Form ADV (P-Cyber) Supporting Statement (Cyber)

OMB CONTROL NUMBER: 3235-0049
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Amendments to Form ADV under the Investment Advisers Act of 1940
A. JUSTIFICATION
1.

Necessity for the Information Collection

Form ADV is a three-part investment adviser form. Part 1 of Form ADV contains
information used primarily by the Securities and Exchange Commission
(“Commission”) staff, and Part 2 is the client brochure. Part 3 requires registered
investment advisers that offer services to retail investors to prepare and file with the
Commission, post to the adviser’s website (if it has one), and deliver to retail
investors a relationship summary.
The Commission uses the information in Form ADV to determine eligibility for
registration with us and to manage our regulatory and examination programs.
Clients use the information required in Form ADV to determine whether to hire or
retain an investment adviser, as well as what types of accounts and services are
appropriate for their needs. Rule 203-1 1 under the Investment Advisers Act of 1940
(“Advisers Act”) 2 requires every person applying for investment adviser registration
with the Commission to file Form ADV. 3 Rule 204-4 4 under the Advisers Act
requires certain investment advisers exempt from registration with the Commission
(“exempt reporting advisers”) to file reports with the Commission by completing a
limited number of items on Form ADV. Rule 204-1 5 under the Advisers Act requires

1
2
3
4
5

17 CFR 275.203-1.
15 U.S.C 80b-4.
17 CFR 279.1.
17 CFR 275.204-4.
17 CFR 275.204-1.

any adviser that is required to complete Form ADV to update the form at least
annually, including exempt reporting advisers that report to the Commission
pursuant to rule 204-4 and requires advisers to submit electronic filings through the
Investment Adviser Registration Depository (“IARD”). The paperwork burdens
associated with rules 203-1, 204-1, and 204-4, as well as the obligation to deliver
codes of ethics to clients under rule 204A-1, are included in the approved annual
burden associated with Form ADV and thus do not entail a separate collection of
information.
On February 9, 2022, the Commission proposed rules related to cybersecurity
risk management for registered investment advisers, registered investment
companies, and business development companies as well as amendments to certain
rules that govern investment adviser and fund disclosures under the Advisers Act and
the Investment Company Act of 1940. 6 The Commission proposed amendments to
Form ADV to provide clients and prospective clients with information regarding an
adviser’s cybersecurity risks and significant cybersecurity incidents that have
occurred in the past two years. Specifically, the proposed amendments would add a
new Item 20 entitled “Cybersecurity Risks and Incidents” to Form ADV’s narrative
brochure, or Part 2A. Advisers would be required to describe cybersecurity risks that
could materially affect the advisory services they offer and how they assess,
prioritize, and address cybersecurity risks created by the nature and scope of their
business. The proposed amendments would also require advisers to describe any

6

Cybersecurity Risk Governance and Incident Disclosure, Securities Act Release No. 11028 (Feb.
9, 2022) available at https://www.sec.gov/rules/proposed/2022/33-11028.pdf (“Cybersecurity Risk
Governance and Incident Disclosure Proposal”).

2

cybersecurity incidents that occurred within the last two fiscal years that have
significantly disrupted or degraded the adviser’s ability to maintain critical
operations, or that have led to the unauthorized access or use of adviser information,
resulting in substantial harm to the adviser or its clients. These amendments are
designed to provide clients and prospective clients with information regarding
cybersecurity risks and incidents that could materially affect the advisory
relationship.
We did not adopt amendments to Form ADV Parts 1 or 3.
Form ADV contains “collection of information” requirements within the
meaning of the Paperwork Reduction Act of 1995. 7 The amendments to Form ADV
related to the cybersecurity risk management rules contain collections of
information. The collection of information is necessary to improve information
available to us and to the general public about advisers’ cybersecurity risks and
incidents. This information would be particularly useful for Commission staff in
reviewing an adviser’s compliance with the proposed rulemakings and rule
amendments. Our staff will also use this information to help prepare for
examinations of investment advisers. Responses are not kept confidential.
The title of this collection of information is: “Form ADV under the Investment
Advisers Act of 1940” and the Commission previously submitted this collection to
the Office of Management and Budget (“OMB”) for review in accordance with 44
U.S.C. 3507(d) and 5 CFR 1320.11. OMB approved, and subsequently extended,

7

44 U.S.C. 3501 to 3520.

3

this collection under control number 3235-0049 (expiring on November 30, 2023).
An agency may not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB control number.
The paperwork burdens associated with rules 203-1, 204-1, 204A-1, and 204-4 are
included in the approved annual burden associated with Form ADV and thus do not
entail separate collections of information. These collections of information are found
at 17 CFR 275.203-1, 275.204- 1, 275.204-4, 275.204A-1, and 279.1 (Form ADV
itself) and are mandatory.
The respondents are investment advisers registered with the Commission or
applying for registration with the Commission or exempt reporting advisers.
2.

