Supporting Statement — 01 — 2015-04-02 Form N-5

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-5

A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-5 1 is the form used by small business investment companies (“SBICs”) to
register their securities under the Securities Act of 1933 (“Securities Act”) 2 and to register
under the Investment Company Act of 1940 (“Investment Company Act”). 3 Section 5 of
the Securities Act requires a company to file a registration statement with the
Commission before it offers a new issue of securities to the public by the use of the mails
or other channels of interstate commerce, 4 and Section 8 of the Investment Company Act
requires an SBIC to register as an investment company. 5 Section 5(b) of the Securities Act
requires that investors be provided with a prospectus containing certain required
information prior to the sale or at the time of confirmation or delivery of the securities. 6
Form N-5 is the registration statement form adopted by the Commission for use by an
SBIC that has been licensed as such under the Small Business Investment Act of 1958 or
which has received the preliminary approval of the Small Business Administration
(“SBA”) and has been notified by the SBA that the company may submit a license
application. Form N-5 is an integrated registration form and may be used as the
registration statement under both the Securities Act and Investment Company Act. A
registration statement on Form N-5 is deemed filed under both Acts unless it is indicated
on the facing page that the filing is being made for purposes of only one of the Acts.

1

17 CFR 239.24 and 274.5.

2

15 U.S.C. 77a et seq.

3

15 U.S.C. 80a-1 et seq.

4

15 U.S.C. 77e.

5

15 U.S.C. 80a-8.

6

15 U.S.C. 77e(b).

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2.

Purpose and Use of the Information Collection

The purpose of Form N-5 is to meet the filing and disclosure requirements of both the
Securities Act and Investment Company Act, and to provide investors with information
sufficient to evaluate an investment in an SBIC. This information collection differs
significantly from many other federal information collections, which are primarily for the
use and benefit of the collecting agency. The information that is required to be filed with
the Commission permits 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 Data Gathering, Analysis, and Retrieval System
(“EDGAR”) automates the filing, processing, and dissemination of full disclosure filings.
This automation has increased the speed, accuracy, and availability of information,
generating benefits to investors and financial markets. Registration statements on Form
N-5 are required to be filed with the Commission electronically on EDGAR. 7 The public
may access filings on EDGAR through the Commission’s Web site (http://www.sec.gov)
or at EDGAR terminals located at the Commission’s public reference rooms.
Prospectuses may be sent to investors by electronic means so long as certain requirements
are satisfied. 8
4.

Duplication

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

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 9 to identify methods to minimize recordkeeping or reporting requirements
affecting small businesses. With respect to registration under the Investment Company
Act, the requirements of Form N-5 do not distinguish between small entities and other
SBICs. Although the burden on smaller SBICs to prepare and file registration statements
7

See rules 101(a)(1)(i) and (iv) of Regulation S-T [17 CFR 232.101(a)(1)(i) and (iv)].

8

See Investment Company Act Release No. 21399 (Oct. 6, 1995) [60 FR 53458 (Oct. 13,
1995)].

9

5 U.S.C. 601 et seq.

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may be greater than for larger SBICs, the Commission believes that imposing different
requirements on smaller SBICs would not be consistent with investor protection and the
purposes of registration statements.
With respect to the registration of securities by SBICs that are registered under the
Investment Company Act, Rules 601 to 610a under the Securities Act exempt certain
small offerings of securities from registration under the Securities Act provided that the
companies file with the Commission advance notice of such offerings on Form 1-E 10 and
deliver an offering circular containing the information specified in Schedule A 11 to each
offeree. 12
6.

