Supporting Statement A

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PAPERWORK REDUCTION ACT SUPPORTING STATEMENT
for the Extension of
Rule 206(4)-6
OMB Control Number 3235-0571

The U.S. Securities and Exchange Commission (“Commission” or SEC) submits this
information collection request (ICR) pursuant to the Paperwork Reduction Act of 1995 (PRA), 44
U.S.C. Section 3501 et seq., with the following justification.

1.

Necessity of Information Collection
Section 206(4) of the Investment Advisers Act of 1940 (“Advisers Act” or “Act”) (15 USC 80b

6(4)) prohibits any investment adviser from engaging in any act, practice or course of business which is
fraudulent, deceptive or manipulative and gives the Securities and Exchange Commission
(“Commission”) the power, by rules and regulations, to define and prescribe means reasonably designed
to prevent such acts, practices and courses of business. The Commission adopted rule 206(4)-6 under
the Advisers Act to address an investment adviser’s fiduciary obligation to clients who have given the
adviser authority to vote their proxies. Under the rule, an investment adviser that exercises voting
authority over client securities is required to: (i) adopt and implement written policies and procedures
that are reasonably designed to ensure that the adviser votes client securities in the best interest of
clients, including procedures to address any material conflict that may arise between the interests of the
adviser and the client; (ii) disclose to clients how they may obtain information from the adviser on how
the adviser has voted with respect to their securities; and (iii) describe to clients the adviser’s proxy
voting policies and procedures and, on request, furnish a copy of the policies and procedures to the
requesting client.
Rule 206(4)-6 contains “collection of information” requirements within the meaning of the
Paperwork Reduction Act of 1995. The title of this collection is “Rule 206(4)-6” and the Commission
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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 3235-0571 (expiring on October 31, 2026). 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 control number. This collection of information is codified at 17 CFR
275.206(4)-6 and is mandatory. The respondents are investment advisers registered with the
Commission that vote proxies with respect to clients’ securities. This collection of information is
necessary to permit advisory clients of these investment advisers to use the information collected to
assess investment advisers’ proxy voting policies and procedures and to monitor the advisers’
performance of their proxy voting activities. Responses to the disclosure requirement are not kept
confidential.

2.

Purpose and Use of Information Collection
The rule is designed to assure that advisers that vote proxies for their clients vote those proxies in

their clients’ best interest and provide clients with information about how their proxies were voted. As
discussed in Item 1 (above), advisory clients use the information required by rule 206(4)-6 to assess
investment advisers’ proxy voting policies and procedures and to monitor the advisers’ performance of
their proxy voting activities. The information required by Advisers Act rule 204-2, a recordkeeping
rule, also is used by the Commission staff in its examination and oversight program. Without the
information collected under the rules, advisory clients would not have information they need to assess
their advisers’ services and monitor their advisers’ handling of their accounts, and the Commission
would be less efficient and effective in its programs.

3.

Use and Consideration of Information Technology
The collection of information requirements under rule 206(4)-6 take the form of (1) writing

policies and procedures that are reasonably designed to ensure that the adviser votes proxies in the best
interest of clients, (2) disclosing how clients may obtain information on how the adviser has voted their
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proxies, and (3) describing to clients information about the adviser’s proxy voting procedures and
policies. Accordingly, the Commission’s use of computer technology may have little effect. The
Commission, however, does currently permit advisers to maintain the records related to their proxy
voting policies and to how they have voted client proxies though the use of electronic media.

4.

Identifying and Minimizing Duplication
The requirements of rule 206(4)-6 are not duplicated elsewhere for those investment advisers

that must comply with the rule, although those advisers effectively are required to use disclosures
mandated by Form ADV and related rules to meet their disclosure obligations under rule 206(4)-6. Rule
204-3 under the Advisers Act generally requires investment advisers to furnish certain information to
clients and prospective clients by providing them a brochure that contains all information required by
Part 2 of Form ADV.
As required by Part 2 of Form ADV, this brochure must include, among other things, the same
proxy-related disclosure mandated by rule 206(4)-6. That is, an investment adviser that has, or will
accept, the authority to vote its clients’ securities must (i) describe in its brochure its voting policies and
procedures, including those adopted pursuant to rule 206(4)-6; (ii) describe in its brochure whether (and,
if so, how) its clients can direct a vote in a particular solicitation; (iii) describe in its brochure how it
addresses conflicts of interest between it and its clients with respect to voting their securities; (iv)
describe in its brochure how clients may obtain information from the investment adviser about how it
voted their securities; and (v) explain in the brochure that clients may obtain a copy of its proxy voting
policies and procedures upon request. These brochure disclosure requirements are not duplicative of
those contained in rule 206(4)-6 because an adviser need not make separate disclosures to satisfy each
requirement.

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5.

Effect on Small Entities
All advisers, regardless of their size, are equally subject to the collection requirements. The

requirements of rule 206(4)-6 apply equally to all investment advisers that are registered with the
Commission and vote proxies on behalf of their clients, including those advisers that are small entities.
It would be incompatible with the objectives of the rule to exempt small entities from these
requirements, which are designed to ensure clients are afforded the full protections attendant to an
adviser’s fiduciary duties as recognized by the Advisers Act when an adviser is voting their proxies.
Nevertheless, in designing the rule, the Commission took an approach that permits small firms to
implement the rule in whatever manner is least burdensome in light of their particular circumstances.
The Commission drafted rule 206(4)-6 to permit each firm subject to the rule to design and structure its
own policies and procedures in light of the firm’s operational structure and the particular types of
conflicts encountered by the firm in connection with its unique business and clients.

6.

Consequences of Not Conducting Collection and Obstacles to Reducing
Burden
Less frequent information collection would be incompatible with the objectives of rule 206(4)-6.

