Form ADV - Supporting Statement (ESG)

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 May 25, 2022, the Commission proposed rules related to disclosures for
environmental, social, and governance (“ESG”) practices for registered investment
advisers, advisers exempt from registration, registered investment companies, and
business development companies 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 useful and comparable information to
help them better evaluate the ESG-related services of the advisers that offer them and
the variety of ways advisers currently approach ESG investing. Specifically, the
proposed amendments would add new sub-Item 8(D) to Form ADV’s narrative
brochure, or Part 2A to provide a description of the ESG factor or factors it considers
for each significant investment strategy or method of analysis for which the adviser
considers any ESG factors. Advisers would also be required to describe any

6

Enhanced Disclosures by Certain Investment Advisers and Investment Companies about
Environmental, Social, and Governance Investment Practices, Investment Advisers Act Release
No. 6034 (May 25, 2022) available at https://www.sec.gov/rules/proposed/2022/ia-6034.pdf
(“ESG Proposal”).

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relationship or arrangement that is material to the adviser’s advisory business or to its
clients, that the adviser or any of its management persons have with any related
person that is an ESG consultant or other ESG service provider. The proposed
amendments would also require advisers to that have specific voting policies or
procedures that have one or more ESG considerations when voting client securities
to include in their brochures a description of which ESG factors they consider and
how they consider them in proxies. Similar to the additions in Part 2A, the proposed
amendments would also amend the Wrap Fee Brochure, or ADV Part 2A, Appendix
1, to help current and prospective wrap fee clients understand better how wrap fee
programs consider ESG factors. Lastly, the proposal would amend ADV Part1A to
expand the information collected about the ESG advisory services provided to
separately managed account clients and private funds while providing additional
information about other business activities and financial industry affiliations for
related person ESG providers. Overall, these amendments are designed to provide
clients and prospective clients with information regarding ESG investment processes
that could materially affect the advisory relationship.
We did not propose amendments to Form ADV Part 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
7

44 U.S.C. 3501 to 3520.

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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,
this collection under control number 3235-0049 (expiring on: October 31, 2024). 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
4

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.
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.

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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
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.

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.

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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.

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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.
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.

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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,
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

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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 December 31, 2020,
approximately 13,812 investment advisers were registered with the Commission, and
4,791 exempt reporting advisers file reports with the Commission. The amendments
we are proposing would increase the information requested in in Part 1A and Part
2A of Form ADV for registered investment advisers. Exempt reporting advisers
would be required to provide the new information requested in the Part 1A items

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.

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that Form ADV requires exempt reporting advisers to complete. 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 the additional collection of information required by those
amendments. 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
would be incurred in the initial submissions of Form ADV. However, recent PRA

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”).

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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.

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Table 1: Form ADV PRA Estimates
Initial hours
per year

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

0.4 hours6

$279.50 per hour
(blended rate for
senior compliance
examiner and
compliance manager)7

1.5 hours x
$279.50 per hour
= $419.25

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 28

29.72
hours10

11.8 hours11

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

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

$2,069,250
aggregated
(previously
presented only in
the aggregate)12

29.72 hours
+ 1.1 hours
= 30.82
hours

0.4 hours + 11.8
hours = 12.2 hours

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

(30.82 + 12.2) x
$279.5 =
$12,024.09

$4,689.5013

173,545 hours15

Same as above

(27,921.86 +
173,545) x $279.5
= $56,309,987.37

$8,752,98616

--

--

--

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

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

$2,433.74 per
adviser20

Same as above

$22,065,230.92
(($279.50 x
(64,755.39 hours
+ 14,189.98
hours))

$7,985,652.523

Wage rate x total
hours (see below)

$0

Proposed additions (per
adviser) to Part 1A Items
5, 6, and 7, and
corresponding schedules;
Proposed additions to Part
2 brochure and wrap fee
program brochure

