FINAL PRA supporting statement.8-7-13

SUPPORTING STATEMENT FOR AMENDMENT TO FORM D
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
The Securities Act of 1933 (the “Securities Act”) generally requires that a registration
statement be filed with the Securities and Exchange Commission disclosing prescribed
information before securities may be offered for sale to the public. The securities cannot be sold
to the public until the registration statement becomes effective. In addition, prospective
investors must be furnished a prospectus containing the most significant information in the
registration statement. Congress, however, recognized that there are certain situations where
there is no practical need for registration or where the public benefits derived from registration
are too remote. Accordingly, a number of exemptions to the registration requirements are
contained in the Securities Act. The exemptions that small businesses most typically rely on are
those provided by Sections 3(b) and 4(a)(2).
The Commission is authorized under Section 3(b) of the Securities Act to exempt
securities from registration if it finds that registration for these securities is not necessary in the
public interest or for the protection of investors because of the small amount involved or the
limited character of the public offering. Section 4(a)(2) of the Securities Act exempts
transactions by an issuer not involving any public offering. Pursuant to this authority, the
Commission has adopted various rules (collectively “Regulation D”) establishing several small
issues or limited offering exemptions from the registration requirements of Securities Act. The
rules (Rules 504, 505, and 506) provide exemptions for offerings that satisfy certain conditions,
such as limitations on the type and/or number of investors and, as applicable, limitation on the
dollar amount.
In addition, Section 4(a)(5) of the Securities Act exempts offers and sales of securities by
an issuer solely to one or more accredited investors, provided that the aggregate offering price of
the securities offered in the transaction does not exceed $5 million, there is no advertising or
public solicitation in connection with the transaction by the issuer or anyone acting on behalf of
the issuer, and the issuer files a prescribed notice with the Commission.
For all Regulation D offerings and offerings under Section 4(a)(5), Form D must be filed
with the Commission no later than 15 days after the first sale of securities in the offering. The
Form D is a simple notice that provides certain information about the issuer and the offering.
Section 201(a)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) directs the
Commission to amend Rule 506 of Regulation D to permit general solicitation or general
advertising in offerings made under Rule 506, provided that all purchasers of the securities are
accredited investors and the issuer takes reasonable steps to verify their status as accredited

investors. In Release No. 33-9415,1 the Commission adopted new paragraph (c) of Rule 506 of
Regulation D to implement Section 201(a)(1) of the JOBS Act. In the release, the Commission
also adopted an amendment to Form D to add a separate check box for issuers to indicate
whether they are claiming an exemption under Rule 506(c).
The amendment to Form D contains a “collection of information” requirement within the
meaning of the Paperwork Reduction Act of 1995. The title for the collection of information is:
“Form D” (OMB Control No. 3235-0076).
2. PURPOSE AND USE OF THE INFORMATION COLLECTION
An important purpose of the notice is to collect empirical data, which provides a
continuing basis for action by the Commission either in terms of amending existing rules and
regulations or proposing new ones. Further, Form D allows the Commission to elicit information
necessary in assessing the effectiveness of Regulation D and Section 4(a)(5) as capital-raising
devices for small businesses.
3. CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY
Form D is filed using the Commission’s Electronic Data Gathering, Analysis and
Retrieval system.
4. DUPLICATION OF INFORMATION
We are not aware of any forms or rules that conflict with or substantially duplicate the
requirements of Form D.
5. REDUCING THE BURDEN ON SMALL ENTITIES
Regulation D is a comprehensive set of exemptions from Securities Act registration
relating to small issues and small issuers. Regulation D was designed to simplify and clarify
existing exemptions and to expand their availability to small issuers.
6. CONSEQUENCES OF NOT CONDUCTING COLLECTION
As stated above, an important purpose of Form D is to collect empirical data, which
provides a continuing basis for action by the Commission in terms of amending existing rules and
regulations or proposing new ones. In addition, the information in Form D filings has been useful
for a number of other purposes, such as serving as a source of information for investors and
facilitating the enforcement of the federal securities laws and the enforcement efforts of state
securities regulators and the Financial Industry Regulatory Authority.

1

Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A
Offerings, Release No. 33-9415 (July 10, 2013) [78 FR 44771 (July 24, 2013)].

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7. SPECIAL CIRCUMSTANCES
Not applicable.
8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission issued a proposing release soliciting comment on the new “collection of
information” requirements and associated paperwork burdens.2 In response to the solicitation for
comment in the proposing release, registrants, investors, and other market participants provided
comments. In addition, the Commission and staff participated in ongoing dialogue with
representatives of various market participants through public conferences, roundtables and
meetings. The Commission considered all comments received prior to publishing the final rule
as required by 1320.11(f).
One comment was received in response to the Commission’s solicitation of comment on
the Paperwork Reduction Act burden hour and cost estimates and the analysis used to derive
such estimates. This commenter stated that it believed that the cost estimates in the PRA and
economic analysis are too low because they did not include all of the possible compliance costs
that would be associated with Rule 506(c). For PRA purposes, we considered only the burden of
responding to the collection of information in Form D and did not consider any of the other
costs, direct or indirect, of conducting a Rule 506(c) offering.
Comments received on the proposal are available at http://www.sec.gov/comments/s7-0712/s70712.shtml. A copy of the adopting release is attached.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.
10. CONFIDENTIALITY
Not applicable.
11. SENSITIVE QUESTIONS
No information of a sensitive nature is required.
12/13. ESTIMATES OF HOUR AND COST BURDENS
The estimated burden hours and cost burden are made solely for the purposes of the
Paperwork Reduction Act and represent the average burden for all issuers. The cost burden is
not derived from a comprehensive or even a representative survey of the costs of Commission
rules and forms.
2

See Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A
Offerings, Release No. 33-9354 (Aug. 29, 2012) [77 FR 54464 (Sept. 5, 2012)].

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Form D takes approximately 4 hours per response to prepare. In 2012, 16,067 companies
made 18,187 initial Form D filings.3 We estimate that 25% of the 4 hours per response (1 hour)
is prepared by the issuer for an annual reporting burden of 18,187 hours (1 hour per response x
18,187 responses). We estimate that 75% of the 4 hours per response (3 hours) is prepared by
outside professionals retained by the issuer. We estimate the cost of these outside professionals
to be $400 per hour ($400 per hour x 3 hours per response x 18,187 responses) for a total cost
burden of $21,824,400. Table 1 illustrates the current total annual compliance burden, in hours
and in costs, of the collection of information pursuant to Form D.
Table 1.

Form D

Estimated paperwork burden under Form D, pre-amendment to Rule 506
Number of
responses
(A)

Burden
hours/form
(B)

Total burden
hours
(C)=(A)*(B)

Internal issuer
time
(D)

External
professional
time
(E)

Professional
costs
(F)=(E)*$400

18,187

4

72,748

18,187

54,561

$21,824,400

We estimate that, following the amendment to Form D, the burden for responding to the
collection of information in Form D will be substantially the same as before the amendment to
Form D because the additional information required in the form is minimal. However, we
believe that the adoption of Rule 506(c), which removes the prohibition on the use of general
solicitation or general advertising for a subset of Rule 506 offerings provided that certain
conditions are met, will increase the number of Form D filings that are made with the
Commission.
For purposes of the Paperwork Reduction Act, we estimate that the adoption of Rule
506(c) will result in a 20% increase in Form D filings relying on Rule 506, or approximately
3,637 filings. We also assume that the number of Form D filings will increase by approximately
3,637 following the adoption of Rule 506(c). Based on this increase, we estimate that the annual
compliance burden of the collection of information requirements for Form D filings after the
adoption of Rule 506(c) will be an aggregate of 21,824 hours of issuer personnel time and
$26,188,800 for the services of outside professionals per year. Table 2 illustrates the estimated
total annual compliance burden, in hours and in costs, of the collection of information pursuant
to Form D following the adoption of Rule 506(c).

3

We had previously estimated the number of responses to be 25,000, as reflected in OMB’s Inventory of Currently
Approved Information Collections (available at:
http://www.reginfo.gov/public/do/PRAMain;jsessionid=D37174B5F6F9148DB767D63DF6983A65), but we are
revising this estimate to reflect the number of initial Form D filings made in 2012.

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Table 2.

Form D

Estimated paperwork burden under Form D, post-amendment to Rule 506
Number of
responses
(A)4

Burden
hours/form
(B)

Total burden
hours
(C)=(A)*(B)

Internal issuer
time
(D)

External
professional
time
(E)

Professional
costs
(F)=(E)*$400

21,824

4

87,296

21,824

65,472

$26,188,800

14. COSTS TO FEDERAL GOVERNMENT
We estimate that the cost of preparing the amendment to Form D is approximately
$50,000.
15. REASON FOR CHANGE IN BURDEN
As explained in further detail in Items 12 and 13 above, the change in burden for Form D
corresponds to an estimated 20% increase in Form D filings, or approximately 3,637 filings,
following the amendment to Rule 506. The table below illustrates the changes in hour and cost
burdens from the burden estimates prior to the amendment to Rule 506.5

Form D

Current Burden
Burden
Cost
Hours
(B)
(A)
18,187
$21,824,400

New Burden
Burden
Cost
Hours
(D)
(C)
21,824
$26,188,800

Program Change
Burden
Cost
Hours
(F)
(E)
3,637
$4,364,400

16. INFORMATION COLLECTION PLANNED FOR STATISTICAL PURPOSES
Not applicable.
17. APPROVAL TO OMIT EXPIRATION 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.

4

The information in this column is based on the 18,187 initial Form D filings that were made in 2012, plus the
additional 3,637 filings we estimate will be filed in the first year after the effectiveness of Rule 506(c).
5

Columns (A) and (B) represent the current burden estimates. Columns (C) and (D) represent the new burden
estimates under the amendment to Rule 506. Columns (E) and (F) represent the program change, which
encompasses the change in the burden estimates attributable to the amendment to Rule 506.

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B. STATISTICAL METHODS
Not applicable.

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