Supporting Statement (Form N-2) FAST Act

OMB CONTROL NUMBER 3235-0026
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-2
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-2 (17 CFR 239.14 and 274.11a-1) is the form used by closed-end
management investment companies (“registered closed-end funds”) to register as
investment companies under the Investment Company Act of 1940 (“Investment
Company Act”) (15 U.S.C. 80a-1 et seq.) and to register their securities under the
Securities Act of 1933 (“Securities Act”) (15 U.S.C. 77a et seq.). Form N-2 is also used
by business development companies (“BDCs’”), which are closed-end management
investment companies that do not register under the Investment Company Act (but
instead elect to be subject to certain provisions of the Investment Company Act (15
U.S.C. 80a-2(a)(48)) to register and offer their securities under the Securities Act.
Section 5 of the Securities Act (15 U.S.C. 77e) requires the filing of a registration
statement prior to the offer of securities to the public and that the statement be effective
before any securities are sold. Section 5(b) of the Securities Act requires that investors
be provided with a prospectus containing the information required in a registration
statement prior to the sale, or at the time of confirmation or delivery, of the securities.
The primary purpose of the registration process is to provide disclosure of financial and
other information to current and potential investors so they may evaluate an investment in
a security.
A closed-end management investment company (that is not a BDC) is required to
register as an investment company under Section 8(a) of the Investment Company Act
(15 U.S.C. 80a-8(a)). Form N-2 permits registered closed-end funds and BDCs to

provide investors with a prospectus covering essential information about the fund when
they make an initial or additional offering of their securities. More-detailed information
is available in the Statement of Additional Information (“SAI”), which is provided to
investors upon request and without charge.
On March 20, 2019, the Commission issued a release adopting rules that will
modernize and simplify certain disclosure requirements in Regulation S-K, and related
rules and forms. 1 In particular, the Commission adopted amendments to Regulation S-T
that will require investment companies filing on Form N-2 to submit the document in
HTML format and to include a hyperlink to each exhibit identified in the exhibit index of
the document.
In several cases, some of these amendments presented only a negligible or
offsetting impact on the cost and hourly burdens associated with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) for certain investment company
registration forms, and consequently, we believe did not warrant making any adjustments
to those forms’ burdens. For example, we noted in the Adopting Release that because
less than 1% of confidential treatment request applications received in fiscal year 2018
were related to exhibits filed with the Investment Company Act forms, we did not believe
the reduction in burden associated with Investment Company Act forms would be
significant enough to warrant an adjustment to our burden estimates. Similarly, with
respect to our adoption of new Item 601(a)(5) in Regulation S-K and the analogous
amendments to certain investment company registration forms, we noted that although
we expected some reduction in burden associated with these amendments, we do not
1

FAST Act Modernization and Simplification of Regulation S-K, Securities Act Release No. 10618
(March 20, 2019) [84 FR 12674 (April 2, 2019)] (“Adopting Release”).

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believe the reduction will be significant enough to warrant an adjustment to our burden
estimates. Third, with respect to the impact our amendments would have on personally
identifiable information (“PII”), we assumed in the Adopting Release that the
amendments would result in some incremental reduction in burden, although we did not
believe the reduction would be significant enough to warrant an additional adjustment to
our burden estimates. Finally, we did not make any adjustments to the paperwork burden
for forms impacted by our amendments to simplify and modernize the rules and forms
governing incorporation by reference, because the amendments resulted in offsetting
adjustments to the paperwork burden per affected form. Given the negligible or
offsetting impacts noted above, we did not incorporate any changes to the burden hours
or costs associated with the foregoing areas because we did not believe the adjustment
would be significant enough to warrant an additional adjustment to our burden estimates
in sections 12 and 13 below.
2.

Purpose and Use of the Information Collection

The purpose of Form N-2 is to meet the filing and disclosure requirements of the
Securities and Investment Company Acts and to enable funds to provide investors with
information necessary to evaluate an investment in a registered closed-end fund or BDC.
This information collection differs significantly from many other federal information
collections, which are primarily for the use and benefit of the collecting agency. The
information specified by Form N-2 required to be filed with the Commission permits
verification of compliance with securities law requirements and assures the public
availability and dissemination of the information.
3.

Consideration Given to Information Technology

The Commission's Electronic Data Gathering, Analysis, and Retrieval System
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(“EDGAR”) automates the filing, processing, and dissemination of disclosure filings.
This automation has increased the speed, accuracy, and availability of information,
generating benefits to investors and financial markets. Registration statements filed on
Form N-2 by registered closed-end funds and BDCs are required to be filed with the
Commission electronically on EDGAR (17 CFR 232.101(a)(1)(i) and (iv)). The public
may access filings on EDGAR through the Commission’s website (http://www.sec.gov).
4.

