and without charge. Based on the historical frequency of amendments made on
Form ADV Parts 1 and 2, we estimate that on average, each adviser preparing a
relationship summary will likely amend the disclosure and average of 1.71 times per
year. 27 We estimate that preparation of the relationship summary for posting to the web
and the posting itself will require 0.5 hours. Using the same percentage of investment
advisers reporting public websites, 91.6% of 8,235 advisers would incur a total annual
burden of 0.86 hours per adviser, or 6,487 hours in aggregate, 28 to post the amended
relationship summaries to their website. This translates into an annual monetized cost of
$53.32 per adviser, or $402,207 in the aggregate for existing registered advisers with
relationship summary obligations. 29
Investment advisers also will be required to communicate any changes in an
amended relationship summary to existing clients who are retail investors. The
communication can be made by delivering the relationship summary or by
communicating the information in another way. For this requirement, we estimate that
27

This estimate is based on IARD system data regarding the number of filings of Form ADV
amendments.

28

0.5 hours to post the amendment x 1.71 amendments annually = 0.86 hours per adviser annually to post
amendments to the website. 0.86 x 8,235 existing advisers amending the relationship summary x
91.6% of advisers with public websites = 6,487 aggregate annual hours to post amendments of the
relationship summary.

29

Based on data from the SIFMA Office Salaries Report, we expect that the posting requirements of rule
204-5 will most likely be performed by a general clerk at an estimated cost of $62 per hour. 0.86 hours
per adviser x $62 = $53.32 per adviser. $53.32 per adviser x 91.6% x 8,235 existing advisers =
$402,207 in annual monetized costs.

12

50% of advisers will choose to deliver the relationship summary to communicate the
updated information, and that the delivery will be made along with other disclosures
already required to be delivered. We believe that it is likely that the other 50% of
advisers will incorporate all of the updated information in their Form ADV Part 2, like
the summary of material changes or other disclosures, which they are already obligated to
deliver in order to avoid having to deliver two documents. We estimate a burden of
561,162 hours, 30 or 136.29 hours per adviser, 31 at a monetized cost of $34,792,044 in
aggregate, 32 or $8,450 per adviser, 33 for the 50% of advisers that choose to deliver
amended relationship summaries in order to communicate updated information. 34 The
Commission is also requiring that all firms make available a copy of the relationship
summary upon request without charge. Where a relationship summary is delivered in
30

8,235 advisers amending the relationship summary x 3,985 retail clients per adviser x 50% delivering
the amended relationship summary to communicate updated information x 0.02 hours per delivery x
1.71 amendments annually = 561,162 hours to deliver amended relationship summaries.

31

3,985 retail clients per adviser x 0.02 hours per delivery x 1.71 amendments annually = 136.29 hours
per adviser.

32

Based on data from the SIFMA Office Salaries Report, we expect that delivery requirements of rule
204-5 will most likely be performed by a general clerk at an estimated cost of $62 per hour. 561,162
hours x $62 = $34,792,044. We estimate that advisers will not incur any incremental postage costs to
deliver the relationship summary for communicating updated information by delivering the
relationship summary, because we estimate that advisers will make the delivery along with other
documents already required to be delivered, such as an interim or annual update to Form ADV, or will
deliver the relationship summary electronically.

33

Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour workyear and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we
expect that delivery requirements of rule 204-5 will most likely be performed by a general clerk at an
estimated cost of $62 per hour. 136.29 hours per adviser x $62 per hour = $8,450 per adviser.

34

For the other 50% of advisers that may choose to communicate updated information in another
disclosure, we estimate no added burden because these advisers will be communicating the information
in other disclosures they are already delivering like the Form ADV Part 2 brochure or summary of
material changes.

13

paper format, the adviser may link to additional information by including URL addresses,
QR codes, or other means of facilitating access to such information. Firms also must
include in their relationship summaries a telephone number for investors to call to obtain
documents.
We estimate that the 8,235 advisers with relationship summary obligations, on
average, will require 0.5 hours each annually to comply with this requirement.
Therefore, we estimate that the 8,235 advisers will incur a total of 4,118 aggregate
burden hours to make copies of the relationship summary available upon request, 35 with a
monetized cost per adviser of $31, or $255,285 in aggregate monetized cost. 36 We
acknowledge that the burden may be more or less than 0.5 hours for some advisers, but
we believe that, on average, 0.5 hours is an appropriate estimate for calculating an
aggregate burden for the industry for this collection of information.
C. Delivery to New Clients or Prospective New Clients
Data from the IARD system indicate that of the 13,299 advisers registered with
the Commission, 8,235 have retail investors, and on average, each has 3,985 clients who
are retail investors. 37 We estimate that the client base for investment advisers will grow

35

0.5 hours to make paper copies of the relationship summary available upon request x 8,235 advisers
with relationship summary obligations = 4,118 hours.

36

Based on data from the SIFMA Office Salaries Report, we expect that the requirement for advisers to
make paper copies of the relationship summary available upon request will most likely be performed
by a general clerk at an estimated cost of $62 per hour. 0.5 hours per adviser x $62 = $31 in monetized
costs per adviser. $31 per adviser x 8,235 advisers with relationship summary obligations = $255,285
total aggregate monetized cost.