Purpose and Use of the Information Collection

The purpose of Form ADV is to provide advisory clients, prospective clients, and
the Commission with information about an adviser, and its business, conflicts of
interest and personnel. We use the information to determine eligibility for
registration with us and to manage our regulatory, examination, and enforcement
programs. The information filed with the Commission permits the verification of
compliance with securities law requirements and assures the public availability and
dissemination of the information. Unlike many other federal information collections,
which are primarily for the use and benefit of the collecting agency, this information
collection is also for the use and benefit of clients and prospective clients. Clients and
prospective clients use certain of the information to determine whether to hire an
adviser and, if hired, how to manage that relationship.

4

This collection of information is found at 17 CFR 275.203-1, 275.204-1, 275.2044, 275.204A-1, and 275.279.1, and it is mandatory. Responses are not kept
confidential. The majority of the respondents to the Form ADV collection of
information are investment advisers registered with the Commission or applying for
registration with the Commission while the additional respondents to the Form ADV
collection of information are exempt reporting advisers. The information collected
takes the form of disclosures to respondents’ clients, potential clients, and the
Commission.
3.

Consideration Given to Information Technology

The information collected pursuant to Form ADV takes the form of disclosures
made by investment advisers to their clients and potential clients and reporting to the
Commission. Investment advisers currently file their Form ADV electronically on
the IARD system. This method of collecting information reduces the regulatory
burden upon investment advisers by permitting them to file applications for
registration, and amendments thereto, at one central location, rather than filing
Form ADV separately with the Commission and the states for notice filing purposes.
Exempt reporting advisers are subject to reporting, but not registration
requirements and must submit their reports through the IARD using the same
process as registered investment advisers. Because exempt reporting advisers may be
required to register on Form ADV with one or more state securities authorities, use
of the existing form and filing system permits these advisers to satisfy both state and
Commission requirements with a single electronic filing. Our approach permits an
adviser to transition from filing reports with us to applying for registration under the
5

Act by simply amending its Form ADV; the adviser would check the box to indicate
it is filing an initial application for registration, complete the items it did not have to
answer as an exempt reporting adviser, and update the pre-populated items that it
already has on file.
4.

Efforts to Identify Duplication

The collection of information requirements of the form, including the
amendments to the form, are not duplicated elsewhere. While Form ADV Part 3
requires firms to summarize topics also required to be discussed in Form ADV Part 1
or Part 2, Form ADV Part 3 has a distinct purpose to help retail investors select or
determine whether to remain with a firm or financial professional by providing better
transparency and summarizing in one place selected information about a particular
investment adviser. The Commission periodically evaluates rule-based reporting and
recordkeeping requirements for duplication, and reevaluates these requirements
whenever it adopts amendments to its rules.
Further, while the proposed Form ADV-C would require advisers to report
certain information regarding a significant cybersecurity incident to the Commission
that may also be discussed in Form ADV Part 2, proposed Form ADV-C has a
distinct purpose to help the Commission monitor and evaluate the effects of the
cybersecurity incident on an adviser and its clients or a fund and its investors and
assess the potential systemic risks affecting financial markets more broadly.

6

5.

Effect on Small Entities

The requirements of Form ADV, including the amendments, are the same for all
investment advisers registered with the Commission, and they are the same for all
exempt reporting advisers, including (in both cases) those advisers that are small
entities. Investment advisers with less than $100 million in assets under management
generally are not permitted to register with the Commission and must register with
state securities authorities. Because the protections of the Advisers Act are intended
to apply equally to retail investor clients of both large and small firms, it would be
inconsistent with the purposes of the Advisers Act to specify differences for small
entities under the new requirements. The Commission reviews all rules periodically,
as required by the Regulatory Flexibility Act, to identify methods to minimize
recordkeeping or reporting requirements affecting small businesses.
6.

Consequences of Not Conducting Collection

The collection of information required by the form is necessary to protect
investors by providing clients and potential clients, as well as the Commission, with
information about the adviser, and its business, conflicts of interest and personnel.
The consequences of not collecting this information would be that clients and
prospective clients may not have the information they need in order to evaluate the
adviser’s business practices and to determine whether to hire an adviser and, if hired,
how to manage that relationship. In addition, if the information is either not
collected or is collected less frequently, the Commission’s ability to protect investors
would be reduced.

7

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

The Commission and the staff of the Division of Investment Management
participate in an ongoing dialogue with representatives of the investment adviser
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. In addition, the
Commission has requested public comment on the proposed amendments to Form
ADV, including the collection of information requirements resulting from the
proposed amendments. Before adopting these amendments, the Commission will
receive and evaluate public comments on the proposed amendments and their
associated collection of information requirements.
9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Confidentiality

The assurance of information collected pursuant to Form ADV is through filings
with the Commission. These disclosures are not kept confidential.

