Rule 482 ( A- Investor Experience) Supporting Statement

OMB CONTROL NUMBER: 3235-0565
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 482

A.

JUSTIFICATION
1.

Necessity for the Information Collection

Like most issuers of securities, when an investment company 1 (“fund”) offers its shares
to the public, its promotional efforts become subject to the advertising restrictions of the
Securities Act of 1933 (15 U.S.C. 77a et seq.) (the “Securities Act”). In recognition of the
particular problems faced by funds that continually offer securities and wish to advertise their
securities, the Securities and Exchange Commission (“Commission”) has adopted advertising
safe harbor rules. The most important of these is rule 482 (17 CFR 230.482) under the Securities
Act, which, under certain circumstances, permits funds to advertise investment performance
data, as well as other information. Rule 482 advertisements are deemed to be “prospectuses”
under Section 10(b) of the Securities Act (15 U.S.C. 77j(b)).
Rule 482 contains certain requirements regarding the disclosure that funds are required to
provide in qualifying advertisements. These requirements are intended to encourage the
provision to investors of information that is balanced and informative, particularly in the area of
investment performance. For example, a fund is required to include disclosure advising
investors to consider the fund’s investment objectives, risks, charges, and expenses, and other
information described in the fund’s prospectus, and highlighting the availability of the fund’s
prospectus. In addition, rule 482 advertisements that include performance data of open-end

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“Investment company” refers to both investment companies registered under the Investment Company Act
of 1940 (“Investment Company Act”) (15 U.S.C. 80a-1 et seq.) and business development companies.

funds or insurance company separate accounts offering variable annuity contracts are required to
include certain standardized performance information, information about any sales loads or other
nonrecurring fees, and a legend warning that past performance does not guarantee future results.
Such funds including performance information in rule 482 advertisements are also required to
make available to investors month-end performance figures via website disclosure or by a tollfree telephone number, and to disclose the availability of the month-end performance data in the
advertisement. The rule also sets forth requirements regarding the prominence of certain
disclosures, requirements regarding advertisements that make tax representations, requirements
regarding advertisements used prior to the effectiveness of the fund’s registration statement, and
requirements regarding the timeliness of performance data. In addition, rule 482(b) describes the
information that is required to be included in an advertisement, including a cautionary statement
under rule 482(b)(4) disclosing the particular risks associated with investing in a money market
fund.
On October 26, 2022, the Commission adopted rule and form amendments that
modernize the requirements for annual and semi-annual shareholder reports provided by openend management investment companies. 2 The Commission also adopted amendments to the
advertising rules for registered investment companies and business development companies to
promote more transparent and balanced statements about investment costs. The advertising rule
amendments require that investment company advertisements providing fee and expense figures
include: (1) the maximum amount of any sales load or any other nonrecurring fee; and (2) the

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Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in
Investment Company Advertisements, Investment Company Act Release No. 34731 (Oct. 26, 2022), 87 FR
72758 (Nov. 25, 2022) (the “Adopting Release”).

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total annual expenses without any fee waiver or expense reimbursement arrangement. Under the
amendments to rule 482, investment company fee and expense presentations in advertisements
must include timely and prominent information about a fund’s maximum sales load (or any other
nonrecurring fee) and gross total annual expenses, based on the methods of computation that the
company’s Investment Company Act or Securities Act registration statement form prescribes for
a prospectus.
Compliance with the requirements of rule 482 is mandatory and the responses to the
information collections would not be kept confidential.
2.

Purpose and Use of the Information Collection

Rule 482 advertisements must be filed with the Commission or, in the alternative, with
the Financial Industry Regulatory Authority (“FINRA”). 3 This information collection differs
from many other federal information collections that are primarily for the use and benefit of the
collecting agency.
Rule 482 contains requirements that are intended to encourage the provision to investors
of information that is balanced and informative. The Commission is concerned that in the
absence of such provisions fund investors may be misled by deceptive rule 482 advertisements
and may rely on less-than-adequate information when determining in which funds they should
invest money. As a result, the Commission believes it is beneficial for funds to provide investors

3

See note to rule 482(h) under the Securities Act, which states that “these advertisements, unless filed with
[FINRA], are required to be filed in accordance with the requirements of §230.497.” See also rule 24b-3
under the Investment Company Act (17 CFR 270.24b-3), which provides that any sales material, including
rule 482 advertisements, shall be deemed filed with the Commission for purposes of Section 24(b) of the
Investment Company Act upon filing with FINRA.

