Form N-2 Supporting Statement

OMB CONTROL NUMBER: 3235-0026
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission
for FORM N-2
A.
1.

JUSTIFICATION
Necessity for the Information Collection

On January 30, 2019, the Securities and Exchange Commission (the
“Commission”) proposed amendments to modernize, simplify, and enhance certain
financial disclosure requirements in Regulation S-K, and related rules and forms. 1 The
proposals were intended to eliminate duplicative disclosures and modernize and enhance
Management’s Discussion and Analysis (“MD&A”) disclosures for the benefit of
investors, while simplifying compliance efforts for registrants. Overall, the proposed
amendments to Item 301, 2 Item 302, 3 and Item 303 4 are expected to reduce disclosure
burdens.
The Paperwork Reduction Act burdens associated with the collection of
information for Form N-2 (OMB Control No. 3235-0026) will be affected by the
amendments.
Form N-2 (17 CFR 239.14 and 274.11a-1) is the form used by closed-end
management investment companies (“registered closed-end funds”) to register as
investment companies under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.) (“Investment Company Act”), and to register their securities under the Securities
Act of 1933 (15 U.S.C. 77a et seq.) (“Securities Act”). Form N-2 is also used by
business development companies (“BDCs’”), which are closed-end management
investment companies that do not register under the Investment Company Act (but
instead elect to be subject to certain provisions of the Investment Company Act (15
U.S.C. 80a-2(a)(48)) to register and offer their securities under the Securities Act.
Form N-2 contains an item that requires BDCs to furnish in a separate section the
information required by Items 301, 302, and 303 of Regulation S-K.

1

See Management’s Discussion and Analysis, Selected Financial Data, and Supplementary
Financial Information, Release No. 33-10750 (January 30, 2020) [85 FR 12068 (February 28, 2020)]
(“MD&A and Financial Disclosure Release” or “Proposing Release”), available at
https://www.sec.gov/rules/proposed/2020/33-10750.pdf.

2

17 CFR 229.301.

3

17 CFR 229.302.

4

17 CFR 229.303.

2.

PURPOSE AND USE OF THE INFORMATION COLLECTION

The proposals are intended to eliminate duplicative disclosures and modernize
and enhance MD&A disclosures for the benefit of investors, while simplifying
compliance efforts for registrants.
3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

The collection of information requirements of the proposals are set forth in the
affected rules and forms. All of the affected forms are filed electronically with the
Commission using the Commission’s Electronic Data Gathering, Analysis and Retrieval
(“EDGAR”) system.
4.

DUPLICATION
The proposals do not duplicate, overlap, or conflict with other federal rules.

5.

EFFECT ON SMALL ENTITIES

The proposals modernize, simplify, and enhance certain financial disclosure
requirements for small entities and other registrants. Many of the proposals simplify and
streamline disclosure requirements in ways that are expected to reduce compliance
burdens. Because the proposals generally do not impose any significant new compliance
obligations, it was unnecessary to propose different compliance and reporting
requirements or timetables or to exempt small entities from all or part of the proposals.
The few proposals that will impose additional disclosure requirements are
expected to only incrementally increase the paperwork burden. For example, the
proposal to disclose critical accounting estimates is expected to have only a minimal
impact on registrants’ burdens because the Commission, in prior guidance, has stated that
companies should provide this disclosure where material. 5 Other proposals codify
existing Commission guidance, so are similarly expected to only incrementally increase
the paperwork burden.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The proposals affect Form N-2, which sets forth the disclosure requirements for
registration statements filed by registered closed-end funds and BDCs to help investors
make informed investment decisions. Less frequent collection would deprive investors of
access to information that is important to their investment decisions.

5

See Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition
and Results of Operation, Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)]

2

7.

INCONSISTENCIES WITH GUIDELINES IN 5 CFR 1320.5(D)(2)
There are no special circumstances in connection with these amendments.

8.

CONSULTATIONS OUTSIDE THE AGENCY

In the Proposing Release, the Commission solicited public comment on the new
“collection of information” requirements and the associated paperwork burdens.
Comments on Commission releases are generally received from registrants, investors,
and other market participants. In addition, the Commission and staff participate in
ongoing dialogue with representatives of various market participants through public
conferences, roundtables and meetings. All comments received on the proposal are
available at https://www.sec.gov/comments/s7-01-20/s70120.htm. The Commission will
consider all comments received prior to publishing the final rules, as required by 5 CFR
1320.11(f).
9.

PAYMENT OR GIFT
No payment or gift has been provided to any respondents.

10.

CONFIDENTIALITY
All documents submitted to the Commission are available to the public.

11.

SENSITIVE QUESTIONS

No information of a sensitive nature will be required under the following
collections of information in connection with these rulemaking amendments: Form N-2.
These information collections collect basic Personally Identifiable Information (PII) that
may include a name and job title. However, the agency has determined that these
information collections do 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 February 5, 2020 is provided as a
supplemental document and is also available at https://www.sec.gov/privacy.
12. and 13.

