REVISED Supporting Statement Form N-5

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-5
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-5 1 is the form used by small business investment companies (“SBICs”) to
register their securities under the Securities Act of 1933 (“Securities Act”) 2 and to
register under the Investment Company Act of 1940 (“Investment Company Act”). 3
Section 5 of the Securities Act requires a company to file a registration statement
with the Commission before it offers a new issue of securities to the public by the use
of the mails or other channels of interstate commerce, 4 and Section 8 of the
Investment Company Act requires an SBIC to register as an investment company. 5
Section 5(b) of the Securities Act requires that investors be provided with a
prospectus containing certain required information prior to the sale or at the time of
confirmation or delivery of the securities. 6
Form N-5 is the registration statement form adopted by the Commission for use
by an SBIC that has been licensed as such under the Small Business Investment Act
of 1958 or which has received the preliminary approval of the Small Business
Administration (“SBA”) and has been notified by the SBA that the company may
submit a license application. Form N-5 is an integrated registration form and may be
used as the registration statement under both the Securities Act and Investment
Company Act. A registration statement on Form N-5 is deemed filed under both Acts
unless it is indicated on the facing page that the filing is being made for purposes of
only one of the Acts.
On March 20, 2019, the Commission issued a release adopting rules that will
modernize and simplify certain disclosure requirements in Regulation S-K, and related

1

17 CFR 239.24 and 274.5.

2

15 U.S.C. 77a et seq.

3

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

4

15 U.S.C. 77e.

5

15 U.S.C. 80a-8.

6

15 U.S.C. 77e(b).

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rules and forms. 7 In particular, the Commission adopted amendments to Regulation S-T
that will require investment companies filing on Form N-5 to submit the document in
HTML format and to include a hyperlink to each exhibit identified in the exhibit index of
the document.
In several cases, some of these amendments presented only a negligible or
offsetting impact on the cost and hourly burdens associated with the Paperwork
Reduction Act for certain investment company registration forms, and consequently, we
believe did not warrant making any adjustments to those forms’ burdens. For example,
we noted in the adopting release that because less than 1% of confidential treatment
request (CTR) applications received in fiscal year 2018 were related to exhibits filed with
the Investment Company Act forms, we did not believe that the reduction in burden
associated with Investment Company Act form would be significant enough to warrant an
adjustment to our burden estimates. Similarly, with respect to our adoption of new Item
601(a)(5) in Regulation S-K and the analogous amendments to certain investment
company registration forms, we noted that although we expected some reduction in
burden associated with these amendments, we do not believe the reduction will be
significant enough to warrant an adjustment to our burden estimates. Third, with respect
to the impact our amendments (including those to certain investment company
registration forms) would have on personally identifiable information (PII), we assumed
in the adopting release that the amendments will result in some incremental reduction in
burden, although we did not believe the reduction will be significant enough to warrant an
additional adjustment to our burden estimates. Finally, we did not make any adjustments
to the paperwork burden for forms impacted by our amendments to simplify and
modernize the rules and forms governing incorporation by reference, because the
amendments resulted in offsetting adjustments to the paperwork burden per affected
form. As a result of the negligible or offsetting impacts noted above, we did not
incorporate any changes to the burden hours or costs associated with the foregoing areas
because we did not believe the adjustment would be significant enough to warrant an
additional adjustment to our burden estimates in sections 12. Burden of Information
Collection and 13. Cost to Respondents.
2.

Purpose and Use of the Information Collection

The purpose of Form N-5 is to meet the filing and disclosure requirements of
both the Securities Act and Investment Company Act, and to provide investors with
information sufficient to evaluate an investment in an SBIC. This information
collection differs significantly from many other federal information collections, which
are primarily for the use and benefit of the collecting agency. The information that is

7

FAST Act Modernization and Simplification of Regulation S-K, Securities Act Release No. 10618
(March 20, 2019) [84 FR 12674 (April 2, 2019)] (“Fast Act Adopting Release”).

