Download:
pdf |
pdfSUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Crowdfunding Rules 400-404 (Funding Portals)
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C.
§ 3501 et seq. (2012).
A.
JUSTIFICATION
1.
Necessity of Information Collection
The Jumpstart Our Businesses Act of 2012 (the “JOBS Act”) added new Securities Act of
1933 (“Securities Act”) Section 4(a)(6), 1 which provides an exemption from the registration
requirements of Securities Act Section 5 for certain crowdfunding transactions. To qualify for
the exemption under Section 4(a)(6), crowdfunding transactions by an issuer must meet specified
requirements, including that transactions must be conducted through an intermediary that either
is registered as a broker or is registered as a new type of entity called a “funding portal.” Title
III adds Securities Exchange Act of 1934 (“Exchange Act”) Section 3(h), which requires the
Commission to adopt rules to exempt, either conditionally or unconditionally, “funding portals”
from having to register as brokers or dealers pursuant to Exchange Act 15(a)(1).
Pursuant to Title III, the Commission adopted Exchange Act Rules 400 through 404 and
Form Funding Portal on October 30, 2015, in order to create a regulatory scheme for funding
portals and to exempt funding portals from having to register as brokers or dealers. 2
The collections of information required under Rules 400 through 404 is mandatory for all
funding portals.
Rule 400 requires each person applying for registration with the Commission as a
funding portal to file electronically with the Commission Form Funding Portal.
Rule 400(a) requires a funding portal to become a member of a national securities
association registered under Section 15A of the Exchange Act.
Rule 400(b) requires a funding portal to file an amendment to Form Funding Portal if any
information previously submitted on Form Funding Portal becomes inaccurate for any reason.
1
Title III amended Securities Act Section 4 to add Section 4(6); however, Title II of the
JOBS Act also amended Securities Act Section 4 and inserted subsections (a) and (b).
The U.S. Code implemented the amendment by adding paragraph (6) at the end of
subsection (a).
2
See Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71387, 71545-49
(Nov. 16, 2015) (“Regulation Crowdfunding”).
Rule 400(c) provides that a funding portal can succeed to the business of a predecessor
funding portal upon the successor filing a registration on Form Funding Portal and the
predecessor filing a withdrawal on Form Funding Portal.
Rule 400(d) requires a funding portal to promptly file a withdrawal of registration on
Form Funding Portal upon ceasing to operate as a funding portal.
Rule 400(e) states that duplicate originals of the applications and reports provided for in
this section must be filed with surveillance personnel designated by any registered national
securities association of which the funding portal is a member.
Rule 400(f) requires a nonresident funding portal to: (1) obtain a written consent and
power of attorney appointing an agent for service of process in the United States; (2) furnish the
Commission with the name and address of its agent for services of process on Schedule C of
Form Funding Portal; (3) certify that it can, as a matter of law, and will provide the Commission
and any registered national securities association of which it becomes a member with prompt
access to its books and records and can, as a matter of law, and will submit to onsite inspection
and examination by the Commission and any registered national securities association of which
it becomes a member; and (4) provide the Commission with an opinion of counsel and certify on
Schedule C on Form Funding Portal that the firm can, as a matter of law, provide the
Commission and registered national securities association of which it becomes a member with
prompt access to its books and records and can, as a matter of law, submit to onsite inspection
and examination by the Commission and any registered national securities association of which
it becomes a member. 3
Rule 403(a) requires a funding portal to implement written policies and procedures
reasonably designed to achieve compliance with the federal securities laws and the rules and
regulations thereunder relating to its business as a funding portal.
Rule 403(b) provides that a funding portal must comply with privacy rules.
Rule 404 requires all registered funding portals to maintain certain books and records
relating to their funding portal activities, for not less than five years, the first two in an easily
accessible place. Rule 404(e) requires funding portals to furnish promptly to the Commission, its
representatives, and the registered national securities association of which the funding portal is a
member true, correct, complete and current copies of such records of the funding portal that are
requested by the representatives of the Commission and the registered national securities
association.
3
Exchange Act Section 3(h)(1)(C) permits us to impose, as part of our authority to exempt
funding portals from broker registration, “such other requirements under [the Exchange
Act] as the Commission determines appropriate.”
2
2.
Purpose and Use of the Information Collection
Form Funding Portal will help ensure that the Commission can make information about
funding portals transparent and easily accessible to the investing public, including issuers and
obligated persons who engage funding portals; investors who may purchase securities through
offerings on funding portals; and other regulators. Further, the information provided on Form
Funding Portal will expand the amount of publicly available information about funding portals,
including disciplinary history. Consequently, the final rules and forms will allow issuers and the
investing public, as well as others, to become more fully informed about funding portals in a
more efficient manner.
In addition, the requirement that each funding portal register with the Commission on
Form Funding Portal will help ensure that the Commission has information to oversee
respondents and their activities in the crowdfunding securities market effectively. In particular,
the information provided in Form Funding Portal will be used in oversight of funding portals,
including, among other things, assessing a funding portal’s application and performing
examinations of funding portals. Moreover, Form Funding Portal will enable the Commission to
obtain an accurate estimate of the number of funding portals; analyze data regarding the various
types of funding portals; and evaluate the disciplinary history of funding portals and associated
persons, including regulatory, civil, and criminal proceedings.
The requirement that a funding portal file amendments to Form Funding Portal will help
ensure the availability of up-to-date information about funding portals and their associated
persons. In addition, the requirement that a funding portal file Form Funding Portal-W to
withdraw from registration will inform the Commission that a funding portal is no longer
engaging in funding portal activities.
The requirement that a funding portal make and keep books and records will help to
ensure that records of the respondent’s funding portal activities, as well as the activities of its
associated persons, exist. The Commission and other regulators could potentially request books
and records during an examination to evaluate the funding portal’s compliance with the
Exchange Act, the rules thereunder, as well as for other regulatory purposes.
The requirement that a nonresident funding portal complete Schedule C of Form Funding
Portal, furnish an agent for service of process, and make certain certifications, will help
minimize legal or logistical obstacles that the Commission may encounter when attempting to
effect service, conserve Commission resources, and avoid potential conflicts of law. The
requirement that a nonresident funding portal provide an opinion of counsel on Form Funding
Portal will help ensure that such nonresident funding portal can provide access to its books and
records and submit to inspection and examination by the Commission.
3.
Consideration Given to Information Technology
The rules will require respondents and registered funding portals to electronically file
Forms Funding Portal, Funding Portal/A, and Funding Portal-W through the Commission’s
Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”). By requiring
submission of information through EDGAR, Commission staff will be able to efficiently retrieve
3
and analyze the data it needs, which should enhance the Commission’s ability to carry out its
mission with respect to funding portal activities effectively. Issuers, the general public, and
others will also be able to access information about funding portals electronically through the
Commission’s EDGAR system. Information submitted on Form Funding Portal will also be
ASCII or HTML format, which may improve the Commission staff’s ability to retrieve and
analyze data and could allow funding issuers, the general public and others to perform better
research into funding portals.
