Final PRA supporting statement

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR PROPOSED AMENDMENTS TO
REGULATION A
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 1933,1 as amended (the “Securities Act”), generally requires that a
registration statement be filed with the Securities and Exchange Commission
(the “Commission”) disclosing prescribed information before securities may be offered for sale
to the public. While the Securities Act already authorizes the Commission to exempt certain
securities and transactions from registration, Section 401 of the Jumpstart Our Business Startups
Act2 added Section 3(b)(2) to the Securities Act, creating a new exemption from registration.
The Commission has adopted various rules (collectively, “Regulation A”) establishing a limited
offering exemption from the registration requirements of the Securities Act. Regulation A
provides an exemption for offerings that satisfy certain conditions, such as filing an offering
statement with the Commission, limiting the dollar amount of the offering and, in certain
instances, filing ongoing reports with the Commission.
In Securities Act Release No. 33-9497 (the “Proposing Release”), the Commission
proposed amendments to Regulation A and Form 1-A, and proposed creating two tiers of
Regulation A offerings with different disclosure requirements.3 Tier 1, for offerings of $5
million or less within a 12-month period, would require the filing and qualification of Form 1-A
and, within 30 days after the termination or completion of the offering, a Form 1-Z exit report.
Tier 2, for offerings up to $50 million within a 12-month period, would require a Form 1-A filing
(with certain additional disclosures), annual and semiannual reports on Forms 1-K and 1-SA
respectively, current reports on Form 1-U, and an exit report on Form 1-Z (in most cases) when
the issuer is eligible to suspend ongoing reporting. For both tiers, the proposed amendments to
Form 1-A would alter the disclosure required by the form by eliminating the Model A disclosure
format and revising and updating Part I and the Model B disclosure format. Proposed Form 1-A
would also require audited financial statements for Tier 2 offerings.
The proposed amendments contain “collection of information” requirements within the
meaning of the Paperwork Reduction Act of 1995. The titles of these requirements are:


“Form 1-A” (OMB Control No. 3235-0286);

1

15 U.S.C. §77a et seq.

2

Pub. L. No. 112-106, 126 Stat. 306 (2012).

3

Proposed Rule Amendments for Small and Additional Issues Exemptions Under Section 3(b) of the Securities
Act, Release No. 33-9497 (Dec. 18, 2013) [79 FR 3926].








“Form 1-K” a proposed new collection of information;
“Form 1-SA” a proposed new collection of information;
“Form 1-U” a proposed new collection of information;
“Form 1-Z” a proposed new collection of information;
“Form ID” (OMB Control Number 3235-0328); and
“Form F-X” (OMB Control Number 3235-0379).4

2. PURPOSE AND USE OF THE INFORMATION COLLECTION
Proposed Amendments Relating to Form 1-A
Form 1-A is an offering statement filed under Regulation A. The information collected is
primarily intended to ensure the adequacy of information available to investors, while the
purpose of proposed Part I of Form 1-A is also to collect empirical data for the Commission.
The empirical data will provide a continuing basis for action by the Commission either in terms
of amending existing rules and regulations or proposing new ones. Other than the information in
Part I, the Commission will use very little of the collected information itself, except on an
occasional basis in the enforcement of the securities laws.
Proposed New Forms 1-K, 1-SA, 1-U and 1-Z
The purpose of proposed Forms 1-K, 1-SA and 1-U is to better inform the public about
companies that have conducted Tier 2 offerings under Regulation A. Form 1-K would provide
audited year-end financial statements and information about the issuer’s business operations,
ownership, management, liquidity, capital resources and operations on an annual basis. Part I of
Form 1-K would also collect information on any offerings under Regulation A that have been
terminated or completed unless such information had been previously reported on Form 1-Z.
Form 1-SA would provide semiannual, interim financial statements and information about the
issuer’s liquidity, capital resources and operations after the issuer’s second fiscal quarter.
Form 1-U would provide information to the public within four business days of fundamental
changes in the nature of the issuer’s business and other significant events. The Commission will
use very little of the collected information itself, except on an occasional basis in the
enforcement of federal securities laws, and on a regular basis with respect to the collection of
empirical information in Part I of Form 1-K on offerings that have been terminated or completed.
The purpose of Form 1-Z is to collect empirical data for the Commission on offerings
conducted under Regulation A that have been terminated or completed, to indicate to the
Commission that issuers that have conducted Tier 2 offerings are suspending their duty to file
reports under Regulation A and to provide such information to the investing public.