8

11.

Sensitive Questions

No information of a sensitive nature will be required under this collection of
information. The IARD system contains an embedded check which prevents
individuals' social security numbers from being subject to public view.
The information collection collects basic Personally Identifiable Information (PII)
that may include names, dates of birth and social security numbers (the social
security numbers are screened from public view). The agency has determined that the
information collection constitutes a system of record for purposes of the Privacy Act
and is covered under System of Records Notice (SORN) SEC-50 “Investment
Adviser Records”. The Investment Adviser Records SORN is provided as a
supplemental document and is also available at https://www.sec.gov/privacy. A
Privacy Act Statement is applicable for the information collection and is available on
the paper form and web platform.
In accordance with Section 208 of the E-Government Act of 2002, the agency has
conducted a Privacy Impact Assessment (PIA) of the IARD system, in connection
with this collection of information. The IARD PIA, published on July 8, 2014, is
provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
Form ADV collects Personally Identifiable Information (PII). Form ADV
requires filers to provide names, dates of birth and social security numbers (the social
security numbers are screened from public view). The IARD system contains an
embedded check which prevents individuals from providing social security numbers.
All individuals (and entities other than trusts) are required to obtain CRD numbers,
9

which do not constitute PII. Such collection and usage is necessary for verification
purposes. Commission staff uses this information for positive verification of
individuals and entities. Alternative identities are used for all individuals and entities
other than trusts because a social security number is the only identifier available to
them. The Commission complies with section 7 of the Privacy Act of 1974 because
the Advisers Act authorizes the Commission to collect this information on Form
ADV from advisers. 8 Filing Form ADV is mandatory. A System of Records Notice
has been published in the Federal Register at 66 FR 7820. It, along with instructions
on how to obtain the applicable Privacy Impact Assessment, can be found at:
http://www.sec.gov/about/privacy/secprivacyoffice.htm.
12.

Estimate of Hour and Cost 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.
The respondents to current Form ADV are investment advisers registered with
the Commission or applying for registration with the Commission and exempt
reporting advisers. 10 Based on the IARD system data as of October 31, 2021,
approximately 14,774 investment advisers were registered with the Commission, and
8
9
10

See 15 U.S.C. §§ 80b-3 and 80b-4.
44 U.S.C. 3501 et seq.
An exempt reporting adviser is an investment adviser that relies on the exemption from investment
adviser registration provided in either section 203(l) of the Advisers Act because it is an adviser
solely to one or more venture capital funds or section 203(m) of the Advisers Act because it is an
adviser solely to private funds and has assets under management in the United States of less than
$150 million.

10

4,985 exempt reporting advisers file reports with the Commission. The amendments
we are proposing would increase the information requested in Part 2A of Form ADV
for registered investment advisers. Because exempt reporting advisers are not
required to complete Form ADV Part 2A, they would not be subject to the proposed
amendments to Form ADV Part 2A and would therefore not be subject to this
collection of information. 11 However, these exempt reporting advisers are included
in the PRA for purposes of updating the overall Form ADV information collection.
In addition, the burdens associated with completing Part 3 are included in the PRA
for purposes of updating the overall Form ADV information collection. 12 Based on
the prior revision of Form ADV, we estimated the annual compliance burden to
comply with the collection of information requirement of Form ADV is 433,004
burden hours and an external cost burden estimate of $14,125,083. 13
We propose the following changes to our PRA methodology for Form ADV:
•

Form ADV Parts 1 and 2. Form ADV PRA has historically calculated a per
adviser per year hourly burden for Form ADV Parts 1 and 2 for each of (1) the
initial burden and (2) the ongoing burden, which reflects advisers’ filings of
annual and other-than-annual updating amendments. We noted in previous PRA
amendments that most of the paperwork burden for Form ADV Parts 1 and 2

11

12
13

An exempt reporting adviser is not a registered investment adviser and therefore would not be
subject to the proposed amendments to Item 5 of Form ADV Part 1A. Exempt reporting advisers
are required to complete a limited number of items in Part 1A of Form ADV (consisting of Items
1, 2.B., 3, 6, 7, 10, 11, and corresponding schedules), and are not required to complete Part 2.
See Updated Supporting Statement for PRA Submission for Amendments to Form ADV under the
Investment Advisers Act of 1940 (“Approved Form ADV PRA”).
See Investment Adviser Marketing, Final Rule, Investment Advisers Act Release No. 5653 (Dec.
22, 2020) [81 FR 60418 (Mar. 5, 2021)] and corresponding submission to the Office of
Information and Regulatory Affairs at reginfo.gov (“2021 Form ADV PRA”).