The rules will also require funding portals to make and keep books and records relating to
its funding portal activities. Rule 404(c) permits funding portals to maintain and preserve the
required records on electronic storage media.
4.
Duplication
In adopting these rules, the Commission sought to design a registration process that is
similar to other registration processes administered by the Commission. The rules are based on
rules applicable to broker-dealers and investment advisers; similarly, Form Funding Portal is
based on Form BD. To the extent market participants are familiar with these existing registration
processes, the Commission believes that using similar processes to register funding portals will
create efficiencies for market participants.
Form Funding Portal, while modeled primarily on Form BD, is designed to capture
information regarding the activities of funding portals and the markets that they serve that will
not otherwise be captured in other forms. This information will permit the Commission to
decide whether to accept an application for registration; to manage the Commission’s regulatory
and examination programs; and to make such information available to FINRA to better inform its
regulation of funding portals. In addition, having information about funding portals in a single
location could improve the funding portal selection process.
In addition, requiring funding portals to file a registration form specifically tailored to
their funding portal activities is consistent with the broader public interest to make available to
the public information about funding portals. The Commission believes that persons seeking to
compile, compare, and analyze data pertaining to the entire universe of registered funding
portals, and regulators overseeing compliance with the rules and regulations applicable to
funding portals, should be able to access relevant information easily within one system.
With respect to the recordkeeping requirements, the Commission has requested
documents that are not duplicative to any other Commission requests of funding portals.
5.
Effect on Small Entities
Paragraph (a) of Rule 0-10 under the Exchange Act provides that, for purposes of the
Regulatory Flexibility Act, “[w]hen used with reference to a broker or dealer, the Commission
has defined the term “small entity” to mean a broker or dealer “small broker-dealer” that: (1) had
total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior
fiscal year as of which its audited financial statements were prepared pursuant to Rule 17a-5(d)
or, if not required to file such statements, a broker or dealer that had total capital (net worth plus
subordinated debt) of less than $500,000 on the last business day of the preceding fiscal year (or
4
in the time that it has been in business if shorter); and (2) is not affiliated with any person (other
than a natural person) that is not a small business or small organization as defined in this
release.” 4 Currently, based on FOCUS Report data, 5 there are 871 broker-dealers that are
classified as “small” entities for purposes of the Regulatory Flexibility Act. 6 We apply
comparable criteria to funding portals that will register under the regulation. Based on
discussions with industry participants, we estimate that, of the anticipated 50 funding portals we
expect to register under the regulation, 30 will be classified as “small” entities for purposes of
the Regulatory Flexibility Act. 7
The Commission notes that funding portals are required by statute to register with the
Commission. As such, the final rules and forms will affect funding portals required to register
with the Commission, including small entities. The Commission does not believe differing
compliance or reporting requirements or an exemption from coverage of the final rules and
forms, or any part thereof, for small funding portals would be appropriate or consistent with
investor protection. Because the Commission believes that the protections of Title III of the
JOBS Act are intended to apply equally to clients of both large and small funding portals, it
would be inconsistent with the purposes of the Exchange Act to specify different requirements
for small funding portals under the final rules and forms. Thus, the final rules and forms are
designed to impose only those burdens necessary to accomplish the objectives of the JOBS Act
and minimize any significant adverse impact on small funding portals.
6.
Consequences of Not Conducting Collection
The collection of information under the final rules and forms is designed to establish a
permanent registration regime and establish certain recordkeeping requirements for funding
portals, as provided in Title III of the JOBS Act. The permanent registration regime will allow
the Commission to retrieve and analyze the data it needs more efficiently, which should enhance
the Commission’s ability to carry out its mission with respect to funding portal activities
effectively. In addition, the permanent registration regime could improve the process through
which issuers and investors select funding portals and incentivize funding portals not to engage
in misconduct. Absent the collection of information, funding portals would not have a
permanent mechanism through which to satisfy the requirement in Section 3(h) of the Exchange
Act that the Commission exempt, conditionally or unconditionally, a registered funding portal
from the requirement to register as a broker-dealer under Section 15(a)(1) of the Exchange Act.
4
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71533
n.1720 (citing 17 CFR 240.0-10(c))
5
See id. at 71533 n.1721 (“FOCUS Reports, or ‘Financial and Operational Combined
Uniform Single’ Reports, are monthly, quarterly, and annual reports that broker-dealers
generally are required to file with the Commission and/or self-regulatory organizations
pursuant to Exchange Act Rule 17a-5 (17 CFR 240.17a-5)”).
6
See id. at 71533 n.1722 (citing 17 CFR 240.0-10(a)).
7
For PRA purposes, the number of small business entities is calculated by multiplying the
number of respondents by the 30/50 percentage or 60%.
5
In addition, less frequent collection of this information would not allow the Commission and
other regulators, issuers or investors to access up-to-date information about funding portals.
7.
Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
Since Rule 400(b) requires registered funding portals to file amendments to Form
Funding Portal if certain information contained in the forms become inaccurate, it is possible for
a registered funding portal to report information to the Commission more often than quarterly.
However, this collection of information is necessary to ensure that the Commission, obligated
persons, as well as the public have access to current information regarding funding portals
registered with the Commission.
Rule 404(a) requires funding portals to maintain and preserve books and records for a
period of not less than five years, the first two in an easily accessible place. This rule is modeled
on Exchange Act Rules 17a-3 and 17a-4, and Rule 204-2 under the Investment Advisers Act, and
OMB has previously approved that collection with the same five-year retention period. This
collection of information will help to ensure that records exist of the respondent’s business
activities and of its associated persons, and that the records could potentially be requested by the
Commission and other regulators during an examination to evaluate the funding portal’s
compliance with the Exchange Act, the rules thereunder, and FINRA rules, as well as for other
regulatory purposes.
8.
Consultations Outside the Agency
The Commission requested comment on the collection of information requirements in the
proposing release in November 2013. 8 The Commission received comments on its estimates of
the costs incurred by intermediaries. 9 The Commission received one comment specifically
addressing Rule 404. The commenter stated that “[u]nder the expectation that crowdfunding
portals will be online operations and will almost certainly retain records through digital methods,
8
Crowdfunding, Exchange Act Release No. 70741, 78 Fed. Reg. 66428, 66559-62 (Nov.
5, 2013).
