Supporting Statement - Rule 482

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 company1 (“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

1

“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 November 7, 2024, the Commission adopted amendments to rule 482 to correct
outdated cross-references and conform the risk statements that money market funds must include
in their advertisements and sales literature to the risk statements that money market funds must
include in their prospectuses.2 The 2023 money market fund reform adopting release amended
the risk statements that money market funds must include in their prospectuses to align with the
changes to money market fund regulations adopted in that release.3 However, rule 482 was not

2

Conforming Amendments to Commission Rules and Forms, Investment Company Act Release No. 35377
(Nov. 7, 2024) (the “Adopting Release”).

3

See Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers;
Technical Amendments to Form N-CSR and Form N-1A, Investment Company Act Release No. 34959
(July 12, 2023) [88 FR 51404 (Aug. 3, 2023)].

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included in the amendments and the statements that rule 482 required were inconsistent with the
recently amended regulatory framework for money market funds. Further, the risk statements
that money market funds were required to include in prospectuses and advertisements have
otherwise always been identical and the risk statements should not differ based on whether an
investor is reviewing a prospectus or an advertisement. As a result, rule 482 included outdated
references to concepts that have been removed or significantly modified in underlying money
market fund regulations (e.g., allowing temporary suspensions of redemptions). The amendments
to rule 482 correct this error, make certain other conforming edits to further align the language of
the risk statements with the risk statements that money market funds must include in their
prospectuses, and correct inaccurate cross references to money market fund rules.
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”).4 This information collection differs
from many other federal information collections that are primarily for the use and benefit of the
collecting agency.

4

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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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
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.5 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

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Id.

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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
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
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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).
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 is provided as a supplemental
document and is available at https://www.sec.gov/privacy.
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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
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
burden hours

Internal annual
burden hours1

Wage rate2

Internal time costs1

$4294

$73

ESTIMATES
Amended risk statement in
advertisement

0.5 hours

0.17 hours3

Number of funds

× 2915

× 2915

Total estimated burden

49

$21,243

Current Burden Estimates

577,847

$213,133,255

Revised Burden Estimates

577,896

$213,154,498

Notes:
This estimate includes the initial burden and internal time costs estimates amortized over a three-year period.
The estimated wage figures are based on published rates for the professionals described in this chart, modified to account for an 1800hour work-year and inflation. The estimated figures for the proposed burdens were multiplied by 5.35 to account for bonuses, firm size,
employee benefits, and overhead. See Securities Industry and Financial Markets Association’s Report on Management & Professional
Earnings in the Securities Industry 2013.
3. This estimate assumes that, after the initial 0.5 hours to amend the fund’s risk statement, funds would not have an ongoing burden
associated with the amendment.
4. This represents a blended rate for a compliance attorney ($449) and a senior programmer ($408).
5. The number of funds estimate is based on the number of money market funds reporting to the Commission on Form N-MFP as of Dec.
2023.
1.
2.

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 577,896 hours, at an average time cost of $213,154,498.
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.

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14.

Cost to the Federal Government

Advertising regulation affects costs incurred by the federal government. Responses
assocatied with rule 482 generally are filed with and reviewed by FINRA and generally not
reviewed by the Commission.
15.

Change in Burden

On November 7, 2024, the Commission adopted amendments to rule 482 to conform the
risk statements that money market funds must include in their advertisements and sales literature
to the risk statements that money market funds must include in their prospectuses.6 As
summarized in Table 1 above, the estimated annual hourly burden associated with rule 482 has
increased from 577,847 hours to 577,896 hours (an increase of 49 hours) as a result of these
amendments. This reflects a slight increase of hours associated with the one-time updates to the
wording of the risk statements already required under current rule 482(b)(4) for certain
registrants. 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.
B.

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

6

Conforming Amendments to Commission Rules and Forms, Investment Company Act Release No. 35377
(Nov. 7, 2024) (the “Adopting Release”).

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