4

Although the proposed rules do not amend Form F-X, the burden hours associated with that form may be
immaterially increased as a follow-on result of them. The Commission is submitting the revised burden hours for
Form F-X to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act,
although the potential minimal increase in burden hours was not noted in the Proposing Release.

2

3. CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY
Forms 1-A, 1-K, 1-SA, 1-U and 1-Z are proposed to be filed electronically using the
Commission’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). Part I of
Forms 1-A and 1-K and all of Form 1-Z are proposed to be online fillable forms.
4. DUPLICATION OF INFORMATION
The Commission makes every effort to coordinate with other regulatory entities when
necessary or appropriate in the public’s interest and for the protection of investors and to
streamline regulations to enhance the production of capital.
Proposed Amendments Relating to Form 1-A
We are not aware of any forms or rules that conflict with or substantially duplicate the
requirements of Form 1-A.
Proposed Forms 1-K, 1-SA, 1-U and 1-Z
We are not aware of any forms or rules that conflict with or substantially duplicate the
requirements of Forms 1-K, 1-SA, 1-U or 1-Z.
5. REDUCING THE BURDEN ON SMALL ENTITIES
Regulation A is an exemption from Securities Act registration relating to small issues and
small issuers. Under the proposed amendments, Regulation A would continue to provide an
exemption to small issuers while allowing them to conduct larger offerings that are exempt from
Securities Act registration. We believe that many of the issuers in Regulation A offerings are
small entities, but we currently do not collect information on total assets of companies that use
Regulation A to determine if they are small entities.
6. CONSEQUENCES OF NOT CONDUCTING COLLECTION
The information required by the proposed amendments to Regulation A are intended to
be used by public investors and to ensure the adequacy of information to investors regarding
offerings pursuant to that exemption. The information required by Part I of Form 1-A and 1-K
and all of Form 1-Z are also designed to collect empirical data for the Commission, which will
provide a continuing basis for action by the Commission for amending existing rules and
regulations or proposing new ones. The exemption from Securities Act registration made in
reliance on the proposed amendments would not be available without these collections of
information.
7. SPECIAL CIRCUMSTANCES
Not applicable.

3

8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission has issued the Proposing Release soliciting comment on the new
“collection of information” requirements and associated paperwork burdens.5 A copy of the
Proposing Release is attached. In response to the solicitation for comment in the Proposing
Release, registrants, investors and other market participants provide comments. In addition, the
Commission and staff participate in ongoing dialogue with representatives of various market
participants through public conferences, roundtables and meetings. The Commission will
consider all comments received prior to publishing the final rule as required by
5 C.F.R. 1320.11(f). Comments received on the proposal are available at
http://www.sec.gov/comments/s7-11-13/s71113.shtml.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.
10. CONFIDENTIALITY
Proposed Rule 252(f) (§ 230.252(f)) allows for a draft Form 1-A to be submitted
confidentially pursuant to Rule 83 (§ 230.83) for review by the Commission’s staff. Form 1-A
must be filed publicly at least 21 days prior to the offering statement being qualified. Proposed
Rule 252(c) also allows for requests for confidential treatment to be made under existing
Rule 406 (§ 230.406) for information required to be filed with the Commission and existing Rule
83 (§ 230.86) for information not required to be filed with the Commission. Otherwise, the
collections of information required by Regulation A are public documents.
11. SENSITIVE QUESTIONS
No information of a sensitive nature would be required under this collection of
information. The information collection collects basic Personally Identifiable Information (“PII”)
that may include: name; business address; residential address (for sole proprietor only);
telephone/cellular/facsimile number; email address; and Tax ID Number (“TIN”). The
information collection is covered under the Systems of Records Notice (SORN), which may be
found at the following link: http://www.sec.gov/about/privacy/sorn/secsorn1.pdf. The Privacy
Impact Assessment (“PIA”) is provided as a supplementary document.
12/13. BURDEN OF INFORMATION COLLECTION AND COSTS TO
RESPONDENTS
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.6
5

See Release No. 33-9497.

