Supporting Statement (Form N-1A) 30e-3

OMB CONTROL NUMBER: 3235-0307
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-1A
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-1A (17 CFR 239.15A and 274.11A) is the form used by open-end
management investment companies (“funds”) to register 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 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, and Section 8 of the Investment Company Act (15 U.S.C.
80a-8) requires a fund to register as an investment company. Form N-1A also permits
funds to provide investors with a prospectus and a statement of additional information
(“SAI”) covering essential information about the fund when it makes an initial or
additional offering of its securities. 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.
On June 5, 2018, the Commission issued a release adopting new rule 30e-3 under
the Investment Company Act and certain amendments to other rules and forms. 1 Rule
30e-3 provides certain funds and unit investment trusts with an optional method to satisfy
shareholder report transmission requirements by making such reports and certain other
1

See Securities Act Release No. 10506 (June 5, 2018) [83 FR 29158 (June 22, 2018)] (“Adopting
Release”).

materials publicly accessible on a website, as long as they satisfy certain other conditions
of the rule regarding (a) availability of the report and other materials; (b) notice to
investors of the website availability of the report; and (c) delivery of paper copies of
materials upon request. In connection with our adoption of rule 30e-3, the Commission
amended certain rules and forms including Form N-1A. Form N-1A was amended to
require certain legend requirements on the prospectuses and annual and semi-annual
reports if relying on rule 30e-3. Responses to the disclosure requirements are not kept
confidential.
2.

Purpose and Use of the Information Collection

The title for the collection of information is: Form N-1A under the Investment
Company Act of 1940 and Securities Act of 1933, Registration Statement of Open-End
Management Investment Companies.” The purpose of Form N-1A is to meet the filing
and disclosure requirements of the Securities Act and the Investment Company Act and
to enable funds to provide investors with information necessary to evaluate an investment
in the fund. Unlike many other federal information collections, which are primarily for
the use and benefit of the collecting agency, this information collection is primarily for
the use and benefit of investors. The information filed with the Commission also permits
the 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 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 their filings to the Commission electronically. EDGAR has increased the speed,
2

accuracy and availability of information, generating benefits to investors and financial
markets. All funds have been required to use EDGAR for their disclosure filings since
November 6, 1995. Form N-1A is 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 Internet Web site (http://www.sec.gov) or
at EDGAR terminals located at the Commission’s public reference rooms. Prospectuses
and SAIs may be sent to investors by electronic means so long as the fund meets certain
requirements. 2
4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it adopts changes in its
rules. The requirements of Form N-1A are not generally duplicated elsewhere.
5.

Effect on Small Entities

The current disclosure requirements for reports on Form N-1A do not distinguish
between small entities and other funds. The burden on smaller funds, however, to
prepare and file registration statements may be 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. 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.
2

Consequences of Not Conducting Collection

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)).

3

The Investment Company Act requires that funds file annual amendments to their
registration statements. Less frequent collection would mean that current information
might not be available to fund investors.
7.

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

Not Applicable.
8.

Consultation Outside the Agency

The Commission requested public comment on the collection requirements for
conditioning reliance on rule 30e-3 with requirements to require legends on prospectuses
and semi-annual and annual reports before it submitted this request for revision and
approval to the Office of Management and Budget.

The Commission’s solicitation of

public comments included estimating and requesting public comments on the burden
estimates for all information collections under this OMB control number (i.e., both
changes associated with the rulemaking and other burden updates). 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
confronting 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, will be
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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 1/29/2016, is provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
12.

Burden of Information Collection

Open-end funds register as investment companies under the Investment Company
Act and register their securities under the Securities Act on Form N-1A. Compliance
with the disclosure requirements of Form N-1A is mandatory. Form N-1A generally
imposes two types of reporting burdens on investment companies: (i) the burden of
preparing and filing the initial registration statement; and (ii) the burden of preparing and
filing post-effective amendments to a previously effective registration statement
(including post-effective amendments filed pursuant to rule 485(a) or 485(b) under the
Securities Act, as applicable). Compliance with the disclosure requirements of Form N1A is mandatory. Responses to the disclosure requirements will not be kept confidential.
The following estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 3 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission rules

