Form ADV_Supporting Statement

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,
Part 2 is the client brochure, and 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 and
prospective 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

1

17 CFR 275.203-1.

2

15 U.S.C 80b-4.

3

17 CFR 279.1.

4

17 CFR 275.204-4.

5

17 CFR 275.204-1.

Advisers Act requires 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 July 26, 2023, the Commission proposed amendments to rule 203A-2(e). 6 The
Commission proposed amendments that would require investment advisers relying on the
exemption in rule 203A-2(e) (“internet investment advisers”) to at all times have an
“operational” interactive website. 7 In addition, the Commission proposed amendments that
would eliminate the de minimis exception in current 203A-2(e) that permits internet investment
advisers to have fewer than 15 non-internet clients in any 12-month period and amendments that
would require internet investment advisers to have more than one client. 8 The Commission also
proposed amendments to the requirement that the internet investment adviser retain in an easily
accessible place, for a period of not less than five years from the filing of a Form ADV, 9 a record
demonstrating that the adviser provides investment advice to its clients exclusively through an

6

Exemption for Certain Investment Advisers Operating Through the Internet Investment Advisers Act
Release No. 6354 (Jul. 26, 2023) [88 FR 50076 (Aug. 1, 2023)].

7

See proposed rule 203A-2(e)(1)(i).

8

See supra note 7; proposed rule 203A-2(e)(1)(i); proposed rule 203A-2(e)(2)

9

The five-year record retention period is a similar recordkeeping retention period as imposed on all SECregistered advisers under rule 204-2 of the Adviser Act. See rule 204-2 (17 CFR 275.204-2).

2

interactive website in accordance with the rule to reflect the proposed amendment that the
adviser’s interactive website must be “operational.” 10
In connection with the proposed amendments to rule 203A-2(e), the Commission
proposed to amend Form ADV to conform certain instructions and definitions to the amended
rule. The proposal would also amend Form ADV to require that an adviser relying on the rule as
a basis for registration to represent on Schedule D of its Form ADV that, among other things, it
has an operational interactive website. 11 This amendment would require internet investment
advisers, as an initial matter and periodically thereafter, to provide an additional affirmative
representation on Form ADV that more clearly notes the requirements of the exemption, thus
reinforcing the conditions of the exemption for the internet investment adviser.
The Commission did not propose amendments to Parts 2 or 3 of Form ADV.
Form ADV contains “collection of information” requirements within the meaning of the
Paperwork Reduction Act of 1995. 12 The amendments to Form ADV related to proposed rule
203A-2(e) contain collections of information. The collection of this information is designed to
provide information to the Commission in connection with the registration and annual
amendments to Form ADV filed by internet investment advisers and would assist Commission
staff in connection with its review of existing registrations and registration applications for
compliance with the rule and, as applicable, for possible deregistration for an inability to meet
the conditions of the rule. This information would also help Commission staff prepare for
examinations of internet investment advisers. Responses are not kept confidential.

10

Proposed 17 CFR 275.203(a)-2(e)(ii).

11

See proposed rule 203A-2(e)(1)(iv).

12

44 U.S.C. 3501 to 3520.

3

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.
Respondents to this collection of information 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

4

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, 275.204- 4,
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

5

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.
5.

Effect on Small Entities

The requirements of Form ADV, including the amendments, are the same for all
investment advisers registered with the Commission, including those advisers that are small
entities. The requirements of Form ADV applicable to exempt reporting advisers also are the
same for all exempt reporting advisers, including those that are small entities. Subject to certain
exceptions, including the exception for internet investment advisers pursuant to rule 203A-2(e),
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, and because small advisers are one of the primary
beneficiaries of this exemption, it would be inconsistent with the purposes of the Advisers Act to
6

specify differences for small entities under the proposed 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.

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

7

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.
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.

8

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 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. 13 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 14 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. 15
13

See 15 U.S.C. §§ 80b-3 and 80b-4.

14

44 U.S.C. 3501 et seq.

15

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.

