Form N-1A (P-Cyber) 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 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 Investment Advisers Act of 1940 and

the Investment Company Act. 1 The Commission proposed several amendments to Form
N-1A to require a description of any significant fund cybersecurity incident that has
occurred in its last two fiscal years, using a structured data language. 2 These amendments
are designed to enhance investor protection by ensuring cybersecurity incident-related
information is available to increase understanding and insight into a fund’s cybersecurity
history.
2.

Purpose and Use of the Information 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 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 also for the use and benefit of investors.
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.
3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”)
system automates the filing, processing and dissemination of full disclosure filings. This

1

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

Although the interactive data filing requirements are included in the instructions to Form N-1A,
we are separately reflecting the hour and cost burdens for these requirements in the burden
estimate for Investment Company Interactive Data (OMB control number 3235-0642) and not in
this estimate.

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automation has increased the speed, accuracy, and availability of information, generating
benefits to investors and financial markets. Form N-1A is required to be filed with the
Commission electronically on EDGAR. 3 The public may access filings on EDGAR
through the Commission’s website (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. 4
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-1A are not generally duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 5 to identify methods to minimize recordkeeping or reporting
requirements affecting small businesses. The proposed 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

3

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

4

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)).

5

5 U.S.C. 601 et seq.

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on smaller investment companies would not be consistent with investor protection and
the purposes of the registration statement requirements.
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

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. In addition, the Commission has requested public comment on
the proposed amendments to Form N-1A, 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.

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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 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.

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 6 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission rules
and forms. In our most recent Paperwork Reduction Act submission for Form N-1A, we
estimated for Form N-1A a total aggregate annual hour burden of 1,672,077 hours, and a
total annual aggregate annual external cost burden of $132,940,008. 7 Compliance with
6

44 U.S.C. 3501 et seq.

7

On September 9, 2021, the Office of Management and Budget approved without change a revision
of the currently approved information collection estimate for Form N-1A.

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the disclosure requirements of Form N-1A is mandatory, and the responses to the
disclosure requirements will not be kept confidential. The table below summarizes our
PRA initial and ongoing annual burden estimates associated with the proposed
amendments to Form N-1A.

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Table 1: Burden Estimates for Initial and Ongoing Registration Statements Filed on
Form N-1A
Internal
initial
burden
hours

Internal
annual
burden
hours1

Wage rate2

Internal time
costs

Annual
external cost
burden

$5,340

$9925

× 13,248
funds

x 6,6247

PROPOSED FORM N-1A ESTIMATES
Cybersecurity
incident disclosures3
Number of funds
Total new aggregate
annual burden
Current aggregate
annual burden
estimates
Revised aggregate
annual burden
estimates
Notes:

21 hours

$356
(blended rate for
compliance attorney
and senior
programmer)

15 hours4
× 13,248
funds6

198,720
$70,744,320
hours
TOTAL ESTIMATED BURDENS INCLUDING AMENDMENTS

$6,571,008

+ 1,672,077
hours

+
$132,940,008

1,870,797
hours

$139,511,016

1. Includes initial burden estimates annualized over a 3-year period.
2. The Commission’s estimates of the relevant wage 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. The estimated figures are modified by firm size,
employee benefits, overhead, and adjusted to account for the effects of inflation.
3. This estimate represents the average burden for a filer. Filers that experience one or several fund cybersecurity
incidents are expected to incur higher burdens.
4. Includes initial burden estimates annualized over a three-year period, plus 8 ongoing annual burden hours. The
estimate of 15 hours is based on the following calculation: ((21 initial hours /3) + 8 additional ongoing burden
hours) = 15 hours.
5. This estimated burden is based on the estimated wage rate of $496/hour, for 2 hours, for outside legal services.
The Commission’s estimates of the relevant wage rates for external time costs, such as outside legal services, take
into account staff experience, a variety of sources including general information websites, and adjustments for
inflation.
6. Includes all open-end funds, including ETFs, registered on Form N-1A. See Cybersecurity Risk Governance
and Incident Disclosure Proposal at section III.C.3.
7. We estimate that 50% of funds will use outside legal services for these collections of information. This
estimate takes into account that funds may elect to use outside legal services (along with in-house counsel), based
on factors such as fund budget and the fund’s standard practices for using outside legal services, as well as
personnel availability and expertise.

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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 $132,940,008 in external
cost burden per year. We estimate that the annual cost of outside services associated with
these proposed amendments to Form N-1A is approximately $992 per fund and the total
annual external cost burden for the Form N-1A proposed amendments is $6,571,008. 8
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 $25.7
million in fiscal year 2020, based on the Commission’s computation of the value of staff
time devoted to this activity and related overhead.
15.

Change in Burden

The estimated hourly burden and external cost associated with Form N-1A has
increased as follows:

8

This estimate is based on the following calculation: 6,624 funds x $992 per filing = $6,571,008.

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Table 2: Comparison of Current and Revised Burden Hours and External Cost for
Registration Statements Filed on Form N-1A
Annual Time Burden (hours)

Form N1A

External Cost Burden (dollars)

Currently
Approved

Revised
Estimate

Change

Currently
Approved

Revised
Estimate

Change

1,672,077

1,870,797

198,720

$132,940,008

$139,511,016

$6,571,008

The changes in annual burden hours and external cost burden are due to our proposed
amendments to Form N-1A requiring a description of any significant fund cybersecurity
incident that has occurred in the fund’s last two fiscal years.
16.

Information Collection Planned for Statistical Purposes

The results of any information collection will not be published.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date for OMB
approval.
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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