Supporting Statement (Rule 30e-1)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 30e-1
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 30(e) of the Investment Company Act of 1940 (“Investment Company Act”) 1
requires a registered investment company to transmit to its shareholders, at least semi-annually,
reports containing financial statements and other financial information as the Commission may
prescribe by rules and regulations. 2 In addition, Section 30(f) permits the Commission to require
by rule that semi-annual reports include such other information as the Commission deems
necessary or appropriate in the public interest or for the protection of investors. 3 Rule 30e-1
under the Investment Company Act generally requires a registered management company
(“fund”) to transmit to its shareholders, at least semi-annually, a report containing the
information that is required to be included in such reports by the fund’s registration statement
form under the Investment Company Act. 4 Failure to require the collection of this information
would seriously impede the amount of current information available to shareholders and the
public about funds and would prevent the Commission from implementing the regulatory
program required by statute.

1

15 U.S.C. 80a-1 et seq.

2

15 U.S.C. 80a-29(e).

3

15 U.S.C. 80a-29(f).

4

17 CFR 270.30e-1.

Rule 30e-1 also permits, under certain conditions, delivery of a single shareholder report
to investors who share an address (“householding”). 5 Specifically, rule 30e-1 permits
householding of annual and semi-annual reports by management companies to satisfy the
transmission requirements of rule 30e-1 if, in addition to the other conditions set forth in the rule,
the management company has obtained from each applicable investor written or implied consent
to the householding of shareholder reports at such address. The rule requires management
companies that wish to household shareholder reports with implied consent to send a notice to
each applicable investor stating, among other things, that the investors in the household will
receive one report in the future unless the investors provide contrary instructions. In addition, at
least once a year, management companies relying on the householding provision must explain to
investors who have provided written or implied consent how they can revoke their consent.
On June 5, 2018, the Commission issued a release adopting new rule 30e-3 under the
Investment Company Act and certain amendments to other rules and forms. 6 New rule 30e-3
will provide certain funds and unit investment trusts with an optional method to satisfy
shareholder report transmission requirements by making such reports and certain other materials
publicly accessible on a website, as long as they satisfy certain other conditions of the rule
regarding (a) availability of the report and other materials; (b) notice to investors of the website
availability of the report; and (c) delivery of paper copies of materials upon request. Reliance on
the rule will be voluntary. We expect that rule 30e-3 will have the effect of reducing external

5

See rule 30e-1(f).

6

See Securities Act release no. 10506 (June 5, 2018) [83 FR 29158 (June 22, 2018)].
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cost burden associated with rule 30e-1. 7 Compliance with the disclosure requirements of rule
30e-1 is mandatory. Responses to the disclosure requirements are not kept confidential.
2.

Purpose and Use of the Information Collection

The purpose of the collection of information required by rule 30e-1 is to provide fund
shareholders with current information about the operations of their funds in accordance with
Section 30 of the Investment Company Act.
3.

Consideration Given to Information Technology

Rule 30e-1 requires transmission of reports to shareholders. Shareholder reports have
historically been sent in paper; however, investors may currently consent to the delivery of
electronic versions. Rule 30e-3, which we expect will reduce the external cost burden associated
with rule 30e-1, is intended to modernize and enhance the manner in which shareholder reports
are made available to investors.
4.

Duplication

To ensure the relevance of the information filed by each fund and to avoid unnecessary
paperwork and duplicative reporting, the Commission has promulgated specific rules and
designed specific forms or items of forms for each type of investment company. 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 required by rule 30e-1 is not generally duplicated elsewhere.
5.

Effect on Small Entities

The current disclosure requirements for shareholder reports do not distinguish between
small entities and other funds. The burden on smaller funds may be greater than for larger funds.

7

See rule 30e-3 [to be codified at 17 CFR 270.30e-3].
3

This burden includes the cost of producing, printing, and transmitting the shareholder reports.
The Commission believes, however, that imposing different requirements on smaller investment
companies would not be consistent with investor protection and the purposes of shareholder
reports. 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 frequency with which information in compliance with rule 30e-1 is collected is
semi-annual, as set out in Section 30(e) of the Investment Company Act and rule 30e-1. Less
frequent collection of information would impede the amount of current information provided to
shareholders about their funds.
7.

Inconsistencies With Guidelines in 5 CFR 1320.5(d)(2)

This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

Before adopting rule 30e-3, the Commission received and evaluated public comments on
the proposal and its collection of information requirements. The Commission received comments
on this aspect of the proposal. Although commenters did not opine on the proposed estimate of
the proportion of total external costs associated with rule 30e-1 associated with printing and
mailing expenses, some did provide estimates of the total costs of print and mail delivery that
suggest that our previously estimated proportion of those costs may be been understated, and we
have revised our estimates to yield overall printing and mailing estimates more similar to those
estimated by commenters than did the estimates in the Proposing Release. 8 The Commission and

8

See, e.g., Comment Letter of Investment Company Institute (Aug. 12, 2015).
4

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 staff with a means of
ascertaining and acting upon paperwork burdens confronting the industry.
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 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.
12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 9 and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms. Compliance with the
disclosure requirements of rule 30e-1 is mandatory. Responses to the disclosure requirements
are not kept confidential.

