SRC Definition PRA Supporting Statement.02-16-2018

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR PROPOSED AMENDMENTS
TO SMALLER REPORTING COMPANY DEFINITION
A.
1.

JUSTIFICATION CIRCUMSTANCES MAKING THE COLLECTION
OF INFORMATION NECESSARY

The Securities Act of 1933,1 as amended (the “Securities Act”), generally requires
that a registration statement be filed with the Securities and Exchange Commission (the
“Commission”) disclosing prescribed information before securities may be offered for sale to
the public. In addition, the Securities Exchange Act of 1934,2 as amended (the “Exchange
Act”), empowers the Commission to require periodic reporting of information by certain
companies. These disclosure requirements are contained in Regulation S-K3 and Regulation
S-X4 and are imposed through Commission forms and schedules that are subject to the
requirements in those regulations.
The Commission’s disclosure system provides accommodations in the form of scaled
disclosure requirements for certain categories of smaller registrants, including those
qualifying as “smaller reporting companies,” as defined in Securities Act Rule 405,5
Exchange Act Rule 12b-2,6 and Item 10(f) of Regulation S-K.7 Substantively, the three
definitions are identical. Smaller reporting companies generally are registrants with:
•
•

less than $75 million in public float as of the last business day of their most
recently completed second fiscal quarter; or
zero public float and annual revenues of less than $50 million during the most
recently completed fiscal year for which audited financial statements are
available.

In Release No. 33-10107, the Commission proposed amendments to the definition of
“smaller reporting company” to expand the number of registrants that would qualify as
smaller reporting companies and would be eligible to rely on the scaled disclosure
requirements. Under the proposed amendments, registrants with less than $250 million in
public float would qualify, as would registrants with zero public float if their revenues were
below $100 million in the previous year.

1

15 USC 77a et seq.

2

15 USC 78a et seq.

3

17 CFR 229.10 et seq.

4

17 CFR 210.1-01 et seq.

5

17 CFR 230.405.

6

17 CFR 240.12b-2.

7

17 CFR 229.10(f).

1

The proposed amendments contain “collection of information” requirements within
the meaning of the Paperwork Reduction Act of 1995.8 The titles of the collections of
information are:
(1)

“Regulation S-K” (OMB Control No. 3235-0071);

(2)

“Regulation C” (OMB Control No. 3235-0074);

(3)

“Regulation 12B” (OMB Control No. 3235-0062);

(4)

“Form 10-K” (OMB Control No. 3235-0063);

(5)

“Form 10-Q” (OMB Control No. 3235-0070);

(6)

“Schedule 14A” (OMB Control No. 3235-0059);

(7)

“Schedule 14C” (OMB Control No. 3235-0057);

(8)

“Form 10” (OMB Control No. 3235-0064);

(9)

“Form S-1” (OMB Control No. 3235-0065);

(10)

“Form S-3” (OMB Control No. 3235-0073);

(11)

“Form S-4” (OMB Control No. 3235-0324); and

(12)

“Form S-11” (OMB Control No. 3235-0067).

2.

PURPOSE AND USE OF THE INFORMATION COLLECTION

The purpose of the new collection of information is to make scaled disclosure
accommodations available to a larger number of registrants in order to promote capital
formation and reduce compliance costs for smaller registrants while maintaining investor
protections. The proposed amendments should decrease the disclosure requirements for
some registrants with a calculable public float of less than $250 million or zero public float,
but less than $100 million in revenues.
3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

Reports on Form 10-K and Form 10-Q, proxy statements on Schedule 14A,
information statements on Schedule 14C, and registration statements on Form 10, Form S-1,
Form S-3, Form S-4, and Form S-11, subject to temporary and continuing hardship
exemptions available under Regulation S-T,9 are required to be filed electronically with the
Commission using the Commission’s Electronic Data Gathering, Analysis and Retrieval
(“EDGAR”) system.
8
9

44 USC 3501 et seq.
17 CFR 223.201 and 223.202.

2

4.

DUPLICATION OF INFORMATION

The Commission makes every effort to coordinate with other regulatory entities when
necessary or appropriate in the public’s interest and for the protection of investors and to
streamline regulations to enhance the production of capital. We are not aware of any forms
or rules that conflict with or substantially duplicate the requirements of Form 10-K, Form 10Q, Schedule 14A, Schedule 14C, Form 10, Form S-1, Form S-3, Form S-4, or Form S-11.
5.