Consequences of Not Conducting Collection

An SBIC must file a registration statement on Form N-5 when licensed as an SBIC by
the SBA. An SBIC must also file Form N-5 if it chooses to sell securities to the public in
order to meet the requirements of Sections 5 and 10(a)(3) of the Securities Act for
delivery of a current prospectus to offerees. A registration statement on Form N-5 must be
updated annually.
In the absence of the disclosure requirements in Form N-5, investors in SBICs may
not receive information crucial to making informed investment decisions. In addition,
Form N-5 satisfies the Investment Company Act requirement that investment companies
register with the Commission before they conduct business. In the absence of a Form N-5
registration statement, SBICs would not be able to comply with the filing requirements of
the Investment Company Act.
Moreover, if information were collected less frequently, the Commission would be
unable to fulfill its responsibilities under the Investment Company Act and investors
would not have current information on which to base their investment decisions.
7.

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

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

10

17 CFR 239.200.

11

17 CFR 230.610a.

12

17 CFR 230.601 to 230.610a.

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8.

Consultation Outside the Agency

The Commission and the 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. These various forums provide the
Commission and staff with a means of ascertaining and acting upon the paperwork
burdens confronting the industry. The Commission requested public comment on the
collection of information requirements in Form N-5 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.

Assurance of Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No information of a sensitive nature will be required in the information collection. The
(these) information collection (s) 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 Notice (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 13 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-5 is mandatory. Responses to the collection of
information will not be kept confidential.
The Commission has received one filing on Form N-5 in the last three years, and we
therefore estimate that SBICs will file about 0.333 filings on Form N-5 per year. The
currently approved burden of Form N-5 is 352 hours per response, divided evenly
13

44 U.S.C. 3501 et seq.

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between in-house compliance attorneys and programmer analysts. Therefore the number
of currently approved aggregate burden hours, when calculated using the current estimate
for number of filings is about 117 hours per year. 14 Based on the Commission’s estimate
of 117 burden hours and an estimated wage rate of approximately $277 per hour, 15 the
total annual cost to reporting persons of the hour burden for filing Form N-5 is
approximately $32,409. 16
13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and update Form
N-5, such as for the services of independent auditors and outside counsel. The cost
burden does not include the cost of the hour burden discussed in Item 12 above. The
currently approved cost burden of Form N-5 is $30,000 per filing. 17 We continue to
believe this estimate for Form N-5’s cost burden is appropriate. Therefore, we estimate
that the aggregate cost burden, when calculated using the Commission’s estimate of 0.333
filings per year, is about $10,000 in external costs per year. 18

14

352 hours per response × 0.333 filings per year = 117.216 hours per year.

15

The Commission’s estimate concerning the wage rate is based on salary information for
the securities industry compiled by the Securities Industry and Financial Markets
Association. The estimated wage figure is based on published rates for compliance
attorneys, modified to account for an 1,800-hour work-year and multiplied by 5.35 to
account for bonuses, firm size, employee benefits, and overhead, yielding an effective
hourly rate of $277. ($334 per hour for compliance attorneys × 0.5) + ($220 per hour for
compliance analysts × 0.5) = $277 per hour. See Securities Industry and Financial
Markets Association, Report on Management & Professional Earnings in the Securities
Industry 2013.

16

117 hours × $277 per hour = $32,409.

17

The cost of compliance varies considerably depending on factors such as whether a filing
is a new registration statement or an update to a previously effective registration
statement; whether the fund being registered presents novel or complex legal issues or is
similar to other funds; whether amendments are required in response to staff comments;
and whether outside counsel and accountants are necessary for preparation of the filing.
We estimate that the cost of compliance may range from less than $15,000 (for a routine
filing) to over $60,000 (for a registration statement presenting significant legal issues per
response) with an average cost per filing of $30,000.

18

$30,000 per filings × 0.333 filings per year = $9,990 per year.

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14.

Costs to Federal Government

The annual cost of reviewing and processing disclosure documents, including new
registration statements, post-effective amendments, proxy statements, shareholder reports,
and other filings of investment companies amounted to approximately $19.8 million in
fiscal year 2012, based on the Commission’s computation of the value of staff time
devoted to this activity and related overhead.
15.

Changes in Burden

There has been no change in estimated burden hours or cost burden.
16.

Information Collection Planned for Statistical Purposes

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. 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 for Paperwork Reduction Act Submissions

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

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

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