Form N-6F Supporting Statement (2014)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-6F
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Certain investment companies can elect to be regulated as business development
companies, as defined in Section 2(a)(48) of the Investment Company Act of 1940 (“Investment
Company Act”), under Sections 55 through 65 of the Investment Company Act. Under Section
54(a) of the Investment Company Act, 1 any company defined in Section 2(a)(48)(A) and (B)
may elect to be subject to the provisions of Sections 55 through 65 by filing with the
Commission a notification of election, if such company has: (1) a class of equity securities
registered under Section 12 of the Securities Exchange Act of 1934 (“Exchange Act’); or (2)
filed a registration statement pursuant to Section 12 of the Exchange Act for a class of equity
securities.
Section 6(f) of the Investment Company Act provides that any closed-end company
which would be excluded from the definition of an investment company by Section 3(c)(1),
except that it presently proposes to make a public offering of its securities as a business
development company, and has notified the Commission, in a form and manner which the
Commission may, by rule, prescribe, that it intends in good faith to file, within 90 days, a
notification of election to become subject to the provisions of Sections 55 through 65, will be
exempt from Sections 1 through 53, except to the extent provided in Sections 59 through 65.
The Commission has adopted Form N-6F as the form to be used pursuant to Section 6(f) to
notify the Commission of such company’s intent to file a notification of election to be regulated
as a business development company and be subject to the provisions of Sections 55 through 65.
1

15 U.S.C. 80a-53(a).

2.

Purpose of the Information Collection

The purpose of Form N-6F is to notify the Commission of the company’s intent to file a
notification of election to become subject to Sections 55 through 65 of the Investment Company
Act. Certain companies may have to make a filing with the Commission before they are ready to
elect to be regulated as a business development company. 2 A company that is excluded from the
definition of “investment company” by Section 3(c)(1) of the Investment Company Act because
it has fewer than one hundred shareholders and is not making a public offering of its securities
may lose such an exclusion solely because it proposes to make a public offering of securities as a
business development company. Such company, under certain conditions, would not lose its
exclusion if it notifies the Commission on Form N-6F of its intent to make an election to be
regulated as a business development company. The company only has to file a Form N-6F once.
3.

Consideration Given to Information Technology

Form N-6F is electronically filed with the Commission. The Commission’s electronic
filing system (Electronic Data Gathering, Analysis and Retrieval or “EDGAR”) automates the
filing, processing and dissemination of full disclosure filings. The system permits publicly held
companies to transmit their filings to the Commission electronically. This automation has
increased the speed, accuracy and availability of information, generating benefits to investors
and financial markets.

2

A company might not be prepared to elect to be subject to Sections 55 through 65 of the
Investment Company Act because its capital structure or management compensation plan is not
yet in compliance with the requirements of those sections.

2

4.

Duplication

The Commission periodically evaluates reporting and recordkeeping requirements for
duplication and reevaluates them whenever it proposes a rule or form or a change in a rule or
form. The information required by Form N-6F is not generally duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory Flexibility
Act, to identify methods to minimize recordkeeping or reporting requirements affecting small
businesses. The current disclosure requirements for Form N-6F do not distinguish between small
entities and other companies intending to be regulated a business development companies.
Although the burden on small companies intending to be regulated as business development
companies may be greater than those of larger ones, the Commission believes the burden
imposed on any company intending to be regulated as a business development company is small
due to the extent and type of information required by the form.
6.

Consequences of Not Conducting Collection

Companies filing a notice of intent to file a notification of election to become subject to
Sections 55 through 65 of the Investment Company Act are required to file the notice of intent
on Form N-6F only once, and therefore the filing of Form N-6F is not a recurring event requiring
periodic collection.
7.

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

This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

The Commission and the Division of Investment Management staff participate in an
ongoing dialogue with representatives of the investment company industry through public

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conferences, meetings, and informal exchanges. These various forums provide the Commission
and the staff with a means of ascertaining and acting upon paperwork burdens that may confront
the industry. The Commission requested public comment on the collection of information
requirements in Form N-6F 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 or Gift

No payment or gift to respondents was provided.
10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No information of a sensitive nature will be required under these collections of
information. These information collections collect basic Personally Identifiable Information
(PII) that may include name, business address, and residential address (for sole proprietor only),
telephone/cellular/facsimile numbers, and email address. The information collection is covered
under the following System of Records Notices (SORN).
http://www.sec.gov/about/privacy/sorn/secsorn1.pdf
12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 (“PRA”) 3 and are not derived from a comprehensive or
even representative survey or study of the cost of Commission rules and forms. Compliance
with Form N-6F is mandatory for companies intending to notify the Commission pursuant to

3

44 U.S.C. 3501 et seq.

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Section 6(f) of their intent to file a notification to be regulated as business development
company. Responses to the disclosure requirements will not be kept confidential.
The Commission estimates that on average approximately 15 companies file notifications
on Form N-6F each year. Each of those companies need only make a single filing of Form N-6F.
The Commission further estimates that this information collection imposes burden of 0.5 hours,
resulting in a total annual PRA burden of 7.5 hours. Based on the estimated wage rate, the total
cost to the industry of the hour burden for complying with Form N-6F would be approximately
$2,505. 4
13.

Costs to Respondents

Cost burden is the cost of services purchased to prepare and update Form N-6F, such as
for the services of outside counsel. The Commission estimates that 15 companies file a notice of
intent to elect to be regulated as business development companies and must file Form N-6F. The
form must be filed only once. The Commission estimates that the total annualized cost burden
for Form N-6F is minimal.
14.

Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including new
registration statements, post-effective amendments, proxy statements, and shareholder reports of
investment companies amounted to approximately $18.6 million in fiscal year 2013, based on the

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The industry burden is calculated by multiplying the total annual hour burden to prepare Form
N-6F (7.5) by the estimated hourly wage rate of $334. The estimated wage figure is based on
published rates for compliance attorneys from the Securities Industry and Financial Markets
Association’s Report on Management & Professional Earnings in the Securities Industry 2013,
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, yielding an effective hourly rate
of $334.

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Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15.

Explanation of Changes in Burden

Currently, the approved annual hour burden for preparing and filing Form N-6F is 6.5
hours based on the previous estimate of 13 responses. The new estimate of the total annual hour
burden is 7.5 hours based on the new estimated total number of responses of 15. The increase in
the total annual hour burden is 1.0 hours. This increase is due to the increase in our estimates of
the annual number of responses.
16.

Information Collection Planned for Statistical Purposes

The results of any information collection 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.
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 application’s scheduled
version release dates. The OMB control number will be displayed.
18.

Exceptions to Certification Statement

The Commission is not seeking an exception to the certification statement.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
The collection of information will not employ statistical methods.

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