REDUCING THE BURDEN ON SMALL ENTITIES

The proposed amendments would amend the definition of smaller reporting company
to capture a greater number of registrants. We estimate that some issuers that would newly
qualify as smaller reporting companies under the proposed definition would be classified as a
“small business” or “small organization” under 17 CFR 230.157. The proposed amendments
may decrease existing collection of information total burden estimates, or not affect them at
all, for some reports on Form 10-K and Form 10-Q, some proxy statements on Schedule 14A,
some information statements on Schedule 14C, and some registration statements on Form 10,
Form S-1, Form S-3, Form S-4, and Form S-11, filed by small businesses or small
organizations that meet the definition of smaller reporting company as we propose to revise
it.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The regulations and forms set forth the disclosure requirements for registration
periodic and current reports filed by companies to help investors make informed investment.
Not conducting this collection would deprive investors of access to information that is
important to their voting and investment decisions.
7.

SPECIAL CIRCUMSTANCES

Not applicable.
8.

CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY

The Commission has issued a proposing release soliciting comment on the new
“collection of information” requirements and the associated paperwork burdens. A copy of
the proposing release is attached. In response to the solicitation for comment in the
proposing release, registrants, investors, and other market participants provide comments. In
addition, the Commission and staff participate in ongoing dialogue with representatives of
various market participants through public conferences, roundtables and meetings. All
comments received on the proposal are available at https://www.sec.gov/comments/s7-1216/s71216.htm. The Commission will consider all comments received prior to publishing the
final rules as required by 5 CFR 1320.11(f).

3

9.

PAYMENT OR GIFT TO RESPONDENTS

Not applicable.
10.

CONFIDENTIALITY

The proposed rules do not prevent requests for confidential treatment from being
made under the Commission’s existing rules. Otherwise, the collections of information are
public documents.
11.

SENSITIVE QUESTIONS

No information of a sensitive nature would be required under the following
collections of information in connection with these rulemaking amendments: Regulation S-T,
Regulation C and Regulation 12B. The information collection does not collect personally
identifiable information (PII). The agency has determined that a system of records notice
(SORN) and privacy impact assessment (PIA) are not required in connection with the
collection of information.
No information of a sensitive nature would be required under the following
collections of information in connection with these rulemaking amendments: Regulation
14A; Schedule 14A, Regulation 14C, Schedule 14C, Form S-1, Form S-3, Form S-4,
Form S-11, Form 10, Form 10-Q, and Form 10-K. The information collection collects basic
Personally Identifiable Information (PII) that may include a name and job title. 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 EDGAR PIA, published on January 29, 2016, is provided as a
supplemental document and is also available at https://www.sec.gov/privacy.
12. AND 13. ESTIMATES OF HOUR AND COST BURDENS
The estimated burden hours and cost burden are made solely for the purposes of the
Paperwork Reduction Act and represent the average burden for all issuers. The cost burden
is not derived from a comprehensive or even a representative survey of the costs of
Commission rules and forms. The estimates include burden estimates for smaller reporting
companies. In addition, for quarterly and annual reports and for proxy and information
statements, we estimate that 75% of the burden of preparation is carried by the registrant
internally and that 25% of the burden is carried by outside professionals retained by the
registrant at an average cost of $400 per hour. For registration statements, we estimate that
25% of the burden of preparation is carried by the registrant internally and that 75% of the
burden is carried by outside professionals retained by the registrant at an average cost of
$400 per hour. In addition, the paperwork burden from Regulation S-K, Regulation C and
Regulation 12B is imposed through the forms that are subject to the requirements in those
regulations and is reflected in the analysis of those forms. To avoid a PRA inventory

4

reflecting duplicative burdens and for administrative convenience each regulation is assigned
one administrative hour.
For purposes of the Paperwork Reduction Act, it is estimated that if the proposed
amendments were adopted, the total decrease in burden hours for Form 10-K, Form 10-Q,
Schedule 14A, Schedule 14C, Form 10, Form S-1, Form S-3. Form S-4, and Form S-11
would be approximately 220,358 burden hours, and the total decrease in external costs would
be approximately $35,691,649. We estimate that over a three-year period, the annual
aggregate decreased burden resulting from the proposed amendments would average:


142,068 hours and $18,943,168 of external costs for Form 10-K;



71,937 hours and $9,594,201of external costs for Form 10-Q;



432 hours and $57,600 of external costs for Schedule 14A;



7 hours and $880 of external costs for Schedule 14C;



9 hours and $11,100 of external costs for Form 10;



3,477 hours and $4,172,314 of external costs for Form S-1;



37 hours and $43,920 of external costs for Form S-3;



2,140 hours and $2,567,578 of external costs for Form S-4; and



251 hours and $300,888 of external costs for Form S-11.

