Form N-6 - Supporting Statement

OMB CONTROL NUMBER: 3235-0503
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-6
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-6 is the form used by separate accounts organized as unit investment
trusts that offer variable life insurance contracts 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 separate account to register as an investment company.
Section 5(b) of the Securities Act makes it unlawful to carry or cause to be carried a
security for purposes of sale or for delivery after the sale “unless accompanied or
preceded” by a prospectus that meets the requirements of section 10(a) of the Act (which,
in turn, generally requires a prospectus relating to a security to contain the information
contained in the registration statement). For separate accounts that offer variable life
insurance contracts, Form N-6 provides the information required to appear in prospectus
meeting the requirements of section 10(a) of the Securities Act (as well as the
information required to appear in the statement of additional information (“SAI”)).
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-6 to submit the document in
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-6 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 the 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-6 is required to be filed with the Commission electronically
on EDGAR (see 17 CFR 232.101(a)(1)(i) and (iv)). The public may access filings on
EDGAR through the Commission’s internet website (http://www.sec.gov) or by using an
EDGAR terminal located in the Commission’s public reference rooms. Prospectuses and
1

FAST Act Modernization and Simplification of Regulation S-K, Securities Act Release No. 10618
(Mar. 20, 2019).

SAIs may be sent to investors by electronic means so long as certain requirements are
met. 2
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-6 are not generally 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 and proposed disclosure
requirements for Form N-6 do not distinguish between small entities and larger entities.
The burden on smaller entities may be greater than for larger entities. This burden
includes the cost of producing, printing, and filing, and disseminating prospectuses and
SAIs. 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.
In any event, no small entities currently file registration statements on Form N-6.
6.

Consequences of Not Conducting Collection

The purpose of Form N-6 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 the security. Less frequent filing

2

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)].

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
frequently, investors may not be provided with the information necessary to evaluate an
investment in the security.
7.

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

Not Applicable.
8.

Consultation Outside the Agency

Before determining whether to adopt the proposed amendments to Form N-6, the
Commission will receive and evaluate public comments on the proposal and its collection
of information requirements. Moreover, 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 that may confront 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

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.

TABLE 1 : BURDEN ESTIMATES F OR INITIAL F ORM N-6 F ILINGS
Internal Burden
Per Response

Wage Rate1

Cost of
Internal Burden

Annual
Cost Burden

$228,438

$26,169

C URREN T L Y AP P ROVED ES T IMAT ES
$296 (blended rate of
$419 for attorneys and
$173 for intermediate
accountants)

Current Form N-6 requirements

771.75 hours

Number of annual responses

×7

×7

×7

Total annual burden

5,402 hours

$1,599,066

$183,183

$228,438

$26,169

Current Form N-6 requirements

Preparation and review of exhibit
hyperlinks

REVI S ED ES T I MAT ES
$296 (blended rate of
$419 for attorneys and
771.75 hours
×
$173 for intermediate
accountants)
0.125 hours

×

$368 (compliance
attorney)

$46.00

0.125 hours

×

$334 (senior
programmer)

$41.75

$300

Total annual burden per response

771.25 hours

$228,52575

$26,469

Number of annual responses

×7

×7

×7

Total annual burden

5,399 hours

$1,599,680

$185,283

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.

TABLE 2 : BURDEN ESTIMATES F OR POST-EFFECTIVE AMENDMENTS
Internal Burden
Per Response

Wage Rate1

Cost of
Internal Burden

Annual
Cost Burden

$22,481.20

$9,493

C URREN T L Y AP P ROVED ES T IMAT ES
75.95 hours

Number of annual responses

× 385

× 385

× 385

Total annual burden

29,241 hours

$8,655,262

$3,654,805

$22,481.20

$9,493

Current Form N-6 requirements

Preparation and review of exhibit
hyperlinks

×

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

Current Form N-6 requirements

REVI S ED ES T I MAT ES
$296 (blended rate of
$419 for attorneys and
75.95 hours
×
$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

76.2 hours

$22,568.95

$9,793

Number of annual responses

× 388

× 388

× 388

Total annual burden

29,565 hours

$8,689,046

$3,770,305

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.

TABLE 3 : TOTAL BURDEN ESTIMATES F OR F ORM N-6
Internal Burden

Cost of
Internal Burden

Annual
Cost Burden

REVI S ED ES T I MAT ES
Initial Form N-6 filings

5,402 hours

$1,599,066

$183,183

Post-effective amendments

29,241 hours

$8,655,262

$3,654,805

Total annual burden

31,987 hours

$9,084,308

$3,816,692

Initial Form N-6 filings

C U RREN T L Y AP P ROVED ES T I MAT ES
5,399 hours
$1,599,680

$185,283

Post-effective amendments

29,337 hours

$8,689,046

$3,770,305

Total annual burden

65,123 hours

$17,518,087

$7,840,000

TABLE 4 : C HANGE IN BURDEN ESTIMATES
Annual Number of Responses

Form
N-6

Previously
Approved

Revised
Estimate

385

388

Annual Time Burden (hours)

Change

Previously
Approved

Revised
Estimate

3

65,123

31,987

Cost Burden (dollars)

Change

Previously
Approved

Revised
Estimate

Change

(33,136)

$7,840,000

$3,816,692

($4,023,308)

As summarized in Table 1 and Table 2 above, the Commission has previously estimated
that separate accounts will make approximately 7 initial registration statement filings and 385
post-effective amendments annually, based on filings with the Commission. 3 The hour burden
estimates for preparing and filing Form N-6 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-6 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-6, Commission staff estimated that the annual compliance burden to
comply with the collection of information requirements of Form N-6 is 65,123 hours, with an
internal cost of about $7.8 million. The amendments to Regulation S-T that will require separate
accounts filing on Form N-6 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 based on the median number of exhibits that are filed

3

This estimate was previously submitted to OMB in connection with the revision of the collection of information
required by Form N-6 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)].

with an affected form. As summarized in Table 3 above, we estimate that the total internal
burden associated with Form N-6 will be 31,987 hours per year, at a cost of about $3.8 million.
13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and update filings on
Form N-6, 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-6, Commission staff estimated about $7.8 million in external cost burden
per year. We estimate that the revised external burden will be $3.8 million.
14.

Cost to the Federal Government

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 $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. A portion of
those costs relate to processing and reviewing Form N-6 filings submitted to the Commission.
15.

Change in Burden

As summarized in Table 4 above, the estimated hourly burden associated with Form N-6
has decreased from 65,123 hours to 31,987 hours (a decrease of 33,136 hours). In addition, the
cost burden associated with Form N-6 has decreased from $7,840,000 to $3,816,692 (a decrease
of $4,023,308). The changes in burden hours 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-6
regarding hyperlinking.
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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.
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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