Form N-1A Supporting Statement

OMB CONTROL NUMBER: 3235-0307

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Form N-1A
A. JUSTIFICATION
1. Necessity for the Information Collection
Form N-1A1 is the form used by open-end management investment companies (“funds”)
to register under the Investment Company Act of 1940 (“Investment Company Act”) 2
and/or to register their securities under the Securities Act of 1933 (“Securities Act”). 3
Section 5 of the Securities Act requires the filing of a registration statement prior to the offer
of securities to the public and that the statement be effective before any securities are sold,4
and Section 8 of the Investment Company Act requires a fund to register as an investment
company. 5 Form N-1A also permits funds to provide investors with a prospectus and a
statement of additional information (“SAI”) covering essential information about the fund
when it makes an initial or additional offering of its securities. 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 the sale or at the time of confirmation or
delivery of the securities.
On September 25, 2019, the Commission issued a release adopting a new rule that will
permit exchange-traded funds (“ETFs”) that satisfy certain conditions to operate without
the expense and delay of obtaining an exemptive order.6 The release also includes certain
disclosure amendments to Form N-1A to provide investors who purchase and sell ETF
shares on the secondary market with additional information regarding ETF trading and
associated costs, regardless of whether such ETFs are structured as funds or unit investment
trusts.
2. Purpose and Use of the Information Collection
The purpose of Form N-1A is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable funds to provide investors
with information necessary to evaluate an investment in the fund. Unlike many other
1

17 CFR 239.15A and 274.11A.

2

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

3

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

4

15 U.S.C. 77e.

5

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

6

Exchange-Traded Funds, Investment Company Act Release No. 33646 (Sept. 25, 2019) [84 FR
57162 (Oct. 24, 2019)].

OMB CONTROL NUMBER: 3235-0307

federal information collections, which are primarily for the use and benefit of the collecting
agency, this information collection is primarily for the use and benefit of investors. The
information filed with the Commission also permits the 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”) provides for automated 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. Form N-1A is required
to be filed with the Commission electronically on EDGAR.7 The public may access filings
on EDGAR through the Commission’s Internet Web site (http://www.sec.gov) or at
EDGAR terminals located at the Commission’s public reference rooms. Prospectuses and
SAIs may be sent to investors by electronic means so long as the fund meets certain
requirements.8
4. Efforts to Identify Duplication
The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it adopts changes in its rules.
The requirements of Form N-1A are not generally duplicated elsewhere.
5. Effect on Small Entities
The Commission reviews all rules periodically, as required by the Regulatory Flexibility
Act, 9 to identify methods to minimize recordkeeping or reporting requirements affecting
small businesses. The current disclosure requirements for reports on Form N-1A do not
distinguish between small entities and other funds. The burden on smaller funds, however,
to prepare and file registration statements may be proportionally greater than for larger
funds. The Commission believes, however, that imposing different requirements on smaller
investment companies would not be consistent with investor protection and the purposes of
the registration statements.

7

See rule 101(a)(iv) of Regulation S-T [17 CFR 232.101(a)(iv)].

8

See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233, Exchange
Act Release No. 36345, Investment Company Act Release No. 21399 (Oct. 6, 1995) (60 FR
53458 (Oct. 13, 1995)).

9

5 U.S.C. 601 et seq.

OMB CONTROL NUMBER: 3235-0307

6. Consequences of Not Conducting Collection
The Investment Company Act requires that funds file annual amendments to their
registration statements. Less frequent collection would mean that current information might
not be available to fund investors.
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-8B-2, the Commission solicited and
evaluated public comments on the proposal’s collection of information requirements. The
Commission did not receive public comment on its proposed estimates, but the Commission
revised its estimates as a result of updated industry data and modifications from the
proposal. 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 information 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
No payment or gift to respondents was provided.
10. Confidentiality
No assurance of confidentiality was provided.
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
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 January 29, 2016, is
provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
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 10 and are not derived from a comprehensive, or
10