3

44 U.S.C. 3501 et seq.

5

and forms. In our most recent Paperwork Reduction Act submission for Form N-1A,
Commission staff estimated the annual compliance burden to comply with the collection
of information requirement of Form N-1A to be 1,662,190 burden hours. 4
Pursuant to the amendments in connection with the rule 30e-3 adoption, we
estimate that these funds will incur 1 burden hour for the first summary prospectus,
statutory prospectus, or shareholder report reflecting these requirements and 0.5 hours for
each additional summary prospectus, statutory prospectus, or annual and semi-annual
report reflecting these requirements. These related disclosure requirements will only
apply during the extended transition period. In light of the short period during which
these additional requirements will be effective and the modest impact they are likely to
have on external service providers such as website hosting services, outside counsel and
auditors, and printing and mailing services, we do not expect them to result in additional
expenses passed on to funds by their service providers in the form of additional external
cost burden. Thus, we do not estimate there will be any external costs to comply with
these disclosure requirements.
We estimate that there are 11,181 funds that could file registration statements or
amendments to registration statements on Form N-1A. 5 Of this group, we estimate that

4

This estimate is based on the last time the rule’s information collection was submitted for PRA
revision in 2020.

5

11,181 funds = 9,360 mutual funds + 1,821 ETFs (1,829 ETFs less 8 UIT ETFs).

6

10,063 funds will rely on rule 30e-3. 6 We estimate that the total annual hour burden
associated with the amendments to Form N-1A is 8,386 hours.7
We estimate that with the additional hour burdens associated with the
amendments the total annual internal burden to comply would be 1,670,576 burden hours
for Form N-1A. 8 Based on the Commission’s estimate of 1,670,576 hours and an
estimated wage rate of about $284 per hour, 9 the total annual cost to registrants of the
hour burden for complying with the amendments to Form N-1A is about $474 million. 10
Summary of Revised Annual Responses, Burden Hours, and Cost Estimates
IC Title

Annual No. of Responses
Previously Requested
Change
approved

Form N-1A

6,002
funds

6,002
funds

0

Annual Time Burden (Hrs.)
Previously Requested Change
approved
1,662,190

1,670,576

8,386

External Cost to Respondents ($) 11
Previously
Requested
Change
approved
$131,139,208

$131,139,208

6

10,063 funds × 0.9 = 9,057 funds. We estimate that for funds that would rely on rule 30e-3 and
rely upon rule 498, that the incremental burden hours associated with relying on rule 30e-3 in
preparing and filing on Form N-1A would also include any burden change associated with rule
498.

7

10,063 funds × (1 hour for the first report in the first year + 0.5 hours for the second report in the
first year) = 15,095 hours. 10,063 funds × 0.5 hours × 2 reports in the second year = 10,063 hours.
10,063 funds × 0 hours in the third year = 0 hours. (15,095 + 10,063 + 0 hours) ÷ 3 years = 8,386
hours per year on an amortized basis.

8

This estimate is based on the following calculation: 1,662,190 + 8,386 = 1,670,576 hours.

9

The Commission’s estimate concerning the wage rate 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 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 $166 and $401, 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 $284. ($166 per hour for intermediate accountants +
$401 per hour for attorneys) ÷ 2 = $284 per hour.

10

1,670,576 hours per year × $284 per hour = $474,443,584 per year.

11

These estimates are discussed in Item 13 of this supporting statement below.

7

$0

13.

Cost to Respondents

In our most recent Paperwork Reduction Act submission for Form N-1A,
Commission staff estimated the annual cost burden to comply with the collection of
information requirement of Form N-1A is $131,139,208. 12 The staff estimates that the
amendments to Form N-1A do not impose any material cost burdens on funds, apart from
the cost of the burden hours discussed above.
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
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.

Change in Burden

The total annual hour burden of 1,670,576 hours represents an increase of 8,386
hours over the previous burden hour estimate of 1,662,190 hours. The annual external
cost burden of $131,139,208 represents no change over the previous external cost burden
of $131,139,208. The changes in burden hours are due to the staff’s estimates of the time
costs that would result from our amendments to Form N-1A in connection with the
adoption of rule 30e-3. These changes in burden also reflect the Commission’s revision
and update of burden estimates for all information collections under this OMB control
number (whether or not associated with rulemaking changes), and the Commission

12

This estimate is based on the last time the rule’s information collection was submitted for PRA
revision in 2020.

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requested public comment on all information collection burden estimates for this OMB
control number.
16.

Information Collection Planned for Statistical Purposes

Not Applicable.
17.

Approval to Omit OMB Expiration Date

Not Applicable.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

Not Applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
Not Applicable.

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