Form N-4 - Supporting Statement

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 (17 CFR 239.17b and 274.11c) 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 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 registration statement be effective before
any securities are sold, and Section 8 of the Investment Company Act (15 U.S.C. 80a-8)
provides for the registration of investment companies. Pursuant to Form N-4, separate
accounts organized as unit investment trusts that offer variable annuity contracts provide
investors with a prospectus and a statement of additional information (“SAI”) covering
essential information about a separate account. 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 or at the time of sale or delivery of securities.
On March 20, 2019, the Commission issued a release adopting rules that will
modernize and simplify certain disclosure requirements in Regulation S-K, and related
rules and forms. 1 In particular, the Commission adopted amendments to Regulation S-T
that will require investment companies filing on Form N-4 to submit the document in
FAST Act Modernization and Simplification of Regulation S-K, Securities Act Release No. 10618
(Mar. 20, 2019).

1

OMB CONTROL NUMBER: 3235-0318
HTML format and to include a hyperlink to each exhibit identified in the exhibit index of
the document.
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 a 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.
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. Form N-4 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 website (http://www.sec.gov) or at EDGAR
terminals located at the Commission’s public reference rooms.

OMB CONTROL NUMBER: 3235-0318
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 generally are not 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 disclosure requirements
for registration statements on Form N-4 do not distinguish between small entities and
other registrants. The burden on smaller registrants, however, to prepare and file
registration statements may be greater than for larger registrants. This burden includes
the cost of producing, printing, filing, and disseminating prospectuses and SAIs. The
Commission believes, however, that imposing different requirements on smaller entities
would not be consistent with investor protection and the purposes of registration
statements.
In any event, no small entities currently file registration statements on Form N-4.
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 a 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

OMB CONTROL NUMBER: 3235-0318
frequently, investors may not be provided with the information necessary to evaluate an
investment in a security.
7.

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

None.
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 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
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

OMB CONTROL NUMBER: 3235-0318
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.

OMB CONTROL NUMBER: 3235-0318

TABLE 1: BURDEN ESTIMATES FOR INITIAL FORM N-4 FILINGS
Internal Burden
Per Response

Wage Rate1

Cost of
Internal Burden

Annual
Cost Burden

$83,069.44

$24,858

CURRENTLY A PPROVED ESTIMA TES
$296 (blended rate of
$419 for attorneys and
$173 for intermediate
accountants)

Current Form N-4 requirements

280.64 hours

Number of annual responses

× 30

× 30

× 30

Total annual burden

8,419 hours

$2,492,083

$745,740

$24,858

REVISED ESTIMATES
Current Form N-4 requirements

Preparation and review of exhibit
hyperlinks

280.64 hours

×

$296 (blended rate of
$419 for attorneys and
$173 for intermediate
accountants)

$83,069.44

0.125 hours

×

$368 (compliance
attorney)

$46.00

0.125 hours

×

$334 (senior
programmer)

$41.75

$300

Total annual burden per response

280.89 hours

$83,157.19

$25,158

Number of annual responses

× 30

× 30

× 30

Total annual burden

8,427 hours

$2,494,716

$880,530

Note: The Commission’s estimates concerning the allocation of burden hours and the relevant wage rates are based on
consultations with industry representatives and on salary information for the securities industry compiled by the Securities
Industry and Financial Markets Association’s Office Salaries in the Securities Industry 2013. The estimated wage figures are
modified by Commission staff to account for an 1800-hour work-year and multiplied by 2.93 to account for bonuses, firm size,
employee benefits, overhead, and adjusted to account for the effects of inflation. See Securities Industry and Financial Markets
Association, Report on Management & Professional Earnings in the Securities Industry 2013.

OMB CONTROL NUMBER: 3235-0318
TABLE 2: BURDEN ESTIMATES FOR POST-EFFECTIVE AMENDMENTS
Internal Burden
Per Response

Wage Rate1

Cost of
Internal Burden

Annual
Cost Burden

$61,479.20

$23,561

CURRENTLY A PPROVED ESTIMA TES
×

$296 (blended rate of
$401 for attorneys and
$166 for intermediate
accountants)

Current Form N-4 requirements

207.7 hours

Number of annual responses

× 1,336

× 1,336

× 1,336

Total annual burden

277,487 hours

$82,136,211

$31,477,496

$61,479.20

$23,561

REVISED ESTIMATES
Current Form N-4 requirements

Preparation and review of exhibit
hyperlinks

207.7 hours

×

$296 (blended rate of
$419 for attorneys and
$173 for intermediate
accountants))