2

required to be filed with the Commission permits verification of compliance with
securities law requirements and assures the public availability and dissemination of
the information. The adopted amendments, furthermore, will facilitate access to
exhibits by investors and other users of the information.
3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis, and Retrieval System
(“EDGAR”) automates the filing, processing, and dissemination of full disclosure
filings. This automation has increased the speed, accuracy, and availability of
information, generating benefits to investors and financial markets. Registration
statements on Form N-5 are required to be filed with the Commission electronically
on EDGAR. 8 The public may access filings on EDGAR through the Commission’s
Web site (http://www.sec.gov) or at EDGAR terminals located at the Commission’s
public reference rooms. Prospectuses may be sent to investors by electronic means so
long as certain requirements are satisfied. 9
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 in Form N-5 is not generally duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, 10 to identify methods to minimize recordkeeping or reporting
requirements affecting small businesses. With respect to registration under the
Investment Company Act, the requirements of Form N-5 do not distinguish between
small entities and other SBICs. Although the burden on smaller SBICs to prepare and
file registration statements may be greater than for larger SBICs, the Commission
believes that imposing different requirements on smaller SBICs would not be
consistent with investor protection and the purposes of registration statements.
With respect to the registration of securities by SBICs that are registered under
the Investment Company Act, Rules 601 to 610a under the Securities Act exempt
8

See rules 101(a)(1)(i) and (iv) of Regulation S-T [17 CFR 232.101(a)(1)(i) and (iv)].

9

See Investment Company Act Release No. 21399 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)].

10

5 U.S.C. 601 et seq.

3

certain small offerings of securities from registration under the Securities Act
provided that the companies file with the Commission advance notice of such
offerings on Form 1-E 11 and deliver an offering circular containing the information
specified in Schedule A 12 to each offeree. 13
6.

Consequences of Not Conducting Collection

An SBIC must file a registration statement on Form N-5 when licensed as an
SBIC by the SBA. An SBIC must also file Form N-5 if it chooses to sell securities to
the public in order to meet the requirements of Sections 5 and 10(a)(3) of the
Securities Act for delivery of a current prospectus to offerees. A registration
statement on Form N-5 must be updated annually.
In the absence of the disclosure requirements in Form N-5, investors in SBICs
may not receive information crucial to making informed investment decisions. In
addition, Form N-5 satisfies the Investment Company Act requirement that
investment companies register with the Commission before they conduct business. In
the absence of a Form N-5 registration statement, SBICs would not be able to comply
with the filing requirements of the Investment Company Act.
Moreover, if information were collected less frequently, the Commission would be
unable to fulfill its responsibilities under the Investment Company Act and investors
would not have current information on which to base their investment decisions.
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 the amendments affecting Form N-5, the Commission solicited
and evaluated public comments on the proposal and its collection of information
requirements. The Commission received no comments in response to its request.
Moreover, 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
11

17 CFR 239.200.

12

17 CFR 230.610a.

13

17 CFR 230.601 to 230.610a.

4

various forums provide the Commission and staff with a means of ascertaining and
acting upon the paperwork burdens confronting the industry.
9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Assurance of Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No questions of a sensitive nature are involved. 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.

Estimate of Burden Hours for Information Requested

The following estimates of average internal burden hours and costs are made
solely for purposes of the Paperwork Reduction Act of 1995 14 and are not derived
from a comprehensive or even representative survey or study of the cost of
Commission rules and forms. Compliance with Form N-5 is mandatory. Responses
to the collection of information will not be kept confidential.

14

44 U.S.C. 3501 et seq.

5

Table 1: BURDEN ESTIMATES FOR FORM N-5 FILINGS1
Burden Per Response
Internal
Burden

Aggregate Burden
Cost of
Internal
Burden

Wage Rate2

Annual
Cost Burden

Annual
Responses

Internal Burden

Cost of
Internal Burden

Annual
Cost Burden

0.333

117 hours

$34,164

$10,000

117 hours

$34,164

$10,000

CURRENTLY APPROVED ESTIMATES
Preparing and filing
reports on Form N-5
generally

352 hours

×

$292 (1:1 blend of
compliance attorney and
programmer analyst)

$102,784

$30,0003

×

Total annual burden

REVISED ESTIMATES
Preparing and filing
reports on Form N-5
generally

352 hours

×

$269 (1:1 blend of
compliance attorney and
intermediate accountant)4

$102,784

$30,000

×

0.333

117 hours

$34,164

$10,000

Preparation and review
of exhibit hyperlinks

0.25 hours

×

$348 (1:1 blend of
compliance attorney and
senior programmer)