Efforts to Identify Duplication

The Commission periodically evaluates rule- and form-based reporting and
recordkeeping requirements for duplication, and reevaluates them whenever it proposes
or adopts changes in its rules or forms. Form N-2’s requirements generally are not
duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) to identify methods to minimize recordkeeping or
reporting requirements affecting small businesses. The current disclosure requirements
for registration statements filed on Form N-2 do not distinguish between small entities
and other funds. The burden on smaller funds to prepare and file registration statements
may be proportionately greater than for larger funds. 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.
6.

Consequences of Not Conducting Collection

In the absence of the disclosure requirements in Form N-2, investors in registered
closed-end funds and BDCs may not receive information necessary to make informed
investment decisions, and consumer confidence in the securities industry could be
4

adversely affected. Form N-2 also satisfies Investment Company Act requirements that
certain investment companies must register with the Commission before they conduct
business. In the absence of a Form N-2 registration statement, registered closed-end funds
would not be able to comply with the registration requirements of the Investment
Company Act, and registered closed-end funds and BDCs would not be able to offer their
shares under the Securities Act.
A registered closed-end fund or BDC must file a registration statement on Form
N-2 only when making initial or additional offerings of securities under the Securities
Act, or when amending its registration statement. Less frequent collection would mean
that information current to a particular offering would not be available to fund investors
and the Commission would not have current information to perform its regulatory
functions.
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

Before adopting the amendments affecting Form N-2, the Commission solicited
and evaluated public comments on the proposal and its collection of information
requirements. The Commission received no comments in response to its request.
Moreover, 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 staff with a means of ascertaining and acting upon
paperwork burdens confronting the industry.

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9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Assurance of Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be
required under this collection of information. The information collection for Form N-2
collects basic Personally Identifiable Information (“PII”) that may include names, job
titles and work addresses. However, the agency has determined that this information
collection does not constitute a system of record for purposes of the Privacy Act (the
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 available at https://www.sec.gov/privacy.
12/13. Estimates of Hour and Cost Burdens
Form N-2 generally imposes two types of reporting burdens on investment
companies: (1) the burden of preparing and filing the initial registration statement; and
(2) the burden of preparing and filing post-effective amendments to a previously effective
registration statement. The following estimates of average burden hours and costs are
made solely for purposes of the Paperwork Reduction Act and are not derived from a
quantitative, comprehensive, or even representative survey or study of the burdens and
costs associated with Commission rules and forms. Compliance with the disclosure

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requirements of Form N-2 is mandatory. Responses to the disclosure requirements are
not kept confidential.
As summarized in Tables 1 and 2 below, in our most recently approved
Paperwork Reduction Act submission for Form N-2, Commission staff estimated that
registered closed-end funds and BDCs would make approximately 136 initial registration
statement filings and 30 post-effective amendments annually, based on filings with the
Commission. 2 As summarized in Table 3 below, the current estimate for the annual
internal compliance burden for Form N-2 is 74,103 burden hours, with an external cost
burden estimate of $4,668,396. The estimates for preparing and filing Form N-2 are
based on the Commission’s experience with the contents of the form. The number of
burden hours may vary depending on, among other things, the complexity of the filing
and whether preparation of the forms is performed by internal staff or outside counsel.
The amendments in connection with the adoption of the FAST Act include
amendments to Regulation S-T that will require registered closed-end funds and BDCs
that file on Form N-2 to submit these documents in HTML format and include a
hyperlink to each exhibit identified in the form’s exhibit index. These new requirements
are expected to increase the burdens and costs for funds that prepare and file Form N-2
registration statements. For purposes of the PRA, we estimated the average burden for a
fund to hyperlink to exhibits based on the median number of exhibits filed with a Form
N-2 registration statement.

2

Form N-2’s most recent information collection, which OMB approved in July 2019, reflects the
adoption of certain form amendments associated with new rule 30e-3 under the Investment
Company Act. See Optional Internet Availability of Investment Company Shareholder Reports,
Securities Act Release No. 10506 (June 5, 2018) [83 FR 29158 (June 22, 2018)].

7

The tables below show the changes in internal time burdens and external
professional costs between the burden estimates currently approved by OMB, and the
new burden estimates under the amendments. 3 The burden estimates were calculated by
multiplying the estimated number of responses by the estimated average amount of
time—one hour—it would take a fund to prepare and review the exhibit hyperlinks. For
purposes of the PRA, we estimate the portion of the burden carried by the fund internally
(25%) reflected in hours (or 0.25 internal burden hours per response), while the portion
carried by outside professionals retained by the fund (75%) is reflected as a cost (based
on a $400 per hour average). 4

3

For convenience, we rounded total estimated hour and cost burdens in the tables to the nearest whole
number.

4

This estimate includes the cost of outside counsel, independent auditors and the services of other
professionals retained to assist in the preparation and filing of the form. We estimate the external
cost associated with the new hyperlinking requirements to be $300 per filing ($400 x .75 = $300).

