Revised - Form N-17D-1 Supporting Statement (Oct. 2019)

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-17D-1 (3235-0229)
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 17(d) of the Investment Company Act [15 U.S.C. 80a-17(d)] (the “Act”)
authorizes the Commission to adopt rules that protect investment companies (“funds”) and their
shareholders from self-dealing and other forms of overreaching by affiliated persons when the
fund and the affiliated person participate in any joint enterprise or other joint arrangement or
profit-sharing plan. 1 Rule 17d-1 under the Act [17 CFR 270.17d-1] prohibits funds and their
affiliated persons from participating in a joint enterprise, unless an application regarding the
transaction has been filed with and approved by the Commission. Subparagraph (d)(3) of the rule
provides an exemption from this requirement for any loan or credit advance to, or acquisition of
securities or other property of, a small business concern, or any agreement to do any of these
transactions (“investments”) made by a small business investment company (“SBIC”) and a bank
that is an affiliated person of (1) the SBIC or (2) an affiliated person of the SBIC (“affiliated
bank”). The exemption requires the Commission to prescribe reports about the investments, and
the Commission has designated Form N-17D-1 (“form”) as the form for reports required by
rule 17d-1(3). 2
An SBIC and its affiliated bank must file Form N-17D-1, which has two parts, with the
Commission. Part I describes any investment in a small business concern made at the same time

1

See 15 U.S.C. 80a-2(a)(3) (definition of “affiliated person”).

by the SBIC and the affiliated bank (or an investment made by either entity when the other has an
existing investment). The SBIC must list the name and address of the small business concern and
the nature of its business, and the name and address of the affiliated bank and the basis of its
affiliation with the SBIC. The SBIC and the affiliated bank also must report any outstanding
investments in the small business concern, and the small business concern’s use of the proceeds
of investments made during the reporting period. If the SBIC invested at the same time or after
the affiliated bank, the report must state any changes in the nature and amount of the affiliated
bank’s investment during the period beginning a year before the SBIC’s investment up to the date
of the report. Finally, the report must state the name of any affiliated person of the SBIC or the
affiliated bank (or any affiliated person of any affiliated person of the SBIC or affiliated bank)
who has any interest in the transactions, the basis of the affiliation, the nature of the interest, and
the consideration the affiliated person received or will receive.
Part II of the form requires a report about any disposition of an investment, default in the
payment of interest or principal, or extension or modification of the terms of any investment
made by an SBIC in a small business concern in which an affiliated bank also has invested. The
report must identify the investment and describe in detail any disposition, default, extension, or
modification involved. If the SBIC has disposed of an investment, the report must state the profit
or loss realized. If a loss was sustained, default occurred, or the terms of the investment were
extended or modified, the report must describe the circumstances of the event.
The SBIC and affiliated bank must file a form for every semi-annual accounting period
2

See 17 CFR 270.17d-2.

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during which one or more of the events referenced in Part I or II occurred. The SBIC and the
affiliated bank may file the form jointly or separately, as long as the separate reports together
contain all the information requested by the form. The Commission processes but does not
review the form routinely. The form is available to members of the public for inspection and
copying. Therefore, it is useful for any person who wishes to monitor joint transactions by SBICs
and their affiliated banks.
2.

Purpose and Use of the Information Collection

As discussed above, Form N-17D-1 provides information to the Commission and the
public about joint transactions by SBICs and their affiliated banks. Joint transactions with
affiliates create the risk that the affiliated persons of the SBIC may engage in self-dealing or
other forms of overreaching at the expense of shareholders. Disclosures on the form provide
information about these joint transactions to persons seeking to make an informed decision about
investing in an SBIC. The form also affords the Commission the opportunity to monitor
compliance with the Act in this area.
If the Commission did not collect the information contained in the form, neither the
Commission nor the investing public would be able to monitor or evaluate the potentially abusive
joint transactions engaged in by SBICs and their affiliated banks. If the rules did not permit
SBICs to file the form, SBICs would have to go through the more time-consuming and expensive
process of filing an application for an exemptive order from the Commission. Thus, the
exemption conditioned on filing the form allows SBICs greater flexibility to engage in these joint
transactions.

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3.