ESTIMATES OF HOUR AND COST BURDENS

The Commission anticipates that the proposals would, overall, reduce the burden
associated with compliance with the federal securities disclosure regime by eliminating
duplicative disclosures and simplifying disclosure. Tables 1 and 2 below show the
estimated incremental and aggregate reductions in paperwork burden as a result of the

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proposals. 6 These estimates represent the average burden for all registrants, both large
and small. In deriving our estimates, we recognize that the burdens will likely vary
among individual registrants based on a number of factors, including the nature of their
business. We do not believe that the proposed amendments would change the frequency
of responses to the existing collections of information; rather, we estimate that the
proposed amendments would change only the burden per response.
The burden estimates were calculated by multiplying the estimated number of
responses by the estimated average amount of time it would take a registrant to prepare
and review disclosure required under the proposals. The portion of the burden carried by
outside professionals is reflected as a cost, while the portion of the burden carried by the
registrant internally is reflected in hours.
For registration statements on Form N-2, we estimate that 25% of the burden of
preparation is carried by the company internally and that 75% of the burden of
preparation is carried by outside professionals retained by the company at an average cost
of $400 per hour. 7
Table 1. Calculation of the Incremental Change in Burden Estimates of Current
Responses Resulting from the Proposed Amendments for Form N-2
Form

N-2

Number of
Estimated
Affected
Responses
(A) 8

36

Burden
Hour
Reduction
per
Current
Affected
Response
(B)

Reduction in
Burden
Hours for
Current
Affected
Responses
(C)

Reduction in
Company
Hours for
Current
Affected
Responses
(D)

Reduction in
Professional
Hours for
Current
Affected
Responses
(E)

Reduction in
Professional
Costs for
Current
Affected
Responses
(F)

= (A) x (B) 9

= (C) x 0.25

= (C) – (D)

= (E) x $400

1.1

40

10

30

$12,000

Form N-2 states that disclosure under Items 301–303 of Regulation S-K is only
required if “the Registrant is regulated as a business development company under the
1940 Act.” Accordingly, although the most recently approved PRA estimates 298
responses for all Form N-2 registrants, any incremental burdens associated with Form N6

For convenience, the estimated hour and cost burdens in the tables have been rounded to the nearest
whole number.

7

We recognize that the costs of retaining outside professionals may vary depending on the nature of the
professional services, but for purposes of this PRA analysis we estimate that such costs would be an
average of $400 per hour. This estimate is based on consultations with several registrants, law firms,
and other persons who regularly assist registrants in preparing and filing reports with the Commission.

8

The number of estimated affected responses is based on the number of responses in the Commission’s
current OMB PRA filing inventory. The OMB PRA filing inventory represents a three-year average.
We do not expect that the proposed amendments would materially change the number of responses in
the current OMB PRA filing inventory.

9

The estimated reductions in Columns (C), (D), and (E) are rounded to the nearest whole number.

4

2 due to the proposed amendments would only affect BDCs. Because we estimate that
approximately 12% of all Form N-2 registrants are BDCs, the estimated burdens have
been reduced to reflect this percentage (e.g., 12% of 298 responses results in 36
responses).
Table 2 summarizes the requested paperwork burden, including the estimated
total reporting burdens and costs, under the proposed amendments.
Table 2. Requested Paperwork Burden under the Proposed Amendments
Current Burden
Form

N-2

Program Change

Current
Annual
Responses
(A)

Current
Burden
Hours
(B)

Current Cost
Burden
(C)

Number of
Affected
Responses
(D)

298

94,350

$6,269,752

36

14.

Reduction
in
Company
Hours
(E) 10
10

Requested Change in Burden

Reduction in
Professional
Costs
(F) 11

Annual
Responses
(G) = (A)

Burden
Hours
(H) = (B)
- (E)

Cost Burden
(I) = (C) - (F)

$12,000

298

94,340

$6,257,752

COSTS TO FEDERAL GOVERNMENT

The annual cost of reviewing and processing disclosure documents, including
registration statements, post-effective amendments, proxy statements, annual reports, and
other filings of investment companies amounted to approximately $22.1 million in fiscal
year 2019, based on the Commission’s computation of the value of staff time devoted to
this activity and related overhead.
15.

CHANGE IN BURDEN

The proposals in Release No. 33-10750 would modernize, simplify, and enhance
certain financial disclosure requirements. If adopted, the proposals would eliminate
duplicative disclosure and modernize and enhance MD&A. The Commission anticipated

10

From Column (D) in Table 1.

11

From Column (F) in Table 1.

