Supporting Statement (Rule 30e-1) (Aug 18)

OMB CONTROL NUMBER: 3235-0025
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 30e-1
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 30(e) of the Investment Company Act of 1940 (“Investment Company Act”) 1
requires a registered investment company to transmit to its shareholders, at least semi-annually,
reports containing financial statements and other financial information as the Commission may
prescribe by rules and regulations. 2 In addition, Section 30(f) permits the Commission to require
by rule that semi-annual reports include such other information as the Commission deems
necessary or appropriate in the public interest or for the protection of investors. 3 Rule 30e-1
under the Investment Company Act generally requires a registered management company
(“fund”) to transmit to its shareholders, at least semi-annually, a report containing the
information that is required to be included in such reports by the fund’s registration statement
form under the Investment Company Act. 4 Failure to require the collection of this information
would impede the amount of current information available to shareholders and the public about
funds and would prevent the Commission from implementing the regulatory program required by
statute.
Rule 30e-1 also permits, under certain conditions, delivery of a single shareholder report
to investors who share an address (“householding”).5 Specifically, rule 30e-1 permits
1

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

2

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

3

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

4

17 CFR 270.30e-1.

5

See 17 CFR 270.30e-1(f).

householding of annual and semi-annual reports by management companies to satisfy the
transmission requirements of rule 30e-1 if, in addition to the other conditions set forth in the rule,
the management company has obtained from each applicable investor written or implied consent
to the householding of shareholder reports at such address. The rule requires management
companies that wish to household shareholder reports with implied consent to send a notice to
each applicable investor stating, among other things, that the investors in the household will
receive one report in the future unless the investors provide contrary instructions. In addition, at
least once a year, management companies relying on the householding provision must explain to
investors who have provided written or implied consent how they can revoke their consent.
On April 8, 2020, the Commission adopted rule and form amendments (the “rules”) that
modify the registration, communications, and offering processes for registered closed-end
investment companies (“registered CEFs”) and business development companies. 6 The rules
include new annual report requirements for registered CEFs. Under the rules, all registered
CEFs would be required to provide management’s discussion of fund performance (“MDFP”) in
their annual reports to shareholders. In addition, registered CEFs using a short-form registration
statement are required to include in their annual reports information regarding fees and expenses,
premiums and discounts, and outstanding senior securities. These funds also are required to
disclose material unresolved staff comments in their annual shareholder reports. Finally,
registered CEFs that currently are required to describe certain changes in their annual reports
(because they choose to rely on rule 8b-16 under the Investment Company Act) are required to
describe such changes in enough detail to allow investors to understand each change and how it
may affect the fund. Further, the rules require any CEF relying on rule 8b-16(b) to describe the

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fund’s current investment objectives, investment policies, and principal risks in its annual report.
These key disclosures must be provided, even if there were no changes in the past year.
Compliance with the disclosure requirements of rule 30e-1 is mandatory. Responses to
the disclosure requirements are not kept confidential.
2.

Purpose and Use of the Information Collection

The purpose of the collection of information required by rule 30e-1 is to provide fund
shareholders with current information about the operations of their funds in accordance with
Section 30 of the Investment Company Act. The amendments to the content of registered CEFs’
shareholder reports are designed to tailor the disclosure framework for registered CEFs in light
of the amendments to the offering rules applicable to them. For example, we expect that the
rules’ reforms to elevate the importance of registered CEFs’ shareholder reports, relative to
prospectus disclosure, with investors looking to the annual reports for key information. The
amendments also are intended to modernize and harmonize disclosure requirements for
registered CEFs with those applicable to operating companies and mutual funds and exchangetraded funds.
3.

Consideration Given to Information Technology

Rule 30e-1 requires transmission of reports to shareholders. Shareholder reports have
historically been sent in paper; however, investors may currently consent to the delivery of
electronic versions. Once rule 30e-3 is in effect, 7 certain registered investment companies will

6

Securities Offering Reform for Closed-End Investment Companies, Investment Company Act
Release No. 33836 (April 8, 2020).

7

17 CFR 270.30e-3. See Optional Internet Availability of Investment Company Shareholder
Reports, Investment Company Act Release No. 33115 (June 5, 2018) [83 FR 29158 (June 22,
2018)].

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have the option to satisfy their obligation to transmit shareholder reports by making such reports
and other materials available at a website address specified in a notice to investors.
4.

