2017 ADV-NR Supporting Statement

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 0-2 and Form ADV-NR
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Rule 0-2 under the Investment Advisers Act of 1940 (“Advisers Act”) establishes
procedures by which a person may serve process, pleadings, or other papers on a non-resident
investment adviser, or on a non-resident general partner or non-resident managing agent of an
investment adviser (17 CFR 275.0-2). Under Rule 0-2, persons who wish to serve the abovereferenced parties may do so by furnishing the Securities and Exchange Commission
(“Commission” or “SEC”) with one copy of the papers that are to be served along with one copy
for each named party. The Secretary of the Commission (“Secretary”) will promptly forward a
copy to each named party by registered or certified mail. If the Secretary certifies that the rule
was followed, the certification constitutes evidence of service of process under rule 0-2. Form
ADV-NR is required to be submitted by an investment adviser's non-resident general partners
and non-resident managing agents in connection with the adviser’s initial Form ADV submission
or within 30 days of becoming non-resident after the investment adviser submits its initial Form
ADV (17 CFR 279.4).
The title of this collection of information is Rule 0-2 and Form ADV-NR under the
Investment Advisers Act of 1940. Rule 0-2 and Form ADV-NR contain “collection of
information” requirements within the meaning of the Paperwork Reduction Act of 1995. 1 This
collection of information has been previously approved and subsequently extended by the Office
of Management and Budget (“OMB”) under control number 3235-0240. The likely respondents

1

44 U.S.C. 3501 to 3520.

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to this information collection would be each non-resident general partner or managing agent of
an SEC-registered adviser and each non-resident general partner or managing agent of an exempt
reporting adviser. This collection of information is found at 17 CFR 275.0-2 and 17 CFR 279.4
and it is mandatory. Responses are not kept confidential. The collection of information is
necessary for us to obtain appropriate consent to permit the Commission and other parties to
bring actions against non-resident partners or agents for violations of the federal securities laws.
2.

Purpose and Use of the Information Collection

Rule 0-2 and Form ADV-NR facilitate service of process to non-resident investment
advisers and exempt reporting advisers and their non-resident general partners or non-resident
managing agents. The Form requires these persons to designate the Commission as agent for
service of process. The collection of information is necessary for us to obtain appropriate
consent to permit the Commission and other parties to bring actions against non-resident partners
and agents for violations of the federal securities laws and to enable the commencement of legal
and/or regulatory actions against investment advisers that are doing business in the United States,
but are not residents.. Respondents include non-resident general partners and managing agents
of registered advisers and non-resident general partners and managing agents of exempt
reporting advisers. 2
3.

Consideration Given to Information Technology

Currently, all SEC-registered investment advisers are required to file Part 1 of Form ADV

2

The Commission adopted amendments to Form ADV-NR on June 22, 2011. The amendments to
Form ADV-NR reflect that, under separate rules, certain advisers exempt from registration with
the Commission are required to file reports on Form ADV and must use Form ADV-NR in the
same way and for the same purpose as it is currently used by registered investment advisers.

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electronically through the IARD. 3 The IARD is an Internet-based system that investment advisers
access through computers in their offices, without the need for specialized software or hardware.
Exempt reporting advisers also are required to file reports on Form ADV and to submit these reports
through the IARD. The information investment advisers submit to the IARD is stored in a
database, and the general public has Internet-access to the data. The IARD also permits investment
advisers to meet Commission and state notice filing requirements electronically.
A majority of non-resident investment advisers and non-resident exempt reporting advisers
file a consent to service of process electronically on IARD. 4 However, non-resident general
partners and non-resident managing agents are required to file a hardcopy of Form ADV-NR with
the Commission. Accordingly, the Commission’s use of computer technology will have little effect
on Form ADV-NR.
4.

Duplication

The collection of information requirements of the form are not duplicated elsewhere.
5.

Effect on Small Entities

All advisers registered with the Commission, regardless of their size, are equally subject
to the collection requirements of Rule 0-2 and Form ADV-NR. In addition, all exempt reporting
advisers are equally subject to the collection requirements of Rule 0-2 and Form ADV-NR. It
would defeat the purpose of the rule to exempt small entities from these requirements. Investment
3

Electronic Filing by Investment Advisers; Amendments to Form ADV, Investment Advisers Act
Release No. 1897 (Sept. 12, 2000) [65 FR 57438 (Sept. 22, 2000)]. Part 2 of Form ADV, and
related rules under the Advisers Act, require a registered investment adviser to provide new and
prospective clients with a brochure and to file the brochure with the Commission electronically.
See Amendments to Form ADV, Investment Advisers Act Release No. 3060 (July 28, 2010) [75
FR 49234 (Aug. 12, 2010)].

4

For most non-resident investment advisers, the consent to service of process is furnished by
signing the non-resident investment adviser execution page of Form ADV.

