Form N-CEN Supporting Statement (Derivatives Adoption)

OMB CONTROL NUMBER: 3235-0729
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-CEN
A. JUSTIFICATION
1. Necessity of Information Collection
All registered investment companies with the exception of face amount certificate
companies are required to file periodic reports with the Commission under the
Investment Company Act of 1940 (“Investment Company Act”). 1 Section 30(a) of
the Investment Company Act 2 provides that each registered investment company
must file annually with the Commission such information, documents and reports as
investment companies having securities registered on a national securities exchange
are required to file annually under the Securities Exchange Act of 1934 (“Exchange
Act”). 3 In addition, section 30(b) of the Investment Company Act requires each
registered investment company to file, among other things, “such information,
documents, and reports (other than financial statements), as the Commission may
require to keep reasonably current the information and documents contained in the
registration statement of such company.” 4
Form N-CEN is used to collect annual, census-type information for registered
funds. Filers must submit this report electronically using the Commission’s electronic
filing system “(EDGAR”) in Extensible Markup Language (“XML”) format. This
collection of information is mandatory for all registered funds, and responses are not
kept confidential.
On November 2, 2020, the Commission issued a release adopting amendments to
Form N-CEN, relating to new rule 18f-4 under the Investment Company Act. 5
Rule 18f-4 permits a fund to enter into derivatives transactions, notwithstanding the
prohibitions and restrictions on the issuance of senior securities under section 18 of
the Investment Company Act, subject to conditions thereunder. The Form N-CEN
amendments require a fund to identify whether it relied on rule 18f-4 during the

1

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

2

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

3

15 U.S.C. 78a et seq.

4

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

5

See Use of Derivatives by Registered Investment Companies and Business Development
Companies, Investment Company Act Release No. 34084 (November 2, 2020) (“Adopting
Release”).

reporting period and whether it relied on any of the exceptions from various
requirements under the rule. 6
2. Purpose and Use of the Information Collection
The purpose of Form N-CEN is to satisfy the filing and disclosure requirements
of section 30 of the Investment Company Act, and of rule 30a-1 thereunder. The
information required to be filed with the Commission assures the public availability
of the information and is designed to facilitate the Commission’s oversight of
registered funds and its ability to monitor trends and risks.
3. Consideration Given to Information Technology
The Commission’s electronic filing system (Electronic Data Gathering, Analysis,
and Retrieval or “EDGAR”) provides for automated filing, processing, and
dissemination of full disclosure filings. This automation has increased the speed,
accuracy, and availability of information, generating benefits to investors and
financial markets. Reports on Form N-CEN are be required to be filed with the
Commission electronically on EDGAR in a structured (XML) format which permits
the electronic analysis of the data in a single filing and comparisons over time or
across similar investment companies.
4. Efforts to Identify Duplication
The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication and reevaluates them whenever it proposes a rule or a
form or a change in a rule or form. The information provided under reports on
Form N-CEN either is not duplicated elsewhere at all or is not duplicated in a format
that permits the electronic analysis of the data in a single filing or in comparison over
time or across similar investment companies. Any information solicited by
Form N-CEN that may be duplicated in other documents filed with the Commission
is in narrative format so that it can be read and understood by investors. The
Commission is not able to analyze narrative information electronically on a regular
basis, using database or spreadsheet applications.
5. Effect on Small Entities
The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 7 to identify methods to minimize recordkeeping or reporting
requirements affecting small businesses. Form N-CEN must be filed by all registered
investment companies other than face amount certificate companies, regardless of
size. The burden on smaller investment companies, however, to prepare reports on
6

See Item C.7.n of Form N-CEN.

7

5 U.S.C. 601 et seq.

2

Form N-CEN may be greater than for larger investment companies. The
Commission believes, however, that imposing different requirements on smaller
investment companies would not be consistent with investor protection and the
purposes of section 30 of the Investment Company Act.
6. Consequences of Not Conducting Collection
The Commission requires the filing of Form N-CEN annually for all registered
investment companies so that it will have current information available for use in
performing inspections, selectively reviewing registration documents, and conducting
studies and other types of analyses necessary to keep the Commission’s regulatory
program for investment companies current with industry conditions. Less frequent
collection would mean that current information may not be available to investors
and may potentially decrease investor confidence in the full and fair disclosure
system that is the hallmark of the U.S. capital markets.
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 affecting Form N-CEN, 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-CEN as
proposed and as compared to the existing approved burden inventory in the
proposing and adopting releases for the amendments. 8 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). The Commission did not receive PRA related burden comments on the
new Form N-CEN reporting requirements.
Moreover, the Commission and the 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.
8

See Adopting Release, supra footnote 1, at section IV.F; Use of Derivatives by Registered
Investment Companies and Business Development Companies; Required Due Diligence by
Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’
Transactions in Certain Leveraged/Inverse Investment Vehicles, Investment Company Act
Release No. 33704 (Nov. 25, 2019) [85 FR 4446 (Jan. 24, 2020)] (“Proposing Release”), at
section IV.H.