9
See, e.g., Letter from Scott Purcell, Founder and CEO, Arctic Island LLC (Dec. 31,
2013); Letter from Scott Purcell, CapSchedule.com, LLC, Oct. 23, 2013; Letter from
David R. Burton, Senior Fellow in Economic Policy, The Heritage Foundation (Feb. 3,
2014); Letter from Bryan Healey, CEO, Joinvestor (Jan. 2, 2014); Letter from Karen
Kerrigan, President & CEO, Small Business & Entrepreneurship Council, Feb. 3, 2014;
Letter from Max Silverman, COO, Seed & Spark (Feb. 3, 2014); Letter from Charles V.
Rossi, Chairman, STA Board Advisory Committee, The Securities Transfer Association,
Inc., Dec. 18, 2013, http://www.sec.gov/comments/s7-09-13/s70913.shtml. See also
Letter from Kit Hayes, Campaign Director, Peers.org (Feb. 7, 2014) (recommending a
lessened paperwork burden in general), http://www.sec.gov/comments/s7-0913/s70913.shtml.
6
the burden of collection should be minimal.” 10 The Commission agreed “that digital
recordkeeping can help to minimize costs” and stated that its “estimates reflect this
assessment.” 11
9.
Payment or Gift
Not applicable.
10.
Confidentiality
To the extent the Commission receives confidential information pursuant to submissions
on Form Funding Portal, such information will be kept confidential, subject to the provisions of
applicable law (e.g., Freedom of Information Act, 5 U.S.C. § 552 (2012)). In particular, the
collection of information may include social security numbers of sole proprietors in Form
Funding Portal that do not have an EIN number, as well as the social security numbers and dates
of birth of direct owners and executive officers that do not have a CRD number. This
information is necessary in connection with the Commission’s enforcement and examination
functions pursuant to Section 15B(c) of the Exchange Act. Guidance is provided in the forms
stating that information, such as social security numbers or dates of births, will not be included in
publicly available versions of the form.
11.
Sensitive Questions
As discussed above in Item 10, the collection of information includes Personally
Identifiable Information (“PII”). 12 In particular, the collection of information may include SSNs
of funding portals that do not have an EIN number, as well as the social security numbers and
dates of birth of direct owners and executive officers that do not have a CRD number.
The Commission has also published a System of Records Notice for the collection of
information relating to funding portals. 13 In addition, a Privacy Impact Assessment (“PIA”) has
been completed for the EDGAR system. 14
10
Letter from Bryan Healey, CEO, Joinvestor (Jan. 2, 2014),
http://www.sec.gov/comments/s7-09-13/s70913.shtml.
11
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71532.
12
The term “Personally Identifiable Information” refers to information which can be used
to distinguish or trace an individual’s identity, such as their name, social security number,
biometric records, etc. alone, or when combined with other personal or identifying
information which is linked or linkable to a specific individual, such as date and place of
birth, mother’s maiden name, etc.
13
See System of Records Notices SEC-55, SEC-49 and SEC-1 available at
http://www.sec.gov/about/privacy/secprivacyoffice.htm.
14
The PIA will be included in the PRA submission to OMB.
7
12.
Burden of Information Collection
a.
Rule 400: Registration of Funding Portals
i.
Form Funding Portal: Application for Funding Portal Registration
The initial application for funding portals under Form Funding Portal is a one-time
reporting burden. The Commission estimates this collection of information will apply to
approximately 50 funding portals during the first year and each year thereafter, totaling 150
during the first three years following effectiveness of the rule. This estimate assumes that, upon
effectiveness of the rules, about 15% of the approximately 200 U.S.-based crowdfunding
portals 15 currently in existence will participate in securities-based crowdfunding and that the
number of crowdfunding portals will grow at 60% per year over the next three years. 16
Therefore, we estimate that an average of approximately 50 respondents will register as funding
portals annually. 17 Of those 50 funding portals, we estimate that two will be nonresident funding
15
This estimate is based in part on an industry estimate that, as of April 2012, there were
approximately 200 non-securities-based crowdfunding portals operating in the United
States. See Massolution, Crowdfunding Industry Report: Market Trends, Composition
and Crowdfunding Platforms 16 (Abridged) (May 2012), available at
http://www.crowdsourcing.org/document/crowdfunding-industry-report-abridgedversionmarket-trends-composition-and-crowdfunding-platforms/14277 (‘‘Massolution 2012’’).
We did not receive comment on these estimates and therefore continue to believe our
estimates in the Proposing Release are appropriate. See also Massolution, 2015CF
Crowdfunding Industry Report: Market Trends, Composition and Crowdfunding
Platforms 85, available at
http://reports.crowdsourcing.org/index.php?route=product/product&product_id=54
(“Massolution 2015”) (estimating that, as of December 2014, there were approximately
375 crowdfunding portals operating in North America, not just the United States).
16
A worldwide survey of crowdfunding portals indicated that, in 2011, approximately
14.8% of the surveyed crowdfunding portals (mostly based in Europe) participated in
“equity-based” crowdfunding. Massolution 2012 at 16. Also, the total number of
crowdfunding portals worldwide grew by an estimated 60% from 2011 to 2012. Id. at 13.
We did not receive comment on these estimates and therefore continue to believe our
estimates in the Proposing Release are appropriate. See also Massolution 2015 at 82-83
(estimating that, as of December 2014, there were approximately 1250 crowdfunding
portals worldwide compared to 813 worldwide in 2012, which represents an increase of
approximately 54%).
17
200 U.S.-based crowdfunding portals × 15% (estimated percentage of crowdfunding
portals that will participate in securities-based crowdfunding) = 30 funding portals that
will participate in securities-based crowdfunding in the first year. Assuming 60% growth
over three years, the number of registered funding portals will be 30 during the first year,
48 during the second year and 77 during the third year. The average over three years is
approximately 50 funding portals per year ((30 + 48 + 77) ÷ 3 = 52, or approximately
50).
8
portals. These estimates are based in part on current indications of interest expressed in
responses to FINRA’s voluntary interim form for funding portals. The Commission also
estimates that approximately 50 new funding portals will register on Form Funding Portal each
year for the first three years. This estimate is based on Form BD registration data. Over the
three years of the information collection, the total estimated number of Form Funding Portal
respondents will be 150. 18
We estimate the burden for registering as a funding portal with us based upon the existing
burdens for completing and filing Form BD. 19 Consequently, we estimate that it will take a
resident funding portal 2.75 hours to complete Form Funding Portal. For the first year, the total
hours required for resident funding portals to register with us will be approximately 137.5
hours. 20
In summary, the Commission estimates that, over a three-year period, the total
reporting burden for the completion and submission of Form Funding Portal will be 412.5
hours, or 137.5 hours per year 21 when annualized over three years. The total burden per
respondent will be 2.75 hours, or 0.92 hours per year 22 when annualized over three years.
ii.