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with balanced information in fund advertisements in order to allow investors to make betterinformed decisions.
3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) automates the filing, processing and dissemination of disclosure filings. This
automation has increased the speed, accuracy, and availability of information, generating
benefits to investors and financial markets. The vast majority of fund advertisements are filed
with FINRA under Investment Company Act rule 24b-3, which allows any sales material filed
with FINRA to be deemed to be filed with the Commission.4 Rule 482 advertisements that are
required to be filed with the Commission are to be filed electronically on EDGAR (17 CFR
232.101(a)(1)(i) and (iv)). 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.
4.

Efforts to Identify Duplication

The Commission periodically evaluates rule- and form-based reporting and
recordkeeping requirements for duplication, and reevaluates them whenever it proposes or adopts
changes in its rules or forms. The requirements of rule 482 are not generally duplicated
elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.), to identify methods to minimize recordkeeping or reporting

4

Id.

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requirements affecting small businesses. The current disclosure requirements for fund
advertisements do not distinguish between small entities and other entities. To the extent smaller
funds advertise, their burden to prepare advertisements may be greater than for larger funds due
to economies of scale. This burden will include the cost of reviewing an advertisement to
confirm that it meets the requirements of rule 482.
The Commission believes, however, that imposing different requirements on smaller fund
companies would not be consistent with investor protection. The use of different standards for
small entities may create a risk that investors may receive false or misleading information. In
addition, the Commission believes that uniform disclosure standards for all fund advertisements
allow investors to compare funds more easily when making an investment decision. Allowing
different standards for small entities may create confusion for investors who wish to compare
funds.
6.

Consequences of Not Conducting Collection

Since fund advertising is voluntary, the Commission does not determine the frequency
with which funds advertise pursuant to rule 482. Therefore, short of not requiring any collection
for advertisements governed by rule 482, the Commission cannot require less frequent collection.
Not requiring disclosure of the information required by rule 482 will harm investors by
denying them information that may be useful in making investment decisions. If such
advertisements did not contain this disclosure, investors could receive inadequate information or
could receive confusing, false, or misleading information. As a result, investor confidence in the
securities industry could be adversely affected.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

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

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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 the staff with a means of ascertaining and acting upon paperwork burdens confronting the
industry. The Commission requested public comment on the collection requirements in rule 482
before it submitted this request for revision and approval to the Office of Management and
Budget. The Commission received no comments in response to its request.
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 agency has determined that this information collection
does not constitute a system of record for purposes of the Privacy Act (the 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 January 29, 2016,
is provided as a supplemental document and is available at https://www.sec.gov/privacy.
12.

Burden of Information Collection

The burden hour estimate for complying with rule 482 is based the Commission’s
experience with the contents of disclosure documents. The number of burden hours may vary
depending on, among other things, the complexity of the document, the number of funds
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included in a single document, and whether preparation of the document is performed by fund
staff or outside counsel. The number of funds used to estimate the burden hours is an estimate
based on the Commission’s statistics. The following estimates of average burden hours are made
solely for purposes of the Paperwork Reduction Act of 1995 (“PRA”) (44 U.S.C. 3501 et seq.)
and are not derived from a comprehensive or representative survey or study of the cost of
Commission rules and forms. Compliance with the requirements of rule 482 is mandatory, and
responses to the information collections are not kept confidential.
The table below summarizes our estimates associated with the amendments to rule 482
that the Adopting Release addresses:

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TABLE 1: RULE 482 PRA ESTIMATES
Internal initial
hour burdens

Internal
annual burden1

Wage Rate2

Internal Time
Costs

FINAL ESTIMATES FOR RULE 482
6 hours3

New general requirements re: fee
and expense figure disclosure
9 hours
Number of responses to rule 482
that include fee/expense figure disclosure
Total burden of new requirements
for fee and expense disclosure
New requirements for disclosure of
fee waivers/expense reimbursement
arrangements
Number of responses to rule 482
that disclose fee waivers/expense
reimbursement arrangements
Total burden of annual requirements
for disclosure of fee waivers/expense
reimbursement arrangements
Total annual burden

x
36,4924
responses

$381
(blended rate for
compliance attorney and
senior programmer)

