Form NSAR SUPPORTING STATEMENT 2

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

JUSTIFICATION
1.

Necessity for the Information Collection

All registered investment companies with the exception of face amount certificate
companies are required to file periodic reports with the Commission under the Investment
Company Act of 1940 (“Investment Company Act”) (15 U.S.C. 80a-1 et seq.). Section
30(a) of the Investment Company Act (15 U.S.C. 80a-29(a)) provides that each registered
investment company must file annually with the Commission such information,
documents and reports as investment companies having securities registered on a national
securities exchange are required to file annually under the Securities Exchange Act of
1934 (“Exchange Act”) (15 U.S.C. 78a et seq.). In addition, Section 30(b) of the
Investment Company Act (15 U.S.C. 80a-29(b)) requires each registered investment
company to file, among other things, “such information, documents, and reports (other
than financial statements), as the Commission may require to keep reasonably current the
information and documents contained in the registration statement of such company….”
Registered unit investment trusts (“UITs”) are required to provide this information on an
annual report filed with the Commission on Form N-SAR (OMB Control No. 3235-0330,
17 CFR 249.330) pursuant to rule 30a-1 under the Investment Company Act (17 CFR
30a-1), and registered management investment companies must submit the required

information on a semi-annual report filed on Form N-SAR pursuant to rule 30b1-1 under
the Investment Company Act (17 CFR 270.30b1-1). 1
2.

Purpose of the Information Collection

The purpose of Form N-SAR is to satisfy the filing and disclosure requirements of
Section 30 of the Investment Company Act, and of rules 30a-1 and 30b1-1 thereunder.
The information required to be filed with the Commission assures the public availability
of the information and permits verification of compliance with Investment Company Act
requirements.
3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis
and Retrieval or “EDGAR”) is designed to automate the filing, processing and
dissemination of full disclosure filings. The system permits publicly held companies to
transmit filings to the Commission electronically. This automation has increased the
speed, accuracy and availability of information, generating benefits to investors and
financial markets. Reports on Form N-SAR are required to be filed with the Commission
electronically on EDGAR. The public may access filings on EDGAR through the
Commission’s Internet Web site (http://www.sec.gov) or at EDGAR terminals located at
the Commission’s public reference rooms.
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 on Form N-SAR either is not duplicated elsewhere at
1

Face amount certificate companies are required to file periodic reports pursuant to
Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m, 78o(d)).

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all or is not duplicated in a format that permits the electronic analysis of the data in a
single filing or in comparison over time or among similar investment companies. Any
information solicited by Form N-SAR that may be duplicated in other documents filed
with the Commission is in narrative format so that it can be read and understood by
investors. The Commission is not able to analyze narrative information electronically on
a regular basis, using database or spreadsheet applications.
5.

Effect on Small Entities

Form N-SAR must be filed by all registered investment companies other than face
amount certificate companies, regardless of size. The burden on smaller funds, however,
to prepare reports on Form N-SAR may be greater than for larger funds. The
Commission believes, however, that imposing different requirements on smaller
investment companies would not be consistent with investor protection and the purposes
of Section 30 of the Investment Company Act.
The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, to identify methods to minimize recordkeeping or reporting requirements
affecting small businesses.
6.

Consequences of Not Conducting Collection

The Commission requires the filing of Form N-SAR semi-annually, rather than
annually, for all registered investment companies other than UITs so that it will have
current information available for use in performing inspections, selectively reviewing
registration documents, and conducting studies and other types of analyses necessary to
keep the Commission’s regulatory program for investment companies current with
industry conditions. The Commission also needs current information about UITs for its
regulatory program; however, the Commission requires the filing of Form N-SAR
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annually, rather than semi-annually, for UITs because the portfolios of these trusts rarely
change so the information in Form N-SAR does not often change. Less frequent
collection would mean that current information may not be available to investors and
may potentially decrease investor confidence in the full and fair disclosure system that is
the hallmark of the U.S. capital markets.
7.

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

Not applicable.
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 and through public conferences, meetings, and informal exchanges. These
various forums provide the Commission and the staff with a means of ascertaining and
acting upon paperwork burdens confronting the industry. The Commission requested
public comment on the collection of information requirements in Form N-SAR 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

Not applicable.
10.

Confidentiality

Not applicable.

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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)

https://www.sec.gov/about/privacy/sorn/secsorn6.pdf

12.

Burden of Information Collection
The Commission estimates that registered management investment companies,

including open-end and closed-end companies, small business investment companies, and
managed separate accounts currently spend as much as 15.35 hours preparing and filing
the form. The Commission further estimates that UITs, including separate account UITs,
spend as much as 7.11 hours preparing and filing Form N-SAR, since a UIT is required to
answer fewer items. The total number of respondents to Form N-SAR is 3,168 and the
number of responses annually is 5,564. 2 The Commission has estimated that the
weighted average annual hour burden per response for Form N-SAR is 14.21 hours, 3 and

2

(2,396 management investment company respondents x 2 responses per year) + (772 UIT
respondents x 1 response per year) = 5,564 responses.

3

((2,396 X 2 X 15.35 hours) + (772 X 1 X 7.11)) / 5,564 = 14.21 hours.

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the total annual hour burden for all respondents would be approximately 79,064 hours. 4
The Commission estimates that the appropriate compensation rate for professionals
commonly used in the preparation of Form N-SAR filings is $318.50 per hour. Based on
this estimate, the total annual cost to the industry of the hour burden is approximately
$25,181,884 for all filers of Form N-SAR. 5
The current approved total annual hour burden for completing Form N-SAR is
82,223 hours. The decrease in estimated annual burden hours for all respondents from
82,223 hours to 79,064 hours is based on the decrease in the annual number of
respondents from 3,270 to 3,168. This represents a decrease of 3,159 hours for all
respondents.
13.

Cost to Respondents

The Commission estimates that there are no external costs associated with
preparation of reports on Form N-SAR.
14.

Cost to the Federal Government

The annual cost of reviewing and processing new registration statements,
post-effective amendments, proxy statements, and shareholder reports of investment
companies amounted to approximately $19.2 million in fiscal year 2014, based on the

4

5,564 responses X 14.21 hours = 79,064 hours.

5

This figure is estimated by multiplying the total annual hour burden (79,064 hours) by the
estimated hourly wage rate of $318.50. The estimated wage figure is based on published
rates for compliance attorneys and senior programmers, modified to account for an 1800hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, yielding effective hourly rates of $334 and $303, respectively.
See Securities Industry Association, Report on Management & Professional Earnings in
the Securities Industry 2013. The estimated wage rate is further based on the estimate
that compliance attorneys and senior programmers would divide time equally, resulting in
a weighted wage rate of $318.50 (($334.00 x .50) + ($303 x .50)).

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

Change in Burden

As noted in section 12 above, the new estimated annual hour burden for Form
N-SAR represents a decrease of 3,159 hours per year. This decrease is due to the
decrease in the estimated number of respondents submitting Form N-SAR per year from
3,270 to 3,168.
16.

Information Collection Planned For Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of
the form. Including the expiration date on the electronic version of the form will
result in increased costs, because the need to make changes to the form may not
follow the application’s scheduled version release dates. The OMB control
number will be displayed.

18.

Exceptions to Certification Statement

Not applicable.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS

Not applicable.

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