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advisers that manage less than $100 million in regulatory assets under management generally are
prohibited from registering with the Commission and register with state securities regulators.
6.

Consequences of Not Conducting Collection

If we did not require a non-resident general partner or non-resident managing agent to file
Form ADV-NR, which appoints the Commission as agent for service, it would be much more
difficult for both advisory clients and financial service regulators to effectively bring a lawsuit
against a non-resident investment adviser.
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 continue to
participate in an ongoing dialogue with representatives of the investment adviser 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
facing the industry.
The Commission requested public comment on the collection of information
requirements in Form ADV-NR 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

None.
10.

Confidentiality

The information collected pursuant to the rule and Form ADV-NR are filings with the

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Commission. These disclosures are not kept confidential.
11.

Sensitive Questions

Form ADV-NR collects information about the investment adviser’s name, SEC file
number, CRD number (if applicable), and the mailing address of the non-resident general partner
or non-resident managing agent of the investment adviser. Form ADV-NR does not collect
Social Security Numbers. A System of Records Notice has been published in the Federal
Register at (SEC-50) 66 FR 7820 and can also be found at
http://www.sec.gov/about/privacy/secprivacyoffice.htm.
a.

No information of a sensitive nature will be required under this collection of

information.
b.

The information collection collects basic Personally Identifiable Information (PII)

that may include the investment adviser’s name, SEC file number, CRD number (if applicable),
and the mailing address of the non-resident general partner or non-resident managing agent of
the investment adviser. The agency has determined that the information collection constitutes a
system of record for purposes of the Privacy Act and is covered under System of Records Notice
(SORN) SEC-50 "Investment Adviser Records". The SEC-50 SORN is provided as a
supplemental document and is also available at https://www.sec.gov/privacy. A Privacy Act
Statement is applicable for the information collection and is available on the web form.
c.

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 EDGAR PIA, published on January 29, 2016, is provided as a
supplemental document and is also available at https://www.sec.gov/privacy.

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12.

Burden of Information Collection

Non-resident general partners and non-resident managing agents of SEC-registered
investment advisers are required to make a one-time filing of Form ADV-NR. In addition, nonresident general partners and non-resident managing agents of exempt reporting advisers are also
required to make a one-time filing of Form ADV-NR. The currently approved collection of
information burden in Form ADV-NR is 20 hours, which is based upon an estimate of 47 annual
responses at 1 hour per response. During 2016, a total of 36 registered investment advisers and
exempt reporting advisers filed reports with the Commission that included a Form ADV-NR.
We continue to estimate that ADV-NR requires an average of one hour to complete.
Accordingly, we estimate that, based on the change in the estimate of number of filers of Form
ADV-NR, the annual aggregate information collection burden for Form ADV-NR will be 36
hours, a decrease of 11 hours over the currently approved burden of 47 hours.
An adviser would likely use a combination of compliance clerks and clerical staff to
complete Form ADV-NR and file it with the Commission. The Commission staff estimates the
hourly wage for compliance clerks to be $66 per hour, including benefits, 5 and the hourly wage
for general clerks to be $59 per hour, including benefits. 6 For each burden hour, compliance
clerks would perform an estimated 0.75 hours, and general clerks also would perform an

5

Data from the SIFMA Office Salaries in the Securities Industry 2013 report, modified by
Commission staff to account for an 1,800-hour work-year and inflation, and multiplied by 2.93 to
account for bonuses, firm size, employee benefits and overhead, suggest that the cost for a
General Clerk is approximately $66 per hour.

6

Data from the SIFMA Office Salaries in the Securities Industry 2013 report, modified by
Commission staff to account for an 1,800-hour work-year and inflation, and multiplied by 2.93 to
account for bonuses, firm size, employee benefits and overhead, suggest that the cost for a

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estimated 0.25 hours. The total cost per response therefore would be an estimated $64.25, 7 for a
total burden cost of $2,313. 8
These estimates of average burden hours and average costs of those average burden hours
are made solely for the purposes of the Paperwork Reduction Act and are not derived from a
comprehensive or representative survey or study, or the cost of Commission rules and forms.
13.

Cost to Respondents

There is no cost burden other than the cost of the hour burden described above.
14.

Cost to the Federal Government

There are no additional costs to the federal government.
15.

Change in Burden

As discussed in Item 12 above, based on an analysis of Form ADV-NR filings during
2016, we estimate that Form ADV-NR will receive 36 annual responses. This will result in a
decrease in the total burden hours for all respondents from an estimated 47 hours per year to an
estimated 36 hours per year.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date.

General Clerk is approximately $59 per hour.
7

(0.75 hours per compliance clerk x $66) + (0.25 hours per general clerk x $59) = = $64.25.

8

$64.25 per adviser x 36 advisers = $2,313.

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18.

Exceptions to Certification Statement for Paperwork Reduction Act Submission
Not applicable.

B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.