Form N-CEN Draft Supporting Statement (12-2019) revised

OMB CONTROL NUMBER 3235-0729

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-CEN
A. JUSTIFICATION
1. Necessity for the Information Collection
All registered investment companies with the exception of face amount certificate
companies are required to file periodic reports with the Commission under the Investment
Company Act of 1940 (“Investment Company Act”). 1 Section 30(a) of the Investment
Company Act 2 provides that each registered investment company must file annually with
the Commission such information, documents and reports as investment companies having
securities registered on a national securities exchange are required to file annually under the
Securities Exchange Act of 1934 (“Exchange Act”). 3 In addition, Section 30(b) of the
Investment Company Act requires each registered investment company to file, among other
things, “such information, documents, and reports (other than financial statements), as the
Commission may require to keep reasonably current the information and documents
contained in the registration statement of such company.” 4
Form N-CEN is used to collect annual, census-type information for registered funds.
Filers must submit this report electronically using the Commission’s electronic filing system
“(EDGAR”) in Extensible Markup Language (“XML”) format. This collection of
information is mandatory for all registered funds, and responses are not kept confidential.
On November 25, 2019, the Commission issued a release that, among other things,
proposed rule 18f-4 under the Investment Company Act, a new exemptive rule designed to
address the investor protection purposes and concerns underlying section 18 of the Act and
to provide an updated and more comprehensive approach to the regulation of funds’ use of
derivatives and the other transactions addressed in the proposed rule. 5 The release also
includes proposed amendments to funds’ reporting requirements, including amendments to
1

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

2

15 U.S.C. 80a-29(a).

3

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

4

15 U.S.C. 80a-29(b).

5

Use of Derivatives by Registered Investment Companies and Business Development
Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers
Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles
Investment Company Act Release No. 33704 (Nov. 25, 2019) (“Derivatives Proposing
Release”).

Form N-CEN. The proposed amendments to Form N-CEN would require a fund to identify
whether it relied on proposed rule 18f-4 during the reporting period. 6 In addition, the
proposed amendment to Form N-CEN would require a fund to identify whether it relied on
any of the exceptions from various requirements under proposed rule 18f-4. A fund would
have to identify whether it is a “limited derivatives user” under the rule, excepted from the
proposed rule’s derivatives risk management program requirement, either because the fund:
(a) limits its derivatives exposure to 10% of its net assets or (b) limits its derivatives use to
hedge certain currency risks. A fund would also have to identify whether it is a
“leveraged/inverse fund” covered by proposed rule 15l-2 under the Exchange Act or
proposed rule 211(h)-1 under the Investment Advisers Act of 1940 that, under proposed rule
18f-4, would be excepted from proposed rule 18f-4’s limit on fund leverage risk. 7 Finally, a
fund would also have to identify whether it has entered into reverse repurchase agreements
or similar financing transactions, or unfunded commitment agreements, as provided under
the proposed rule. 8
2. Purpose and Use of the Information Collection
The purpose of Form N-CEN is to satisfy the filing and disclosure requirements of
Section 30 of the Investment Company Act, and of rule 30a-1 thereunder. The information
required to be filed with the Commission assures the public availability of the information
and is designed to facilitate the Commission’s oversight of registered funds and its ability to
monitor trends and risks. The proposed amendments would facilitate the Commission’s and
staff’s oversight functions by allowing for the identification of which funds were excepted
from certain of proposed rule 18f-4’s provisions or relied on the rule’s provisions regarding
reverse repurchase agreements and unfunded commitment agreements.
3. Consideration Given to Information Technology
The Commission’s electronic filing system (Electronic Data Gathering, Analysis, and
Retrieval or “EDGAR”) provides for automated filing, processing, and dissemination of full
disclosure filings. This automation has increased the speed, accuracy, and availability of
information, generating benefits to investors and financial markets. Reports on Form
N-CEN are be required to be filed with the Commission electronically on EDGAR in a
structured (XML) format which permits the electronic analysis of the data in a single filing
and comparisons over time or across similar investment companies.
4. Efforts to Identify Duplication
The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication and reevaluates them whenever it proposes a rule or a form or
a change in a rule or form. The information provided under reports on Form N-CEN either
6

Id. at 220-221.

7

Id.

8

Id.

2

is not duplicated elsewhere at all or is not duplicated in a format that permits the electronic
analysis of the data in a single filing or in comparison over time or across similar investment
companies. Any information solicited by Form N-CEN that may be duplicated in other
documents filed with the Commission is in narrative format so that it can be read and
understood by investors. The Commission is not able to analyze narrative information
electronically on a regular basis, using database or spreadsheet applications.
5. Effect on Small Entities
The Commission reviews all rules periodically, as required by the Regulatory Flexibility
Act, 9 to identify methods to minimize recordkeeping or reporting requirements affecting
small businesses. Form N-CEN must be filed by all registered investment companies other
than face amount certificate companies, regardless of size. The burden on smaller
investment companies, however, to prepare reports on Form N-CEN may be greater than
for larger investment companies.
The information collection required by the proposed amendments to Form N-CEN
would not distinguish between small entities and other funds in terms of what information
would be required to be reported, including the information required by the amendments.
The Commission believes that imposing different reporting requirements on smaller funds
would not be consistent with investor protection and the purposes of the reports. The
Commission also believes that all fund investors, including investors in small funds, would
benefit from enhanced Commission monitoring and oversight of the fund industry, which
we anticipate would result from the proposed amendments to Form N-CEN.
6. Consequences of Not Conducting Collection
The Commission requires the filing of Form N-CEN annually for all registered
investment companies so that it will have current information available for use in
performing inspections, selectively reviewing registration documents, and conducting
studies and other types of analyses necessary to keep the Commission’s regulatory program
for investment companies current with industry conditions. Less frequent collection would
mean that current information may not be available to investors and may potentially
decrease investor confidence in the full and fair disclosure system that is the hallmark of the
U.S. capital markets.
7. Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8. Consultation Outside the Agency
The Commission and staff of the Division of Investment Management participate in an
ongoing dialogue with representatives of the investment company industry through public
9