3

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, will be
required under this collection of information. The information collection collects
basic Personally Identifiable Information (PII) that may include name, job title, and
work address. 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 February 5, 2020 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 9 and are not derived from a
comprehensive, or even representative, survey or study of the cost of Commission
rules and forms. Compliance with Form N-CEN is mandatory. Responses to the
collection of information will not be kept confidential.
Form N-CEN is a structured form that requires registered funds to provide
census-type information to the Commission on an annual basis. The Commission
estimates that registered management investment companies, would spend as much
as 13.35 hours preparing and filing the form. The Commission further estimates that
UITs, including separate account UITs, would spend as much as 9.11 hours
preparing and filing Form N-CEN, since a UIT is required to answer fewer items.
We estimate that the average annual hour burden to complete the generally
applicable items on Form N-CEN response will be 12.31 hours per year. 10 We
estimate that the aggregate annual hour burden to complete the generally applicable
items will be 34,899 hours per year. 11 We therefore estimate that filers would have
9

44 U.S.C. 3501 et seq.

10

This estimate is based on the following calculation: ((2,139 management investment company
registrants × 13.35 hours per year) + (696 UIT registrants × 9.11 hours per year)) ÷ 2,835
total registrants = 12.31 hours per year.

11

This estimate is based on the following calculation: 2,835 registrants × 12.31 hours per year =
34,896 hours per year.

4

total average annualized paperwork related expenses related to complete the
generally applicable items of $12,249,496.35 for reports on Form N-CEN. 12
Additionally, we estimate that filers will be required to file 12,365 responses related
to liquidity risk management items on Form N-CEN. We estimate that the average
annual hour burden of the liquidity risk management items on Form N-CEN will be
one hour per response per year, for an additional average annual hour burden of
12,365 hours and average aggregate time costs of $4,340,115. 13 Additionally, we
estimate that filers will be required to file 9,854 responses regarding swing pricing. 14
We estimate that the average annual hour burden as a result of the swing pricingrelated items on Form N-CEN will be an additional 0.5 hour per fund per year for an
average annual hour burden of 4,927 hours and average aggregate time costs of
$1,729,377. 15 We estimate that filers will be required to file 2,091 responses regarding
rule 6c-11. For these responses related to rule 6c-11, we estimate an average annual
hour burden of 0.1 hour per response per year, for an average annual hour burden of
209.1 hours and average aggregate time costs of $73,394.1. 16 We estimate that filers
will be required to file 2,835 responses regarding rule 12d1-4. For these responses
related to rule 12d1-4, we estimate an average annual hour burden of 0.1 hour per
response per year, for an average annual hour burden of 283.5 hours and average
aggregate time costs of $99,508.5. 17 We estimate that filers will be required to file
5,524 responses regarding rule 18f-4. For these responses related to rule 18f-4, we an

12

This estimate is based on average annual burden estimate of 34,896 hours. This was then
multiplied by a blended hourly wage of $351 per hour, $334 per hour for Senior Programmers
and $368 per hour for compliance attorneys, as we believe these employees would commonly
be responsible for completing reports on Form N-CEN ($351 × 34,896 = $12,249,496.35).
The estimated wage figures are based on published rates for senior programmers and
compliance attorneys, modified by Commission staff to account for an 1800-hour work-year
and inflation, and multiplied by 5.35 to account for bonuses, firm size, employee benefits,
and overhead, yielding effective hourly rates of $334 and $368, respectively. See Securities
Industry and Financial Markets Association, Report on Management & Professional Earnings in
the Securities Industry 2013.

13

These estimates are based on the following calculation: 12,365 funds x 1 hour = 12,365
hours. 12,365 hours × $351 per hour = $4,340,115.

14

As of the end of March 31, 2020, there were 9,854 open-end mutual funds (including funds
that invest in other funds) and 2,091 ETFs.

15

These estimates are based on the following calculation: 9,854 funds x .5 hour = 4,927 hours.
4,927 hours × $351 per hour = $1,729,377.

16

These estimates are based on the following calculation: 2,091 ETFs x 0.1 hour = 209.1 hours.
209.1 hours × $351 per hour = $73,394.1.

17

These estimates are based on the following calculation: 2,835 registrants x 0.1 hour = 283.5
hours.
283.5 hours × $351 per hour = $99,508.5.

5

average annual hour burden of 0.4 hour per response per year, for an average annual
hour burden of 2,210 hours and average aggregate time costs of $775,570. 18
We estimate that the total hour burdens and time costs associated with Form NCEN, including the burdens associated with the liquidity-related, swing pricingrelated, rule 6c-11-related items, rule 12d1-4-related items, and rule 18f-4-related
items will result in an average annual hour burden of 54,890.6 hours 19 and average
aggregate time costs of $19,267,460.6. 20
TABLE 1: FORM N-CEN PRA ESTIMATES
Internal
Burden

Wage Rate

Cost of
Internal Burden

BURDEN FOR REPORT AND GENERAL ITEMS
$351 (blended rate of
$368 for compliance
attorney and $334 for
senior programmer)