11

would be incurred in the initial submissions of Form ADV. However, recent PRA
amendments have continued to apply the total initial hourly burden for Parts 1 and
2 to all currently registered or reporting RIAs and ERAs, respectively, in addition
to the estimated number of new advisers expected to be registering or reporting
with the Commission annually. We believe that the total initial hourly burden for
Form ADV Parts 1 and 2 going forward should be applied only to the estimated
number of expected new advisers annually. This is because currently registered
or reporting advisers have generally already incurred the total initial burden for
filing Form ADV for the first time. On the other hand, the estimated expected
new advisers will incur the full total burden of initial filing of Form ADV, and we
believe it is appropriate to apply this total initial burden to these advisers. We
propose to continue to apply any new initial burdens resulting from proposed
amendments to Form ADV Part 2, as applicable, to all currently registered or
reporting investment advisers plus all estimated expected new RIAs and ERAs
annually.
The table below summarizes our PRA initial and ongoing burden estimates
associated with the proposed amendments to Form ADV. The proposed new
burdens take into account changes in the numbers of advisers since the last approved
PRA for Form ADV, and the increased wage rates due to inflation.

12

Table 1: Form ADV PRA Estimates
Internal initial
burden hours

Internal annual
amendment burden
hours1

Wage rate2

Internal time costs

Annual external
cost burden3

PROPOSED AMENDMENTS TO FORM ADV
RIAs (burden for Parts 1 and 2, not including private fund reporting)4

Proposed
addition (per
adviser) to Part
2A (Item 20)

3 hours

0.2 hours

$279.50 per hour
(blended rate for
senior compliance
examiner and
compliance
manager)5

Current burden
per adviser7

29.72 hours8

11.8 hours9

$273 per hour
(blended rate for
senior compliance
examiner and
compliance manager)

Revised burden
per adviser

29.72 hours +
3 hours =
32.72 hours

0.2 hours + 11.8
hours = 12 hours

$279.50 (blended rate
for senior compliance
examiner and
compliance manager)

Total revised
aggregate
burden estimate

61,140.0812

183,456 hours13

Same as above

3.2 hours x $279.50
= $894.4

1 hour of
external legal
services ($496)
for ¼ of
advisers that
prepare Part 2;
1 hour of
external
compliance
consulting
services ($739)
for ½ of
advisers that
prepare Part 26

(29.72 + 11.8) x
$273 = $11,334.96

$2,069,250
aggregated
(previously
presented only
in the
aggregate)10

(32.72 + 12) x
$279.5 = $12,499.24

$4,689.5011

(61,140.08 +
183,456) x $279.5 =
$68,364,604.40

$9,701,37214

RIAs (burden for Part 3)15
No proposed
changes

--

--

--

--

--

Current burden
per RIA

20 hours,
amortized
over three
years = 6.67
hours16

1.58 hours17

$273 (blended rate
for senior compliance
examiner and
compliance manager)

$273 x (6.67 + 1.71)
= $2,287.74

$2,433.74 per
adviser18

Total updated
aggregate
burden estimate

66,149.59
hours19

14,573.92 hours20

Same as above

$22,562,221
(($279.50 x
(66,149.59 hours +
14,573.92 hours))

$8,157,555 21

ERAs (burden for Part 1A, not including private fund reporting)22
No proposed
changes

--

--

--

--

--

Current burden

3.60 hours23

1.5 hours + final

$273 (blended rate
for senior compliance

Wage rate x total

$0

13

per ERA
Total updated
aggregate
burden estimate

1,245.6 25

filings24

examiner and
compliance manager)

8,033.6 hours26

Same as above

hours (see below)
$2,593,536.40
($279.5 x (1,245.6 +
8,033.6 hours))

$0

--

--

Private Fund Reporting27
No proposed
changes

--

--

--

Current burden
per adviser to
private fund

1 hour per
private fund28

N/A–included in
the existing annual
amendment
reporting burden for
ERAs

$273 (blended rate
for senior compliance
examiner and
compliance manager)

Total updated
aggregate
burden estimate

1,150 hours30

N/A

Same as above

Cost of
$46,865.74 per
fund, applied to
6% of RIAs
that report
private funds29
$3,978,123.5 ($279.5
x 14,233 hours))

$15,090,768.30
31

TOTAL ESTIMATED BURDENS, INCLUDING AMENDMENTS
Current per
adviser
burden/external
cost per adviser
Revised per
adviser
burden/external
cost per adviser