Form 10-K
We estimate that approximately 782 registrants would become newly eligible to use
scaled disclosure for smaller reporting companies or have a new opportunity to assess
whether to avail themselves of scaled disclosure for their annual reports and could experience
burden and cost savings if these proposed amendments are adopted. We estimate that if these
registrants use all of the scaled disclosure requirements, they would save 177,584 burden
hours and an aggregate cost of $23,678,960. However, we assume that a portion of these
newly eligible smaller reporting companies either (1) would not elect to rely on all of the
available scaled disclosure accommodations or (2) would already qualify as emerging growth
companies, which are eligible to rely on certain scaled disclosure requirements for a limited
period, including some of the scaled requirements available to smaller reporting companies.
Accordingly, we estimate that approximately 80% of these savings would be realized. As a
result, we estimate that the aggregate decrease in burden for Form 10-K would be 142,068
internal burden hours (80% x 227.09 internal hours saved per response x 782 responses) and
costs of $18,943,168 (80% x 75.70 professional hours saved per response x $400 per hour x
782 responses).

5

Form 10-Q
We assume that the same approximately 782 registrants would become newly eligible
to use scaled disclosure for purposes of their quarterly reports. We estimate that if these
registrants use all of the scaled smaller reporting company requirements, they would save
29,974 burden hours and an aggregate cost of $3,997,584. Assuming that newly eligible
registrants realize approximately 80% of these savings, we estimate that the aggregate
decrease in burden for Form 10-Q would be 23,979 internal burden hours per quarter (80% x
38.33 internal hours saved per response x 782 responses) and costs of $3,198,067 per quarter
(80% x 12.78 professional hours saved per response x $400 per hour x 782 responses).
Schedule 14A
We estimate that registrants newly eligible to use scaled disclosure would file
approximately 720 definitive proxy statements on Schedule 14A. We estimate that if these
registrants use all of the scaled smaller reporting company requirements, they would save
540 burden hours and an aggregate cost of $72,000. Assuming that newly eligible registrants
realize approximately 80% of these savings, we estimate that the aggregate decrease in
burden for Schedule 14A would be 432 internal burden hours (80% x 0.75 internal hours
saved per response x 720 responses) and costs of $57,600 (80% x 0.25 professional hours
saved per response x $400 per hour x 720 responses).
Schedule 14C
We estimate that registrants newly eligible to use scaled disclosure would file
approximately 11 definitive information statements on Schedule 14C. We estimate that if
these registrants use all of the scaled smaller reporting company requirements, they would
save eight burden hours and an aggregate cost of $1,100. Assuming that newly eligible
registrants realize approximately 80% of these savings, we estimate that the aggregate
decrease in burden for Schedule 14C would be seven internal burden hours (80% x 0.75
internal hours saved per response x 11 responses) and costs of $880 (80% x 0.25 professional
hours saved per response x $400 per hour x 11 responses)
Form 10
We estimate that registrants newly eligible to use scaled disclosure would file one
registration statement on Form 10. We estimate that if this registrant uses all of the scaled
smaller reporting company requirements, it would save nine burden hours and an aggregate
cost of $11,100 (27.75 professional hours x $400 per hour). Due to the low number of Form
10 filers, the reduced number of scaled disclosure accommodations available to emerging
growth companies for purposes of Form 10, and rounding considerations, we assume that any
newly eligible registrant would realize the full extent of these savings.

6

Form S-1
We estimate that registrants newly eligible to use scaled disclosure would file
approximately 52 registration statements on Form S-1. We estimate that if these registrants
use all of the scaled smaller reporting company requirements, they would save 4,346 burden
hours and an aggregate cost of $5,215,392. Assuming that newly eligible registrants realize
approximately 80% of these savings, we estimate that the aggregate decrease in burden for
Form S-1 would be 3,477 internal burden hours (80% x 83.58 internal hours saved x 52
filings) and costs of $4,172,314 (80% x 250.74 professional hours saved x $400 per hour x
52 filings).
Form S-3
We estimate that registrants newly eligible to use scaled disclosure would file
approximately 183 registration statements on Form S-3. We estimate that if these registrants
use all of the scaled smaller reporting company requirements, they would save 46 burden
hours and an aggregate cost of $54,900. Assuming that newly eligible registrants realize
approximately 80% of these savings, we estimate that the aggregate decrease in burden for
Form S-3 would be 37 internal burden hours (80% x 0.25 internal hours saved x 183 filings)
and costs of $43,920 (80% x 0.75 professional hours saved x $400 per hour x 183 filings).
Form S-4
We estimate that registrants newly eligible to use scaled disclosure would file
approximately 32 registration statements on Form S-4. We estimate that if these registrants
use all of the scaled smaller reporting company requirements, they would save 2,675 burden
hours and an aggregate cost of $3,209,472. Assuming that newly eligible registrants realize
approximately 80% of these savings, we estimate that the aggregate decrease in burden for
Form S-4 would be 2,140 internal burden hours (80% x 83.58 internal hours saved x 32
filings) and costs of $2,567,578 (80% x 250.74 professional hours saved x $400 per hour x
32 filings).
Form S-11
We estimate that registrants newly eligible to use scaled disclosure would file
approximately three registration statements on Form S-11. We estimate that if these
registrants use all of the scaled smaller reporting company requirements, they would save
251 burden hours (83.58 internal hours saved x 3 filings) and an aggregate cost of $300,888
(250.74 professional hours saved x $400 per hour x 3 filings). Due to the low number of
Form S-11 filers and rounding considerations, we assume that the newly eligible registrants
would realize the full extent of these savings.
Table 1 illustrates the current and proposed burdens under the proposed amendments
for each report or statement affected:

7

Table 1. Decrease in Paperwork Burden under the proposed amendments for annual
reports; quarterly reports; and current reports
Current
Burden
Hours
(A)
Form 10-K
Form 10-Q
Schedule 14A
Schedule 14C
Form 10
Form S-1
Form S-3
Form S-4
Form S-11

14.

14,596,183
3,220,037
546,814
55,881
11,621
150,242
127,806
564,731
12,465

Decrease in
Burden
Hours
(B)
142,068
71,937
432
7
9
3,477
37
2,140
251

Proposed
Burden
Hours
(C)=(A)-(B)
14,454,115
3,148,100
546,382
55,874
11,612
146,765
127,769
562,591
12,214

Current
Professional
Costs
(D)
($)
$1,946,859,390
$429,368,808
$72,908,472
$7,451,624
$13,945,651
$180,290,100
$153,367,008
$677,677,104
$14,957,568

Decrease in
Professional
Costs
(E)
($)
18,943,168
9,594,201
57,600
880
11,100
4,172,314
43,920
2,567,578
300,888

Proposed
Professional
Costs
(F)=(D)-(E)
($)
$1,927,916,222
$419,774,607
$72,850,872
$7,450,744
$13,934,551
$176,117,786
$153,323,088
$675,109,526
$14,656,680

COSTS TO FEDERAL GOVERNMENT

We estimate the cost of preparing the amendments will be approximately $150,000.
15.

REASON FOR CHANGE IN BURDEN

Tables 2A and 2B below illustrate the changes to the total annual compliance burden
of the collection of information in hours and cost per response, respectively. The total
estimated burdens were calculated by deducting the incremental burden savings from the
existing burdens. Then, the requested burdens and costs per response were calculated by
dividing the requested burden estimates by the number of annual responses, which is not
expected to change as a result of the proposed amendments.
Table 2A. Calculation of Burden Hours per Response
Annual
Responses
(A)

Form 10-K
Form 10-Q
Schedule 14A
Schedule 14C
Form 10
Form S-1
Form S-3
Form S-4
Form S-11

8,137
22,907
5,586
569
216
901
1,082
551
64

Current
Burden
Hours per
Response
(B)
1,793.804
140.57
97.89
98.21
53.80
166.75
472.48
1,024.92
194.765

Current
Burden
Hours
(C)=(A)*(B)

14,596,183
3,220,037
546,814
55,881
11,621
150,242
511,224
564,731
12,465

8

Decrease in
Burden
Hours
(D)

142,068
71,937
432
7
9
3,477
37
2,140
251

Proposed
Burden
Hours
(E)=(C)-(D)

14,454,115
3,148,100
546,382
55,874
11,612
146,765
511,077
562,591
12,214

Proposed
Burden Hours
per Response
(F)=(E)/(A)

1,776.3445
137.4296
97.8127
98.197
53.76
162.8912
472.34
1,021.036
190.84

Table 2B. Calculation of Costs per Response
Annual
Responses
(A)

Form 10-K
Form 10-Q
Schedule 14A
Schedule 14C
Form 10
Form S-1
Form S-3
Form S-4
Form S-11

16.

8,137
22,907
5,586
569
216
901
1,082
551
64

Current Cost
per Response
(B)
($)

Current Cost
(C)=(A)*(B)
($)

200,500.1843
18,744
13,052
13,096
64,563
200,100
141,744
1,229,904
233,712

1,946,859,390
429,368,808
72,908,472
7,451,624
13,945,651
180,290,100
153,367,008
761,310,576
14,957,568

Decrease in
Cost
(D)
($)

Proposed
Cost (E)=(C)(D)
($)

Proposed Cost
per Response
(F)=(E)/(A)
($)

18,943,168
9,594,201
57,600
880
11,100
4,172,314
43,920
2,567,578
300,888

1,927,916,222
419,774,607
72,850,872
7,450,744
13,934,551
176,117,786
153,323,088
758,742,998
14,656,680

236,932.0661
18,325.1673
13,042
13,094
64,511.81
195,469.240
141,703
1,225,756.055
229,010.62

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 EDGAR
application’s scheduled version release dates. The OMB control number will be displayed.
18.

EXCEPTIONS TO CERTIFICATION FOR PAPERWORK
REDUCTION ACT SUBMISSIONS

Not applicable.
B.

STATISTICAL METHODS
Not applicable.

9