Preparing and Filing the Report

12.31 hours

×

$4,320.81

Number of Registrants Filing 21

× 2,835

× 2,835

Total Annual Burden

34,896 hours

$12,249,496.35

BURDEN FOR LIQUIDITY RISK MANAGEMENT ITEMS
Liquidity Risk Management Items
Number of Funds Filing

1 hour

×

$351 blended rate

×12,365

$351
×12,365

12,365 hours

$4,340,115

BURDEN FOR SWING PRICING ITEMS
Swing Pricing Items

.5 hours

Number of Funds Filing

×9,854

×

$351 blended rate

$175.5
×9,854

4,927 hours

$1,729,377

BURDEN FOR RULE 6c-11 ITEMS
Rule 6c-11 Items

.1 hours

Number of ETFs

×2,091

×

$351 blended rate

$35.1
×2,091

209.1 hours

$73,394.1

BURDEN FOR RULE 12d1-4 ITEMS
Rule 12d1-4 Items

.1 hours

×

$351 blended rate

$35.1

18

These estimates are based on the following calculation: 5,524 funds x 0.4 hour = 2,210 hours.
2,210 hours × $351 per hour = $775,570.

19

This estimate is based on the following calculation: 34,896 hours + 12,365 hours + 4,927
hours + 209.1 hours + 283.5 hours + 2,210 hours = 54,890.6 hours.

20

This estimate is based on the following calculation $12,249,496.35 + $4,340,115 +
$1,729,377 + $73,394.1 + $99,508.5 + $775,570 = $19,267,460.6.

21

Our burden estimate for preparing and filing a report is based on the number of registrants.
See supra footnote 10. Our burden estimates for specific Form N-CEN items in this Table 1 are
based on the applicable number of estimated funds, registrants, or ETFs, responding to that
item. See supra footnotes 13-18.

6

Number of Registrants Filing

×2,835

×2,835

283.5 hours

$99,508.5

BURDEN FOR RULE 18f-4 ITEMS
Rule 18f-4 Items

.4 hours

Number of Funds Filing

×

$351 blended rate

$140.40

×5,524

×5,524

2,210 hours

$775,570

TOTAL BURDEN
54,890.6
hours

Total Annual Burden

$19,267,460.6

TABLE 2: CHANGE IN BURDEN ESTIMATES 22
Annual Number of Responses

Form
NCEN

Previously
Approved

Revised
Estimate

2,835

2,835

Annual Time Burden (hours)

Change

Previously
Approved

Revised
Estimate

+0

52,680.6

54,890.6

Cost Burden (dollars)

Change

Previously
Approved

Revised
Estimate

Change

+2,210

$18,491,890.6

$19,267,460.6

+$775,570

13. Cost to Respondents
The Commission previously estimated, with respect to the filing of a report on
Form N-CEN, an external cost of $91 per registrant/fund. 23 External costs include
the cost of goods and services, which with respect to reports on Form N-CEN, would
include the costs of registering and maintaining an LEI for the registrant/funds. 24 We
estimate in the Adopting Release that the amendments to Form N-CEN will impose
no additional external costs associated with this collection of information. We
estimate that in the aggregate all applicable funds will incur external annual costs of
$1,344,980. 25
22

This table includes current burden estimates from the approved Form N-CEN burden
inventory. These baseline estimates differ from the estimates provided in the Adopting
Release, to reflect inventory updates and revisions approved by OMB since the Commission’s
rule 18f-4 adoption.

23

As of 2020 the annual cost of maintaining an LEI from the GMEI Utility was $80, plus an
$11 surcharge for the LEI Central Operating Unit. See GMEI Utility, Frequently Asked
Questions, available at https://www.gmeiutility.org/frequentlyAskedQuestions.jsp. The
Commission has further estimated the one-time burden associated with obtaining an LEI is
one hour, with ongoing administration of an LEI corresponding to one hour per year.

24

See Items B.1.d. and C.1.c. of Form N-CEN (requiring LEI for the registrant and each
management investment company).

25

This estimate is based on the following calculation: $91 per registrant or fund per year ×
(2,835 investment company registrants + 9,854 mutual funds (which reflects the number of
mutual fund series, but excludes money market funds, which would have already obtained

7

14. Costs to Federal Government
We previously estimated that 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. We estimate that the
amendments to Form N-CEN will not impose additional costs to the federal
government associated with this collection of information.
15. Changes in Burden
As summarized in Table 2 above, the estimated annual burden hours for
Form N-CEN has increased from 52,680.6 to 54,890.6 hours (an increase of 2,210
hours). This is due to amendments to Form N-CEN requiring a fund to identify
whether it relied on rule 18f-4 during the reporting period and whether the fund has
relied on certain provisions of the rule. We do not estimate a change in cost burden.
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 requested public
comment on all information collection burden estimates for this OMB control
number.
16. Information Collection Planned For Statistical Purposes
The results of any information collected will not be published.
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 for Paperwork Reduction Act Submissions
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.

LEIs pursuant to the requirements of Form N-MFP) + 2,091 ETFs) = $91 per registrant/fund
per year × 14,780 registrants and funds = $1,344,980 per year.

8