Efforts to Identify Duplication

To ensure the relevance of the information filed by each fund and to avoid unnecessary
paperwork and duplicative reporting, the Commission has promulgated specific rules and
designed specific forms or items of forms for each type of investment company. 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
information required by rule 30e-1 is not generally duplicated elsewhere.
Information about fees and expenses, premiums and discounts, and outstanding senior
securities that certain registered CEFs would be required to disclose in their annual shareholder
reports under the proposal is also required in these funds’ prospectuses. However, because the
annual report will be incorporated by reference into the fund’s prospectus under the proposal,
requiring disclosure in both the prospectus and annual report should not require duplicative
disclosure.
Although we proposed that registered CEFs would be required to report information on
Form 8-K, we did not adopt the proposed Form 8-K amendments.
5.

Effect on Small Entities

The current disclosure requirements for shareholder reports do not distinguish between
small entities and other funds. The burden on smaller funds may be greater than for larger funds.
This burden includes the cost of producing and transmitting the shareholder reports. The
Commission believes, however, that imposing different requirements on smaller investment
companies would not be consistent with investor protection and the purposes of shareholder

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reports. 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.
Under the amendments, smaller registered CEFs generally would not be able to file shortform registration statements, so these funds would not be required to disclose in their annual
reports: (1) information regarding fees and expenses, premiums and discounts, and outstanding
senior securities; and (2) material unresolved staff comments. The other annual report
requirements apply to all registered CEFs because we believe investors in both large and small
registered CEFs would benefit from the additional disclosure.
6.

Consequences of Not Conducting Collection

The frequency with which information in compliance with rule 30e-1 is collected is
semi-annual, as set out in Section 30(e) of the Investment Company Act and rule 30e-1. Less
frequent collection of information would impede the amount of current information provided to
shareholders about their funds.
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, 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
rule 30e-1 as proposed and as compared to the existing approved burden inventory in the
proposing and adopting releases for the amendments.8 Moreover, the Commission and staff of

8

See, e.g., Adopting Release; Securities Offering Reform for Closed-End Investment Companies,

5

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.
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, would be
required under this collection of information. The information collection would not collect
personally identifiable information (“PII”). The agency has determined that a system of records
notice (“SORN”) and privacy impact assessment (“PIA”) would not be required in connection
with the collection of information.
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 9 and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms.
We have previously estimated that it takes approximately 86.5 hours and costs $10,354
per registered investment company to comply with the collection of information associated with

Investment Company Act Release No. 33427 (Mar. 20, 2019) (“Proposing Release”).
9

44 U.S.C. 3501 et seq.

6

rule 30e-1. 10 We estimate that there are 686 registered CEFs that would be required to disclose
certain information in their shareholder reports under the rules, 11 including 455 registered CEFs
that would be able to file short-form registration statements under the rules and that would be
subject to additional disclosure requirements under the proposal. 12
We estimate that the amendments to require registered CEFs filing a short-form
registration statement to disclose fee and expense table, share price data, a senior securities table,
and unresolved staff comments would incrementally increase the compliance burden on these
funds by 3 hours per registered CEF that would be eligible to use the short-form registration
statement. We estimate that the requirement to include MDFP would incrementally increase the
paperwork burden associated with rule 30e-1 by 16 hours and that the amendment to rule 8b-16
would incrementally increase the paperwork burden associated with rule 30e-1 by 5 hours.
For purposes of the PRA, we estimate the amendments would result in 14,946 hours of
total incremental burden under rule 30e-1. 13 In connection with our estimate of the total
incremental burden of the amendments, we have allocated a portion of those burdens as internal
burden hours and a portion as costs of outside professionals. Based on consultations with
companies, law firms, fund representatives, and other persons who regularly assist funds in
preparing and filing reports with the Commission, the staff estimates that 75% of the burden of
preparing annual reports under rule 30e-1 is undertaken by the fund internally. Accordingly, we

10

The estimated aggregate annual hour and cost burden of rule 30e-1 is approximately 1,028,658
hours and $147,750,391. These estimates are based on the last time the rule’s information
collections were approved, pursuant to a submission for a PRA extension in 2018.

11

This estimate is based on SEC filings and Morningstar data as of December 2019.

12

This estimate is based on trading data as of June 30, 2019.