Registered National Securities Association Membership
The requirement that newly-registered intermediaries will be required to become
members of a registered national securities association is a one-time third party disclosure
burden. In the Proposing Release, the Commission included an estimate of PRA burdens and
costs for newly-registered intermediaries to become and remain members of FINRA or any other
registered national securities association. The Commission, however, stated in the Adopting
18
50 (estimated number of Form Funding Portal applicants Y1) + 50 (estimated number of
Form Funding Portal applicants Y2) + 50 (estimated number of Form Funding Portal
applicants Y3) = 150.
19
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526
n.1657 (“While it is likely that the time necessary to complete Form BD varies depending
on the nature and complexity of the entity’s securities business, we currently estimate the
average time necessary for a broker-dealer to complete and file an application for brokerdealer registration on Form BD to be approximately 2.75 hours. We also estimate that
the time burden to register as a funding portal on Form Funding Portal will be, for
purposes of this PRA analysis, the same as the time required to complete and file Form
BD because the information required for that form is similar.”).
20
2.75 hours/respondent × 50 funding portals Y1 = 137.5 hours. In addition, those entities
that register as nonresident funding portals will face an additional burden, which is
accounted for below. See infra A.12.v.
21
Y1 (2.75 hours × 50 new funding portals) + Y2 (2.75 hours × 50 new funding portals) +
Y3 (2.75 hours × 50 new funding portals) = 412.5 hours ÷ 3 = 137.5 hours per year.
22
412.5 hours (total annual reporting burden) ÷ 150 (total funding portals by end of Y3) =
2.75 hours ÷ 3 = .92 hours per respondent.
9
Release that “after further consideration, the Commission does not believe the hour burdens and
costs associated with FINRA’s membership constitute paperwork burdens and costs attributable
to the Commission’s rules.” 23 Therefore, we are not providing estimates of burdens and costs
resulting from membership in a registered national securities association.
iii.
Form Funding Portal/A: Amendment to Registration
Once registered, funding portals will need to file an amended Form Funding Portal when
information it originally reported on Form Funding Portal changes or becomes inaccurate. Such
amendments will be an on-going reporting burden. The Commission estimates that each funding
portal will need to submit approximately 3.2 amendments per year. This figure is based on the
number of amended Forms BD we received from October 1, 2011 through September 15,
2015. 24
We estimate that the average time necessary to complete an amended Form Funding
Portal will be approximately 0.33 hours (i.e., 20 minutes per amendment). This figure is based
on previous estimates of the average time necessary to complete an amended Form BD, which is
a similar form. 25 Thus, we estimate that the total annual burden hours for funding portals to
complete and file amended Forms Funding Portal will be approximately 52.8 hours for the first
year. 26
In summary, the Commission estimates that, over a three-year period, the total
ongoing reporting burden will be 316.8 hours, or 105.6 hours per year 27 when annualized
23
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526.
24
We received 15,491, 13,271, 12,902, 14,330 and 10,848 amended Forms BD during the
fiscal years ending 2011, 2012, 2013, 2014 and 2015, respectively, reflecting an average
of 13,368 amendment filings per year (15,491 + 13,271+12,902+ 14,330+10,848) / 5
years). As of September 15, 2015, there were 4,213 broker-dealers registered with the
Commission. Therefore, we estimate that there are approximately 3.17 amendments
(13,368 amended Forms BD / 4,213 broker-dealers) per registered broker-dealer per year.
We estimate that funding portals will need to file amendments at approximately the same
rate. We estimated 3.4 amendments per year per funding portal in the PRA for the
proposed rules. However, we have changed this estimate based on more current
information regarding broker-dealer Form BD amendments.
25
See Regulation Crowdfunding, Exchange Act Release No. Exchange Act Release No.
76324, 80 Fed. Reg. at 71526 n.1663 (“We currently estimate that the average time
necessary to complete an amended Form BD to be approximately 20 minutes, or 0.33
hours. We estimate that an amendment to Form Funding Portal will take the same
amount of time as an amendment to Form BD because the forms are similar. ”).
26
50 (funding portals in Y1) × 3.2 (amendments per year) × 0.33 hours (estimated time per
amendment) = 52.8 hours.
27
Y1 (50 funding portals × 3.2 amendments per year × .33 hours per amendment) + Y2 (100
funding portals × 3.2 amendments per year × .33 hours per amendment) + Y3 (150
10
over three years. The total reporting burden per respondent to amend Form Funding
Portal will be 2.11 hours, or 0.70 hours per year 28 when annualized over three years.
iv.
Form Funding Portal-W: Notice of Withdrawal from Registration as
a Funding Portal
We take into consideration funding portals that register to engage in crowdfunding
transactions conducted in reliance on Section 4(a)(6) may eventually decide to withdraw their
registration. Withdrawal from Form Funding portal is a one-time reporting burden requiring the
entity to complete and file with us Form Funding Portal-W. We estimate that approximately five
funding portals may choose to withdraw from registration each year. 29 Over three years of the
information collection, the total estimated number of Form Funding Portal-W respondents will
be 15. 30
The Commission estimates that the average amount of time for a funding portal to
complete Form Funding Portal-W will be 0.25 hours. This figure is based on the burden estimate
for completing Form BDW. 31 Thus, the Commission estimates a total burden of 1.25 hours for
the first year. 32
funding portals × 3.2 amendments per year × .33 hours per amendment) = 316.8 hours ÷
3 = 105.6 hours per year.
28
316.8 (total annual reporting burden to amend Form Funding Portal) ÷ 150 (total funding
portals at the end of Y3) = 2.11 hours ÷ 3 = .70 hours per respondent.
29
We estimate that the percentage of registered funding portals participating in
crowdfunding transactions in reliance on Section 4(a)(6) that will withdraw from
registration annually will be the same as the percentage of broker-dealers that withdraw
from registration annually (10%) because of the similarity of the businesses. Of our
estimate of 50 registered funding portals participating in crowdfunding transactions in
reliance on Section 4(a)(6), we estimate that approximately five funding portals per year
(50 registered funding portals × 10%) will withdraw from registration. For funding
portals, a decision to withdraw registration will be required to be reported to us in the
same way as an amendment; however, for broker-dealers, withdrawal requires the filing
of Form BDW. We previously estimated six funding portals per year would withdraw
from registration (50 registered funding portals x 11%). However, we have changed this
estimate based on more current information regarding broker-dealer withdrawals. See
Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71526 n.1660.
30
5 (estimated number of Form Funding Portal-W applicants Y1) + 5 (estimated number of
Form Funding Portal-W applicants Y2) + 5 (estimated number of Form Funding Portal-W
applicants Y3) = 15 applicants.
31
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71526
n.1658.
