PRA supporting statement.5-5-2015

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR AMENDMENTS TO
REGULATION A

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. 33-9741 (the “Adopting Release”), the Commission
adopted amendments to Regulation A and Form 1-A, and adopted two tiers of Regulation A
offerings with different disclosure requirements.3 Tier 1, for offerings of $20 million or less
within a 12-month period, requires 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, requires 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 amendments to Form 1-A 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. Form 1-A also requires audited financial statements
for Tier 2 offerings. In response to public comment and to simplify Exchange Act registration in
connection with Regulation A offerings, the adopted rules also amend Form 8-A to allow
Regulation A issuers to use the form.
The amendments contain “collection of information” requirements within the meaning of
the Paperwork Reduction Act of 1995. The titles of these requirements are:


“Regulation A (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

Amendments for Small and Additional Issues Exemptions Under the Securities Act (Regulation A), Release No.
33-9741 (March 25, 2015) [80 FR 21805].









“Form 1-K” (OMB Control No. 3235-0720);
“Form 1-SA” (OMB Control No. 3235-0721);
“Form 1-U” (OMB Control No. 3235-0722);
“Form 1-Z” (OMB Control No. 3235-0723);
“Form ID” (OMB Control No. 3235-0328);
“Form F-X” (OMB Control No. 3235-0379); and
“Form 8-A” (OMB Control No. 3235-0056).

2. PURPOSE AND USE OF THE INFORMATION COLLECTION
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 amended 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.
New Forms 1-K, 1-SA, 1-U and 1-Z
The purpose of 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 yearend 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
also collects 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
provides 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 provides
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.

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3. CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY
Forms 1-A, 1-K, 1-SA, 1-U and 1-Z will 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 will 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.
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.
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 adopted amendments, Regulation A continues 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 adopted 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 amendments would not be available without these collections of information.
7. SPECIAL CIRCUMSTANCES
Not applicable.

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8. CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY
The Commission issued Securities Act Release No. 33-9497 (the “Proposing Release”)
soliciting comment on the new “collection of information” requirements and associated
paperwork burdens.4 In response to the solicitation for comment in the Proposing Release,
issuers, 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 5 C.F.R. 1320.11(f).
Comments received on the proposal are available at http://www.sec.gov/comments/s7-1113/s71113.shtml.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.
10. CONFIDENTIALITY
Adopted Rule 251(e) (§ 230.251(e)) 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. Adopted Rule 252(d) (§ 230.252(d)) also allows for a draft Form 1-A to be
submitted for non-public review by the Commission’s staff. Form 1-A must be filed publicly at
least 21 days prior to the offering statement being qualified if the non-public submission option
is used. Otherwise, the collections of information required by Regulation A are public
documents.
11. SENSITIVE QUESTIONS
No information of a sensitive nature is 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

4

See 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].

4

not derived from a comprehensive or even a representative survey of the costs of Commission
rules and forms.5
Adopted 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 adopted amendments relating to Form 1-A 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 adopted 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, we believe that the 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.

5

The adopted amendments rescind Form 2-A and the filing requirements related to that form. The amendments will
not change the one administrative burden hour associated with the review of Regulation A. Also, although changes
were made in the Adopting Release to proposed Regulation A and the proposed forms, these changes do not have an
impact on the estimated burdens that were submitted prior to adoption of the amendments.

5

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

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

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

Forms 1-K, 1-SA, 1-U and 1-Z
For the adopted new collections of information, adopted 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 ongoing reporting regime and
therefore be required to file 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 Form 1-Z.
We estimate that the burden of preparing the information required by Form 1-K will be
approximately 80% of the estimated burden for 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 will 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 will be filed annually,
but will be filed after the issuer’s second fiscal quarter rather than its fiscal year end. Unlike
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 will 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 will be required to file one current report annually, with
6

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 Regulation A will
file a Form 1-Z in the second fiscal year after qualification of the offering statement (157 total
responses). All Tier 1 issuers will 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 will
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 is 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

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The adopted 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 adopted Regulation A.
We estimate that 75% of the issuers who would seek to offer and sell securities in reliance on
adopted 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 adopted 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).
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 adopted 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 adopted rules. We
estimate that approximately 2% of the offerings under adopted 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).6

6

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

8

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

Form 8-A Filing Burden
Form 8-A is not a new collection of information. It is a registration statement used to
register a class of securities under Section 12(b) or Section 12(g) of the Exchange Act. Table 8
illustrates the current total annual compliance burden, in hours and costs of the collection of
information under Form 8-A.
Table 8.

Form 8-A

Current estimated paperwork burden under Form 8-A.
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

946

3

2,838

2,838

External
professional
time
(E)
0

The adopted rules change Form 8-A to allow Regulation A issuers to use the form, but
we do not believe that these changes alter the burden hours per response for the form (3 hours).
We estimate that approximately 2% of the issuers filing a Form 1-A will also file a Form 8-A to
register a class of securities under the Exchange Act (5 responses), resulting in an annual burden
of approximately 15 hours (3 hours per response x 5 responses).
Table 9.

Form 8-A

Estimated paperwork burden under Form 8-A, post-amendments relating to
Regulation A.
Number of
responses
(A)

Burden
hours/form
(B)

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

Internal issuer
time
(D)

951

3

2,853

2,853

External
professional
time
(E)
0

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

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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 adopted amendments by requiring additional information in Form 1-A, predominantly
with respect to Tier 2 offerings. The approximately 250 issuers relying on adopted 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 adopted amendments to
Regulation A do not change the one administrative burden hour associated with reviewing
Regulation A, but the approximately 220 additional issuers that we estimate will rely on
Regulation A due to the amendments will 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 amendments, we estimate that the total annual paperwork burden under
Regulation A and Form 1-A will increase from 18,270 hours to 187,750 hours, an increase of
169,480 hours.
To obtain the EDGAR access codes required to make a filing on EDGAR, including a
Form 1-A filing, issuers will need to file a Form ID. The amendments to Regulation A do not
change Form ID itself, but we estimate that the approximately 188 issuers relying on amended
Regulation A and filing Form ID annually will 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 adopted amendments to
Regulation A do not change Form F-X itself, but we estimate that the approximately 5 issuers
relying on adopted Regulation A and filing Form F-X annually will increase the current
paperwork burden under Form F-X from 322 hours to 332 hours, an increase of 10 hours.
Form 8-A is used to register a class of securities under Section 12 of the Exchange Act.
The adopted amendments add language to Form 8-A that allows the form to be used in certain
circumstances by Regulation A issuers. Although we do not believe that the amendments result
in a change to the existing paperwork burden per response, the estimated 5 issuers relying on
amended Regulation A and filing a Form 8-A annually will increase the current paperwork
burden under Form 8-A from 2,838 hours to 2,853 hours, an increase of 15 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.

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17. APPROVAL TO OMIT EXPIRATION DATE
We request authorization to omit the expiration date on the electronic version of the
forms. 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.
18. EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION ACT
SUBMISSIONS
Not applicable.
B. STATISTICAL METHODS
Not applicable.

11