5

that the proposals would, in the aggregate, reduce the burden and costs of affected
parties.
Specifically, the reasons for the change in burden for the specific amendments are
as follows:
Proposed Amendments and Effects
Item 301: Selected Financial Data

Affected Forms 12
• Form N-2

Estimated Net Effect
• 0.3 hour net decrease in
compliance burden per form

• Replacing the reference to Item 301 with a reference to
Rule 1-02(bb) of Regulation S-X in Items 1112, 1114, and
1115 of Regulation AB would generally result in similar
disclosure being presented under these Items, and therefore
not affect the burden estimate.
Item 302(a): Supplementary Financial Information

• Form N-2

• Elimination of Item 302(a) requirement to disclose selected
quarterly financial data of selected operating results because
Item 302(a) information is largely available in Forms 10-Q,
which would decrease the paperwork burden by reducing
repetitive information about a registrant’s quarterly
performance.
Item 303(a): Full Fiscal Years

• 0.5 hour net decrease in
compliance burden per form

• Form N-2

• 0.4 hour net increase in
compliance burden per form

• Elimination of Item 301 requirement to furnish selected
financial data for each of the registrant’s last five fiscal years
because Item 303 already calls for disclosure of material
trend information, which would decrease the paperwork
burden by reducing repetitive information about a
registrant’s historical performance.

Restructuring and Streamlining:
• Establishing a new paragraph to emphasize the purpose of
the MD&A section at the outset to clarify and focus
registrants is expected to have a minimal impact on the
paperwork burden, as the change would codify existing
guidance.
• Amendments to streamline the text of new Item 303 would
have no effect on the paperwork burden because these
amendments are clarifications of existing requirements.
Capital Resources:
• Expanding Item 303(a)(2) to also require a discussion of
material cash requirements, in addition to commitments for
capital expenditures, would increase the paperwork burden.
Results of Operations – Known Trends or Uncertainties:
• Amending Item 303(a)(3)(ii) to clarify that a registrant
should disclose reasonably likely changes in the relationship
12

The SEC’s Division of Corporation Finance will be responsible for submitting the PRA for the other
Affected Forms to OMB.

6

between costs and revenues would increase the paperwork
burden, although this effect is expected to be minimal
because the amendment is consistent with existing guidance.
Results of Operations – Net Sales, Revenues, and Line Item
Changes:
• Amending Item 303(a), Item 303(a)(3)(iii) and Instruction
4 to Item 303(a) to clarify that a registrant should include in
its MD&A a discussion of the reasons underlying material
changes from period-to-period in one or more line items
could marginally increase the paperwork burden by requiring
a more nuanced discussion consistent with the overall
objective of MD&A.
Results of Operations – Inflation and Price Changes:
• Eliminating the specific reference to inflation within Item
303(a)(3)(iv) for issuers should marginally reduce the
paperwork burden, although such decrease is expected to be
minimal.
Off-Balance Sheet Arrangements:
• Replacing Item 303(a)(4) with an instruction emphasizing
a more principles-based approach with respect to off-balance
sheet arrangement disclosures, would reduce duplicative
disclosures and decrease the paperwork burden.
• Amending Items 2.03 and 2.04 of Form 8-K to retain the
definition of “off-balance sheet arrangements” that is
currently in Item 303(a)(4) would not result in any changes
in reporting obligations under Item 2.03 and Item 2.04 of
Form 8-K, and would therefore result in no change in
paperwork burden for this form.
Contractual Obligations Table:
• Eliminating Item 303(a)(5), the requirement that registrants
provide a tabular disclosure of contractual obligations, would
reduce duplicative disclosures and decrease the paperwork
burden.
Critical Accounting Estimates:
• Amending Item 303 to explicitly require disclosure of
critical accounting estimates would provide more clarity on
the uncertainties involved in creating an accounting policy
and how significant accounting policies of registrants may
differ. This would increase the paperwork burden.
Item 303(b): Interim Periods
• Amending Item 303(b) to allow for more flexibility in
interim periods compared and eliminating certain
instructions and providing cross-references to similar
instructions in Item 303(a) would decrease the paperwork
burden.
Total

7

• Form N-2

• 0.7 hour net decrease in
compliance burden per form

Form N-2

1.1 hour net decrease

16.
INFORMATION COLLECTIONS PLANNED FOR STATISTICAL
PURPOSES
The information collections do not employ statistical methods.
17.

APPROVAL TO OMIT OMB EXPIRATION DATE

We request authorization to omit the expiration date on the electronic version of
the form. Including the expiration date on the electronic version of the form will result in
increased costs because the need to make changes to the form may not follow the
application’s scheduled version release dates. The OMB control number will be
displayed.
18.

EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION
ACT SUBMISSIONS

There are no exceptions to certification for the Paperwork Reduction Act
submissions.
B.

STATISTICAL METHODS
The information collections do not employ statistical methods.

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