9

Based on the IARD system data as of June 2022, approximately 15,062 investment advisers were
registered with the Commission, and 5,481 exempt reporting advisers file reports with the
Commission. The total number of advisers relying on the internet adviser exemption under rule
203A-2(e) was 266 as of December 2022. 16 The Commission proposed amendments to Form
ADV Part 1A, Schedule D, requiring internet investment advisers to indicate on Schedule D that,
if applying for registration with the Commission, the adviser will provide—and if amending its
existing registration and is continuing to rely on the internet adviser exemption, that it has
provided—investment advice to all of its clients exclusively through an operational interactive
website. These changes are designed to provide information to the Commission in connection
with the registration and annual amendments to Form ADV filed by internet investment advisers
and would assist Commission staff in connection with its review of existing registrations and
registration applications for compliance with the rule and, as applicable, for possible
deregistration for an inability to meet the conditions of the rule. The Commission does not
believe that these ministerial amendments to Form ADV requiring a very small number of
advisers to check a box make any substantive modifications to any existing collection of
information requirements or impose any new substantive recordkeeping or information collection
requirements within the meaning of the PRA. Accordingly, the Commission did not revise the
burden and cost estimates in connection with these proposed amendments.
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. 17

16
17

The data comes from Form ADV filings received by the Commission through Mar. 31, 2023. No adviser
relying on rule 203A-2(e) is an exempt reporting adviser.
See Investment Adviser Marketing, Final Rule, Investment Advisers Act Release No. 5653 (Dec. 22, 2020)

10

We recently proposed certain changes to our PRA methodology for Form ADV Form
ADV Parts 1 and 2: 18
•

Form ADV Parts 1 and 2. Form ADV PRA has historically calculated an hourly burden
per adviser per year 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 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 1, as applicable, to all currently registered investment advisers.
The table below summarizes the burden estimates associated with the proposed

amendments to Form ADV Part 1. We do not believe that the proposed amendments make any
substantive modifications to any existing collection of information requirements or impose any
new substantive recordkeeping or information collection requirements. The proposed new
burdens take into account changes in the numbers of advisers since the last approved PRA for
Form ADV, the increased wage rates due to inflation, and changes due to the proposed change in
methodology for calculating the burden associated with Form ADV.

[81 FR 60418 (Mar. 5, 2021)] (“IA Marketing Release”) and corresponding submission to the Office of
Information and Regulatory Affairs at reginfo.gov (“2021 Form ADV PRA”).
18

See 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) [87 FR 36654 (Aug. 16, 2022)] (“ESG Proposal”) and corresponding submission to the
Office of Information and Regulatory Affairs at reginfo.gov (“2022 Form ADV Proposed Changes”).

11

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 hours5

$318 per hour
(blended rate for
senior compliance
examiner and
compliance manager)6

0 hours x $318 per
hour = $0

29.72
hours8

11.8 hours9

$273.00 per hour
(blended rate for
senior compliance
examiner and
compliance manager)

(29.72 + 11.8) x
$273.00 =
$11,334.96

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

Revised burden per
adviser

Same as
above

Same as above

$318 (blended rate for
senior compliance
examiner and
compliance manager)

(29.72 + 11.8) x
$318 =
$13,203.36

$4,780.5011

Total revised aggregate
burden estimate

16,405.4412

185,401.60
hours13

Same as above

Proposed additions (per
adviser) to Part 1A,
Schedule D

0 hours

Current burden per
adviser7

(16,405,44 +
185,401.60) x
$318 =
$64,174,638.72

$2,638,83614

RIAs (burden for Part 3)15
No proposed changes

--

Current burden per RIA

20 hours,
amortized
over three
years =
6.67
hours16

Total updated aggregate
burden estimate

70,646.67
hours19

--

1.58

hours17

15,646.74 hours20

--

--

--

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

$273 x (6.67 +
1.58) = $2,249.52

$2,433.74 per
adviser18

$318 (blended rate for
senior compliance
examiner and
compliance manager

$27,441,303.32
($318 x
(70,646.67 hours
+ 15,646.74
hours)