13

We calculated the total incremental burden as follows: (455 registered CEFs eligible to use the short-form
registration statement x 3 hours = 1,365 hours) + (686 registered CEFs required to disclose MDFP x 16

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estimate for purposes of the PRA that the incremental burden for rule 30e-1 under the proposal
would be 11,210 hours for internal time. 14 At an estimated wage rate of $294 per hour, 15 we
estimate that the incremental annual cost to registrants of the hour burden for complying with the
proposed amendments would be $3,295,446. 16
TABLE 1: CHANGE IN BURDEN ESTIMATES
Number of Estimated Affected
Responses

Burden Hour Increase per Current
Affected Response

Burden Hours for Current Affected
Responses

Proposed
Estimate

Revised
Estimate

Change

Proposed
Estimate

Revised
Estimate

Change

Proposed
Estimate

Revised
Estimate

Change

Short-form
Registration
Statement

457

455

-2

3

3

0

1,371

1,365

-6

MDPF
requirement

704

686

-18

16

16

0

11,264

10,976

-288

Rule 8b-16
Changes

704

521

-183

4

5

+1

2,816

2,605

-211

13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare, print, and transmit
reports under rule 30e-1, such as for the services of independent auditors and outside counsel.
The cost burden does not include the hour burden discussed in Item 12 above.

hours = 10,976 hours) + (521 registered CEFs relying on rule 8b-16(b) x 5 hours = 2,605 hours) = 14,946
burden hours.
14

14,946 total incremental burden hours × 0.75 = 11,210 burden hours for internal time.

15

This wage rate estimate is based on salary information for the securities industry compiled by the
Securities Industry and Financial Markets Association. The estimated wage figure is based on
published rates for intermediate accountants and attorneys, modified by Commission staff to
account for an 1,800-hour work year; multiplied by 5.35 to account for bonuses, firm size,
employee benefits, and overhead; and adjusted to account for the effects of inflation, yielding
effective hourly rates of $172 and $415, respectively. See Securities Industry and Financial
Markets Association, Report on Management & Professional Earnings in the Securities Industry
2013. We estimate that intermediate accountants and attorneys will divide their time equally,
yielding an estimated hourly wage rate of $294. ($172 per hour for intermediate accountants +
$415 per hour for attorneys) ÷ 2 = $294 per hour.

16

11,210 hours per year x $294 per hour = $3,295,446 per year.

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Based on consultations with companies, law firms, fund representatives, and other
persons who regularly assist funds in preparing and filing reports with the Commission, the staff
estimates that 25% of the burden of preparing annual reports under rule 30e-1 is undertaken by
outside professionals, such as outside counsel and independent auditors, retained by the fund at
an average cost of $400 per hour. 17 Thus, we estimate that the annual cost burden related to rule
30e-1 would increase by $1,577,100 for the services of outside professionals. 18
TABLE 2: CHANGE IN BURDEN ESTIMATES
Annual Number of Responses

Rule
30e1

Annual Time Burden (hours)

Cost Burden (dollars)

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

23,784

23,784

0

1,028,658

1,039,868

+11,210

$147,750,391

$149,244,791

+$1,494,400

14.

Cost to the Federal Government

There are no costs to the federal government associated with rule 30e-1. The annual cost
of reviewing and processing registration statements, post-effective amendments, proxy
statements, shareholder reports, and other filings 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. We note, however, that
shareholder reports are filed with the Commission to comply with the requirements of Form NCSR, and not rule 30e-1, which requires the transmission of the reports to shareholders.

17

We recognize that the costs of retaining outside professionals may vary depending on the nature
of the professional services, but for purposes of this PRA analysis, we estimate that such costs
would be an average of $400 per hour. This estimate is based on discussions the staff has had
with several law and accounting firms to estimate an hourly rate of $400 as the cost to operating
companies and funds for the services of outside professionals retained to assist in the preparation
of these and similar reports.

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15.

Change in Burden

As summarized in Table 1 above, the estimated hourly burden associated with rule 30e-1
would increase from 1,028,658 hours to 1,039,868 hours (an increase of 11,210 hours). The
estimated cost burden associated with rule 30e-1 would increase from $147,750,391 to
$149,244,791 (an increase of $1,494,400). This increase is due to an increase in the estimated
burden for registered CEFs that would be required to disclose additional information in their
shareholder reports under the proposal.
16.

Information Collection Planned for Statistical Purposes

The results of any information collection will not be published.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date for OMB approval.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

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

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

18

15,771 total incremental burden hours x 0.25 x $400 = $1,577,100.

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