Rule 30b1-10 supporting statement

OMB CONTROL NUMBER: 3235-0754

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 30b1-10 and Form N-RN
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Section 30(b) of the Investment Company Act of 1940 [15 U.S.C. 80a-30(b)] (“Act”)
provides that “[e]very registered investment company shall file with the Commission…such
information, documents, and reports (other than financial statements), as the Commission may
require, to keep reasonably current the information and documents contained in the registration
statement of such company…”
Rule 30b1-10 [17 CFR 270.30b1-10] and Form N-RN [17 CFR 274.223] require openend investment companies, including exchange-traded funds that redeem in kind (“In-Kind
ETFs”) but not including money market funds, to file a current report on Form N-RN on a nonpublic basis when certain events related to their liquidity occur. The information reported on
Form N-RN concerns events under which more than 15% of a fund’s or In-Kind ETF’s net assets
are, or become, illiquid investments that are assets as defined in rule 22e-4 under the Act and
when holdings in illiquid investments are assets that previously exceeded 15% of a fund’s net
assets have changed to be less than or equal to 15% of the fund’s net assets. 1 The information
reported on Form N-RN also regards events under which a fund’s holdings in assets that are
highly liquid investments fall below the fund’s highly liquid investment minimum for more than
7 consecutive calendar days. A report on Form N-RN is required to be filed, as applicable,

1

See Item C.1 and Item C.2 of Part A of Form N-RN.

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within one business day of the occurrence of one or more of these events. 2 Compliance with rule
30b1-10 is mandatory for all funds other than money market funds. Responses to the disclosure
requirements will be kept confidential.
On October 28, 2020 the Commission issued a release adopting a new exemptive rule
under the Act (17 CFR 270.18f-4 (“rule 18f-4”)) designed to address the investor protection
purposes and concerns underlying section 18 of the Act and to provide an updated and more
comprehensive approach to the regulation of funds’ use of derivatives and the other transactions
that rule 18f-4 addresses. 3 In this release, the Commission also amended Form N-LIQUID (and
also re-titled it as “Form N-RN”) to add new reporting requirements for funds subject to the
VaR-based limit on fund leverage risk pursuant to rule 18f-4, and also adopted conforming
amendments to rule 30b1-10. We are requiring these funds to file Form N-RN to report
information about VaR test breaches under certain circumstances. These funds will be required
to determine their compliance with the applicable VaR test on at least a daily basis. A fund that
determines that it is out of compliance with the VaR test and has not come back into compliance
within five business days after such determination will have to file a nonpublic report on Form
N-RN providing certain information regarding its VaR test breaches. In addition, a fund that has
come back into compliance with the VaR test must file a report on Form N-RN within one
business day to indicate that.

2

See General Instruction A.2 of Form N-RN.

3

Investment Company Act Release No. 34084 (Nov. 2, 2020).

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2.

Purpose and Use of the Information Collection

Certain provisions of the rule and form contain “collection of information” requirements
within the meaning of the Paperwork Reduction Act of 1995 [44 U.S.C. 3501, et seq.], and the
Commission is submitting the collection of information to the Office of Management and Budget
(“OMB”) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The information
collection requirements for rule 30b1-10 and Form N-RN are designed to enable the Commission
to receive information on fund liquidity events, and events regarding funds’ compliance with the
VaR-based limit on fund leverage risk in rule 18f-4, more uniformly and efficiently, and to
enhance the Commission’s oversight of funds when these events occur and its ability to respond
to market events. The Commission will be able to use the information provided on Form N-RN
in its regulatory, disclosure review, inspection, and policymaking roles.
3.

Consideration Given to Information Technology

The Commission's Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) is designed to automate the filing, processing and dissemination of disclosure
filings. The system permits publicly-held companies to transmit their filings to the Commission
electronically. EDGAR has increased the speed, accuracy and availability of information,
generating benefits to investors and financial markets. All funds have been required to use
EDGAR for their disclosure filings since November 6, 1995. Form N-RN is required to be filed
with the Commission electronically on EDGAR.
4.

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-RN are not generally duplicated elsewhere.
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5.

Effect on Small Entities

The information collection requirements of rule 30b1-10 and Form N-RN do not
distinguish between small entities and other funds. The burden of the conditions on smaller
funds 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 rule’s conditions and could potentially
jeopardize the interests of investors in small funds. The Commission reviews all rules
periodically, as required by the Regulatory Flexibility Act, to identify methods to minimize
recordkeeping or reporting requirements affecting small businesses.
6.

Consequences of Not Conducting Collection

Rule 30b1-10 and Form N-RN set forth the disclosure requirements for current reports
filed by funds to enable the Commission to receive information on fund liquidity events, and
events regarding funds’ compliance with the VaR-based limit on fund leverage risk in rule 18f-4,
more uniformly and efficiently and to enhance the Commission’s oversight of funds when these
events occur and its ability to respond to market events. Less frequent collection would mean
that timely disclosure of information regarding these events would not be available to the
Commission.
7.