For example, if the information required by the rule were to be either not collected or collected less
frequently, both the Commission’s ability to protect investors and the ability of advisory clients to assess
and monitor advisers’ proxy voting practices would be reduced.

7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
Not applicable.

8.

Public Comment and Consultations Outside the Agency

The SEC did not receive public comment during the 60-day notice and comment period.

9.

Payment or Gift to Respondents
Not applicable.

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10.

Assurance of Confidentiality and Privacy
Rule 206(4)-6 requires investment advisers to make certain disclosures to their clients. These

responses are not kept confidential.

11.

Collection Questions of a Sensitive Nature
Not applicable

12.

Estimated Time Burden and its Cost Equivalent
Rule 206(4)-6 requires an investment adviser that votes client securities to adopt written policies

and procedures reasonably designed to ensure that the adviser votes client securities in the best interest
of clients, and requires the adviser to disclose to clients information about those policies and procedures.
For purposes of estimating the paperwork burden for investment advisers under rule 206(4)-6, we
estimate that the number of investment advisers subject to collection of information requirements under
the rule is 15,996. We further estimate that each of these advisers is required to spend on average 10
hours annually documenting its proxy voting procedures under the requirements of the rule, for a total
burden of 159,960 hours.
The rule also requires these advisers to describe their proxy voting policies and procedures to
clients and make certain related disclosures, as discussed in Item 1, above. The attendant paperwork
burden is already incorporated in collections titled “Form ADV” (OMB control number 3235-0049) and
“Rule 204-3” (OMB control number 3235-0047). As discussed above, investment advisers are required
to make disclosures concerning their proxy voting policies and procedures in brochures that contain all
information required by Part 2 of Form ADV, including the information described in rule 206(4)-6.
In addition, rule 206(4)-6 requires these investment advisers to provide copies of their proxy
voting policies and procedures to clients upon request. Based on information submitted to the
Commission by SEC-registered investment advisers, we estimate that SEC-registered advisers have, on
average, 3,771 clients each. However, we estimate that, on average, at least 90 percent of each adviser’s
clients would find the adviser’s description of its policies sufficiently informative, and at most ten
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percent, or 377 clients of each adviser on average, would request copies of the underlying policies and
procedures. We estimate that it would take these advisers 0.1 hours per client to deliver copies of the
policies and procedures, for a total burden of 603,049.2 hours.
Accordingly, we estimate that rule 206(4)-6 results in an annual aggregate burden of collection
for SEC-registered investment advisers of a total of 763,009.2 hours.
We believe that investment advisers use financial compliance examiners to document their firms’
proxy voting policies and procedures. We estimate the hourly wage for financial compliance examiners
to be $365, including benefits. Additionally, we believe that investment advisers use office clerks to
deliver copies of proxy voting policies in response to clients’ requests. We estimate the hourly wage for
office clerks to be $144, including benefits. Accordingly, we estimate the annual aggregate cost of
collection to be $145,224,484.80. Information related to the estimated total burden is also summarized
in the table below.

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RUL E 2 0 6 (4 )-6 PRA ESTIMATES
CURRENT BURDEN ESTIMATES 1
Hour Burden

Wage rate

Documenting proxy voting policies and
procedures

140,030 hours
(10 hours x 14,003 advisers)

Delivery of proxy voting policies and
procedures to clients

490,105 (0.1 hours per client x
350 x 14,003)

Total Current burden estimates

630,135 hours

×

×

Internal time costs

$339
(rate for compliance
manager)

$47,470,170

$68
(rate for senior operations
manager)

$33,327,140

$80,797,310

REVISED BURDEN ESTIMATES
Hour burden

Wage rate

Internal time costs

Documenting proxy voting policies and
procedures

159,960 hours
(10 hours x 15,996 advisers)

×

$365
(rate for Financial
Compliance Manager)

$58,385,400

Delivery of proxy voting policies and
procedures to clients

603,049.2 hours
(0.1 hours x 377 x 15,996)

×

$144
(rate for Office Clerk,
General)

$86,839,084.80

Total Revised Burden Estimates

763,009.2 hours

$145,244,484.80

Summary of Revised Annual Responses, Burden Hours, and Cost Estimates
IC Title

Rule
206(4)-6

13.

Annual No. of Responses

Annual Time Burden (Hrs.)

External Cost to Respondents ($)

Previously
approved

Requested

Change

Previousl
y
approved

Requested

Change

Previously
approved

Requested

Change

4,901,050

6,030,492 2

+1,129,442

630,135

763,009.2

+132,874.
2

0

0

0

Estimated Additional Cost Burden
Not applicable

1

The current burden estimates reflect a scrivener’s error that labeled the wage rates for a compliance manager and a
general clerk as for senior operations managers. The revised burden estimates label the wage rate estimates for a
financial compliance examiner and an office clerk, general. See supra note 9.

2

15,996 x 377 = 6,030,492.

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14.

Annual Cost to the Federal Government
Not applicable

15.

Reasons for Changes in Burden Estimates
We have increased the estimated hour burden from 630,135 hours to 763,009.2 hours based on

new information with respect to the number of registered investment advisers that provide discretionary
asset management services and to the estimated average number of clients per SEC-registered
investment adviser. This new information is based on data derived from information submitted by
advisers on Form ADVs filed through the IARD. The number of hours per response has not changed
since the last estimate. The increase in hour burden is entirely due to an increase in the number of
respondents.

16.

Plans for Publishing Results
Not applicable.

17.

Approval to Omit Display of OMB Expiration Date
Not applicable

18.

Exceptions to the Certification for Paperwork Reduction Act Submissions
Not applicable

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