$87

$300

×

0.333

.08325 hours

$29

$100

117 hours

$34,193

$10,100

Total annual burden

Notes:
1. The cost and hourly burden figures are rounded to the nearest whole number.
2. The Commission’s estimates concerning the allocation of burden hours and the relevant wage rates are based on consultations with industry representatives and on salary information for the
securities industry compiled by the Securities Industry and Financial Markets Association’s Office Salaries in the Securities Industry 2013. The estimated wage figures are modified by Commission
staff to account for an 1800-hour work-year and multiplied by 2.93 to account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the effects of inflation. See
Securities Industry and Financial Markets Association, Report on Management & Professional Earnings in the Securities Industry 2013.
3. The cost of compliance varies considerably depending on factors such as whether a filing is a new registration statement or an update to a previously effective registration statement; whether
the fund being registered presents novel or complex legal issues or is similar to other funds; whether amendments are required in response to staff comments; and whether outside counsel and
accountants are necessary for preparation of the filing. We estimate that the cost of compliance may range from less than $15,000 (for a routine filing) to over $60,000 (for a registration
statement presenting significant legal issues per response) with an average cost per filing of $30,000.
4. The Commission used a more recent estimate for the respective wage rates when issuing these amendments in than it did when making the other wage rate estimates.

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As summarized in Table 1 above, the Commission has previously estimated that
about 0.333 filings on Form N-5 each year, incurring 117 hours of internal hour
burden at a cost of about $34,186. The hour burden estimates for preparing and filing
reports on Form N-5 are based on the Commission’s experience with the contents of
the form. The number of burden hours may vary depending on, among other things,
the complexity of the filing and whether preparation of the forms is performed by
internal staff or outside counsel.
The FAST Act amendments will require funds filing reports on Form N-5 to
submit these documents in HTML format and to include a hyperlink to each exhibit
identified in the exhibit index of these documents. For purposes of the Paperwork
Reduction Act, we estimated the average burden for a fund to hyperlink to exhibits
based on the median number of exhibits that are filed with an affected form. As
summarized in Table 1 above, we estimate that the total internal burden associated
with Form N-5 will be 117 hours per year, at a cost of about $34,193.
13.

Estimate of Total Annual Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and update
Form N-5, such as for the services of independent auditors and outside counsel. The
cost burden does not include the cost of the hour burden discussed in Item 12 above.
Estimates are based on the Commission’s experience with the filing of such reports.
The currently approved external cost burden of Form N-5 is $10,000 per filing.
However, with the added requirements in the FAST Act Adopting Release, the
external cost burden per response increased by $100. 15 The aggregate external cost
burden per response is increased to $10,100.
14.

Costs to Federal Government

The annual cost of reviewing and processing disclosure documents, including
new registration statements, post-effective amendments, proxy statements,
shareholder reports, and other filings of investment companies amounted to

15

In the FAST Act Adopting Release, we mistakenly noted the external burden increased by $400 to
$10,400. However, the $400 increase was not adjusted to reflect that only 75% of the estimated 1
burden hour, would be allocated for external professional services needed to comply with the new
requirements. In addition, the hourly burden was not adjusted to reflect 0.333 filings per year.
Table 1 above reflects the revised figures.

1

approximately $22.2 million in fiscal year 2018, based on the Commission’s
computation of the value of staff time devoted to this activity and related overhead.
15.

Changes in Burden

There has been no change in estimated internal burden hours. However, we
estimate an annual increase of $100 in the external cost burden from $10,000 to
$10,100. The changes in external cost burdens are due to the increase in the external
time burden arising from our amendments affecting Form N-5 regarding hyperlinking
of exhibits.
Table 2: CHANGE IN BURDEN ESTIMATES
Form N-5

Annual No. of Responses
Previously Requested
approved

Form N-5

16.

1

1

Change

0

Annual Time Burden (Hrs.)
Previously Requested
approved

117

117

Change

0

Burden Cost Burden ($)
Previously Requested
approved

$10,000

$10,100

Change

$100

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

Not applicable.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING
STATISTICAL METHODS
Not applicable.

2