Form N-1A Supporting Statement (FAST Act)

Form N-1A Supporting Statement (FAST Act).pdf

Form N-1A under the Securities Act of 1933 and under the Investment Company Act of 1940, registration statement of open- end management investment companies

OMB: 3235-0307

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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 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-1A to

1

FAST Act Modernization and Simplification of Regulation S-K, Securities Act
Release No. 10618 (Mar. 20, 2019) [84 FR 12674 (Apr. 2, 2019)].

OMB CONTROL NUMBER 3235-0307
submit the document in HTML format and to include a hyperlink to each exhibit
identified in the exhibit index of the document.
In several cases, some of these amendments presented only a negligible or
offsetting impact on the cost and hourly burdens associated with the Paperwork
Reduction Act for certain investment company registration forms, and consequently,
we believe did not warrant making any adjustments to those forms’ burdens. With
respect to our adoption of new Instruction 2 to Item 28, we noted that although we
expected some reduction in burden associated with these amendments, we do not
believe the reduction will be significant enough to warrant an adjustment to our
burden estimates. Third, with respect to the impact new Instruction 3 to Item 28
would have on personally identifiable information (PII), we estimated in the
adopting release that the amendments will result in some incremental reduction in
burden, although we did not believe the reduction will be significant enough to
warrant an additional adjustment to our burden estimates. Finally, we did not make
any adjustments to the paperwork burden for forms impacted by our amendments to
simplify and modernize the rules and forms governing incorporation by reference,
because the amendments resulted in offsetting adjustments to the paperwork burden
per affected form. As a result of the negligible or offsetting impacts noted above, we
did not incorporate any changes to the burden hours or costs associated with the
foregoing areas because we did not believe the adjustment would be significant
enough to warrant an additional adjustment to our burden estimates in sections 12
and 13 below.

OMB CONTROL NUMBER 3235-0307
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 OpenEnd 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, 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.2 The public may access filings on EDGAR
through the Commission’s Internet Web site (http://www.sec.gov) or at EDGAR
2

17 CFR 232.101(a)(1)(i) and (iv).

OMB CONTROL NUMBER 3235-0307
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.3
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
change in a rule. The requirements of Form N-1A are not generally duplicated
elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 4 to identify methods to minimize recordkeeping or reporting
requirements affecting small businesses. The current disclosure requirements for
registration statements on Form N-1A do not distinguish between small entities and
other investment companies. The burden on smaller investment companies of
preparing and filing registration statements may be proportionately greater than for
larger investment companies. This burden includes the cost of producing, printing,
filing, and disseminating prospectuses. 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.

3

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)).

4

5 U.S.C. 601 et seq.

OMB CONTROL NUMBER 3235-0307
6.

Consequences of Not Conducting Collection

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 filers to provide
investors with information necessary to evaluate an investment in the 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 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)

This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

Before adopting the amendments affecting Form N-1A, 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-1A as proposed and as compared
to the existing approved burden inventory in the proposing release for the
amendments. 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 received no comments in
response to its request. Moreover, the Commission and the staff of the Division of
Investment Management participate in an ongoing dialogue with representatives of

OMB CONTROL NUMBER 3235-0307
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

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 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 EGovernment 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 January 29, 2016, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy.

OMB CONTROL NUMBER 3235-0307
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 5 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission
rules and forms. Compliance with the disclosure requirements of Form N-1A is
mandatory. Responses to the disclosure requirements will not be kept confidential.

5

44 U.S.C. 3501 et seq.

OMB CONTROL NUMBER 3235-0307

Table 1: Burden Estimates for Initial Registration Statements Filed on Form N-1A
Burden Per Response
Internal
Burden

Aggregate Burden
Cost of
Internal
Burden

Wage Rate1

Annual
Cost Burden

Annual
Responses

Internal Burden

Cost of
Internal Burden

Annual
Cost Burden

6,002

1,670,576 hours

$473,869,904

$131,139,208

1,670,576 hours

$

$131,139,208

CURRENTLY A PPROVED ESTIMA TES
Preparing and filing
reports on Form N-1A
generally

278 hours

×

$284 (1:1 blend of attorney
and intermediate accountant)

$78,952

$21,849

×

Total annual burden
REVISED ESTIMATES
Preparing and filing
reports on Form N-1A
generally

278 hours

×

$284 (1:1 blend of attorney
and intermediate accountant)

$78,952

$21,849

×

6,002

1,670,576 hours

$473,869,904

$131,139,208

Preparation and review
of exhibit hyperlinks

0.25 hours

×

$348 (1:1 blend of
compliance attorney and
senior programmer)

$87

$300

×

6,002

1,501 hours

$522,174

$1,800,800

1,672,077 hours

$474,392,078

$132,940,008

Total annual burden
Notes:

1. 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: Change in Burden Estimates
Annual Number of Responses

Form N-1A

Annual Time Burden (hours)

Cost Burden (dollars)

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

6,002

6,002

0

1,670,576

1,672,077

+ 1,501

$131,139,208

$132,940,008

+ $1,800,800

As summarized in Table 1 above, the Commission has previously estimated that
funds will make about 6,002 filings on Form N-1A each year, incurring
1,670,576 hours of internal hour burden at a cost of about $473.87 million. The hour
burden estimates for preparing and filing reports on Form N-1A 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.
The amendments to Regulation S-T that will require funds filing reports on
Form N-1A 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 funds that prepare and file these registration
statements. For purposes of the Paperwork Reduction Act, we estimated the average
burden for a fund to hyperlink to exhibits based on the median number of exhibits
that are filed with an affected form. As summarized in Table 1 above, we estimate
that the total internal burden associated with Form N-1A will be 1,672,077 hours per
year, at a cost of about $474.4 million.
13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and amend
registration statements on Form N-1A, such as for the services of independent
auditors and outside counsel. The cost burden does not include the hour burden
discussed in Item 12 above. Estimates are based on the Commission’s experience
with the filing of registration forms.

As summarized in Table 1 above, in our most recent Paperwork Reduction Act
submission for Form N-1A, Commission staff estimated about $131.1 million in
external cost burden per year. We estimate that the revised external burden will be
$132.9 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,
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.
15.

Change in Burden

As summarized in Table 2 above, the estimated hourly burden associated with
Form N-1A has increased from 1,670,576 hours to 1,672,077 hours (an increase of
1,501 hours). In addition, the cost burden associated with Form N-1A has increased
from $131,139,208 to $132,940,008 (an increase of $1,800,800). 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-1A
regarding hyperlinking. 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.

10

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 Statement for Paperwork Reduction Act
Submission

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.

11


File Typeapplication/pdf
AuthorNixon, Naseem
File Modified2021-01-26
File Created2021-01-26

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