Form N-4 Draft Supporting Statement (3-2020)

OMB CONTROL NUMBER: 3235-0318

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-4
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-4 is the form used by insurance company separate accounts organized as unit
investment trusts that offer variable annuity contracts to register as investment companies under
the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (“Investment Company Act”)
and/or to register their securities under the Securities Act of 1933 (15 U.S.C. 77a et seq.)
(“Securities Act”). Section 5(b) of the Securities Act makes it unlawful to carry or cause to be
carried a security for purposes of sale or for delivery after the sale “unless accompanied or
preceded” by a prospectus that meets the requirements of section 10(a) of the Act (which, in turn,
generally requires a prospectus relating to a security to contain the information contained in the
registration statement). For separate accounts organized as unit investment trusts that offer
variable annuity contracts, Form N-4 provides the information required to appear in prospectus
meeting the requirements of section 10(a) of the Securities Act (as well as the information
required to appear in the statement of additional information (“SAI”).
On March 11, 2020, the Commission issued a release adopting rule and form
amendments designed to enhance disclosures for variable annuities and variable life insurance
contracts (together, “variable contracts”). The rules use a layered disclosure approach that 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 that presents key information about

a variable contract’s terms, benefits, and risks, with access to more detailed information available
online and electronically or in paper format on request. 1
The Commission adopted amendments to Form N-4 to update and enhance the
disclosures to investors in variable annuity contracts, and to implement the new summary
prospectus regime. The Commission amended certain disclosure requirements that Form N-4
currently requires. In addition, amended Form N-4 requires certain new disclosures regarding,
among other things: the Key Information Table, an overview of the contract, principal risks,
optional benefits, loans, and the Appendix of available portfolio companies. The amendments
also reduced or eliminated certain disclosures currently required by the form, including the
requirements to include condensed financial information for each class of accumulation units of
the registrant.
2.

Purpose and Use of the Information Collection

The purpose of Form N-4 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors with
information necessary to evaluate an investment in the security. 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 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.

1

Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable
Life Insurance Contracts, Investment Company Act Release No. 33814 (Mar. 11, 2020), available
at https://www.sec.gov/rules/final/2020/33-10765.pdf (“Adopting Release”).

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3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis and
Retrieval or “EDGAR”) is designed to automate the filing, processing, and dissemination of full
disclosure filings. The system permits publicly held companies to transmit filings to the
Commission electronically. This automation has increased the speed, accuracy, and availability
of information, generating benefits to investors and financial markets. Registration statements
on Form N-4 are required to be filed with the Commission electronically on EDGAR. See 17
CFR 232.101(a)(1)(i) and (iv). The public may access filings on EDGAR through the
Commission’s internet website (http://www.sec.gov) or by using an EDGAR terminal located in
the Commission’s public reference rooms. Prospectuses and SAIs may be sent to investors by
electronic means so long as certain requirements are met. 2
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 requirements of Form N-4 are not generally 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 and proposed disclosure requirements for
Form N-4 do not distinguish between small entities and larger entities. The burden on smaller
entities may be greater than for larger entities. This burden includes the cost of producing,
2

See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233, Exchange
Act Release No. 36345, Investment Company Act Release No. 21399 (Oct. 6, 1995) [60 FR
53458 (Oct. 13, 1995)].

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printing, and filing, and disseminating prospectuses and SAIs. 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.
No small entities currently file registration statements on Form N-4. Therefore, the
interactive data amendments for variable contract issuers registering on these forms would not
affect any small entities.
6.

Consequences of Not Conducting Collection

The purpose of Form N-4 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors with
information necessary to evaluate an investment in the security. Less frequent filing would be
inconsistent with the filing and disclosure requirements of the Securities Act and the Investment
Company Act. In addition, if the form were to be filed less frequently, investors may not be
provided with the information necessary to evaluate an investment in the security.
7.

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

Not applicable.
8.