32
0.25 hours (burden for Form Funding Portal-W) × 5 funding portals (estimated number of
Form Funding Portal-W applicants Y1) = 1.25 hours. We previously estimated it would
11
In summary, the Commission estimates that, over a three-year period, the total
reporting burden for the completion of Form Funding Portal-W will be 3.75 hours, or
approximately 1.25 hours per year 33 when annualized over three years. The total one-time
reporting burden will be 0.25 hours per respondent, or 0.08 hours per year 34 when
annualized over three years.
v.
Form Funding Portal: Completion of Schedule C, Designation of
U.S. Agent for Service of Process and Opinion of Counsel for
Nonresident
The designation of a U.S. agent for service of process is a one-time reporting burden.
The Commission estimates that there will be approximately two nonresident funding portal
respondents each year. Those nonresident funding portal respondents will need to complete
Schedule C of Form Funding Portal (including the required certifications), provide an opinion of
counsel, and document the appointment of an agent for service of process.
The Commission estimates that the average amount of time to complete Schedule C of
Form Funding Portal and make the required certifications will be half an hour. 35 Thus, the
Commission estimates that the total burden to complete Schedule C of Form Funding Portal and
make the required certifications will be approximately one hour for the first year. 36 In addition,
each nonresident funding portal must provide an opinion of counsel on Form Funding Portal.
The Commission estimates that the average initial reporting burden to provide an opinion of
counsel will be one hour. 37 Thus, Commission estimates that the total internal burden to provide
take 1 hour to complete Form Funding Portal-W; however we have changed the estimate
for completing Form Funding Portal-W to 0.25 hours based on the current estimate for
completing Form BDW.
33
Y1 (5 funding portals × 0.25 hours) + Y2 (5 funding portals × 0.25 hours) + Y3 (5 funding
portals × 0.25 hours) = 3.75 hours ÷ 3 = 1.25 hours per year.
34
3.75 hours (total burden to complete Form Funding Portal-W, over three years) ÷ 15
(total estimated number of entities withdrawing from Form Funding Portal registration by
end of Y3) = 0.25 hours ÷ 3 = 0.08 hours per respondent.
35
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526.
Although the PRA submission for the proposed rules had a time burden that differed from
the burden in the Proposing Release (1.5 hours vs. half an hour), the Commission
received no comments about the estimates in the Proposing Release and determined the
Proposing Release estimates were appropriate to use in the Adopting Release.
36
2 (firms expected to file Schedule C of Form Funding Portal Y1) × 0.5 hours (average
estimated time to complete Schedule C of Form Funding Portal) = 1 hour.
37
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526.
Although the PRA submission for the proposed rules had a time burden that differed from
the burden in the Proposing Release (3 hours vs. one hour), the Commission received no
comments about the estimates in the Proposing Release and determined the Proposing
Release estimates were appropriate to use in the Adopting Release.
12
an opinion of counsel will be two hours for the first year. 38 Each nonresident funding portal
must hire an agent for the service of process. The Commission estimates that the average initial
reporting burden to document the appointment of an agent for the service of process will be half
an hour per nonresident funding portal, or one hour total for the first year. 39
Thus, the Commission estimates that each nonresident funding portal will face a one-time
registration burden of two hours to complete Schedule C and make the required certifications,
provide an opinion of counsel, and document the appointment of an agent for the service of
process. 40 After the first year, the Commission estimates there will be approximately two new
nonresident funding portal respondents each year. The Commission estimates that these
respondents will face the same burden as the first year respondents. Thus, after the first year, the
Commission estimates an initial reporting burden of 4 hours per year. 41
In summary, the Commission estimates that, over a three-year period, the total
additional one-time reporting burden for nonresident funding portal respondents will be 12
hours, or approximately 4 hours per year 42 when annualized over three years. The average
burden for each nonresident funding portal will be approximately 2 hours, or 0.67 hours
per year 43 when annualized over three years.
b.
Rule 404: Books and Records to Be Made and Maintained by Funding
Portals
The maintenance of books and records is an ongoing annual recordkeeping burden. The
Commission estimates that this collection of information will apply to 50 funding portals in the
first year, 50 additional funding portals in the second year, and 50 additional funding portals in
38
2 (nonresident funding portals expected to provide opinion of counsel Y1) × 1 hour
(average estimated time to provide an opinion of counsel) = 2 hours.
39
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526.
0.5 hours × 2 (nonresident funding portals expected to register as funding portal Y1) = 1
hour.
40
0.5 hours (to complete Schedule C) + 1 hour (to provide opinion of counsel) + 0.5 hours
(to document the appointment of an agent for service of process) = 2 hours per funding
portal, or 4 hours total for the first year (2 hours × 2 nonresident funding portals Y1).
41
0.5 hours (Schedule C) + 1 hour (opinion of counsel) + 0.5 hours (agent) × 2 (estimated
nonresident funding portal applicants) = 4 hours per year, or 8 hours total over years two
and three (2 hours × 4 total new nonresident funding portals over Y2 and Y3).
42
6 (nonresident funding portals expected to register at the end of Y3) × 2 hours (average
estimated time to complete Schedule C, provide opinion of counsel, and document the
appointment of an agent for service of process) = 12 hours ÷ 3 = 4 hours per year.
43
12 (estimated additional burden to register over three years) ÷ 6 (estimated number of
nonresident funding portals to register over three years) = 2 hours ÷ 3 = 0.67 hours per
respondent.
13
the third year, which totals 150 funding portals for years one through three.
The Commission estimates that the average annual burden for funding portals to comply
with the recordkeeping requirements will be approximately 325 hours per respondent. 44 The
Commission currently estimates the annual recordkeeping burden for broker-dealer compliance
with Rule 17a-3 to be 394.16 hours per respondent, and the most recently approved annual
recordkeeping burden for broker-dealer compliance with Rule 17a-4 to be 249 hours per
respondent. 45 We expect the burden of the rules will likely be less than that of Rules 17a-3 and
17a-4. For the purposes of the PRA, we assume that the recordkeeping burden, on average, for a
funding portal to comply with the rules will be 50% of the burdens of a broker-dealer to comply
with Rules 17a-3 and 17a-4. Therefore, we estimate the first year burden to be 325 hours per
respondent, or 16,250 hours total for the first year. 46 We expect the ongoing recordkeeping
burden for funding portals will also be approximately 325 hours per respondent, because
maintaining such records will be consistent each year.
In summary, the Commission estimates that, over a three-year period, the total
recordkeeping burden will be 97,500 hours, or 32,500 hours per year 47 when annualized
over three years. The total recordkeeping burden per respondent will be 650 hours, or
216.67 hours per year 48 when annualized over three years.
c.