23.82 hours

23.82 hours x $273 =
$6,502.86 per adviser
cost of the burden
hour

$77733

16.28 hours

16.28 hours x $279.5
= $4,550.26 per
adviser cost of the
burden hour

$1,598.0335

$14,125,08337

32

34

Current
aggregate
burden
estimates

433,004 initial and amendment hours annually

433,004 x $273 =
$118,210,092
aggregate cost of the
burden hour

Revised
aggregate
burden
estimates

335,748.79338 Initial and amendment hours annually

290,831.73 x $279.5
= $81,287,468.54
aggregate cost of the
burden hour

36

$32,949,695.30
39

Notes:
1. This column estimates the hourly burden attributable to annual and other-than-annual updating amendments to Form ADV, plus
RIAs’ ongoing obligations to deliver codes of ethics to clients.
2. As with Form ADV generally, and pursuant to the currently approved PRA (see 2021 Form ADV PRA), we expect that for most
RIAs and ERAs, the performance of these functions will most likely be equally allocated between a senior compliance examiner and a
compliance manager, or persons performing similar functions. The Commission’s estimates of the relevant wage rates are based on
salary information for the securities industry compiled by the SIFMA Wage Report. The estimated figures are modified by firm size,
employee benefits, overhead, and adjusted to account for the effects of inflation. For RIAs and ERAs that do not already have a senior
compliance or a compliance manager, we expect that a person performing a similar function would have similar hourly costs. The
estimated wage rates in connection with the proposed PRA estimates are adjusted for inflation from the wage rates used in the
currently approved PRA analysis.
3. External fees are in addition to the projected hour per adviser burden. Form ADV has a one-time initial cost for outside legal and
compliance consulting fees in connection with the initial preparation of Parts 2 and 3 of the form. In addition to the estimated legal
and compliance consulting fees, investment advisers of private funds incur one-time costs with respect to the requirement for
investment advisers to report the fair value of private fund assets.
4. Based on Form ADV data as of October 31, 2021, we estimate that there are 14,774 RIAs (“current RIAs”) and 514 advisers that
are expected to become RIAs annually (“newly expected RIAs”).
5. The $279.50 wage rate reflects current estimates from the SIFMA Wage Report of the blended hourly rate for a senior compliance
examiner ($243) and a compliance manager ($316). ($243 + $316) / 2 = $279.5. The Commission’s estimates of the relevant wage