44 U.S.C. 3501 et seq.

OMB CONTROL NUMBER: 3235-0307

even representative, survey or study of the cost of Commission rules and forms. Compliance
with Form N-1A is mandatory. Responses to the collection of information will not be kept
confidential.
Form N-1A is the registration form used by open-end management investment
companies. The respondents to the amendments to Form N-1A are open-end management
investment companies registered or registering with the Commission. We currently estimate
for Form N-1A a total hour burden of 1,642,490 burden hours and external cost of
$131,139,208. 11
The Commission adopted amendments to Form N-1A designed to provide investors
who purchase open-end ETF shares in secondary market transactions with tailored
information regarding ETFs, including information regarding purchasing and selling shares
of ETFs. Specifically, the amendments to Form N-1A will require new narrative disclosures
regarding ETF trading and associated costs. In addition, the Commission requires an ETF
that does not rely on new rule 6c-11 to disclose median bid-ask spread information on their
websites or in their prospectuses. The amendments also exclude ETFs that provide
premium/discount disclosures on their websites in accordance with rule 6c-11 from the
premium discount disclosure requirements in Form N-1A. The Commission also adopted
amendments to Form N-1A designed to eliminate certain disclosures for ETFs that are no
longer necessary.
Form N-1A generally imposes two types of reporting burdens on investment companies:
(i) the burden of preparing and filing the initial registration statement; and (ii) the burden of
preparing and filing post-effective amendments to a previously effective registration
statement (including post-effective amendments filed pursuant to rule 485(a) or 485(b) under
the Securities Act, as applicable).

11

This estimate is based on the last time the form’s information collection was submitted for PRA
approval in 2019.

OMB CONTROL NUMBER: 3235-0307

TABLE 1: FORM N-1A PRA ESTIMATES
Wage rate2

Internal time
costs

$365 (compliance attorney)

$609.55

×

$331 (senior programmer)

$552.77

×

$365 (compliance attorney)

$121.67

0.33 hours

×

$331 (senior programmer)

$110.33

2.5 hours

×

$365 (compliance attorney)

$912.50

2.5 hours

×

$331 (senior programmer)

$827.50

0.5 hours

×

$365 (compliance attorney)

$182.50

0.5 hours

×

$331 (senior programmer)

$165.50

Initial hours

Annual hours1

Draft and finalize disclosure and
amend registration statement

5 hours

1.67 hours

×

5 hours

1.67 hours

Bid-ask spread and premium or
discount requirements

1 hour

0.33 hours

1 hour

Review and update disclosures
Maintain bid-ask spread
requirements
Total new annual burden per ETF

7 hours

Number of ETFs

10 hours

$3,482.32

× 1,970

× 1,970
$6,860,170.40

Annual external cost
burden

Total new annual burden

19,700 hours

Current burden estimates

+ 1,642,490 hours

+ $131,139,208

$0

Revised burden estimates

1,662,190 hours

$131,139,208

Notes:
1. Includes initial burden estimates annualized over a three-year period.
2. The Commission’s estimates of the relevant wage rates are based 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 figures are modified by 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.

TABLE 2: CHANGE IN BURDEN ESTIMATES
Annual Number of Responses

Form N-1A

Annual Time Burden (hours)

Cost Burden (dollars)

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

Previously
Approved

Revised
Estimate

Change

6,002

6,002

0

1,642,490

1,662,190

+ 19,700

$131,139,208

$131,139,208

0

DRAFT 2019–09–18

Table 1 above summarizes the final PRA estimates associated Form N-1A. We estimate
that the total hour burdens and time costs associated with the amendments to Form N-1A
will result in an average aggregate annual burden of 19,700 hours at an average aggregate
time cost of $6,860,170.40. Therefore, the revised aggregate estimate for Form N-1A,
including the new amendments, is 1,662,190 hours.
13. Cost to Respondents
Cost burden is the cost of goods and services purchased to prepare and update filings on
Form N-1A, 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. The Commission
currently estimates for Form N-1A a total external cost burden of $131,139,208. As
summarized in Table 1 above, the Commission does not estimate any change in external
cost. Therefore, the revised aggregate estimate for Form N-1A, including the new
amendments, is $131,338,208 in external costs.
14. Costs to the 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 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
As summarized in Table 2 above, the estimated hourly burden associated with Form
N-1A has increased from 1,642,490 hours to 1,662,190 hours (an increase of 19,700 hours).
The change in burden hours is due to the estimates of the time burden that will result from
our amendments affecting Form N-1A. The Commission does not estimate any change in
cost burden.
16. Information Collection Planned for Statistical Purposes
The results of any information collection will not be published.
17. Approval to Omit OMB Expiration Date
We request authorization to omit the expiration date on the electronic version of the form
for design and IT project scheduling reasons. The OMB control number will be displayed.
18. Exceptions to Certification Statement for Paperwork Reduction Act Submission
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.

6