6

The proposed amendments will rescind Form 2-A and the filing requirements related to that form. The proposed
amendments will not change the one administrative burden hour associated with the review of Regulation A.

4

Proposed Amendments to Form 1-A
Form 1-A is currently estimated to take approximately 608 hours per response to prepare
with 30 responses per year. Table 1 illustrates the current total annual compliance burden, in
hours and in costs, of the collection of information pursuant to Form 1-A.
Table 1.

Form 1-A
Regulation A
Total

Estimated paperwork burden under Form 1-A, pre-amendments relating to
Form 1-A
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

30
0
30

608
1
609

18,240
1
18,270

13,680
1
13,703

External
professional
time
(E)
4,560
0
4,568

Professional
costs
(F)=(E)*$400
$1,824,000
$0
$1,827,200

We believe that the proposed amendments relating to Form 1-A, if adopted, would
increase the existing paperwork burden of the form by requiring additional information in
Form 1-A, predominantly with respect to Tier 2 offerings. For purposes of the Paperwork
Reduction Act, we estimate that the total burden to prepare and file proposed Form 1-A,
including any amendments to the form, is 750 hours, or a 23% increase from the 608 hours per
response currently required. We also estimate that the number of offerings under Regulation A
would increase from approximately 30 per year to 250 per year. We estimate that 75% of the
750 hours per response (562.5 hours) is prepared by the issuer for an annual reporting burden of
140,625 hours (562.5 hours per response x 250 responses). We estimate that 25% of the 750
hours per response (187.5 hours) is prepared by outside professionals retained by the issuer. We
estimate the cost of these outside professionals to be $400 per hour for a total cost burden of
$18,750,000 ($400 per hour x 187.5 hours per response x 250 responses). As mentioned above,
the proposed amendments will not change the one administrative burden hour associated with the
review of Regulation A, resulting in an estimated total compliance burden of 751 hours per
response and an estimated annual compliance burden of 187,750 hours. Table 2 illustrates the
estimated total annual compliance burden, in hours and in costs, of the collection of information
pursuant to Form 1-A following these amendments.
Table 2.

Form 1-A
Regulation A
Total

Estimated paperwork burden under Form 1-A, post-amendments relating to
Form 1-A
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

