PRA_-_Form_N-1A_SUPPORTING_STATEMENT_(2012)[1]

SUPPORTING STATEMENT
for the Paperwork Reduction Act
Information Collection Submission
“Form N-1A”
A.

JUSTIFICATION
1.

Information Collection Necessity

Form N-1A (17 CFR 239.15A and 274.11A) is the form used by open-end
management investment companies (“funds”) under the Investment Company Act of
1940 (15 U.S.C. 80a-1 et seq.) (“Investment Company Act”) and/or to register their
securities under the Securities Act of 1933 (15 U.S.C. 77a et seq.) (“Securities Act”).
Section 5 of the Securities Act (15 U.S.C. 77e) requires the filing of a registration
statement prior to the offer of securities to the public and that the statement be effective
before any securities are sold, and Section 8 of the Investment Company Act (15 U.S.C.
80a-8) requires a fund to register as an investment company. Form N-1A also permits
funds to provide investors with a prospectus and a statement of additional information
(“SAI”) covering essential information about the fund when it makes an initial or
additional offering of its securities. Section 5(b) of the Securities Act requires that
investors be provided with a prospectus containing the information required in a
registration statement prior to the sale or at the time of confirmation or delivery of the
securities.
2.

Information Collection Purpose

The title for the collection of information is: Form N-1A under the Investment
Company Act of 1940 and Securities Act of 1933, Registration Statement of Open-End
Management Investment Companies.” The purpose of Form N-1A is to meet the filing
and disclosure requirements of the Securities Act of 1933 (“Securities Act”) and the

Investment Company Act of 1940 (“Investment Company Act”) and to enable funds to
provide investors with information necessary to evaluate an investment in the fund.
Unlike many other federal information collections, which are primarily for the use and
benefit of the collecting agency, this information collection is primarily for the use and
benefit of investors. The information filed with the Commission also permits the
verification of compliance with securities law requirements and assures the public
availability and dissemination of the information.
3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis
and Retrieval or “EDGAR”) is designed to automate the filing, processing and
dissemination of full disclosure filings. The system permits publicly held companies to
transmit filings to the Commission electronically. This automation has increased the
speed, accuracy, and availability of information, generating benefits to investors and
financial markets. Form N-1A is required to be filed with the Commission electronically
on EDGAR. (17 CFR 232.101(a)(1)(i) and (iv)). The public may access filings on
EDGAR through the Commission’s Internet Web site (http://www.sec.gov) or at EDGAR
terminals located at the Commission’s public reference rooms. Prospectuses and SAIs
may be sent to investors by electronic means so long as the fund meets certain
requirements. 1

1

See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233,
Exchange Act Release No. 36345, Investment Company Act Release No. 21399 (Oct. 6,
1995) (60 FR 53458 (Oct. 13, 1995)).

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4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it adopts changes in its
rules. The requirements of Form N-1A are not generally duplicated elsewhere.
5.

Effect on Small Entities

The current disclosure requirements for reports on Form N-1A do not distinguish
between small entities and other funds. The burden on smaller funds, however, to
prepare and file registration statements may be greater than for larger funds. The
Commission believes, however, that imposing different requirements on smaller
investment companies would not be consistent with investor protection and the purposes
of the registration statements. We review 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 Less Frequent Collection

The Investment Company Act requires that funds file annual amendments to their
registration statements. Less frequent collection would mean that current information
might not be available to fund investors.
7.

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

Not Applicable.
8.

Consultation Outside the Agency

Form N-1A has previously been amended through rulemaking actions pursuant to
the Administrative Procedures Act. Comments are generally received from registrants,
trade associations, the legal and accounting professions, and other interested parties. In

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addition, the Commission and 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. The Commission requested
public comment on the collection of information requirements in Form N-1A before it
submitted this request for extension and approval to the Office of Management and
Budget. The Commission received no comments in response to its request.
9.

Payment of Gift

Not Applicable. No payment or gift to respondents is provided.
10.

Assurance of Confidentiality

Not Applicable. No assurance of confidentiality is provided.
11.

Sensitive Questions

Not Applicable. No questions of a sensitive nature are involved.
12.

Time Burden Estimate

Open-end funds register as investment companies under the Investment Company
Act and register their securities under the Securities Act on Form N-1A. Compliance
with the disclosure requirements of Form N-1A is mandatory.
The estimate of the annual number of registration statements filed on Form N-1A
is based on the average annual number of filings received by the Commission over the
past three years. The hour burden estimates for preparing and filing Form N-1A are
based on the Commission’s experience with the contents of the form and discussions with
industry representatives. The number of burden hours may vary depending on, among
other things, the complexity of the filing and whether preparation of the form is
performed by fund staff or outside counsel. This estimate is made solely for purposes of