Consideration Given to Information Technology

The Commission’s electronic filing system, called EDGAR, for Electronic Data
Gathering, Analysis and Retrieval, is designed to automate the filing, processing, and
dissemination of full disclosure filings. Form N-17D-1 is not currently required to be filed on
EDGAR, but may be in the future.
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. Form N-17D-1 does not call for duplicative information and the information called for in
the form is not otherwise available to the Commission or the public.
5.

Effect on Small Entities

The form was developed to meet the special needs of SBICs, many of which are small
entities. As discussed above, one of the purposes of the form is to allow such entities to avoid the
more onerous and expensive exemptive application process. The Commission believes the
benefits of disclosure to investors and the flexibility to SBICs of filing the form justify the costs
of providing the information on the form.
6.

Consequences of Not Conducting Collection

SBICs and affiliated banks must file a form no later than 30 days after the six-month
accounting period in which the contemporaneous investment occurs. Less frequent collection
would permit the potentially abusive affiliated transactions to proceed for too long without
disclosure to the Commission and investors. Investors could be harmed and the Commission
would have no meaningful way of making a current assessment of these transactions.
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7.

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

None.
8.

Consultations Outside the Agency

The Commission adopted the form, after notice and public comment, on November 17,
1961. 3 The Commission requested public comment on the collection of information requirements
of Form N-17D-1 before it submitted this request for extension and approval to the Office of
Management and Budget. The Commission received no comments in response to this request.
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.
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

3

Adoption of Rules and a Related Form Applicable to Small Business Investment Companies
Licensed by the Small Business Administration to Provide Exemption from Certain

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Identifiable Information (PII) that may include names, job titles, and work addresses. 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 1/29/2016, is provided as a supplemental document
and is also available at https://www.sec.gov/privacy.
12.

Burden of Information Collection

Most of the information requested on the form should be readily available to the SBIC or
the affiliated bank in records kept in the ordinary course of business, or with respect to the SBIC,
pursuant to the recordkeeping requirements under the Act. Commission staff estimates that it
should take approximately one hour for an accountant or other professional to complete the
form. 4 There is one SBIC that may file the form annually. 5 No SBIC has filed the form in recent
years, however. Thus, Commission staff estimates that one SBIC is likely to file the form in any
year. Thus, the estimated total annual burden of filling out the form is 1 hour, at an estimated
total annual cost of $216. 6

Requirements of Sections 17(a), 17(d) and 18(c) of the Investment Company Act of 1940,
Investment Company Act Release No. 3361 (Nov. 17, 1961) [26 FR 11239 (Nov. 29, 1961)].
4

This estimate of hours is based on conversations with representatives of SBICs and accountants.

5

As of October 22, 2019, one SBIC was registered with the Commission.

6

The estimated wage figure is based on published rates for Senior Accountants ($216). The
$216/hour figure for a Senior Account is from Securities Industry and Financial Markets
Association’s Management & Professional Earnings in the Securities Industry 2013, modified by

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The estimate of average burden hours is made solely for purposes of the Paperwork
Reduction Act. The estimate is not derived from a comprehensive or even a representative survey
or study of the costs of Commission rules.
Table 1: Summary of Revised Annual Responses, Burden Hours, and Cost Estimates
IC Title
Form N-17D-1

13.

Annual no. of Responses
Previously Requested Change
approved
1
1
0

Annual Time Burden (Hrs.)
Previously Requested Change
approved
1
1
0

Annual Cost ($)
Previously Requested Change
approved
201
216
+15

Cost to Respondents

Commission staff estimates that the only cost burden of the form is identified in item 12
of this Supporting Statement.
14.

Cost to Federal Government

The Commission processes, but does not review, the reports on Form N-17D-1. The
Commission’s operational cost of processing the form is nominal.
15.

Changes in Burden

The estimated burden hours associated with Form N-17D-1 is estimated to be 1 hour and
no external cost burden. There were no changes to the annual hour burden and the annual cost
burden. The increase in the estimated annual total burden from $201 to $216 is based on an
increase in the estimated per-hour wage rate of a senior accountant.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
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.

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17.

Approval to Omit OMB Expiration Date

Not applicable.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submissions

The Commission is not seeking an exception to the certification statement.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
The collection of information will not employ statistical methods.

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