14

rates are based on salary information for the securities industry compiled by Securities Industry and Financial Markets Association’s
Office Salaries in the Securities Industry 2013, as modified by Commission staff for 2020 ( “SIFMA Wage Report”).
6. We estimate that a quarter of RIAs would seek the help of outside legal services and half would seek the help of compliance
consulting services in connection with the proposed amendments to Form ADV Part 2. This is based on previous estimates and ratios
we have used for advisers we expect to use external services for initially preparing various parts of Form ADV. See 2020 Form ADV
PRA Renewal (the subsequent amendment to Form ADV described in the 2021 Form ADV PRA did not change that estimate).
Because the SIFMA Wage Report does not include a specific rate for outside compliance consultant, we are proposing to use the rates
in the SIFMA Wage Report for outside management consultant, as we have done in the past when estimating the rate of outside
compliance counsel. We are adjusting these external costs for inflation, using the currently estimated costs for outside legal counsel
and outside management consultants in the SIFMA Wage Report: $495 per hour for outside counsel, and $739 per hour for outside
management consultant (compliance consultants).
7. Per above, we are proposing to revise the PRA calculation methodology to apply the full initial burden only to expected RIAs, as
we believe that current RIAs have generally already incurred the burden of initially preparing Form ADV.
8. See 2020 Form ADV PRA Renewal (stating that the estimate average collection of information burden per adviser for Parts 1 and 2
is 29.22 hours, prior to the most recent amendment to Form ADV). See also 2021 Form ADV PRA (adding 0.5 hours to the estimated
initial burden for Part 1A in connection with the most recent amendment to Form ADV). Therefore, the current estimated average
initial collection of information hourly burden per adviser for Parts 1 and 2 is 29.72 hours (29.22 + 0.5 = 29.72).
9. The currently approved average total annual burden for RIAs attributable to annual and other-than-annual updating amendments to
Form ADV Parts 1 and 2 is 10.5 hours per RIA, plus 1.3 hours per year for each RIA to meet its obligation to deliver codes of ethics
to clients (10.5 + 1.3 = 11.8 hours per adviser). See 2020 Form ADV PRA Renewal (these 2020 hourly estimates were not affected by
the 2021 amendments to Form ADV). As we explained in previous PRAs, we estimate that each RIA filing Form ADV Part 1 will
amend its form 2 times per year, which consists of one interim updating amendment (at an estimated 0.5 hours per amendment), and
one annual updating amendment (at an estimated 8 hours per amendment), each year. We also explained that we estimate that each
RIA will, on average, spend 1 hour per year making interim amendments to brochure supplements, and an additional 1 hour per year
to prepare brochure supplements as required by Form ADV Part 2. See id.
10. See 2020 Form ADV PRA Renewal (the subsequent amendment to Form ADV described in the 2021 Form ADV PRA did not
affect that estimate).
11. External cost per RIA includes the external cost for initially preparing Part 2, which we have previously estimated to be
approximately 10 hours of outside legal counsel for a quarter of RIAs, and 8 hours of outside management consulting services for half
of RIAs. See 2020 Form ADV Renewal (these estimates were not affected by subsequent amendments to Form ADV). We add to this
burden the estimated external cost associated with the proposed amendment (an additional hour of each, bringing the total to 11 hours
and 9 hours, respectively, for ¼ and ½ of RIAs, respectively). (((.25 x 14,774 RIAs) x ($496 x 11 hours)) + ((0.50 x 14,774 RIAs) x
($739 x 9 hours))) / 14,774 RIAs = $4,689.50 per adviser.
12. Per above, we are proposing to revise the PRA calculation methodology for current RIAs to not apply the full initial burden to
current RIAs, as we believe that current RIAs have generally already incurred the initial burden of preparing Form ADV. Therefore,
we calculate the initial burden associated with complying with the proposed amendment of 3 initial hours x 14,774 current RIAs =
44,322 initial hours in the first year aggregated for current RIAs. We are not amortizing this burden because we believe current
advisers will incur it in the first year. For expected RIAs, we estimate that they will incur the full revised initial burden, which is
32.72 hours per RIA. Therefore, 32.72 hours x 514 expected RIAs = 16,818.08 aggregate hours for expected RIAs. We do not
amortize this burden for expected new RIAs because we expect a similar number of new RIAs to incur this initial burden each year.
Therefore, the total revised aggregate initial burden for current and expected RIAs is 44,322 hours + 16,818.08 hours = 61,140.08
aggregate initial hours.
13. 12 amendment hours x (14,774 current RIAs + 514 expected new RIAs) = 183,456 aggregate amendment hours.
14. Per above, for current RIAs, we are proposing to not apply the currently approved external cost for initially preparing Part 2,
because we believe that current RIAs have already incurred that initial external cost. For current RIAs, therefore, we are applying
only the external cost we estimate they will incur in complying with the proposed amendment. Therefore, the revised total burden for
current RIAs is (((.25 x 14,774 RIAs) x ($496 x 1 hour)) + ((0.50 x 14,774 RIAs) x ($739 x 1 hour))) / 14,774 RIAs = $7,290,969
aggregated for current RIAs, We do not amortize this cost for current RIAs because we expect current RIAs will incur this initial cost
in the first year. For expected RIAs, we apply the currently approved external cost for initially preparing Part 2 plus the estimated
external cost for complying with the proposed amendment. Therefore, $4,689.50 per expected RIA x 514 = $2,410,403 aggregated for
expected RIAs. We do not amortize this cost for expected new RIAs because we expect a similar number of new RIAs to incur this
external cost each year. $7,290,969 aggregated for current RIAs + $2,410,403 aggregated for expected RIAs = $9,701,372 aggregated
external cost for RIAs.
15. Even though we are not proposing amendments to Form ADV Part 3 (“Form CRS”), the burdens associated with completing Part
3 are included in the PRA for purposes of updating the overall Form ADV information collection. Based on Form ADV data as of
October 31, 2021, we estimate that 8,877 current RIAs provide advice to retail investors and are therefore required to complete Form
CRS, and we estimate an average of 347 expected new RIAs to be advising retail advisers and completing Form CRS for the first time
annually.
16. See Form CRS Relationship Summary; Amendments to Form ADV, Investment Advisers Act Release No. 5247 (Jun. 5, 2019)
[84 FR 33492 (Sep. 10, 2019)] (“2019 Form ADV PRA”). Subsequent PRA amendments for Form ADV have not adjusted the
burdens or costs associated with Form CRS. Because Form CRS is still a new requirement for all applicable RIAs, we have, and are
continuing to, apply the total initial amendment burden to all current and expected new RIAs that are required to file Form CRS, and
amortize that initial burden over three years for current RIAs.
17. As reflected in the currently approved PRA burden estimate, we stated that we expect advisers required to prepare and file the
relationship summary on Form ADV Part 3 will spend an average 1 hour per year making amendments to those relationship

