Form N-CR Supporting Statement (2017)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for

Rule 30b1-8 and Form N-CR
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 30(b) of the Investment Company Act of 1940 [15 U.S.C. 80a-30(b)] (“Act”)
provides that “[e]very registered investment company shall file with the Commission…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…” Rule 30b1-8 under the Act [17 CFR 270.30b1-8], entitled
“Current Report for Money Market Funds,” provides that every registered open-end management
investment company, or series thereof, that is regulated as a money market fund under rule 2a-7
[17 CFR 270.2a-7], that experiences any of the events specified on Form N-CR [17 CFR
274.222], must file with the Commission a current report on Form N-CR within the time period
specified in that form. Similar to Form 8-K under the Securities Exchange Act of 1934 [17 CFR
249.308], Form N-CR requires disclosure of certain specific reportable events.
Specifically, a money market fund is required to file Form N-CR if a portfolio security
defaults, an affiliate provides financial support to the fund, the fund experiences a significant
decline in its shadow price, or when liquidity fees or redemption gates are imposed and when
they are lifted. In most cases, a money market fund is required to submit a brief summary filing
on Form N-CR within one business day of the occurrence of the event, and a follow up filing
within four business days that includes a more complete description and information.
Compliance with rule 30b1-8 is mandatory for any fund that holds itself out as a money market
fund in reliance on rule 2a-7. Responses to the disclosure requirements will not be kept
confidential.
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2.

Purpose and Use of the Information Collection

The information collection requirements for rule 30b1-8 and Form N-CR are designed to
assist Commission staff in its oversight of money market funds and its ability to respond to
market events. It also provides investors with better and timelier disclosure of potentially
important events. Finally, the Commission is able to use the information provided on Form NCR in its regulatory, disclosure review, inspection, and policymaking roles.
3.

Consideration given to Information Technology

The Commission's electronic filing project (Electronic Data Gathering, Analysis and
Retrieval System, or "EDGAR") is designed to automate the filing, processing and dissemination
of full disclosure filings. EDGAR permits investment companies to transmit their filings to the
Commission electronically. Such automation has increased the speed, accuracy and availability
of information, generating benefits to investors and financial markets. Form N-CR is required to
be filed with the Commission electronically on EDGAR.
4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it adopts changes in its rules. The
requirements of Form N-CR are not generally duplicated elsewhere.
5.

Effect on Small Entities

Pursuant to 5 U.S.C. section 605(b), the Commission does not believe that compliance
with rule 30b1-8 and filing Form N-CR will not have a significant effect on small entities.
6.

Consequences of Not Conducting Collection

Rule 30b1-8 and Form N-CR set forth the disclosure requirements for current reports
filed by money market funds to assist Commission staff in its oversight of money market funds
and provide investors with better and timelier disclosure of potentially important events. Less
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frequent collection would deprive investors of access to information that is important to their
investment decisions.
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 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 requirements in rule
30b1-8 and Form N-CR 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.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be required
under this collection of information. The information collection collects basic Personally
Identifiable Information (PII) that may include names and job titles. However, the agency has
determined that the information collection does not constitute a system of record for purposes of
the Privacy Act. Information is not retrieved by a personal identifier. In accordance with
Section 208 of the E-Government Act of 2002, the agency has conducted a Privacy Impact
Assessment (PIA) of the EDGAR system, in connection with this collection of information. The
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EDGAR PIA, published on 1/29/2016, is provided as a supplemental document and is also
available at https://www.sec.gov/privacy.
12.

Burden of Information Collection

The Commission estimates that it will receive, in the aggregate, an average of 37 reports
per year filed on Form N-CR. 1 Taking into account a blend of legal and financial in-house
professionals, 2 we estimate that a fund will spend, on average, 8.5 burden hours 3 and time costs
of approximately $3,100 4 for one report. The Commission therefore estimates that the total
annual burden for Form N-CR reporting will be 315 burden hours and the total annual time cost
will be $114,700. 5
13.

Cost to Respondents

Cost burden is the cost of services purchased to comply with rule 30b1-8 and Form NCR, such as computer programmers, outside counsel, and third-party service providers. The
Commission estimates that some funds may engage outside legal counsel to complete Form N-

1

The estimated number of reports per year filed on Form N-CR is based on initial and follow-up amendment
filings with the Commission in 2016.

2

Recognizing that, depending on the particular circumstances, different members of a fund’s financial team
may assist with the preparation of Form N-CR in varying degrees, we have estimated the time costs for a
financial professional to be $263 per hour, which is the blended average hourly rate for a senior portfolio
manager ($311), financial reporting manager ($275), and senior accountant ($204). For similar reasons, we
have estimated the time costs for a legal professional to be $455 per hour, which is the blended average
hourly rate for a deputy general counsel ($564) and compliance attorney ($345). Estimated wage figures
are based on published rates taken from SIFMA’s Management & Professional Earnings in the Securities
Industry 2013, available at http://www.sifma.org/research/item.aspx?id=8589940603, modified by
Commission staff to account for an 1800 hour work-year and multiplied by 5.35 to account for bonuses,
firm size, employee benefits, and overhead, and adjusted for inflation.

3

When filing a report, the Commission estimates that a fund will spend on average approximately 4.5 hours
of legal professional time and 4 hours of financial professional time to prepare, review and submit a filing.
The estimates of the average legal professional time above have already been reduced by the corresponding
average amount of time that we estimate will be shifted in the aggregate from in-house counsel to outside
counsel.

4

This estimate is based on the following calculations: (4.5 hours x $455 per hour for a legal professional =
$2,048) + (4 hours x $263 per hour for a financial professional = $1,052) = $3,100.

5

This estimate is based on the following calculation: 37 reports per year x 8.5 burden hours per report = 315
burden hours; 37 reports per year x $3,100 time cost per report = $114,700 in time costs.

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CR. 6 The Commission estimates that funds will incur, on average, external costs of
approximately $840 for one report; 7 therefore the total external costs for Form N-CR reporting
will be $31,080. 8
14.

Cost to the Federal Government

The annual cost of reviewing and processing registration statements, post-effective
amendments, proxy statements, shareholder reports, and other filings of investment companies
amounted to approximately $22.9 million in fiscal year 2016, based on the Commission’s
computation of the value of staff time devoted to this activity and related overhead. A portion of
those costs will relate to processing and reviewing Form N-CR filings submitted to the
Commission for compliance with rule 30b1-8.
15.

Change in Burden

The estimated hourly burden associated with Form N-CR has decreased from 941 hours
to 315 hours (a decrease of 626 hours). The estimated external cost burden associated with Form
N-CR has decreased from $80,780 to $31,080. The decrease in burden hours and external
burden costs for compliance with rule 30b1-8 and Form N-CR is attributable to a decrease in the
estimated number of reports filed on Form N-CR each year.

6

We estimate the cost for outside legal counsel to be $400 per hour. This is based on an estimated $400 per
hour cost for outside legal services, and is the same estimate used by the Commission for these services in
the "Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $150
Million Under Management, and Foreign Private Advisers" final rule: SEC Release No. IA-3222 (June 22,
2011); 76 FR 39646 (July 6, 2011).

7

We estimate that approximately a quarter of the total legal professional time that will otherwise have been
spent on responding to Form N-CR, or 2.1 hours, will be shifted from in-house counsel to outside counsel.
Accordingly, we estimate that funds will incur additional external legal costs of $840 (2.1 hours x $400 per
hour for outside counsel) per report.

8

This estimate is based on the following calculation: 37 reports per year x $840 external cost per report =
$31,080 in external costs.

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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 for Paperwork Reduction Act
Submission

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

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