Consultation Outside the Agency

Before adopting the amendments to Form N-4, the Commission solicited and evaluated
public comments on the proposal and its collection of information requirements. Specifically,
the public was given the opportunity to comment on the Commission’s estimates for the burdens
of Form N-4 as proposed and as compared to the existing approved burden inventory in the
proposing release for the amendments. Generally, comments were received from filers, investors
and other market participants, and were considered by the Commission as discussed in the
Adopting Release. The Commission received one comment regarding our proposed estimates

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for internal burdens and external costs associated with the current burdens associated with
preparing and filing a post-effective amendment on Form N-4. The estimates submitted by that
commenter were in some respects higher, and others lower, than our estimates as originally
proposed. In light of the commenter’s estimates, and because variable annuity contracts
registered on Form N-4 today tend to offer greater numbers of portfolio companies and optional
benefits than variable annuity contracts offered in the past, we believe that certain of our
estimates as originally proposed were too low. Therefore, we increased our baseline current
estimates (before the effect of the amendments we adopted) for certain burdens and costs
associated with Form N-4. 3
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 staff with a means of ascertaining and acting upon paperwork burdens that
may confront the industry.
9.

Payment or Gift

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, is required under
this collection of information. The information collection collects basic Personally Identifiable

3

See Adopting Release, supra footnote 1.

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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 1/29/2016, 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 (44 U.S.C. 3501 et seq.) and are not derived from a
comprehensive or even representative survey or study of the cost of Commission rules and
forms.
Form N-4 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 hour and cost burden estimates for preparing and filing initial registration statements and
post-effective amendments on Form N-4 are based on the Commission’s experience with the
contents of the form. The number of burden hours and cost may vary depending on, among
other things, the complexity of the filing and whether preparation of the form is performed by
internal staff or outside counsel. We currently estimate for Form N-4 a total of 271,914 internal
burden hours.
The table below summarizes the estimated adjustments to the Form N-4 collection of
information from the proposed amendments, the estimated adjustments to the Form N-4

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collection of information from the final amendments, and the final PRA estimates for internal
and external burdens associated with amended Form N-4:
FORM N–4 PRA ESTIMATES
Internal Hour
Burden

Wage Rate

Internal Time Costs

Annual External
Cost Burden

$457

--

ESTIMATES FOR IN ITIA L REGISTRATION STA TEMEN TS
$269
(blended rate for
compliance attorney and
intermediate accountant)

Final form amendments
per filing

1.7 hours

Number of initial registration statements

× 30

× 30

Total additional burden for all initial
registration statements

51 hours

$13,710

×

ESTIMATES FOR POST-EFFECTIVE AMEN DMEN TS
$269
(blended rate for
compliance attorney and
intermediate accountant)

Final form amendments
per filing

10 hours

Number of post-effective amendments

× 1,336

× 1,336

Total additional burden for all posteffective amendments

13,360 hours

$3,593,840

--

Total additional annual burden for all
initial registration statements and posteffective amendments

13,411 hours

$3,607,559

--

×

$2,690

--

TOTA L ESTIMA TED BURDENS IN CLUDING AMEN DM EN TS
Current burden estimates

271,914 hours

$77,223,576

$32,111,916

Revised burden estimates

300,937 hours

$80,952,053

$30,342,168

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The table above summarizes our PRA initial and ongoing annual burden estimates
associated with Form N-4 as amended. In the aggregate, we estimate the total annual
hour burden to comply with amended Form N-4 to be 300,937 hours, at an average time
cost of $80,952,053.
13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and submit
reports on Form N-4. The cost burden does not include the hour burden discussed in
Item 12 above. We currently estimate for Form N-4 a total annual external cost burden
of $32,111,916. As outlined in the table above, we now estimate the total external cost
burden to comply with amended Form N-4 to be $30,342,168.
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 $21.2
million in fiscal year 2019, 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 the table above, the estimated hourly burden associated with
Form N-4 has increased from 271,914 hours to 300,937 hours (an increase of 29,023
hours). Further, the estimated cost burden has decreased from $32,111,916 to
$30,342,168 (a decrease of $1,769,748). These estimates reflect the increase in estimated
burdens associated with the amendments, adjustments to certain per filing estimates, and
current estimates for the number of filings on Form N-4.

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16.

Information Collection Planned for Statistical Purposes

Not applicable.
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.
Submission

Exceptions to Certification Statement for Paperwork Reduction Act

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
Not applicable.

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