Rule 403: Compliance Policies and Procedures
All registered funding portals will be required to implement written policies and
procedures reasonably designed to achieve compliance with the federal securities laws and the
rules and regulations thereunder. Based on discussion with industry participants, we estimate
that 50 funding portals in year one will each spend approximately 40 hours to establish written
policies and procedures to achieve compliance with these requirements. This will result in an
initial recordkeeping burden of 2,000 hours in the first year. 49 The Commission expects an
average of 50 new funding portals to register in each subsequent year, these funding portals must
44
394.16 hours (recordkeeping burden for Rule 17a-3) + 249 hours (recordkeeping burden
for Rule 17a-4) × 50% = 321.58.
45
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71531.
46
325 hours × 50 funding portals in Y1 = 16,250 hours.
47
Y1 recordkeeping burden (325 hours × 50 funding portals) + Y2 recordkeeping burden
(325 hours × 100 funding portals) + Y3 recordkeeping burden (325 hours × 150 funding
portals) = 97,500 hours ÷ 3 = 32,500 hours per year.
48
97,500 hours (total recordkeeping burden over three years) ÷ 150 (number of funding
portals at the end of Y3) = 650 hours ÷ 3 = 216.67 hours per respondent.
49
40 hours × 50 funding portals in Y1 = 2,000 hours.
14
also establish written policies and procedures. Thus, the Commission estimates a total one-time
burden of 6,000 hours to establish written policies and procedures over three years. 50
We estimate that, on an ongoing basis, funding portals will spend approximately 5 hours
per year updating, as necessary, the policies and procedures required by the rules. This will result
in an aggregate ongoing recordkeeping burden of 1,500 hours over three years. 51
In summary, the Commission estimates that, over a three-year period, the total
recordkeeping burden to establish and maintain compliance policies and procedures will be
7,500 hours, or 2,500 per year 52 when annualized over three years. The total estimated
burden per funding portal will be 50 hours, or 16.67 hours per year 53 when annualized
over three years.
d.
Rule 403: Compliance Privacy
i.
Regulation S-P
We estimate that all funding portals will be subject to the requirements of Regulation S-P
under the regulation. In developing an estimate we have considered: (1) the minimal
recordkeeping burden imposed by Regulation S-P (Regulation S-P has no recordkeeping
requirement, and records relating to customer communications already must be made and
retained pursuant to other Commission rules); (2) the summary fashion in which information
must be provided to investors in the privacy and opt-out notices required by Regulation S-P (the
model privacy form adopted by the Commission and the other agencies in 2009, designed to
serve as both a privacy notice and an opt-out notice, is only two pages); and (3) the availability
of the model privacy form and online model privacy form builder. Given these considerations
and with the aid of our institutional knowledge, we estimate that each funding portal will spend,
on an ongoing basis, an average of approximately 12 hours per year complying with the
information collection requirement of Regulation S-P, for a total of approximately 600 burden
hours in the first year. 54
50
Y1 one-time burden (40 hours × 50 new funding portals) + Y2 one-time burden (40 hours
× 50 new funding portals) + Y3 one-time burden (40 hours × 50 new funding portals) =
6,000 hours.
51
Y1 ongoing burden (5 hours × 50 funding portals) + Y2 ongoing burden (5 hours × 100
funding portals) + Y3 ongoing burden (5 hours × 150 funding portals) = 1,500 hours.
52
6,000 hours (total one-time burden) + 1,500 hours (total ongoing burden) = 7,500 hours ÷
3 = 2,500 hours per year.
53
7,500 hours (total burden to establish and maintain compliance policies and procedures)
÷ 150 (estimated number of funding portals at the end of Y3) = 50 hours ÷ 3 = 16.67
hours per respondent.
54
12 hours × 50 funding portals in Y1 = 600 hours.
15
In summary, the Commission estimates that, over a three-year period, the total
third-party disclosure burden for Regulation S-P will be 3,600 hours, or 1,200 hours per
year 55 when annualized over three years. The reporting burden per respondent will be
approximately 24 hours per respondent, or approximately 8 hours per year 56 when
annualized over three years.
ii.
Regulation S-AM
Regulation S-AM will require funding portals to provide a notice to each affected
individual informing the individual of his or her right to prohibit such marketing before a
receiving affiliate may make marketing solicitations based on the communication of certain
consumer financial information from the broker. Based on the discussion with industry
participants, we estimate that approximately 20 funding portals will have affiliations that will
subject them to the requirements of Regulation S-AM under the regulation in the first year. For
each subsequent year, we estimate that approximately the same number of new funding portals
each year will also be subject to the requirements of Regulation S-AM. Accordingly, we estimate
the total number of funding portals subject to S-AM will be 60 over three years. 57
We estimate that each new funding portal will require an average one-time burden of 1
hour to review affiliate marketing practices, for a total of 60 hours over three years. 58 We also
estimate that each new funding portal will be required to provide notice and opt-out opportunities
to consumers pursuant to the requirements of Regulation S-AM and that they will incur an
average first-year burden of 18 hours in doing so, for a total estimated burden of 1,080 hours
over three years. 59 We estimate that funding portals will incur an ongoing burden related to the
requirements of Regulation S-AM to provide notice and opt-out opportunities of approximately 4
hours per respondent per year to create and deliver notices to new investors and record any opt-
55
Y1 ongoing burden (12 hours × 50 funding portals) + Y2 ongoing burden (12 hours × 100
funding portals) + Y3 ongoing burden (12 hours × 150 funding portals) = 3,600 hours ÷ 3
= 1,200 hours per year.
56
3,600 hours (total burden for Regulation S-P over three years) ÷ 150 (total funding
portals at the end of Y3) = 24 hours ÷ 3 = 8 hours per respondent.
57
20 (new funding portals Y1) + 20 (new funding portals in Y2) + 20 (new funding portals
in Y3) = 60.
58
Y1 initial burden to review marketing practices (1 hour × 20 new funding portals) + Y2
initial burden to review marketing practices (1 hour × 20 new funding portals) + Y3 initial
burden to review marketing practices (1 hour × 20 new funding portals) = 60 hours.
59
Y1 initial burden (18 hours × 20 new funding portals) + Y2 initial burden (18 hours × 20
new funding portals) + Y3 initial burden (18 hours × 20 new funding portals) = 1,080
hours.
16
outs that are received on an ongoing basis, for a total of approximately 480 burden hours over
three years. 60
In summary, the Commission estimates that, over a three-year period, the total
third-party disclosure burden for Regulation S-AM will be 1,620 hours, or 540 hours per
year 61 when annualized over three years. The estimated total burden per respondent will
be 27 hours, or 9 hours per year 62 when annualized over three years.
iii.
Regulation S-ID
Regulation S-ID generally will require funding portals to develop and implement a
written identity theft prevention program that is designed to detect, prevent and mitigate identity
theft in connection with certain existing accounts or the opening of new accounts. We estimate
that all funding portals will need to comply with Regulation S-ID.