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

Under applicable federal regulations, OMB generally will not approve a collection of
information that includes a pledge of confidentiality unless the pledge is “supported by
disclosure and data security policies that are consistent with the pledge....”4 In addition, if an

4

5 CFR 1320.5(d)(2)(vii).

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agency proposes to collect confidential information, it must be able to “demonstrate that it has
instituted procedures to protect the information’s confidentiality to the extent permitted by law.” 5
Form N-RN elicits non-public information about circumstances regarding certain fund
liquidity events, and events regarding funds’ compliance with the VaR-based limit on fund
leverage risk in rule 18f-4. When these events occur, reporting to the Commission is necessary
to provide the Commission with timely information that may prompt the Commission to inquire
further into the circumstances that gave rise to the requirement to file Form N–RN. The
Commission finds that it is neither necessary nor appropriate in the public interest or for the
protection of investors to make the information filed on Form N-RN publicly available and,
therefore, does not intend to make public Form N-RN. 6
In addition, the Commission recognizes the importance of sound data security practices
and protocols for non-public information, including information that may be competitively
sensitive. The Commission has substantial experience with storage and use of non-public
information reported on Form PF and delayed public disclosure of information on Form N-MFP
(although the Commission no longer delays public disclosure of reports on Form N-MFP), as
well as other non-public information that the Commission handles in its ordinary course of
business. Commission staff has in place controls and systems for the use and handling of nonpublic information reported on Form N-RN.

5

5 CFR 1320.5(d)(2)(viii).

6

See section 45(a) of the Act, which requires information in investment company forms to be made available
to the public, unless the Commission finds that public disclosure is neither necessary nor appropriate in the
public interest or for the protection of investors.

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8.

Consultation Outside the Agency

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

No payment or gift to respondents was provided.
10.

Confidentiality

See section A.7 of this supporting statement.
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 the name, email address, and phone number of
persons authorized to receive information about and respond to questions about a Form N-RN
filing. 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
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of the Paperwork Reduction Act and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms. Compliance with rule
30b1-10 and Form N-RN is mandatory. The staff estimates that the Commission receives an
average of 84 reports per year on Form N-RN. 7
When filing a report on Form N-RN, 8 staff estimates that a fund will spend on average
approximately .06 hours of an in-house attorney’s time and 0.02 hours for a senior programmer
of an in-house accountant’s time to prepare, review, and submit Form N-RN reports, at a total
time cost of $1,436. Accordingly, in the aggregate, staff estimates that compliance with rule
30b1-10 and Form N-RN will result in a total annual burden of approximately 366 burden hours
and total annual time costs of approximately $77.537.
Table 1: Change in Burden Estimates

Annual Number of Responses

Annual Time Burden (hours)

Cost Burden (dollars)
Previously
approved

Revised
estimate

Change

30

150 9

$0

$0

$0

Previously
approved

Rule
30b110

Revised
estimate,
incorporating
final
amendments
to Form NRN

84

Change

+54

Previously
approved

Revised
estimate,
incorporating
final
amendments
to Form NRN

366

Change

216

7

The previously approved estimated number of annual filings based on the number of filings in Spring 2020
was 30 filings in aggregate per year. However, in a modification from the calculation at proposal, the final
PRA analysis increases this total by approximately 54 filings in aggregate per year due to the adopted
derivatives rules. The total average number of filings per year is estimated to be 84 filings.

8

For purposes of this estimate, the staff expects that it would take approximately the same amount of time to
prepare and file a report on Form N-RN, regardless under which Part of Form N-RN it is filed.

9

The previously approved burden estimated 5 total burden hours per filing for a total of 150 hours.

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13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to comply with rule 30b1-10 and
Form N-RN, such as licensing software solutions or for the services of external service
providers. The cost burden does not include the hour burden discussed in Item 12. Estimates are
based on the Commission’s experience with the filing of registration forms. The Commission
estimates that there will be no external costs associated with this collection of information.
14.

Cost to the Federal Government

The annual cost of reviewing and processing registration statements, post-effective
amendments, proxy statements, shareholder reports, and other filings of investment companies
amounted to approximately $22.2 million in fiscal year 2019, based on the Commission’s
computation of the value of staff time devoted to this activity and related overhead. A portion of
those costs will relate to processing and reviewing Form N-RN filings submitted to the
Commission for compliance with rule 30b1-10.
15.

Change in Burden

Rule 30b1-10 has a current annual burden of 150 hours. The hour burden associated with
rule 30b1-10 has increased by 216 hours to a total of 366 hours since our last burden analysis.
This increase is due to a change in our estimate of the number of annual responses from 30 to 84
and the increase in estimated burden hours to comply with the new form and rule amendments.
The Commission continues to estimate that there is no external cost burden associated with this
rule. These changes in burden also reflect the Commission’s revision and update of burden
estimates for all information collections under this OMB control number (whether or not
associated with rulemaking changes).

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16.

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 Submission

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

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