Supporting Statement

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 May 3, 2019, the Commission proposed amendments to the financial
statement requirements for acquired and disposed businesses to improve the financial
information about acquired or disposed businesses, facilitate more timely access to
capital, and reduce the complexity and costs of preparing the disclosure. 1 The
proposed amendments to the Commission’s rules and forms would, among other
things, affect financial reporting for acquisitions involving investment companies,
including financial information provided on Form N-1A.
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.

1

See Amendments to Financial Disclosures about Acquired and Disposed Businesses,
Securities Act Release No. 10635 (May 3, 2019) [84 FR 24600 (May 28, 2019)].

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
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, including the requirements affected by the
proposed amendments, 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.
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
2

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

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.

2

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

In September 2015, the Commission issued a Request for Comment on the
Effectiveness of Financial Disclosures About Entities Other Than the Registrant; 5
and on May 3, 2019, the Commission issued a proposing release soliciting comment
on the “collection of information” requirements and associated paperwork burdens
of the proposed amendments. 6 Comments on the Commission’s releases are
generally received from registrants, investors, and other market participants. In
addition, the Commission and staff participate in an ongoing dialogue with
representatives of various market participants through public conferences, meetings,
and informal exchanges. The Commission considers all comments received.
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.
12.

Burden of Information Collection

The below estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 7 and are not derived from a
5

See Release No. 33-9929 (Sept. 25, 2015) [80 FR 59083 (Oct. 1, 2015)].

6

See supra note 1.

7

44 U.S.C. 3501 et seq.

3

comprehensive or even representative survey or study of the cost of Commission
rules and forms. Compliance with Form N-1A is mandatory. Responses to the
collection of information will not be kept confidential.
We estimate that the proposed amendments will result in a reduction of 100
burden hours for each Form N-1A filing that contains acquired fund financial
information. To estimate the overall paperwork burden reduction from the proposed
amendments, we first estimated the number of filings that include acquired fund
financial statements. To do so, we searched the various form types over a three-year
period ended October 1, 2018 for indications of fund acquisition disclosure. 8 Based
on this review, we estimate that 12 of the 8,936 total average number of Form N-1A
filings (or 0.0013%) contained fund acquisition disclosure. Using the currentlyapproved number of responses (6,002), we therefore estimate that 8 Form N-1A
filings (0.0013% of 6,002) would be affected by the proposed amendments annually.
As shown in Table 1 below, we estimate that 25% of the burden of preparation
for Form N-1A is carried by the registrant internally and that 75% of the burden of
preparation is carried by outside professionals retained by the company. We estimate
that such costs would be an average of $400 per hour. 9
Table 1: Calculation of the Change in Burden Estimates of Current Responses
Due to Proposed Amendments to Form N-1A
Form

N-1A

Number of
Estimated
Affected
Reponses
(A)

8

Burden
Hour
Change per
Current
Affected
Response
(B)

Change in
Burden
Hours for
Current
Affected
Responses
(C)

(100)

= (A) x (B)
(800)

Change in
Company
Hours for
Current
Affected
Responses
(D)

Change in
Professional
Hours for
Current
Affected
Responses
(E)

Change in
Professional
Costs for
Current
Affected
Responses
(F)

= (C) x 0.25

= (C) x 0.75

= (E) x $400

(200)

(600)

($240,000)

8

To conduct this analysis, Commission staff used text-based search terms of filings
made through the EDGAR system to identify filings that may contain acquired fund
financial statements and pro forma financial information from investment company
registrants. However, the use of text-based search terms may understate the actual
number of instances. Because the number of filings varied from year to year, we use
an average over a three-year period.

9

This $400 estimate is based on consultations with several registrants, law firms, and
other persons who regularly assist registrants in preparing and filing reports with the
Commission.

4

Table 2: Requested Paperwork Burden Under the Proposed Amendments
to Form N-1A
Current Burden
Form

N-1A

Program Change

Current
Annual
Responses

Current
Burden
Hours

Current Cost
Burden

(A)

(B)

6,002

1,672,077

13.

Requested Burden

Reduction
in
Company
Hours
(E)

Reduction in
Professional
Costs

Annual
Responses
(G)

Burden
Hours
(H)

Cost Burden
(I)

(C)

Number
of
Affected
Responses
(D)

(F)

= (A)

= (B) + (E)

= (C) + (F)

$132,940,008

8

(800)

($240,000)

6,002

1,671,277

$132,700,008

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 2 above, in our most recent Paperwork Reduction Act
submission for Form N-1A, Commission staff estimated $132,940,008 in external
cost burden per year. We estimate that the revised external burden will be
approximately $132,700,008.
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 decreased from 1,672,077 hours to 1,671,277 hours (a decrease of
800 hours). In addition, the cost burden associated with Form N-1A has decreased
from $132,940,008 to $132,700,008 (a decrease of $240,000). The changes in burden
hours and external cost burdens are due the estimated reduction in the hour- and
cost-burden for each Form N-1A filing that contains acquired fund financial
information that would result from the proposed amendments.
16.

Information Collection Planned for Statistical Purposes

The results of any information collected will not be published.

5

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.

6