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summaries and will likely amend the disclosure an average of 1.71 times per year, for approximately 1.58 hours per adviser. See 2019
Form ADV PRA (these estimates were not amended by the 2021 amendments to Form ADV),
18. See 2020 Form ADV PRA Amendment (this cost was not affected by the subsequent amendment to Form ADV and was not
updated in connection with that amendment; while this amendment did not break out a per adviser cost, we calculated this cost from
the aggregate total and the number of advisers we estimated prepared Form CRS). Note, however, that in our 2020 Form ADV PRA
Renewal, we applied the external cost only to expected new retail RIAs, whereas we had previously applied the external cost to
current and expected retail RIAs. We believe that since Form CRS is still a newly adopted requirement, we should continue to apply
the cost to both current and expected new retail RIAs. See 2019 Form ADV PRA.
19. 8,877 current RIAs x 6.67 hours each for initially preparing Form CRS = 59,209.59 aggregate hours for current RIAs initially
filing Form CRS. For expected new RIAs initially filing Form CRS each year, we are not proposing to use the amortized initial
burden estimate, because we expect a similar number of new RIAs to incur the burden of initially preparing Form CRS each year.
Therefore, 347 expected new RIAs x 20 initial hours for preparing Form CRS = 6,940 aggregate initial hours for expected RIAs.
59,209.59 hours + 6,940 hours = 66,149.59 aggregate hours for current and expected RIAs to initially prepare Form CRS.
20. 1.58 hours x (8,877 current RIAs updating Form CRS + 347 expected new RIAs updating Form CRS) = 14,573.92 aggregate
amendment hours per year for RIAs updating Form CRS.
21. We have previously estimated the initial preparation of Form CRS would require 5 hours of external legal services for an
estimated quarter of advisers that prepare Part 3, and; 5 hours of external compliance consulting services for an estimated half of
advisers that prepare Part 3. See 2020 PRA Renewal (these estimates were not amended by the most recent amendment to Form
ADV). The hourly cost estimate of $496 and $739 for outside legal services and management consulting services, respectively, are
based on an inflation-adjusted figure in the SIFMA Wage Report. Therefore, (((.25 x 8,877 current RIAs preparing Form CRS) x
($496 x 5 hours)) + ((0.50 x 8,877 current RIAs preparing Form CRS) x ($739 x 5 hours))) = $21,903,997.50. For current RIAs, since
this is still a new requirement, we amortize this cost over three years for a per year initial external aggregated cost of $7,301,332.50.
For expected RIAs that we expect would prepare Form CRS each year, we use the following formula: (((.25 x 347 expected RIAs
preparing Form CRS) x ($496 x 5 hours)) + ((0.50 x 347 expected RIAs preparing Form CRS) x ($739 x 5 hours))) = $856,222.50
aggregated cost for expected RIAs. We are not amortizing this initial cost because we estimate a similar number of new RIAs would
incur this initial cost in preparing Form CRS each year, $7,301,332.50 + $856,222.50 = $8,157,555 aggregate external cost for
current and expected RIAs to initially prepare Form CRS.
22. Based on Form ADV data as of October 31, 2021, we estimate that there are 4,985 currently reporting ERAs (“current ERAs”),
and an average of 346 expected new ERAs annually (“expected ERAs”).
23. See 2021 Form ADV PRA.
24. The previously approved average per adviser annual burden for ERAs attributable to annual and updating amendments to Form
ADV is 1.5 hours. See 2021 Form ADV PRA. As we have done in the past, we add to this burden the burden for ERAs making final
filings, which we have previously estimated to be 0.1 hour per applicable adviser, and we estimate that an expected 371 current ERAs
will prepare final filings annually, based on Form ADV data as of December 2020.
25. For current ERAs, we are proposing to not apply the currently approved burden for initially preparing Form ADV, because we
believe that current ERAs have already incurred this burden. For expected ERAs, we are applying the initial burden of preparing
Form ADV of 3.6 hours. Therefore, 3.6 hours x 346 expected new ERAs per year = 1,245.6 aggregate initial hours for expected
ERAs. For these expected ERAs, we are not proposing to amortize this burden, because we expect a similar number of new ERAs to
incur this burden each year. Therefore, we estimate 1,245.6 aggregate initial annual hours for expected ERAs.
26. The previously approved average total annual burden of ERAs attributable to annual and updating amendments to Form ADV is
1.5 hours. See 2020 Form ADV Renewal (this estimate was not affected by the subsequent amendment to Form ADV). As we have
done in the past, we added to this burden the currently approved burden for ERAs making final filings of 0.1 hour, and multiplied that
by the number of final filings we are estimating ERAs would file per year (371 final filings based on Form ADV data as of December
2020). (1.5 hours x 4,985 currently reporting ERAs) + (0.1 hour x 371 final filings) = 7,514.6 updated aggregated hours for currently
reporting ERAs. For expected ERAs, the aggregate burden is 1.5 hours for each ERA attributable to annual and other-than-annual
updating amendments to Form ADV x 346 expected new ERAs = 519 annual aggregated hours for expected new ERAs updating
Form ADV (other than for private fund reporting). The total aggregate amendment burden for ERAs (other than for private fund
reporting) is 7,514.6 + 519 = 8,033.6 hours.
27. Based on Form ADV data as of October 31, 2021, we estimate that 5,232 current RIAs advise 43,501 private funds, and expect an
estimated 136 new RIAs will advise 407 reported private funds per year. We estimate that 4,959 current ERAs advise 23,476 private
funds, and estimate an expected 372 new ERAs will advise 743 reported private funds per year. Therefore, we estimate that there are
66,977 currently reported private funds reported by current private fund advisers (43,501 + 23,476), and there will be annually 1,150
new private funds reported by expected private fund advisers (407 + 743). The total number of current and expected new RIAs that
report or are expected to report private funds is 5,368 (5,232 current RIAs that report private funds + 136 expected RIAs that would
report private funds).
28. See 2020 Form ADV PRA Renewal (this per adviser burden was not affected by subsequent amendments to Form ADV).
29. We previously estimated that an adviser without the internal capacity to value specific illiquid assets would obtain pricing or
valuation services at an estimated cost of $37,625 each on an annual basis. See Rules Implementing Amendments to the Investment
Advisers Act of 1940, Investment Advisers Act Release No. IA-3221 (Jun. 22, 2011) [76 FR 42950 (Jul. 19, 2011)]. However,
because we estimated that external cost in 2011, we are proposing to use an inflation-adjusted cost of $46,865.74, based on the CPI
calculator published by the Bureau of Labor Statistics at https://www.bls.gov/data/inflation_calculator.htm. As with previously
approved PRA methodologies, we continue to estimate that 6% of RIAs have at least one private fund client that may not be audited.
See 2020 Form ADV PRA Renewal.
30. Per above, for currently reported private funds, we are proposing to not apply the currently approved burden for initially reporting