9

44 U.S.C. 3501 et seq.
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We estimate that there are 11,892 funds that are required to comply with rule 30e-1. 10
We estimate that each fund incurs an annual hourly burden of 86.5 hours based on current and
previously adopted requirements. 11 We estimate that the hourly burden associated with rule
30e-1 will not change as a result of rule 30e-3. Thus, in the aggregate, the Commission estimates
that compliance with rule 30e-1 will result in a total annual burden of about 1,028,658 hours. 12
Based on the Commission’s estimate of 1,028,658 hours and an estimated wage rate of about
$284 per hour, 13 the total annual cost to registrants of the hour burden for complying with the
requirements of rule 30e-1 is about $292 million.14
13.

Cost to Respondents

10

There are 9,360 mutual funds, 1,821 exchange-traded funds (1,829 ETFs less 8 unit
investment trust ETFs), and 711 closed-end funds. This estimate is based on data
reported on Form N-SAR filed with the Commission as well as Investment Company
Institute statistics as of December 31, 2017, available at
http://www.ici.org/research/stats. 9,360 mutual funds + 1,821 ETFs + 711 closed-end
funds = 11,892 funds.

11

84 hours per fund per year current burden + 2.5 hours per fund per year for recently
adopted amendments to the requirements of Regulation S-X = 86.5 hours per fund per
year. See Investment Company Reporting Modernization, Investment Company Act
Release No. 32314 (Oct. 13, 2016) [81 FR 81870, at text following n.1562 (Nov. 18,
2016)].

12

11,892 funds × 86.5 hours per fund per year = ~1,028,658 hours per year.

13

The Commission’s estimate concerning the wage rate is based on salary information for
the securities industry compiled by the Securities Industry and Financial Markets
Association. The estimated wage figure is based on published rates for intermediate
accountants and attorneys, modified to account for an 1,800-hour work year; multiplied
by 5.35 to account for bonuses, firm size, employee benefits, and overhead; and adjusted
to account for the effects of inflation, yielding effective hourly rates of $166 and $401,
respectively. See Securities Industry and Financial Markets Association, Report on
Management & Professional Earnings in the Securities Industry 2013. We estimate that
intermediate accountants and attorneys will divide their time equally, yielding an
estimated hourly wage rate of $284. ($166 per hour for intermediate accountants + $401
per hour for attorneys) ÷ 2 = $284 per hour.

14

1,028,658 hours per year × $284 per hour = $292,138,872 per year.
6

Cost burden is the cost of goods and services purchased to prepare, print, and transmit
reports under rule 30e-1, such as for the services of independent auditors and outside counsel.
The cost burden does not include the hour burden discussed in Item 12 above.
We estimate that each fund currently incurs an annual cost burden of $31,061 per fund.
We estimate that 90 percent of funds required to comply with rule 30e-1 (or about 10,703 funds)
will rely on new rule 30e-3. 15 We estimate that for the 90 percent of funds relying on rule 30e-3,
two-thirds of the external costs currently attributed to rule 30e-1 relate to printing and mailing
costs, which would not be applicable to funds relying on rule 30e-3. Thus, their annual cost
burden related to rule 30e-1 would decrease from $31,061 to about $10,354 per fund. 16
Therefore, we estimate that the total annual external cost burden for all funds under rule 30e-1
will be $147,750,391. 17
14.

Cost to the Federal Government

There are no costs to the federal government associated with rule 30e-1. 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 $22.2 million in fiscal year 2017, based on the Commission’s computation of the
value of staff time devoted to this activity and related overhead. We note, however, that

15

11,892 funds × 0.90 proportion estimated to rely = ~10,703 funds relying.

16

$31,061 per fund per year in external costs × ⅓ proportion not attributable to printing and
mailing expenses = ~$10,354 per fund per year in external costs.

17

10,703 funds expected to rely × $10,354 external costs per fund expected to rely =
$110,818,862 in external costs for funds expected to rely. $110,818,862 in external costs
for funds expected to rely + ((11,892 total funds – 10,703 funds expected to rely) ×
$31,061 in external costs for funds not expected to rely) = $147,750,391 in external costs.
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shareholder reports are filed with the Commission to comply with the requirements of Form NCSR, and not rule 30e-1, which requires the transmission of the reports to shareholders.
15.

Change in Burden

The estimated hourly burden associated with rule 30e-1 has decreased from 1,043,592
hours to 1,028,658 hours (a decrease of 14,934 hours). The estimated cost burden associated
with rule 30e-1 has decreased from $368,352,399 to $147,750,391 (a decrease of $220,602,008).
This decrease is due to a decrease in the estimated burden for those funds that rely on new rule
30e-3.
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 OMB expiration date.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

Not applicable.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

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