Based on our institutional knowledge, we estimate that the initial burden for funding
portals to comply with the applicable portions of Regulation S-ID will be (1) 25 hours to develop
and obtain board approval of a program; (2) 4 hours to train staff; and (3) 2 hours to conduct an
initial assessment of relevant accounts, for a total of 31 hours per funding portal. 63 We estimate
that all funding portals will incur this one-time burden, resulting in an aggregate time burden of
4,650 hours over three years. 64
With respect to the requirements of Regulation S-ID, we estimate that the ongoing burden
per year will include: (1) 2 hours to periodically review and update the program, review and
preserve contracts with service providers and review and preserve any documentation received
from service providers; (2) 4 hours to prepare and present an annual report to a compliance
director; and (3) 2 hours to conduct periodic assessments to determine if the entity offers or
maintains covered accounts for a total of 8 hours, 65 of which we estimate 7 hours will be spent
by internal counsel and 1 hour will be spent by a compliance officer. We estimate that all
60
Y1 ongoing burden (4 hours × 20 funding portals) + Y2 ongoing burden (4 hours × 40
funding portals) + Y3 ongoing burden (4 hours × 60 funding portals) = 480 hours.
61
60 hours (to review affiliate marketing practices) + 1,080 hours (to provide notice and
opt-out opportunities to consumers) + 480 hours (to create and deliver notices to new
investors and record any opt-outs that are received) = 1,620 hours ÷ 3 = 540 hours per
year.
62
1,620 hours (total estimated burden over three years) ÷ 60 (estimated number of
respondents at the end of Y3) = 27 hours ÷ 3 = 9 hours per respondent.
63
25 hours + 4 hours + 2 hours = 31 hours.
64
Y1 one-time burden (31 hours × 50 new funding portals) + Y2 one-time burden (31 hours
× 50 new funding portals) + Y3 one time burden (31 hours × 50 new funding portals) =
4,650 hours.
65
2 hours + 4 hours + 2 hours = 8 hours.
17
funding portals will incur this ongoing time burden, resulting in an aggregate burden of 2,400
hours over three years. 66
In summary, the Commission estimates that, over a three-year period, the total
recordkeeping burden for Regulation S-ID will be 7,050 hours, or 2,350 67 hours annualized
over three years. The estimated total burden per respondent will be 47 hours, or 15.67
hours per year 68 when annualized over three years.
66
Y1 ongoing burden (8 hours × 50 funding portals) + Y2 ongoing burden (8 hours × 100
funding portals) + Y3 ongoing burden (8 hours × 150 funding portals) = 2,400 hours.
67
4,650 (total initial burden by the end of Y3) + 2,400 (total ongoing burden by the end of
Y3) = 7,050 hours ÷ 3 = 2,350 hours per year.
68
7,050 hours (total estimated burden over three years) ÷ 150 (estimated number of funding
portals by the end of Y3) = 47 hours ÷ 3 = 15.67 hours per respondent.
18
e.
Summary of Hourly Burdens
The table below summarizes the Commission’s estimates of the total hourly reporting
burden for all respondents under Regulation Crowdfunding.
Crowdfunding PRA - Funding Portals - Hourly Burden
Nature of Information
Collection Burden
Type of Burden
Number of
Respondents
Number of
Responses Per
Year
Initial Burden
Per Response
Per Year Per
Respondent
Ongoing
Burden Per
Response Per
Year Per
Respondent
Annualized
Burden
Estimate Per
Respondent
Annualized
Hourly Burden
Estimate
Industry-Wide
Small
Business
Entities
Affected
a.
Rule 400: Registration of
Funding Portals
i.
Form Funding Portal:
Application for Funding Portal
Registration
Reporting
150
1
0.92
-
0.92
137.50
90.0
ii.
Registered National Securities
Association Membership
Third-Party
Disclosure
150
1
-
-
-
-
90.0
iii.
Form Funding Portal/A:
Amendment to Registration
Reporting
150
3.2
-
0.22
0.70
105.60
90.0
iv.
Form Funding Portal-W: Notice
of Withdrawal from
Registration as a Funding Portal
Reporting
15
1
0.08
-
0.08
1.25
9.0
v.
Form Funding Portal:
Designation of U.S. Agent for
Service of Process and Opinion
of Counsel for Nonresident
Reporting
6
1
0.67
-
0.67
4.00
3.6
b.
Rule 404: Books and Records
to Be Made and Maintained by
Funding Portals
Recordkeeping
150
1
-
216.67
216.67
32,500.00
90.0
c.
Rule 403: Compliance Policies
and Procedures
Recordkeeping
150
1
13.33
3.33
16.67
2,500.00
90.0
d.
Rule 403: Compliance Privacy
i.
Regulation S-P
Third-Party
Disclosure
150
1
8.00
-
8.00
1,200.00
90.0
ii.
Regulation S-AM
Third-Party
Disclosure
60
1
6.33
2.67
9.00
540.00
36.0
iii.
Regulation S-ID
Recordkeeping
150
1
10.33
5.33
15.67
2,350.00
90.0
39,338.35
13.
Costs to Respondents
a.
Rule 400: Registration of Funding Portals
i.
Form Funding Portal: Application for Funding Portal Registration
We estimated the initial registration costs for funding portals to become members of a
national securities association in the PRA submission for the proposed rules. As explained in
further detail above, the Commission determined not to provide estimates of burdens and costs
resulting from membership in a registered national securities association in the PRA analysis in
the Adopting Release. 69
69
See supra 12.a.ii.
19
ii.
Registered National Securities Association Membership
As explained in further detail above, the Commission determined not to provide estimates of
burdens and costs resulting from membership in a registered national securities association in the
PRA analysis in the Adopting Release. 70
iii.
Form Funding Portal/A: Amendment to Registration
Not applicable.
iv.
Form Funding Portal-W: Notice of Withdrawal from Registration as
a Funding Portal
Not applicable.
v.
Form Funding Portal: Designation of U.S. Agent for Service of
Process and Obtain an Opinion of Counsel for Nonresident
The Commission estimates that two nonresident funding portals will register each year,
for a total of six nonresident funding portals total over three years. These funding portals will
face an additional initial cost to retain an agent for the service of process, and provide an opinion
of counsel to register as a nonresident funding portal.
The Commission estimates that this initial cost for nonresident funding portals will be
approximately $25,179 to retain an agent for the service of process and provide an opinion of
counsel. 71 Over three years, the initial additional cost across all nonresident funding portals will
be approximately$151,074. 72
70
See supra 12.a.ii.
