Supporting Statement.SecurityRatings

SUPPORTING STATEMENT FOR FINAL RULES UNDER THE
SECURITIES ACT OF 1933,
SECURITIES EXCHANGE ACT OF 1934,
DODD-FRANK WALL STREET REFORM AND
CONSUMER PROTECTION ACT
This supporting statement is part of a submission under the Paperwork Reduction Act
of 1995, 44 U.S.C. §3501, et seq.
A. JUSTIFICATION
1. CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY
In Release No. 33-9245,1 the Securities and Exchange Commission (the
“Commission”) adopted amendments to certain rules and form requirements in light of
Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(“the Act”). These amendments replace rule and form requirements under the Securities Act
of 1933 and the Securities Exchange Act of 1934 for securities offering or issuer disclosure
rules that rely on, or make special accommodations for, security ratings (for example, Forms
S-3 and F-3 eligibility criteria) with alternative requirements.
The proposed amendments contain “collection of information” requirements within
the meaning of the Paperwork Reduction Act of 1995. The titles for the collections of
information contained by the proposed amendments are: 2
“Form S-1” (OMB Control No. 3235-0065) ;
“Form S-3” (OMB Control No. 3235-0073);
“Form F-1” (OMB Control No. 3235-0258);
“Form F-3” (OMB Control No. 3235-0256);
“Form F-9” (OMB Control No. 3235-0377)3; and
“Form F-10” (OMB Control No. 3235-0380).
2. PURPOSE AND USE OF THE INFORMATION COLLECTION
The purpose of the collections of information is to replace rule and form requirements
under the Securities Act of 1933 and the Securities Exchange Act of 1934 for securities
1

Security Ratings, Release No. 33-9245 (July 27, 2011) [76 FR 46603].

2

Although the amendments include revisions to Form S-4, Form F-4 and Schedule 14A, the
Commission does not anticipate any changes to the reporting burden or cost burdens associated with
these forms, or the number of respondents as a result of the proposed amendments.

3

The Commission has rescinded Form F-9, which eliminates this as a title for the collection of
information effective December 31, 2012.

1

offering or issuer disclosure rules that rely on, or make special accommodations for, security
ratings (for example, Forms S-3 and F-3 eligibility criteria) with alternative requirements.
3. CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY
The collection of information requirements of the amendments will be set forth in
Form S-1, Form S-3, Form F-1, Form F-3 and Form F-10.4 These forms and schedules are
filed electronically with the Commission using the Commission’s Electronic Data Gathering,
Analysis and Retrieval system.
4. DUPLICATION OF INFORMATION
We are not aware of any rules that conflict with or substantially duplicate the
proposed rules.
5. REDUCING THE BURDEN ON SMALL ENTITIES
We anticipate that the amendments will result in a net decrease in the burdens and
costs for companies that would be subject to the proposed amendments. We are not aware of
any issuers that currently rely on the rules or any issuers that would be eligible to register
under the affected rules that is a small entity, however. In this regard, we note that credit
rating agencies rarely, if ever, rate the securities of small entities. We further note most
security ratings are obtained and used by the issuer. For these reasons, the amendments
should not have a significant economic impact on small entities.

6. CONSEQUENCES OF NOT CONDUCTING COLLECTION
The regulations and forms set forth the disclosure requirements for registration
statements and proxy and information statements filed by companies to help investors make
informed investment and voting decisions. Less frequent collection would deprive investors
of access to information that is important to their voting and investment decisions.
7. SPECIAL CIRCUMSTANCES
Not applicable.
8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission previously issued a proposing release soliciting comment on the
new “collection of information” requirements and associated paperwork burdens.5 In
4

5

The Commission has rescinded Form F-9, which eliminates the collection of information for that form
effective December 31, 2012.
Security Ratings, Release No. 33-9186 (Feb. 9, 2011) [76 FR 8946].