$9,930,272.0821

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

Current burden per ERA

3.60
hours23

1.5 hours + final
filings24

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

Total revised aggregate

1,245.6025

8,777.60 hours26

$318 (blended rate for
senior compliance

12

$0

$3,187,377.60
($318 x (1,245.6 +

$0

examiner and
compliance manager

burden estimate

8,777.60 hours))

Private Fund Reporting27
No proposed changes

Current burden per
adviser to private fund

1 hour per
private
fund28

Total updated aggregate
burden estimate

1,150
hours30

N/A – included in
the existing annual
amendment
burden

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

N/A

$318 (blended rate for
senior compliance
examiner and
compliance manager)

Cost of
$46,865.74 per
fund, applied to
6% of RIAs that
report private
funds29
$365,700 ($318 x
1,15030 hours))

$14,856,439.5831

hours32

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

$77733

13.89 hours34

13.89 hours x
$318 = $4,417.02
per adviser cost of
the burden hour

$1,273.3035

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

$14,125,08337

299,273.65 x
$318 =
$95,169,020.70
aggregate cost of
the burden hour

$27,425,547.6639

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

Revised per adviser
burden/external cost per
adviser

Current aggregate burden
estimates

Revised aggregate burden
estimates

23.82

433,004 initial and amendment hours

annually36

299,273.6538 Initial and amendment hours annually

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, modified by firm size, employee benefits,
overhead, and adjusted to account for the effects of inflation.
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 June 2022, we estimate that there are 15,160 RIAs (“current RIAs”) and 552 advisers that are expected to become RIAs
annually (“newly expected RIAs”).
5. We estimate that 12,570 RIAs (80% of the total of 15,712 combined current and expected RIAs that are required to complete Parts 1 and 2) would incur a
burden of 0 hour, and 3,142 RIAs (20% of 15,712 current and expected RIAs that are required to complete Parts 1 and 2) would incur a burden of 0 hours.
(12,570 RIAs x 0) + (3,142 RIAs x 0) / 15,712 = 0 blended average hours per RIA.
6. The $318 wage rate reflects current estimates from the SIFMA Wage Report of the blended hourly rate for a senior compliance examiner ($276) and a
compliance manager ($360). ($276 + $360) / 2 = $318.
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.

13

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 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.
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). The proposal does not add to this burden. This burden remains 10 hours and 8 hours,
respectively, for ¼ and ½ of RIAs, respectively). (((.25 x 15,160 RIAs) x ($565 x 10 hours)) + ((0.50 x 15,160 RIAs) x ($842 x 8 hours))) / 15,160 RIAs =
$4,780.50 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 0 initial hours x 15,160 current RIAs = 0 initial hours in the first year aggregated for current RIAs. For expected
RIAs, we estimate that they will incur the full revised initial burden, which is 29.72 hours per RIA. Therefore, 29.72 hours x 552 expected RIAs = 16,405.44
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 0 hours + 16,405.44 hours = 16,405.44 aggregate
initial hours.
13. 11.8 amendment hours x (15,160 current RIAs + 552 expected new RIAs) = 185,401.60 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 15,160 RIAs) x ($565 x 0 hour)) + ((0.50 x 15,160
RIAs) x ($842 x 0 hour))) = $0 aggregated for current RIAs, For expected RIAs, we apply the currently approved external cost for initially preparing Part 2.
Therefore, $4,780.50 per expected RIA x 552 = $2,638,836 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 (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.
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 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. 9,556 current RIAs x 6.67 hours each for initially preparing Form CRS = 63,706.67 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. 63,706.67 hours + 6,940 hours = 70,646.67 aggregate hours for current and expected RIAs to initially prepare
Form CRS.
20. 1.58 hours x (9,556 current RIAs updating Form CRS + 347 expected new RIAs updating Form CRS) = 15,646.74 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 $565 and $842 for outside legal services and
management consulting services, respectively, are based on an inflation-adjusted figure in the SIFMA Wage Report. Therefore, (((.25 x 9,556 current RIAs
preparing Form CRS) x ($565 x 5 hours)) + ((0.50 x 9,556 current RIAs preparing Form CRS) x ($842 x 5 hours))) = $26,864,305. 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 $8,954,768.33. For expected RIAs that we