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private funds on Form ADV, because we believe that current private fund advisers have already incurred this burden. For the
estimated 1,150 new private funds annually of expected private fund advisers, we calculate the initial burden of 1 hour per private
fund. 1 hour per expected new private fund x 1,150 expected new private funds = 1,150 aggregate hours for expected new private
funds. For these expected new private funds, we are not proposing to amortize this burden, because we expect new private fund
advisers to incur this burden with respect to new private funds each year. Therefore, we estimate 1,150 aggregate initial hours for
expected private fund advisers.
31. As with previously approved PRA methodologies, we continue to estimate that 6% of registered advisers have at least one private
fund client that may not be audited, therefore we estimate that the total number of audits for current and expected RIAs is 6% x
5,368current and expected RIAs reporting private funds or expected to report private funds = 322.08 audits. We therefore estimate
that approximately 322 registered advisers incur costs of $46,865.74 each on an annual basis (see note 29 describing the cost per
audit), for an aggregate annual total cost of $15,090,768.30.
32. 433,004 currently approved burden hours / 18,179 advisers (current and expected annually) = 23.82 hours per adviser. See 2021
Form ADV PRA.
33. $14,125,083 currently approved aggregate external cost / 18,179 advisers (current and expected annually) = $777 blended average
external cost per adviser.
34. 335,748.79 aggregate annual hours for current and expected new advisers / (14,774 current RIAs + 514 expected RIAs + 4,985
current ERAs +346 expected ERAs) = 16.28 blended average hours per adviser.
35. $32,949,695.30 aggregate external cost for current and expected new advisers / (20,619 advisers current and expected annually) =
$1,598.03 blended average hours per adviser.
36. See 2021 Form ADV PRA.
37. See 2021 Form ADV PRA.
38. 61,140.08 hours + 183,456 hours + 66,149.59 hours + 14,573.92 hours + 1,245.6 + 8,033.6 hours + 1,150 hours = 335,748.79
aggregate annual hours for current and expected new advisers.
39. $9,701,372 + $8,157,555 + $15,090,768.30= $32,949,695.30.

13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and amend
Form ADV, such as for the services of 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 ADV, Commission staff estimated about $14,125,083 in
external cost burden per year, or $777 per adviser. 14 We estimate that the annual cost
of outside services associated with these proposed amendments to Form ADV is
approximately $1,598.03 per adviser and the total annual external cost burden for the
Form ADV proposed amendments is $32,949,695.30.

14

See Approved Form ADV PRA (describing the external cost burden as $777 per adviser).

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14.

Cost to the Federal Government

There are no costs to the government directly attributable to Form ADV.
15.

Change in Burden

We estimate that amendments to Form ADV, will result in a revised annual
aggregate burden hours for Form ADV (Parts 1, 2 and 3) for all registered advisers
and exempt reporting advisers would be 335,748.793 hours per year, with a
monetized value of $81,287,468.54. 15 This would be an aggregate decrease of
97,255.207 hours, or $36,922,743.56 in the monetized value of the hour burden, form
the currently approved annual aggregate burden estimates. 16 The aggregate annual
estimated external cost burden of $32,949,695.30 represents an increase of
$18,824,612.30 from the previously approved estimate of $14,125,083. The changes
are due to proposed amendments, updated data, and using a new methodology for
certain estimates.
16.

Information Collection Planned for Statistical Purposes

The results of any information collection 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, although the OMB control number will be displayed. Including the
expiration date on the electronic version of this form will result in increased costs,

15
16

See supra Table 1 Form ADV PRA Estimates.
See supra Table 1 Form ADV PRA Estimates.

18

because the need to make changes to the form may not follow the application’s
scheduled version release dates.
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.

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