$2,286
x 36,492
responses

218,952 hours

$83,420,712

4 hours5

$1,524

6 hours

x

36,492
responses

$381
(blended rate for
compliance attorney and
senior programmer)
-

x36,492
responses

145,968 hours

$55,613,808

364,920 hours

$139,034,520

TOTAL FINAL ESTIMATED BURDENS INCLUDING AMENDMENTS
Current burden estimates

212,927 hours

$74,098,735

Revised burden estimate

577,847 hours

$213,133,255

Notes:
1. Includes initial burden estimates annualized over a 3-year period.
2. These PRA estimates assume that the same types of professionals would be involved in preparing advertisements (reflecting the proposed and
final amendments to rule 482) that we believe otherwise would be involved in preparing a fund’s advertisements. The Commission’s estimates of
the relevant wage rates are based on salary information for the securities industry compiled by the Securities Industry and Financial Markets
Association’s Office Salaries in the Securities Industry 2013. The estimated figures are modified by firm size, employee benefits, overhead, and
adjusted to account for the effects of inflation. See Securities Industry and Financial Markets Association, Report on Management & Professional
Earnings in the Securities Industry 2013.
3. This estimate assumed that, after the initial 9 hours that an entity would spend on the proposed fee and expense disclosure, which we
annualize over a 3-year period, the entity would incur 3 additional burden hours associated with ongoing compliance with these requirements per
year. The estimate of 6 hours is based on the following calculation: ((9 initial hours /3) + 3 hours of additional ongoing burden hours) = 6 hours.
4. The Commission estimates that there was a total of 41,953 responses to rule 482 that either were filed with FINRA or with the Commission in
2021. Of those, the Commission estimates that 1,124 were responses from closed-end funds and BDCs, and that 2,816 were responses from
variable insurance contracts. The number of responses filed with the SEC is based on the average number of responses filed with the Commission
from 2019-2021. The Commission assumes that, moving forward, closed-end funds and BDCs will choose to use free writing prospectuses under
rule 433, and also that variable insurance contracts will not be subject to the amendments to rule 482. Therefore, we exclude closed-end funds,
BDCs, and variable insurance contracts from the total responses to rule 482 for purposes of this estimate. For purposes of estimating the burden
of the final rules amendments, we estimate that 38,013 responses to rule 482 are filed annually. We estimate that approximately 96% of these
rule 482 responses provide fee and expense figures in qualifying advertisements and would, therefore, be required to comply with the final rule
amendments regarding such information (for example, ensuring that the fee and expense figures are presented in accordance with the
prominence and timeliness requirements in the amendments to rule 482).
5. This estimate assumed that, after the initial 6 hours that an entity would spend on the proposed fee waiver and expense reimbursement
requirements, which we annualized over a 3-year period, the entity would incur 2 additional burden hours associated with ongoing compliance with
these requirements per year. The estimate of 4 hours is based on the following calculation ((6 initial hours/ 3) + 2 hours of additional ongoing
burden hours) = 4 hours.

The table above summarizes our PRA initial and ongoing annual burden estimates
associated with rule 482, as amended. In the aggregate, we estimate the total annual burden to
comply with amended rule 482 to be 577,847 hours, at an average time cost of $213,133,255.

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13.

Cost to Respondents

Cost burden is the cost of services purchased to comply with rule 482, such as for the
services of computer programmers, outside counsel, financial printers, and advertising agencies.
The external cost burden does not include the internal cost of the hour burden discussed in Item
12 above. Estimates are based on the Commission’s experience with advertisements and sales
literature. As reflected in the table above, the Commission continues to attribute no external cost
burden to rule 482.
14.

Cost to the Federal Government

Advertising regulation affects costs incurred by the federal government. For purposes of
estimating the burden of the final rule amendments, we estimate that 38,013 responses to rule
482 are filed annually; however, these responses generally are filed with and reviewed by
FINRA and generally not reviewed by the Commission.
15.

Change in Burden

As summarized in Table 1 above, the estimated annual hourly burden associated with rule
482 has increased from 212,927 hours to 577,847 hours (an increase of 364,920 hours). This
reflects an increase of hours due to an increase in the estimated number of hours needed to
comply with amended rule 482. There is no annual external cost burden attributed to rule 482.
16.

Information Collection Planned for Statistical Purposes

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

Approval to Omit OMB Expiration Date

Not applicable.
18.

Exception to Certification Statement for Paperwork Reduction Act
Submission

The Commission is not seeking an exception to the certification statement.

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B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
The collection of information will not employ statistical methods.

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