2

response to the solicitation for comment in the proposing release, registrants, investors, and
other market participants provided comments. The public can review the comments at
http://www.sec.gov/comments/s7-18-08/s71808.shtml.
Some commentators believed that our estimates in the proposing release understated
the number of companies that would no longer be eligible under the proposals.6 One
commentator reviewed data from March 2008 to March 2011 in the utility industry and
believed that at least 60 utility companies would no longer have been eligible to use Form S3 or Form F-3 over that three year period.7 One commentator believed the potential number
of utility companies who would lose eligibility may have been understated because utility
companies did not make offerings due to market conditions.8 Another commentator believed
that our PRA figures were “way off” because there are “far more S-1, S-3, F-1 and F-3
filings” than described in the release, although the commentator did not provide any
additional data.9 We believe the changes we have made to the proposals will reduce the
number of currently eligible issuers that would no longer be eligible to use Form S-3 and
Form F-3, particularly utility companies. Our PRA estimates reflect the expected impact of
the final rules.
In addition to soliciting comments from the public in the proposing release, the
Commission and staff participate in ongoing dialogue with representatives of various market
participants through public conferences, roundtables and meetings.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.
10. CONFIDENTIALITY
Not applicable.
11. SENSITIVE QUESTIONS
Not applicable.
12. AND 13. ESTIMATES OF HOUR AND COST BURDENS
The Commission expects that under the amendments, the number of companies in a 12month period eligible to register on Form S-3 or Form F-3 for primary offerings of non6

See letters from Securities Industry and Financial Markets Association (SIFMA), Entergy Services,
Inc. (Entergy) and Edison Electric Institute.

7

See letter from SIFMA.

8

See letter from Entergy.

9

See letter from John W. Chang.

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convertible securities, other than common equity, for cash will increase by approximately
four issuers for Form S-3 and one issuer for Form F-3. The Commission expects that the
issuers filing on Form S-1 and F-1 will decrease by the same amounts.
In addition, because these amendments relate to eligibility requirements, rather than
disclosure requirements, the Commission does not expect that the revisions adopted will
impose any new material recordkeeping or information collection requirements. Issuers may
be required to ascertain the aggregate principal amount of non-convertible securities, other
than common equity, issued or outstanding that were issued in registered primary offerings
for cash, but the Commission believes that this information should be readily available and
easily calculable.
The Commission is also rescinding Form F-9, which is the form used by qualified
Canadian issuers to register investment grade securities. Because of Canadian regulatory
developments, the Commission no longer believes that keeping Form F-9 as a distinct form
would serve a useful purpose. In addition, Canadian issuers have infrequently used Form F9. As a result of the rescission of Form F-9, the Commission believes there would be an
additional six filers on Form F-10.10 The Commission does not believe that the burden of
preparing Form F-10 will change (though the number of respondents will increase) because
the information required by Form F-10 is substantially the same as that required by Form F9, and the requirements of Form F-10 are not changing.
The Commission estimates that there will be no annual incremental increase in the
paperwork burden for issuers to comply with the collection of information requirements. The
Commission does estimate, however, that the number of respondents on Forms S-3, F-3 and
F-10 will increase as a result of the amendments. As a result, the aggregate burden hour and
professional cost numbers will increase for those forms due to the additional number of
respondents. The Commission also expects that the number of respondents will decrease for
Forms S-1 and F-1, which will reduce the aggregate burden hour and professional costs for
those forms. These estimates represent the average burden for all companies, both large and
small. For each estimate, the Commission calculates that 25% of the burden will be carried
by the company internally, and 75% will be carried by outside professionals retained by the
company. The portion of the burden carried by the company internally is reflected in hours,
while the portion of the burden carried by outside professionals retained by the company is
reflected as a cost. The Commission estimates these costs to be $400 per hour. A summary
of the changes is included in the table below.

10

Based on a review of Commission filings, since January 1, 2007, only 22 issuers have filed on Form F9. As a result, the Commission estimates that over a 12-month period, approximately six additional
Form F-10s will be filed.