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the Paperwork Reduction Act and is not derived from a quantitative, comprehensive, or
even representative survey or study of the burdens associated with Commission rules and
forms.
Form N-1A generally imposes two types of reporting burdens on investment
companies: (1) the burden of preparing and filing the initial registration statement; and
(2) the burden of preparing and filing post-effective amendments to a previously effective
registration statement.
Commission staff estimate that the burden hours required to comply with
requirements of Form N-1A are as follows:
Calculation of Hour Burden of Initial Form N-1A Filings
•
•
•
•
•

Number of initial Form N-1A filings annually
Average number of portfolios per filing
Number of portfolios/funds referenced in initial
Form N-1A filings annually
Hour burden per portfolio/fund for preparing initial
Form N-1A filing
Total annual hour burden for initial Form N-1A
filings (360 x (830.47))

48
7.5
360
830.47
298,969

Calculation of Hour Burden of Post-Effective Amendments
•
•
•
•
•

Number of post-effective amendments filed annually
Average number of portfolios per filing
Number of portfolios/funds referenced in posteffective amendments filed annually
Hour burden per portfolio/fund for preparing posteffective amendments
Total annual hour burden to prepare post-effective
amendments (9,568 x (133.75))
Total Annual Hour Burden

•

Annual hours for initial Form N-1A filings + annual

5

5,642
1.7
9,568
133.75
1,279,720

hours for post-effective amendments
(298,969 + 1,279,720)

1,578,689

Based on the estimated wage rate, the total cost to the fund industry of the hour
burden for complying with Form N-1A is approximately $505.2 million. 2
13. Total Annual Cost Burden
Cost burden is the cost of goods and services purchased to prepare and update
reports filed on Form N-1A, such as for the services of outside counsel. The cost burden
does not include the hour burden discussed in Item 12. Estimates are based on the
Commission’s experience with the filing of Form N-1A.
Commission staff estimates that the cost burden for preparing an initial Form N1A is $35,433 per portfolio and for preparing a post-effective amendment to a previously
effective registration statement is $11,494 per portfolio. These costs include expenses
related to the preparation and review of materials by outside counsel to the fund and
independent counsel to the board, accounting and audit expenses, and printer costs. The
Commission estimates that, on an annual basis, 360 portfolios will be referenced in initial
filings on Form N-1A and 9,568 portfolios will be referenced in post-effective
amendments of Form N-1A filings. Thus, the total cost burden allocated to Form N-1A
would be as follows:
2

The cost to the industry is calculated by multiplying the total annual hour burden
(1,578,689 hours) by the estimated hourly wage rate of $320. The staff estimates that the
average hourly rate for a compliance attorney is $322 and the average hourly rate for a
senior programmer is $318. The estimated wage rate was further based on the estimate
that attorneys and programmers would divide time equally, resulting in a weighted wage
rate of $320 (($322 x .50) + ($318 x .50)). All hourly rates for the occupations in this
statement are from SIFMA's Management & Professional Earnings in the Securities
Industry (2011), modified by Commission staff to account for an 1800-hour work-year
and multiplied by 5.35 to account for bonuses, firm size, employee benefits and
overhead.

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Cost Burden of Preparing and Filing Initial Form N-1A
•
•
•

Cost burden per portfolio/fund of preparing and
filing initial Form N-1A
Number of portfolios/funds referenced in initial
Form N-1A filings annually
Cost burden of preparing and filing portfolio/fund on
initial Form N-1A (number of portfolios x cost per
portfolio)

$35,433
360

$12,755,880

Cost Burden of Preparing and Filing Post-Effective Amendments
•
•
•

Cost burden per portfolio/fund of preparing and
filing post-effective amendments
Number of portfolios/funds referenced in posteffective amendments filed annually
Cost burden of preparing and filing portfolio/fund
post-effective amendments (number of portfolios x
cost per portfolio)

$11,494
9,568

$109,974,592

Total Cost Burden
•

14.

Initial Form N-1A + post-effective amendments
($12,755,880 + $109,974,592)

$122,730,472

Federal Government Cost

The annual cost of reviewing and processing new registration statements,
post-effective amendments, proxy statements, and shareholder reports of investment
companies amounted to approximately $20.5 million in fiscal year 2011, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15.

Changes in Burden

Currently, the approved annual hour burden for preparing and filing registration
statements on Form N-1A is 1,248,589 hours based on the previous estimate of 1,935
responses. The new estimate of the total annual hour burden is 1,578,689 hours based on

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the new estimated total number of responses of 6,002, referencing a total of 9,928
portfolios. The increase in the total annual hour burden is 330,100 hours. This increase
is due to the increase in our estimates of the average number of post-effective
amendments filed annually and an increase in our estimates of the average current hour
burden per portfolio/fund for preparing post-effective amendments.
16.

Information Collection Planned for Statistical Purposes

Not Applicable. The results of any information collected 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 for design and IT project scheduling reasons. The OMB control number will be
displayed.
18.

Exceptions to Certification Statement

Not Applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS

Not Applicable.

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