Supporting Statement (Form N-4)

OMB CONTROL NUMBER: 3235-0318
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-4
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-4 (17 CFR 239.17b and 274.11c) is the form used by insurance company
separate accounts organized as unit investment trusts that offer variable annuity contracts
to register as investment companies under the Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.) (“Investment Company Act”) and/or to register their securities
under the Securities Act of 1933 (15 U.S.C. 77a et seq.) (“Securities Act”). Section 5 of
the Securities Act (15 U.S.C. 77e) requires the filing of a registration statement prior to
the offer of securities to the public and that the registration statement be effective before
any securities are sold, and Section 8 of the Investment Company Act (15 U.S.C. 80a-8)
provides for the registration of investment companies. Pursuant to Form N-4, separate
accounts organized as unit investment trusts that offer variable annuity contracts provide
investors with a prospectus and a statement of additional information (“SAI”) covering
essential information about a separate account. Section 5(b) of the Securities Act
requires that investors be provided with a prospectus containing the information required
in a registration statement prior to or at the time of sale or delivery of securities.
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. 1 New
rule 30e-3 will provide certain funds and unit investment trusts with an optional method

1

See Securities Act Release No. 10506 (June 5, 2018) [83 FR 29158 (June 22, 2018)] (“Adopting
Release”).

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. In connection with our adoption of rule 30e-3, the
Commission is amending certain rules and forms including Form N-4. Form N-4 is
amended to require certain legend requirements on the prospectuses and annual and
semi-annual reports if relying on rule 30e-3. Responses to the disclosure requirements
are not kept confidential.
2.

Purpose and Use of the Information Collection

The purpose of Form N-4 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors
with information necessary to evaluate an investment in a security. 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 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.
3.

Consideration Given to Information Technology

The Commission’s electronic filing system (Electronic Data Gathering, Analysis
and Retrieval or “EDGAR”) is designed to automate the filing, processing, and
dissemination of full disclosure filings. The system permits publicly held companies to
transmit filings to the Commission electronically. This automation has increased the
speed, accuracy, and availability of information, generating benefits to investors and

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financial markets. Form N-4 is required to be filed with the Commission electronically
on EDGAR (17 CFR 232.101(a)(1)(i) and (iv)). The public may access filings on
EDGAR through the Commission’s website (http://www.sec.gov) or at EDGAR
terminals located at the Commission’s public reference rooms.
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 requirements of Form N-4 generally are not duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.), to identify methods to minimize recordkeeping or
reporting requirements affecting small businesses. The current disclosure requirements
for registration statements on Form N-4 do not distinguish between small entities and
other registrants. The burden on smaller registrants, however, to prepare and file
registration statements may be greater than for larger registrants. This burden includes
the cost of producing, printing, filing, and disseminating prospectuses and SAIs. The
Commission believes, however, that imposing different requirements on smaller entities
would not be consistent with investor protection and the purposes of registration
statements.
In any event, no small entities currently file registration statements on Form N-4.
6.

Consequences of Not Conducting Collection

The purpose of Form N-4 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors

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with information necessary to evaluate an investment in a security. Less frequent filing
would be inconsistent with the filing and disclosure requirements of the Securities Act
and the Investment Company Act. In addition, if the form were to be filed less
frequently, investors may not be provided with the information necessary to evaluate an
investment in a security.
7.

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

None.
8.

Consultation Outside the Agency

The Commission requested public comment on the collection requirements for
conditioning reliance on rule 30e-3 with requirements to require legends on prospectuses
and semi-annual and annual reports before it submitted this request for revision and
approval to the Office of Management and Budget. The Commission and 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

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required under this collection of information. The information collection collects basic
Personally 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./13. Estimate of Hour and Cost Burden of Information Collection
Form N-4 generally imposes two types of reporting burdens on investment
companies: (1) the burden of preparing and filing the initial registration statement; and
(2) the burden of preparing and filing post-effective amendments to a previously effective
registration statement. Providing the information required by Form N-4 is mandatory.
Responses will not be kept confidential. The following estimates of average burden
hours and costs are made solely for purposes of the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et. seq.) and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms.
In our most recent Paperwork Reduction Act submission for Form N-4,
Commission staff estimated the annual compliance burden to comply with the collection
of information requirement of Form N-4 to be 271,301 burden hours and $32,111,916 in
external costs. 2
2

These estimates are based on the last time the form’s information collection was submitted for
PRA renewal in 2018.

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Pursuant to the amendments in connection with the rule 30e-3 adoption, we
estimate that these funds will incur 1 burden hour for the first summary prospectus,
statutory prospectus, or shareholder report reflecting these requirements and 0.5 hours for
each additional summary prospectus, statutory prospectus, or annual and semi-annual
report reflecting these requirements. These related disclosure requirements will only
apply during the extended transition period. In light of the short period during which
these additional requirements will be effective and the modest impact they are likely to
have on external service providers such as website hosting services, outside counsel and
auditors, and printing and mailing services, we do not expect them to result in additional
expenses passed on to funds by their service providers in the form of additional external
cost burden. Thus, we do not estimate there will be any external costs to comply with
these disclosure requirements.
We estimate that there are 1,361 responses on Form N-4 each year. 3 Of this
group, we estimate that 1,225 of the responses will be made by funds that will rely on
rule 30e-3. 4 Consequently, we estimate that the total annual hour burden associated with
the amendments to Form N-4 and relating to statutory prospectuses is 613 hours. 5
We estimate that with the additional hour burdens associated with the
amendments the total annual internal burden to comply would be 271,914 burden hours

3

The estimate of the annual number of registration statements filed on Form N-4 is based on the
average annual number of filings received by the Commission over the past three years (January 1,
2015 through December 31, 2017).

4

1,361 responses × 0.9 = 1,225 responses.

5

1,225 responses × 1 hour in the first year = 1,225 hours. 1,225 responses × 0.5 hours in the
second year = 613 hours. 1,225 responses × 0 hours in the third year = 0 hours. (1,225 + 613 + 0
hours) ÷ 3 years = 613 hours per year on an amortized basis.

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for Form N-4. 6 Based on the Commission’s estimate of 271,914 hours and an estimated
wage rate of about $284 per hour, 7 the total annual cost to registrants of the hour burden
for complying with the amendments to Form N-4 is about $77 million.8
Table 1: Summary of Revised Annual Responses, Burden Hours, and
Burden Hour Costs for Each Information Collection
Information Collection

No. of Responses

Initial Form N-4 Filings
Post-Effective
Amendments
Total
14.

35
1,326

Burden
Hours
9,763
262,151

Burden Hour
Costs
$870,030
$31,241,886

1,361

271,914

$32,111,916

Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including new
registration statements, post-effective amendments, proxy statements, and shareholder
reports 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.
15.

Changes in Burden

The total annual hour burden of 271,914 hours represents an increase of 613 hours
over the previous burden hour estimate of 271,301 hours. In addition, the annual external
6

This estimate is based on the following calculation: 271,301 + 613 = 271,914 hours.

7

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.

8

271,914 hours per year × $284 per hour = $77,223,576 per year.

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cost burden of $32,111,916 has not changed. The changes in burden hours are due to the
staff’s estimates of the time costs that would result from our amendments to Form N-4 in
connection with the adoption of rule 30e-3.
16.

Information Collection Planned for Statistical Purposes

Not Applicable.
17.

Approval to Omit OMB Expiration Date

Not Applicable.
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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