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Table 1: Calculation of Incremental PRA Burden Estimates
Current
Annual
Responses
(A)

Estimated
Annual
Responses
(B)

Current
Burden
Hours
(C)

Increase/(Decrease)
in Burden Hours
(D)

Estimated
Burden Hours
(E)
=C+D

Current
Professional
Costs
(F)

Increase/(Decrease)
in Professional
Costs
(G)

Estimated
Professional
Costs
=F+G
(H)

Form S-1

768

764

186,687

(972)

185,715

$224,024,000

($1,166,792)

$222,857,208

Form S-3

2,065

2,069

243,927

472

244,399

$292,711,500

$566,996

$293,278,496

Form F-1

42

41

18,975

(452)

18,523

$22,757,400

($541,843)

$22,215,557

Form F-3

106

107

4,426

42

4,468

$5,310,600

$50,100

$5,360,700

Form F-10

75

81

469

36

505

$562,500

$45,000

$607,500

Total

(874)

($1,046,539)

To calculate the increase or reduction in burden hours, we divided the current burden
hours (Column C) by the current number of annual responses (Column A) to arrive at the
current burden hours per response (C/A = current burden hours per response). We then took
that number and multiplied it by the estimated number of annual responses (Column B) to
arrive at the estimated burden hours (Column E) (current burden hours per response x B = E).
To calculate the increase or reduction in professional costs, we divided the current
professional costs (Column F) by the current number of annual responses (Column A) to
arrive at the current professional costs per response (F/A = current professional costs per
response). We then took that number and multiplied it by the estimated annual responses
(Column B) to arrive at the estimated professional costs (Column H) (current professional
costs per response x B = H).
14. COSTS TO FEDERAL GOVERNMENT
We estimate that the cost of preparing the amendments was approximately $50,000.
15. REASON FOR CHANGE IN BURDEN
The Commission estimates that there will be no annual incremental increase in the
paperwork burden for issuers to comply with the collection of information requirements. The
Commission does estimate, however, that the number of respondents on Forms S-3, F-3 and
F-10 will increase as a result of the amendments. As a result, the aggregate burden hour and
professional cost numbers will increase for those forms due to the additional number of
respondents. The Commission also expects that the number of respondents will decrease for
Forms S-1 and F-1, which will reduce the aggregate burden hour and professional costs for
those forms.
Table 2 below illustrates the changes in cost and hour burdens from the burden
estimates currently approved by OMB. Columns (A) and (B) represent the most recent
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burden estimates submitted to OMB. Columns (C) and (D) represent the new burden
estimates under the proposed amendments. Columns (E) and (F) represent the program
change, which encompasses the change in the burden estimates attributable to the proposed
amendments.
Table 2:11
Current Burden

Change in Burden

Program Change

Burden
Hours
(A)

Professional
Costs
(B)

Proposed
Burden
Hours
(C)

Proposed
Professional
Costs
(D)

Increase/(Decre
ase) in Burden
Hours
(E)

Form S-1

186,687

$224,024,000

185,715

$222,857,208

(972)

Increase/(Decre
ase) in
Professional
Costs
(F)
($1,166,792)

Form S-3

243,927

$292,711,500

244,399

$293,278,496

472

$566,996

Form F-1

18,975

$22,757,400

18,523

$22,215,557

(452)

($541,843)

Form F-3

4,426

$5,310,600

4,468

$5,360,700

42

$50,100

Form F-10

469

$562,500

505

$607,500

36

$45,000

(874)

($1,046,539)

Total

16. INFORMATION COLLECTION PLANNED FOR STATISTICAL
PURPOSES
Not applicable.
17. DISPLAY OF OMB APPROVAL DATE
We request authorization to omit the expiration date on the electronic version of this form
for design and scheduling reasons. The OMB control number will be displayed.

18. EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION
ACT SUBMISSIONS
Not applicable.
B. STATISTICAL METHODS
Not applicable.
11

Figures in Table 2 have been rounded to the nearest whole number.

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