0.3 hours
for Part 1A,
other than
private fund
reporting +
0.8 hours5
for Part 2 =
1.1 hours

Current burden per
adviser9

Revised burden per
adviser

Total revised aggregate
burden estimate

27,921.86
14

RIAs (burden for Part 3)17
No proposed changes

--

Current burden per RIA

20 hours,
amortized
over three
years =
6.67
hours18

Total updated aggregate
burden estimate

64,755.39
hours21

--

1.58

hours19

14,189.98 hours22

ERAs (burden for Part 1A, not including private fund reporting)24
Proposed additions (per
adviser) to Part 1A Items
5, 6, and 7, and
corresponding schedules

Current burden per ERA

0.3 hours

N/A – would be
included in the
existing ongoing
reporting burden
for ERAs

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

3.60
hours25

1.5 hours + final
filings26

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

13

$0

Revised burden per ERA

3.9 hours
(0.3 hours +
3.6 hours)

1.5 hours + final
filings (same as
above)

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

Total revised aggregate
burden estimate

2,639.427

7,780.1 hours28

Same as above

$2,912,250.25
($279.5 x (2,639.4
+ 7,780.1 hours))

$0

0.2 hours

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

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

Wage rate x total
hours (see below)

$0

Current burden per
adviser to private fund

1 hour per
private
fund30

N/A – included in
the existing annual
amendment
burden

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

Revised burden per
adviser to private fund

1.2 hours

N/A

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

Total revised burden
estimate

14,233
hours32

N/A

Same as above

$0

Private Fund Reporting29

Proposed additions to Part
1A Item 7, and
corresponding schedules

Cost of
$46,865.74 per
fund, applied to
6% of RIAs that
report private
funds31

$3,978,123.5
($279.5 x 14,233
hours))

$14,153,453.5033

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

23.82 hours34

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

$77735

Revised per adviser
burden/external cost per
adviser

15.74 hours36

15 hours x $279.5
= $4,192.5 per
adviser cost of the
burden hour

$1,593.4437

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

$14,125,08339

Current aggregate burden
estimates

Revised aggregate burden
estimates

433,004 initial and amendment hours

annually38

305,064.7340 Initial and amendment hours annually

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

$30,892,092.00
41

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 the SIFMA Wage Report
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.

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4. Based on Form ADV data as of December 2020, we estimate that there are 13,812 RIAs (“current RIAs”) and 413 advisers that are expected to become
RIAs annually (“newly expected RIAs”).
5. We estimate that 80% of RIAs incorporate ESG factors into their advisory services, which we believe is similar to the estimated percentage of registered
funds that pursue either an ESG integration, ESG focused or ESG impact strategy. See discussion of PRA analysis for funds, above. Therefore, 11,380 RIAs
(80% of the total of 14,225 combined current and expected RIAs that are required to complete Parts 1 and 2) would incur a burden of 1 hour, and 2,845 RIAs
(20% of 14,225 combined current and expected RIAs that are required to complete Parts 1 and 2) would incur a burden of 0 hours. (11,380 RIAs x 1) +
(2,845 RIAs x 0) / 14,225 = 0.8 blended average hours per RIA.
6. We estimate that 11,380 RIAs (80% of the total of 14,225 combined current and expected RIAs that are required to complete Parts 1 and 2) would incur a
burden of 0.5 hour, and 2,845 RIAs (20% of 14,225 current and expected RIAs that are required to complete Parts 1 and 2) would incur a burden of 0 hours.
(11,380 RIAs x 0.5) + (2,845 RIAs x 0) / 14,225 = 0.4 blended average hours per RIA.
7. 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.
8. 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).
9. 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.
10. 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).
11. 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
in 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.
12. See 2020 Form ADV PRA Renewal (the subsequent amendment to Form ADV described in the 2021 Form ADV PRA did not affect that estimate).
13. 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 13,812 RIAs) x ($496 x 11 hours))
+ ((0.50 x 13,812 RIAs) x ($739 x 9 hours))) / 13,812 RIAs = $4,689.50 per adviser.
14. 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 1.1 initial hours x 13,812 current RIAs = 15,193.2 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 30.82 hours per RIA. Therefore, 30.82 hours x 413 expected RIAs = 12,728.66 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 15,193.2 hours + 12,728.66 hours = 27,921.86 aggregate initial hours.
15. 12.2 amendment hours x (13,812 current RIAs + 413 expected new RIAs) = 173,545 aggregate amendment hours.
16. 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 13,812 RIAs) x ($496 x 1 hour)) + ((0.50 x 13,812
RIAs) x ($739 x 1 hour))) = $6,816,222 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 413 = $1,936,763.50 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. $6,816,222 aggregated for
current RIAs + $1,936,763.50 aggregated for expected RIAs = $8,752,986 aggregated external cost for RIAs.
17. 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 December 2020, we estimate that 8,617 current RIAs
provide advice to retail investors and are therefore required to complete Form CRS, and we estimate an average of 364 expected new RIAs to be advising
retail advisers and completing Form CRS for the first time annually.
18. See Form CRS Relationship Summary; Amendments to Form ADV, Investment Advisers Act Release No. 5247 (June 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 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.
19. As reflected in the currently approved PRA burden estimate, we stated that we expect advisers required to prepare and file the relationship summary on

