Rule 11a-2 Supporting Statement

OMB CONTROL NUMBER: 3235-0272
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 11a-2
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 11 of the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (“1940
Act”) makes it unlawful for certain types of registered investment companies to make an offer
to their shareholders to exchange their securities for the securities of another investment
company on a basis other than net asset value unless the terms of the exchange offer are
approved by the Securities and Exchange Commission (“Commission”) or are in accordance
with rules adopted by the Commission.
The Commission exercised its rulemaking authority under Section 11 by adopting Rule
11a-2 (17 CFR 270.11a-2) as an exemptive rule. Rule 11a-2 codified the conditions under
which the Commission previously had approved exchange offers of certain registered insurance
company separate accounts. Consequently, Rule 11a-2 significantly reduced the number of
routine applications that separate accounts file under Section 11.
The one reporting requirement imposed under Rule 11a-2 is disclosure in the offering
account’s registration statements under the Securities Act of 1933 (15 U.S.C. 77a et seq.)
(“1933 Act”) of any administrative fee or sales load imposed in connection with an exchange
offer. The minor burden imposed by this requirement is substantially outweighed by the
elimination of a substantial number of applications.

2.

Purpose and Use of the Information Collection

Without this rule, the separate accounts sponsoring life insurers would bear the expense
of filing individual exemptive applications in order to obtain the relief needed to make an
exchange of securities. Accordingly, the Commission staff would be required to process such
applications, which would be quite lengthy and burdensome for both the life insurers and the
Commission’s staff. In addition, the information required by the rule is used by investors to
weigh the costs of making an exchange of securities against the potential for benefits. Without
disclosure of the costs of an exchange transaction, investors would be unable to evaluate the
costs.
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
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 Internet Web site (http://www.sec.gov) or at EDGAR terminals located at the
Commission’s public reference rooms.
4.

Duplication

The information is not duplicated elsewhere, and similar information is not available
from other sources.

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5.

Effect on Small Entities

Rule 11a-2 does not have a significant economic impact on small entities. The
Commission staff takes the position that because separate accounts are part of the sponsoring
insurance company, there are no insurance company separate accounts that are “small entities”
for purposes of Rule 0-10 under the 1940 Act (17 CFR 270.0-10).
6.

Consequences of Not Conducting Collection

Disclosure of fees charged in connection with an exchange offer is required in the
prospectus contained in the offering account’s registration statement under the 1933 Act.
Because Section 10 of the 1933 Act requires that the information in a prospectus be as of a
date no more than sixteen months prior to its use, a registrant making an offer under the 1933
Act, including an exchange offer, must update its prospectus approximately annually. Less
frequent collection would inhibit dissemination of the timely information that enables investors
to make informed investment decisions.
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 requested public comment on the collection of information
requirements in Rule 11a-2 before it submitted this request for extension and approval to the
Office of Management and Budget. The Commission received no comments in response to
this request.
9.

Payment or Gift

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No payment or gift to respondents was provided.
10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

The information collection does not collect personally identifiable information (PII).
12.

Burden of Information Collection

The Commission includes the estimated burden of complying with the information
collection required by Rule 11a-2 in the total number of burden hours estimated for completing
the relevant registration statements and reports the burden of Rule 11a-2 in the separate
Paperwork Reduction Act (“PRA”) submissions for those registration statements (see the
separate PRA submissions for Form N-3 (17 CFR 274.11b), Form N-4 (17 CFR 274.11c) and
Form N-6 (17 CFR 274.11d). The Commission is requesting a burden of one hour per
response for Rule 11a-2 for administrative purposes, resulting in a total annual PRA burden of
676 hours.
Table 1: Summary of Revised Annual Responses, Burden Hours, and Cost Estimates
IC Title
Rule 11a-2

Annual No. of Responses
Previously
Requested Change
approved
673
676
+3

13.

Annual Time Burden (Hrs.)
Previously
Requested Change
approved
673
676
+3

External Cost to Respondents ($)
Previously
Requested Change
approved
$0
$0
$0

Cost to Respondents

It is estimated that there is no cost of the paperwork burdens of Rule 11a-2 beyond the
cost of the hour burden identified in Item 12 of this Supporting Statement.
14.

Cost to the Federal Government

Rule 11a-2 reduced the Commission’s staff’s operational cost attributable to the
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reviewing and processing of exemptive applications. Because separate accounts rely on the
rule without the need for prior Commission approval, cost to the government is minimal.
Moreover, operational costs are far less than those incurred in processing individual
applications.
15.

Change in Burden

There are currently 676 registrants governed by Rule 11a-2, which represents an
increase of 3 over the prior 673 registrants. Additionally, the 676 burden hours represent an
increase of 3 hours over the previous estimate. This increase is due to the increase in the
number of registrants. The cost burden has not changed.
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 not display the expiration date for OMB
approval.
18.
Submission

Exceptions to Certification Statement for Paperwork Reduction Act

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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