71
See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71527
n. 1665 (“We have altered our cost estimates slightly from the Proposing Release (from
$25,130 to $25,179) and note that the amended estimates are consistent with our recent
estimates of what it would cost other types of nonresident entities to retain an agent for
service of process and provide an opinion of counsel. See Registration Process for
Security-Based Swap Dealers and Major Security-Based Swap Participants, Exchange
Act Release No. 34-75611, 80 FR 48964, 48994 (Aug. 14, 2015). We inadvertently
included the costs to non-resident funding portals of completing Schedule C in the
Proposing Release. We anticipate, however, that nonresident funding portals will incur a
time burden rather than a cost burden to complete Schedule C.”).
72
$25,179 × 6 (estimated nonresident funding portals at the end of Y3) = $151,074. The
Commission originally estimated ongoing costs for retaining an agent for service of
process, but after closer review has determined it is not likely that there are ongoing costs
for retaining such an agent.
20
In summary, the Commission estimates that, over a three-year period, the total
additional cost for all nonresident funding portals to, retain an agent for service of process,
and provide an opinion of counsel will be approximately $151,074, or $50,358 per year 73
when annualized over three years. The total cost per respondent will be $25,179 per year, 74
or $8,393 when annualized over three years.
b.
Rule 404: Books and Records to be Made and Maintained by Funding
Portals
We assume that a funding portal’s initial recordkeeping cost associated with making and
keeping records by a funding portal will not be significantly different from the ongoing
recordkeeping cost because maintaining such records will be consistent each year. The most
recently approved annual recordkeeping cost for broker-dealer compliance with Rule 17a-3 is
currently estimated at $5,706.67 per respondent. These ongoing recordkeeping costs reflect the
costs of systems and equipment development. The most recently approved annual recordkeeping
cost for broker-dealer compliance with Rule 17a-4 is currently estimated at $5,000 per
respondent. Given the more limited scope of a funding portal’s business as compared to that of a
broker, the more limited scope of the books and records rules, and the fact that funding portals
will be required to make, deliver and store records electronically, we expect the annual
recordkeeping cost of the rule requirements will likely be less than that of Rules 17a-3 and 17a4. For purposes of the PRA, we assume that the annual recordkeeping cost on average for a
funding portal to comply with the rule requirements that records be made and kept will be about
50% less than burdens of a broker-dealer to comply with Rules 17a-3 and 17a-4.
Based on the above, we expect the initial recordkeeping cost for funding portals,
therefore, to be approximately $5,350 per respondent, 75 or $802,500 total over three years. 76 We
also estimate that the ongoing recordkeeping cost for funding portals after the initial year will be
approximately $5,350 per respondent, or $802,500 over a three-year period. 77
In summary, the Commission estimates that, over a three year period, the total cost
for all funding portals to comply with Rule 404 will be approximately $1,605,000, or
73
$151,074÷ 3 = $50,358 per year.
74
$151,074(aggregate cost over three years) ÷ 6 (nonresident funding portals at the end of
Y3) = $25,179 ÷ 3 = $8,393 per respondent.
75
$5,706.67 (recordkeeping cost for Rule 17a-3) + $5,000 (recordkeeping cost for Rule
17a-4) × 50% = $5,353, or approximately $5,350.
76
Y1 ($5,350 × 50 new funding portals in Y1) + Y2 ($5,350 × 50 new funding portals in Y2)
+ Y3 ($5,350 × 50 new funding portals in Y3) = $802,500.
77
Y2 ($5,350 × 50 ongoing funding portals established in Y1) + Y3 ($5,350 × 100 ongoing
funding portals established in Y1 and Y2) = $802,500.
21
$535,000 per year 78 when annualized over three years. The total cost per respondent will be
$10,700, or $3,566.67 per year 79 when annualized over three years.
c.
Rule 403: Compliance Policies and Procedures
Not applicable.
d.
Rule 403: Compliance Privacy
Not applicable.
78
$802,500 (initial costs) + $802,500 (ongoing costs) = $1,605,000 ÷ 3 = $535,000 per
year.
79
$1,605,000 ÷ 150 (funding portals at the end of Y3) = $10,700 ÷ 3 = $3,566.67 per
respondent.
22
e.
Summary of Cost Burdens
The table below summarizes the Commission’s estimate of the annual cost burdens for
funding portals.
Crowdfunding PRA - Funding Portals - Cost Burden
Nature of Information
Collection Burden
Type of Burden
Number of
Respondents
Number of
Responses Per
Year
Initial Burden
Per Response
Per Year Per
Respondent
Ongoing
Burden Per
Response Per
Year Per
Respondent
Annualized
Burden
Estimate Per
Respondent
Annualized
Hourly Burden
Estimate
Industry-Wide
Small
Business
Entities
Affected
a.
Rule 400: Registration of
Funding Portals
i.
Form Funding Portal:
Application for Funding Portal
Registration
Reporting
150
1
-
-
-
-
90.0
ii.
Registered National Securities
Association Membership
Third-Party
Disclosure
150
1
-
-
-
-
90.0
iii.
Form Funding Portal/A:
Amendment to Registration
Reporting
150
3.2
-
-
-
-
90.0
iv.
Form Funding Portal-W: Notice
of Withdrawal from
Registration as a Funding Portal
Reporting
15
1
-
-
-
-
9.0
v.
Form Funding Portal:
Designation of U.S. Agent for
Service of Process and Opinion
of Counsel for Nonresident
Reporting
6
1
$8,393.00
-
$8,393.00
$50,358.00
3.6
b.
Rule 404: Books and Records
to Be Made and Maintained by
Funding Portals
Recordkeeping
150
1
$1,783.33
$1,783.33
$3,566.67
$535,000.00
90.0
c.
Rule 403: Compliance Policies
and Procedures
Recordkeeping
150
1
-
-
-
-
90.0
d.
Rule 403: Compliance Privacy
i.
Regulation S-P
Third-Party
Disclosure
150
1
-
-
-
-
90.0
ii.
Regulation S-AM
Third-Party
Disclosure
60
1
-
-
-
-
36.0
iii.
Regulation S-ID
Recordkeeping
150
1
-
-
-
-
90.0
$585,358.00
14.
Costs to Federal Government
There will be no additional costs to the Federal Government.
15.
Reason for Change
Not applicable. Rules 400 to 404 are new rules.
16.
Information Collection Planned for Statistical Purposes
Not applicable. The information collection is not used for statistical purposes.
17.
Display of OMB Approval Date
We request authorization to omit the expiration date on the electronic version of the form,
although the OMB control number will be displayed. Including the expiration date on the
23
electronic version of this 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.
18.
Exceptions to Certification for Paperwork Reduction Act Submissions
This collection complies with the requirements in 5 CFR 1320.9.
B.
COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods.
24
| File Type | application/pdf |
| File Modified | 2015-11-18 |
| File Created | 2015-11-18 |