250
0
250

750
1
751

187,500
1
187,750

140,625
1
140,813

5

External
professional
time
(E)
46,875
0
46,938

Professional
costs
(F)=(E)*$400
$18,750,000
$0
$18,775,200

Proposed Forms 1-K, 1-SA, 1-U and 1-Z
For the proposed new collections of information, proposed new Forms 1-K, 1-SA, 1-U
and 1-Z, we assume, for purposes of this analysis under the Paperwork Reduction Act, that 75%
of all issuers filing a Form 1-A (188 responses) will enter the proposed ongoing reporting regime
and therefore be required to file proposed Forms 1-K, 1-SA and 1-U. We also assume that all of
the issuers conducting a Tier 1 offering and 50% of the issuers with an ongoing reporting
obligation under Tier 2 will be required to file proposed Form 1-Z.
We estimate that the burden of preparing the information required by Form 1-K would be
approximately 80% of the estimated burden for proposed Form 1-A (600 hours per response) due
to the lack of offering-specific disclosure and an issuer’s ability to update disclosure previously
provided on Form 1-A. We further estimate that 75% of the 600 hours per response (450 hours)
is prepared by the issuer for an annual reporting burden of 84,600 hours (450 hours per response
x 188 responses). We estimate that 25% of the 600 hours per response (150 hours) is prepared
by outside professionals retained by the issuer. We estimate the cost of these outside
professionals to be $400 per hour for a total cost burden of $11,280,000 ($400 per hour x 150
hours per response x 188 responses).
We estimate that the burden of preparing the information required by Form 1-SA would
be similar to the compliance burden for issuers filing a Form 10-Q, which has been previously
estimated at 187.43 hours per response. Like Form 1-K, the Form 1-SA would be filed annually,
but would be filed after the issuer’s second fiscal quarter rather than its fiscal year end. Unlike
proposed Form 1-K, Form 1-SA does not require the provision of audited financial statements
and only requires financial statements for a semiannual period. As such, we estimate that 85% of
the 187.43 hours per response (159.32 hours) is prepared by the issuer for an annual reporting
burden of 29,952 hours (159.32 hours per response x 188 responses). We estimate that 15% of
the 187.43 hours per response (28.11 hours) is prepared by outside professionals retained by the
issuer. We estimate the cost of these outside professionals to be $400 per hour for a total cost
burden of $2,113,872 ($400 per hour x 28.11 hours per response x 188 responses).
We estimate that the burden of preparing the information required by Form 1-U would be
similar to, but less than, the compliance burden for issuers filing a Form 8-K, which is 5.71 hours
per response. Since Form 1-U’s fewer triggering events make it less burdensome to complete
than Form 8-K, we estimate the average burden of preparing Form 1-U as 5 hours per response.
We also estimate that on average issuers would be required to file one current report annually,
with some issuers filing none and other issuers filing more than one. As with Form 1-SA, we
estimate that 85% of the 5 hours per response (4.25 hours) is prepared by the issuer for an annual
reporting burden of 799 hours (4.25 hours per response x 188 responses). We estimate that
15% of the 5 hours per response (0.75 hours) is prepared by outside professionals retained by the
issuer. We estimate the cost of these outside professionals to be $400 per hour for a total cost
burden of $56,400 ($400 per hour x 0.75 hours per response x 188 responses).
We estimate that all of the issuers conducting Tier 1 offerings (63 responses) and 50% of
the issuers with an ongoing reporting obligation (94 responses) under Tier 2 of proposed
Regulation A would file a Form 1-Z in the second fiscal year after qualification of the offering
6

statement (157 total responses). All Tier 1 issuers would be required to file a Form 1-Z.
Although we believe that the number of issuers eligible to file a Form 1-Z to suspend or
terminate ongoing reporting may exceed 94 issuers, we estimate that 50% of the issuers with
ongoing reporting obligations would choose not to file a Form 1-Z so as to facilitate continued
quotations on the over-the-counter markets and to otherwise enhance the liquidity of their
securities. The Form 1-Z would be similar to the Form 15 that issuers file to provide notice of
termination of the registration of a class of securities under Exchange Act Section 12(g) or to
provide notice of the suspension of the duty to file reports required by Exchange Act
Sections 13(a) or 15(d). Therefore, we estimate a similar burden of 1.5 hours per response for
Form 1-Z, resulting in an aggregate annual reporting burden of 235.5 hours (1.5 hours per
response x 157 responses).
Table 3.

Form 1-K
Form 1-SA
Form 1-U
Form 1-Z

Estimated paperwork burden of Forms 1-K, 1-SA, 1-U and 1-Z
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal
issuer time
(D)

188
188
188
157

600
187
5
1.5

112,800
35,237
940
235.5

84,600
29,952
799
235.5

External
professional
time
(E)
28,200
5285
141
0

Professional
Costs
(F)=(E)*$400
$11,280,000
$2,113,872
$56,400
$0

Form ID Filing Burden
Form ID is not a new collection of information. It is the application form for access
codes to permit filing on EDGAR. Table 4 illustrates the current total annual compliance
burden, in hours and in costs, of the collection of information under Form ID.
Table 4.