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Form ADV Part 3 will spend an average 1 hour per year making amendments to those relationship 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).
20. 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.
21. 8,617 current RIAs x 6.67 hours each for initially preparing Form CRS = 57,475.39 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, 364 expected new RIAs x 20 initial hours for preparing Form CRS = 7,280
aggregate initial hours for expected RIAs. 57,475.39 hours + 7,280 hours = 64,755.39 aggregate hours for current and expected RIAs to initially prepare
Form CRS.
22. 1.58 hours x (8,617 current RIAs updating Form CRS + 364 expected new RIAs updating Form CRS) = 14,189.98 aggregate amendment hours per year
for RIAs updating Form CRS.
23. 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 8,617 current RIAs
preparing Form CRS) x ($496 x 5 hours)) + ((0.50 x 8,617 current RIAs preparing Form CRS) x ($739 x 5 hours))) = $21,262,447.5. 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 $7,087,482.5. For expected RIAs that
we expect would prepare Form CRS each year, we use the following formula: (((.25 x 364 expected RIAs preparing Form CRS) x ($496 x 5 hours)) + ((0.50 x
364 expected RIAs preparing Form CRS) x ($739 x 5 hours))) = $898,170 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, $7,087,482.5 + $898,170 = $7,985,652.5
aggregate external cost for current and expected RIAs to initially prepare Form CRS.
24. Based on Form ADV data as of December 2020, we estimate that there are 4,859 currently reporting ERAs (“current ERAs”), and an average of 303
expected new ERAs annually (“expected ERAs”).
25. See 2021 Form ADV PRA.
26. 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.
27. Per above, 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 current RIAs, therefore, we are applying only the burden we estimate for the proposed amendment. Therefore, the
revised total burden for current RIAs is 0.3 hour x 4,859 current ERAs = 1,457.7 aggregate initial hours per year for current ERAs. We are not amortizing this
burden because we expect current ERAs to incur this burden in the first year. For expected ERAs, we are applying the revised total initial burden of preparing
Form ADV of 3.9 hours. Therefore, 3.9 hours x 303 expected new ERAs per year = 1,181,7 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, in total,
1,457.7 hours + 1,181,7 hours = 2,639.4 aggregate initial annual hours for current and expected ERAs.
28. 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 4,859 currently reporting ERAs) + (0.1 hour x 371 final filings) = 7,325.6
updated aggregated hours for currently reporting ERAs. For expected ERAs, the aggregate burden is 1.5 hours for each ERA attributable to annual and otherthan-annual updating amendments to Form ADV x 303 expected new ERAs = 454.5 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 7,325.6 + 454.5 = 7,780.10
hours.
29. Based on Form ADV data as of December 2020, we estimate that 4,949 current RIAs advise 41,938 private funds, and expect an estimated 83 new RIAs
will advise 332 reported private funds per year. We estimate that 4,791 current ERAs advise 23,053 private funds, and estimate an expected 348 new ERAs
will advise 697 reported private funds per year. Therefore, we estimate that there are 64,991 currently reported private funds reported by current private fund
advisers (41,938 + 23,053), and there will be annually 1,029 new private funds reported by expected private fund advisers (332 + 697). The total number of
current and expected new RIAs that report or are expected to report private funds is 5,032 (4,949 current RIAs that report private funds + 83 expected RIAs
that would report private funds).
30. See 2020 Form ADV PRA Renewal (this per adviser burden was not affected by subsequent amendments to Form ADV).
31. 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 (June 22, 2011) [76 FR 42950 (July 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.
32. Per above, for currently reported private funds, we are proposing to not apply the currently approved burden for initially reporting private funds on Form
ADV, because we believe that current private fund advisers have already incurred this burden. Therefore, we calculated the burden on current private fund
advisers for only the proposed incremental new additional burden attributable to private fund reporting of 0.2 hours per private fund x 64,991 currently
reported private funds = 12,998.2 aggregate hours for current private fund advisers. We expect advisers to incur this initial burden in the first year and are
therefore not amortizing this burden. For the estimated 1,029 new private funds annually of expected private fund advisers, we calculate the initial burden of