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TABLE 1: BURDEN ESTIMATES FOR INITIAL FORM N-2 FILINGS
Internal
Burden Per
Response

Hourly Wage Rate

Annual Internal
Cost Burden

Annual
External
Cost Burden

$146,928

$31,941

CURRENTLY APPROVED ESTIMATES

Current Form N-2
requirements

517.35 hours

X

$284 5
(blended rate of $401
for attorneys and $166
for intermediate
accountants)

Number of annual responses

× 136

× 136

× 136

TOTAL ANNUAL BURDEN

70,360 hours

$19,982,240

$4,343,976

$139,167

$31,941

$67.25

$300

REVISED ESTIMATES

Current Form N-2
requirements

517.35 hours

×

+ Preparation and review of
exhibit hyperlinks

0.25 hours

×

$269 6
(blended rate of $365
for compliance
attorneys and $172 for
intermediate
accountants)
$269

Annual burden per response

517.6 hours

$139,234

$32,241

Number of annual responses

× 136

× 136

× 136

TOTAL ANNUAL BURDEN

70,394 hours

$18,935,824

$4,384,776

5

The Commission’s estimates concerning the allocation of burden hours and the relevant wage rates
are based on consultations with industry representatives and 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.

6

The Commission used a different attorney position and more recent estimate for the respective wage
rates when issuing these amendments in than it did when making the prior wage rate estimates,
resulting in a lower internal burden than previously estimated.

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TABLE 2: BURDEN ESTIMATES FOR POST-EFFECTIVE AMENDMENTS
Internal Burden
Per Response

Hourly Wage Rate

Annual Internal
Cost Burden

Annual
External
Cost Burden

$35,429

$10,814

CURRENTLY APPROVED ESTIMATES

Current Form N-2 requirements

124.75 hours

$284
(blended rate for
attorneys and
intermediate
accountants)

×

Number of annual responses

× 30

× 30

× 30

TOTAL ANNUAL BURDEN

3,743 hours

$1,063,012

$324,420

$269
(blended rate for
compliance attorneys
and intermediate
accountants)

$33,557

$10,814

$269

$67.25

$300

REVISED ESTIMATES

Current Form N-2 requirements

124.75 hours

+ Preparation and review of
exhibit hyperlinks

0.25 hours

×

Annual burden per response

125 hours

$33,625

$11,114

Number of annual responses

× 30

× 30

× 30

TOTAL ANNUAL BURDEN

3,751 hours

$1,008,750

$333,420

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TABLE 3: TOTAL BURDEN ESTIMATES FOR FORM N-2
Internal Burden

Annual Internal
Cost Burden

Annual External
Cost Burden

CURRENTLY APPROVED ESTIMATES 7
Initial Form N-2 filings

70,360 hours

$19,982,240

$4,343,976

Post-effective amendments

3,743 hours

$1,063,012

$324,420

Total annual burden

74,103 hours

$21,045,252

$4,668,396

Initial Form N-2 filings

70,394 hours

REVISED ESTIMATES
$18,935,824

$4,384,776

Post-effective amendments

3,751 hours

$1,008,750

$333,420

Total annual burden

74,145 hours

$19,944,574

$4,718,196

TABLE 4: CHANGE IN FORM N-2 BURDEN ESTIMATES
Annual Number of Responses

Form
N-2

Previously
Approved

Revised
Estimate

166

166

Annual Time Burden (hours)

Change

Previously
Approved

Revised
Estimate

0

74,103

74,145

Cost Burden (dollars)

Change

Previously
Approved

Revised
Estimate

Change

+ 42

$4,668,396

$4,718,196

+$49,800

As reflected above, we estimate that taken together, registered closed-end funds
and BDCs will annually incur an additional internal burden of 42 hours to comply with
the FAST Act amendments to Form N-2. We further estimate that with the additional
hour burdens associated with the FAST Act amendments coupled with the revised wage
rates, the total annual internal burden to comply with Form N-2 would be 75,145 hours
per year, at an internal cost of about $19,944,574. The total external cost to comply with
Form N-2 would be $4,718,196.
14.

Cost to the Federal Government

The annual cost of reviewing and processing new registration statements,
post-effective amendments, proxy statements, and shareholder reports of investment

7

The currently approved burden hours reflected in Table 3 differ from the current burden hours
reflected in the Adopting Release, which estimated 73,250 collective burden hours to prepare and
file Form N-2 based on the (then) most currently-approved PRA submission. See supra footnote
Error! Bookmark not defined., at 12714. Our figures here reflect the most recently approved PRA

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companies amounted to approximately $22.2 million in fiscal year 2018, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead. A portion of those costs relate to processing and reviewing Form N-2 filings
submitted to the Commission.
15.

Change in Burden

The estimated hourly burden associated with preparing and filing registration
statements on Form N-2 has increased from 74,103 hours to 74,145 hours (an increase of
42 hours). In addition, the estimated annual external cost burden has increased from
$4,668,396 to $4,718,196 (an increase of $49,800). The changes in burden hours and
external costs are due to the estimates of the internal time burden and external costs that
will result from the amendments affecting Form N-2 regarding hyperlinking.
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.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

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.

submission, which includes the additional burdens associated with new rule 30e-3. See supra
footnote Error! Bookmark not defined.

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