Form ID

Current estimated paperwork burden under Form ID
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

36,590

0.15

5,489

5,489

0

$0

The proposed rules would not change Form ID itself, but we anticipate that the number of
Form ID filings would increase due to an increase in issuers relying on proposed Regulation A.
We estimate that 75% of the issuers who would seek to offer and sell securities in reliance on
proposed Regulation A would not have previously filed an electronic submission with the
Commission and would, therefore, be required to file a Form ID to receive EDGAR access codes
prior to filing a Form 1-A. As noted above, we estimate that approximately 250 issuers per year
would seek to offer and sell securities in reliance on proposed Regulation A, which would
correspond to approximately 188 additional Form ID filings. As a result, we estimate the
additional annual burden would be approximately 28.2 hours (0.15 hours per response x 188
responses).
7

Table 5.

Form ID

Estimated paperwork burden under Form ID, post-amendments relating to
Regulation A.
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

36,778

0.15

5,517

5,517

External
professional
time
(E)
0

Professional
Costs
(F)=(E)*$400
$0

Form F-X Filing Burden
Form F-X is not a new collection of information. It is used to appoint an agent for
service of process by Canadian issuers eligible to use Regulation A, issuers registering securities
on Forms F-8 or F-10 under the Securities Act or filing periodic reports on Form 40-F under the
Exchange Act, as well as in certain other circumstances.
Table 6.

Form F-X

Current estimated paperwork burden under Form F-X.
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

161

2

322

322

External
professional
time
(E)
0

The proposed rules would not change Form F-X itself, but would amend the rules to
allow for the form to be filed electronically for offerings under Regulation A. Canadian
companies are the only type of issuer that would be required to use this form under the proposed
rules. We estimate that approximately 2% of the offerings under proposed Regulation A would
be conducted by Canadian companies (5 responses) resulting in an annual burden of
approximately 10 hours (2 hours per response x 5 responses).7
Table 7.

Form F-X

Estimated paperwork burden under Form F-X, post-amendments relating to
Regulation A.
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

166

2

332

332

External
professional
time
(E)
0

14. COSTS TO FEDERAL GOVERNMENT
We estimate that the cost of preparing the amendments would be approximately
$100,000.

7

In this regard, we note that no Canadian issuers filed a Form 1-A in 2013.

8

15. REASON FOR CHANGE IN BURDEN
As explained in further detail in Items 12 and 13 above, the change in burden for
Form 1-A corresponds to an estimated increase in the existing paperwork burden of the form
under the proposed amendments by requiring additional information in Form 1-A, predominantly
with respect to Tier 2 offerings. The approximately 250 issuers relying on proposed
Regulation A and filing Form 1-A annually would increase the current paperwork burden under
Form 1-A from 18,240 hours to 187,500 hours, an increase of 169,260 hours. The proposed
amendments to Regulation A would not change the one administrative burden hour associated
with reviewing Regulation A, but the approximately 220 additional issuers relying on
Regulation A after the proposed amendments would increase the current annual administrative
paperwork burden associated with reviewing Regulation A from 30 hours to 250 hours, an
increase of 220 hours. Due to the proposed amendments, there would be increase of 126,840
hours and an increase of $16,912,200 in cost burden.
To obtain the EDGAR access codes required to make a filing on EDGAR, including a
Form 1-A filing, issuers would need to file a Form ID. The proposed amendments to
Regulation A would not change Form ID itself, but the approximately 188 issuers relying on
proposed Regulation A and filing Form ID annually would increase the current paperwork
burden under Form ID from 5488.5 hours to 5516.7 hours, an increase of 28.2 hours.
Form F-X is used to appoint an agent for service of process by Canadian issuers eligible to
use Regulation A as well as in certain other circumstances. The proposed amendments to
Regulation A would not change Form F-X itself, but the approximately 5 issuers relying on
proposed Regulation A and filing Form F-X annually would increase the current paperwork
burden under Form F-X from 322 hours to 332 hours, an increase of 10 hours.
Forms 1-K, 1-SA, 1-U and 1-Z are new collections of information, so there is no change
in burden.
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
Form 1-A, Form 1-K and Form 1-Z for design and scheduling reasons. Including the expiration
date on the electronic version of the form will result in increased costs, because the need to make
changes to the form may not follow the EDGAR application’s scheduled version release dates.
The OMB control number will be displayed.

9

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

10