0.125 hours

×

$368 (compliance
attorney)2

$46.00

0.125 hours

×

$334 (senior
programmer)2

$41.75

$300

Total annual burden per response

207.95 hours

$61,566.95

$23,861

Number of annual responses

× 1,366

× 1,366

× 1,366

Total annual burden

284,060 hours

$84,100,454

$32,594,126

Notes: The Commission’s estimates concerning the allocation of burden hours and the relevant wage rates are based on
consultations with industry representatives and on salary information for the securities industry compiled by the Securities
Industry and Financial Markets Association’s Office Salaries in the Securities Industry 2013. The estimated wage figures are
modified by Commission staff to account for an 1800-hour work-year and multiplied by 2.93 to account for bonuses, firm size,
employee benefits, overhead, and adjusted to account for the effects of inflation. See Securities Industry and Financial Markets
Association, Report on Management & Professional Earnings in the Securities Industry 2013.

OMB CONTROL NUMBER: 3235-0318
TABLE 3: TOTAL BURDEN ESTIMATES FOR FORM N-4
Cost of
Internal Burden

Internal Burden

Annual
Cost Burden

CU RRENTLY APPROVED ESTIMATES
Initial Form N-4 filings

8,419 hours

$2,492,083

$745,740

Post-effective amendments

292,518 hours

$83,980,587

$32,184,326

Total annual burden

300,937 hours

$86,472,670

$30,342,168

Initial Form N-4 filings

8,427 hours

$2,494,716

$880,530

Post-effective amendments

277,821 hours

$84,100,454

$32,594,126

Total annual burden

286,248 hours

$86,595,170

$32,758,826

REVISED ESTIMATES

TABLE 4: CHANGE IN BURDEN ESTIMATES
Annual Number of Responses

Form
N-4

Previously
Approved

Revised
Estimate

1,336

1,366

Annual Time Burden (hours)

Change

Previously
Approved

Revised
Estimate

30

300,937

286,248

Change
14,689

Cost Burden (dollars)
Previously
Approved

Revised
Estimate

Change

$30,342,168

$32,758,826

+2,416,658

As summarized in Table 1 and Table 2 above, the Commission has previously
estimated that separate accounts will make approximately 30 initial registration statement
filings and 1,336 post-effective amendments annually, based on filings with the
Commission. 2 The hour burden estimates for preparing and filing Form N-4 are based on
the Commission’s experience with the contents of the form. The number of burden hours
may vary depending on, among other things, the complexity of the filing and whether
preparation of the forms is performed by internal staff or outside counsel.
Form N-4 imposes two types of reporting burdens on separate accounts organized
as unit investment trusts that offer variable life insurance contracts that are registered
under the Investment Company Act: (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.
As summarized in Table 3 above, in our most recent Paperwork Reduction Act
submission for Form N-4, Commission staff estimated that the annual compliance burden
to comply with the collection of information requirements of Form N-4 is 300,937 hours,
with an internal cost of about $81 million. The amendments to Regulation S-T that will
require separate accounts filing on Form N-4 to submit these documents in HTML format
and to include a hyperlink to each exhibit identified in the exhibit index of these
documents are expected to increase the burdens and costs for separate accounts that
prepare and file these registration statements. For purposes of the Paperwork Reduction
Act, we estimated the average burden for a separate account to hyperlink to exhibits
2

This estimate was previously submitted to OMB in connection with the revision of the collection
of information required by Form N-4 pursuant to the Commission’s adoption of new rule 30e-3 on
June 5, 2018. See Optional Internet Availability of Investment Company Shareholder Reports,
Securities Act Release No. 10506 (June 5, 2018) [83 FR 29158 (June 22, 2018)].

based on the median number of exhibits that are filed with an affected form. As
summarized in Table 3 above, we estimate that the total internal burden associated with
Form N-4 will be 286,248 hours per year, at a cost of about $77.3 million.
13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and update
filings on Form N-4, such as for the services of independent auditors and outside counsel.
The external cost burden does not include the cost of the internal hour burden discussed
in Item 12. Estimates are based on the Commission’s experience with the filing of
registration forms.
As summarized in Table 3 above, in our most recent Paperwork Reduction Act
submission for Form N-4, Commission staff estimated about $32.1million in external
cost burden per year. We estimate that the revised external burden will be $32.5 million.
14.

Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including 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.

Changes in Burden

As summarized in Table 4 above, the estimated hourly burden associated with
Form N-4 has increased from 300,937 hours to 286,248 hours (a decrease of 14,689
hours). In addition, the cost burden associated with Form N-4 has increased from
$30,342,168 to $32,758,826(an increase of $2,416,658). The changes in burden hours

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and external cost burdens are due to the estimates of the time burden and external costs
that will result from our amendments affecting Form N-4 regarding hyperlinking.
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.

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.

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