14

expect would prepare Form CRS each year, we use the following formula: (((.25 x 347 expected RIAs preparing Form CRS) x ($565 x 5 hours)) + ((0.50 x 347
expected RIAs preparing Form CRS) x ($842 x 5 hours))) = $975,503.75 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, $8,954,768.33 + $975,503.75 = $9,930,272.08
aggregate external cost for current and expected RIAs to initially prepare Form CRS.
22. Based on Form ADV data as of June 30, 2022, we estimate that there are 5,481 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 = 1,245.60 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 1,245.60 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 5,481 currently reporting ERAs) + (0.1 hour x 371 final filings) = 8,258.60
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 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 8,258.60 + 519 = 8,777.60 hours.
27. Based on Form ADV data as of June 30, 2022, we estimate that 5,142 current RIAs advise 50,968 private funds. Previously, based on Form ADV data as
of October 31, 2021, we have estimated 136 new RIAs will advise 407 reported private funds per year. We have also estimated 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
74,444 currently reported private funds reported by current private fund advisers (50,968 + 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 5,278 (5,142 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 (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.
30. 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 to the 74,444 currently reported private funds 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 burden per private fund. Therefore, 1
hours 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.
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 5,278 current and expected RIAs reporting private
funds or expected to report private funds = 316.68 audits. We therefore estimate that approximately 317 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 $14,856,439.58.
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. 299,273.65 aggregate annual hours for current and expected new advisers (see infra note 38) / (15,160 current RIAs + 552 expected RIAs + 5,481
current ERAs +346 expected ERAs*) = 13.89 blended average hours per adviser. * The parenthetical totals 21,539 current and expected advisers.
35. $27,425,547.66 aggregate external cost for current and expected new advisers (see infra note 39) / (21,539 advisers current and expected annually) =
$1,273.30 blended average hours per adviser.
36. See 2021 Form ADV PRA.
37. See 2021 Form ADV PRA.
38. 16,405.44 hours (internal initial burden for Parts 1 and 2) + 185,401.60 hours (internal annual amendment burden for Parts 1 and 2) + 70,646.67
hours (internal initial burden for Part 3) + 15,646.74 hours (internal annual amendment burden for Part 3) + 1,245.60 hours (internal initial burden for ERAs)
+ 8,777.60 hours (internal annual amendment burden for ERAs) + 1,150 hours (internal initial burden for private funds) = 299,273.65 aggregate annual
hours for current and expected new advisers.

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39. $2,638,836 (annual external cost burden for Parts 1 and 2) + $9,930,272.08 (annual external cost burden for Part 3) + $14,856,439.58 (annual
external cost burden for private funds) = $27,425,547.66

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.
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. 19
Commission staff estimates that advisers will incur no additional external costs in connection
with these proposed amendments to Form ADV. In connection with our prior proposed changes
to the methodology for calculating Form ADV burden, adjusting for inflation, and the increased
number of respondents to the information collection, we estimate about $27,425,547.66 in
external cost burden per year, or $1,2730.30 per adviser.
14.

Cost to the Federal Government

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

Change in Burden

We estimate that the proposed amendments to Form ADV will result in no change in
aggregate burden hours. Due to updated data and using a new methodology for certain estimates,
we estimate the revised annual aggregate burden hours for Form ADV (Parts 1, 2 and 3) for all
registered advisers and exempt reporting advisers would be 299,273.65 hours per year, with a

19

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

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monetized value of $95,169,020.70. 20 This would be an aggregate decrease of 133,730.79 hours,
or $23,041,191.40 in the monetized value of the hour burden, from the currently approved annual
aggregate burden estimates. 21 The aggregate annual estimated external cost burden of
$27,425,547.66 represents an increase of $13,300,464.66 from the previously approved estimate
of $14,125,083. 22
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.

20

See supra Table 1 Form ADV PRA Estimates.

21

See Approved Form ADV PRA (estimating the hour burden at 433,004.44 hours and the monetized value at
$118,210,212.10). See also supra Table 1 Form ADV PRA Estimates.

22

See supra Table 1 Form ADV PRA Estimates.

17