5 U.S.C. 601 et seq.

3

conferences, meetings, and information exchanges. These various forums provide the
Commission and staff with a means of ascertaining and acting upon paperwork burdens
confronting the industry. Before adopting the proposed amendments to Form N-CEN, the
Commission will receive and evaluate public comments on the proposal and its collection of
information requirements.
9. Payment or Gift
No payment or gift to respondents was provided.
10. 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 collects basic Personally
Identifiable Information (“PII”) that may include names, job titles, and work addresses.
However, the agency has determined that the information collection does not constitute a
system of record for purposes of the Privacy Act. Information is not retrieved by a personal
identifier. In accordance with Section 208 of the E-Government Act of 2002, the agency has
conducted a Privacy Impact Assessment (PIA) of the EDGAR system, in connection with
this collection of information. The EDGAR PIA, published on January 29, 2016, is
provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
12. Burden of Information Collection
The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 10 and are not derived from a comprehensive, or
even representative, survey or study of the cost of Commission rules and forms. Compliance
with Form N-CEN is mandatory. Responses to the collection of information will not be
kept confidential.
Form N-CEN is a structured form that requires registered funds to provide census-type
information to the Commission on an annual basis. The Commission currently estimates for
Form N-CEN total burden hours of 74,598 and external costs of $2,088,176. 11 The
Commission proposed amendments to Form N-CEN to require funds to identify whether
they relied on proposed rule 18f-4 during the reporting period.

10

44 U.S.C. 3501 et seq.

11

This estimate is based on the last time the form’s information collection was submitted for PRA approval
in 2017.

4

TABLE 1: FORM N-CEN PRA ESTIMATES

Internal initial
burden hours

Internal annual
burden hours

Wage rate1

Internal time
costs

PROPOSED ESTIMATES
Reporting derivatives-related fund
census information

0 hour

0.01 hours

×

$365 (compliance attorney)

$3.7

0 hour

0.01 hours

×

$331 (senior programmer)

$3.3

Total new annual burden per fund

0.02 hours

$7

Number of funds

× 12,375

× 12,375
$86,625

Total new annual burden

248 hours

Current burden estimates

74,598 hours

Revised burden estimates

74,846 hours

Notes:
1. See Derivatives Proposing Release supra note 5 at n.628. These PRA estimates
assume that the same types of professionals would be involved in the proposed
reporting requirements that we believe otherwise would be involved in preparing
and filing reports on Form N-CEN.
2. This estimate assumes each fund reporting on Form N-CEN would spend 1 to 2
minutes reporting these new proposed data elements.

TABLE 2: CHANGE IN BURDEN ESTIMATES
Annual Number of Responses

Form N-CEN

Annual Time Burden (hours)

Cost Burden (dollars)

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

3,113

3,113

0

74,598

74,846

+ 248

$2,088,176

$2,088,176

0

5

Table 1 above summarizes our PRA initial and ongoing annual burden estimates
associated with the proposed amendments to Form N-CEN based on current Form
N-CEN practices and burdens associated with minor amendments to the form. Staff
estimates there will be no external costs associated with this collection of
information. The Commission estimated that the total hour burdens associated with
the proposed amendments to Form N-CEN will result in an average aggregate
annual burden of 248 hours. Therefore, the revised aggregate estimate for Form
N-CEN, including the proposed amendments, is 74,846 hours.
13. Cost to Respondents
Cost burden is the cost of goods and services purchased to prepare and submit
reports on Form N-CEN. The cost burden does not include the hour burden
discussed in Item 12 above.
As summarized in Table 2 above, in its most recent Paperwork Reduction Act
submission for Form N-CEN, the Commission estimated total external cost burden
of $2,088,176 per year. 12 The Commission does not estimate any change in external
cost. Therefore, the revised aggregate estimate for Form N-CEN, including the
proposed amendments, is $2,088,176 in external costs.
14. Costs to Federal Government
The annual cost of reviewing and processing disclosure documents, including
new registration statements, post-effective amendments, proxy statements,
shareholder reports, and other filings of investment 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.
15. Changes in Burden
As summarized in Table 2 above, the estimated hourly burden associated with
Form N-CEN has increased from 74,598 hours to 74,846 hours (an increase of 248
hours). The change in burden hours is due to the estimates of the time burden that
will result from our amendments affecting Form N-CEN. The Commission does not
estimate any change in cost burden.
16. Information Collection Planned for Statistical Purposes
The results of any information collection will not be published.

12

This estimate is based on the last time the form’s information collection was submitted
for PRA approval in 2017.

6

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.

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