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both the proposed incremental new additional burden attributable to private fund reporting of 0.2 hours per private fund, and the 1 hour initial burden per
private fund. Therefore, 1.2 hours per expected new private fund x 1,029 expected new private funds = 1,234.8 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. 12,998.2 hours + 1,234.8 hours = 14,233 aggregate hours for private fund advisers.
33. 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 5,032 current and expected RIAs reporting private
funds or expected to report private funds = 301.92 audits. We therefore estimate that approximately 302 registered advisers incur costs of $46,865.74 each
on an annual basis (see note 31 describing the cost per audit), for an aggregate annual total cost of $14,153,453.48.
34. 433,004 currently approved burden hours / 18,179 advisers (current and expected annually) = 23.82 hours per adviser. See 2021 Form ADV PRA.
35. $14,125,083 currently approved aggregate external cost / 18,179 advisers (current and expected annually) = $777 blended average external cost per
adviser.
36. 305,064.73 aggregate annual hours for current and expected new advisers (see infra note 40) / (13,812 current RIAs + 413 expected RIAs + 4,859
current ERAs +303 expected ERAs*) = 15.74 blended average hours per adviser. * The parenthetical totals 19,387 current and expected advisers.
37. $30,892,092.00 aggregate external cost for current and expected new advisers / (19,387 advisers current and expected annually) = $1,593.44 blended
average hours per adviser.
38. See 2021 Form ADV PRA.
39. See 2021 Form ADV PRA.
40. 27,921.86 hours + 173,545 hours + 64,755.39 hours + 14,189.98 hours + 2,639.4 hours + 7,780.1 hours + 14,233 hours = 305,064.73 aggregate
annual hours for current and expected new advisers.
41. $8,752,986 + $7,985,652.50 + $14,153,453.50 = $30,892,092.00

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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 $1,593.44 per adviser and the total annual external cost burden for the
Form ADV proposed amendments is $30,892,092.00.
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 305,064.73 hours per year, with a monetized
value of $81,287,468.54. 15 This would be an aggregate decrease of 127,939.27 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 $30,892,092.00 represents an increase of $16,767,009 from

14
15
16

See Approved Form ADV PRA (describing the external cost burden as $777 per adviser).
See supra Table 1 Form ADV PRA Estimates.
See supra Table 1 Form ADV PRA Estimates.

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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,
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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