37

This average is based on advisers’ responses to Item 5 of Part 1A of Form ADV as of December 31,
2018.

14

by approximately 4.5% annually. 38 Based on our experience with Form ADV Part 2, we
estimate the annual hour burden for initial delivery of a relationship summary will be the
same by paper or electronic format, at 0.02 hours for each relationship summary, 39 or 3.6
annual hours per adviser. 40 Therefore, we estimate that the aggregate annual hour burden
for initial delivery of the relationship summary to new clients will be 29,646 hours, 41 at a
monetized cost of $1,838,052, or $223 per adviser. 42

38

In the Proposing Release, we determined this estimate based on IARD system data. See Proposing
Release, supra footnote 2 at section V. The number of retail clients reported by RIAs changed by
6.7% between December 2015 and 2016, and by 2.3% between December 2016 and 2017. (6.7% +
2.3%) / 2 = 4.5% average annual rate of change over the past two years. We did not receive comments
on this estimate.

39

This is the same as the estimate for the burden to deliver the brochure required by Form ADV Part 2.
See Brochure Adopting Release, supra note 17.

40

3,985 clients per adviser with retail clients x 4.5% = 179 new clients per adviser. 179 new clients per
adviser x 0.02 hours per delivery = 3.6 hours per adviser for delivery of a relationship summary to new
or prospective new clients.

41

3.6 hours per adviser for delivery obligation to new or prospective clients x 8,235 advisers = 29,646
hours.

42

Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour workyear and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we
expect that delivery requirements of rule 204-5 will most likely be performed by a general clerk at an
estimated cost of $62 per hour. 29,646 hours x $62 = $1,838,052. We estimate that advisers will not
incur any incremental postage costs to deliver the relationship summary to new or prospective clients
because we estimate that advisers will make the delivery along with other documentation normally
provided in such circumstances, such as Form ADV Part 2. $1,838,052 / 8,235 investment advisers =
$223 per adviser.

15

Table 1: Summary of Revised Annual Responses, Burden Hours, and Burden Hour Costs Estimates for Each Information
Collection

IC

Rule 204-5 under the Investment
Advisers Act of 1940
Description of Parts of IC

Third Party Disclosure (Posting of the
Relationship Summary to Website)
Third Party Disclosure (One-time Initial
IC1 Delivery to Existing Clients)
Third Party Disclosure (Additional
IC1 Delivery to Existing Clients)
Third Party Disclosure (Posting of
IC1 Amended Relationship Summaries to
Third Party Disclosure (Communicating
IC1 Changes to Amended Relationship
Third Party Disclosures (Making Copies
of the Relationship Summary Available
IC1 Upon Demand
Third Party Disclosure (Delivery to New
IC1 Clients or Prospective New Clients)
Total for IC
IC1

Annual No. of Responses
Requested
Previously Change Due
Total
to Agency
approved
Discretion
0

Monetized Time Burden ($)
Requested
Previously Change Due
Total
approved to Agency
Discretion

8,235

0

4,072

4,072

0

0

32,816,475 32,816,475

0

236,204

236,204

0

0

3,281,647 3,281,647

0

142,256

142,256

0

8,819,872

8,819,872

12,899

0

6,487

6,487

0

402,207

402,207

28,058,086 28,058,086

0

561,162

561,162

8,235

0

4,118

4,118

1,476,741 1,476,741
65,662,318 65,662,318

0
0

29,646
983,945

29,646
983,945

0
0

0
0
0

8,235

Annual Time Burden (Hrs.)
Requested
Previously Change Due
Total
approved to Agency
Discretion

12,899

8,235

16

252,469

252,469

14,643,477 14,643,477

34,792,044 34,792,044

255,285
0
0

255,285

1,838,052 1,838,052
61,003,406 61,003,406

13.

Cost to Respondents

There is no cost burden other than the cost of the hour burden described above.
External costs for the preparation of the relationship summary are already included for
the collection of information estimates for Form ADV, in a separate collection of
information associated with the proposed amendment to Form ADV to add a new Part 3:
Form CRS under the Advisers Act. We do not anticipate external costs to rule 204-5 for
several reasons, as follows: (i) investment advisers without a public website would not
be required to establish or maintain one; (ii) we do not expect that investment advisers
will incur external costs for the initial delivery of the relationship summary to existing
clients because we assume that advisers will make such deliveries along with another
required delivery, such as an interim or annual update to the Form ADV Part 2; (iii) we
do not expect advisers to incur external costs related to deliveries of the relationship
summary due to new account type openings, or material changes to the nature or scope of
the relationship, because we assume that advisers will deliver the relationship summary
along with new account agreements and other information normally required in such
circumstances; (iv) we do not expect investment advisers to incur external costs in
delivering amended relationship summaries because we assume that they will make this
delivery with other disclosures required to be delivered, such as an interim or annual
update to Form ADV; and (v) we do not expect that advisers will incur external costs to
deliver the relationship summary to new or prospective clients because we assume that
advisers will make the delivery along with other documentation normally provided in

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such circumstances, such as Form ADV Part 2, or will deliver the relationship summary
electronically.
14.

Costs to Federal Government

There are no costs to the government directly attributable to proposed rule 204-5.
15.

Changes in Burden

This is the first request for approval of the collection of information for this rule.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

Not Applicable.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

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

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

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