2021 Rule 0-2 ADV-NR Supporting Statement

OMB CONTROL NUMBER: 3235-0240
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 0-2 and Form ADV-NR
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Rule 0-2 under the Investment Advisers Act of 1940 (“Advisers Act”) establishes
procedures by which a person may serve process, pleadings, or other papers on a non-resident
investment adviser, or on a non-resident general partner or non-resident managing agent of an
investment adviser (17 CFR 275.0-2). Under Rule 0-2, persons who wish to serve the abovereferenced parties may do so by furnishing the Securities and Exchange Commission
(“Commission” or “SEC”) with one copy of the papers that are to be served along with one copy
for each named party. The Secretary of the Commission (“Secretary”) will promptly forward a
copy to each named party by registered or certified mail. If the Secretary certifies that the rule
was followed, the certification constitutes evidence of service of process under Rule 0-2. Form
ADV–NR (17 CFR 279.4) designates the Secretary, among others, as the non-resident general
partner’s or non-resident managing agent’s agent for service of process. 1 Form ADV-NR must
be submitted by an investment adviser’s non-resident general partner and non-resident managing
agent in connection with the adviser’s initial Form ADV submission or within 30 days of
becoming a non-resident after the investment adviser submits its initial Form ADV.
The title of this collection of information is “Rule 0-2 and Form ADV-NR under the
Investment Advisers Act of 1940.” Rule 0-2 and Form ADV-NR contain “collection of
1

Non-resident investment advisers comply with Rule 0-2 by simply executing Form ADV
(17 CFR 279.1). This burden estimate is incorporated into a separate burden estimate for
Form ADV.

information” requirements within the meaning of the Paperwork Reduction Act of 1995. 2 This
collection of information has been previously approved and subsequently extended by the Office
of Management and Budget (“OMB”) under control number 3235-0240. The likely respondents
to this information collection would be each non-resident general partner or non-resident
managing agent of an SEC-registered investment adviser and each non-resident general partner
or non-resident managing agent of an exempt reporting adviser. 3 This collection of information
is found at 17 CFR 275.0-2 and 17 CFR 279.4 and it is mandatory. Responses are not kept
confidential. The collection of information is necessary for us to obtain appropriate consent to
permit the Commission and other parties to bring actions against non-resident partners and
agents for violations of the federal securities laws and to enable the commencement of legal
and/or regulatory actions against investment advisers that are doing business in the United States,
but are not residents.
On November 4, 2021, the Commission proposed to amend Form ADV-NR to require an
investment adviser’s non-resident general partners and non-resident managing agents to file
Form ADV-NR electronically through the Investment Adviser Registration Depository
(“IARD”), rather than in paper format, as is currently required. 4 As part of the proposed
amendments, the IARD would be modified to permit non-resident general partners and non-

2

44 U.S.C. 3501 et seq.

3

See Form ADV, General Instruction 19 (Who is required to file Form ADV-NR?),
available at https://www.sec.gov/about/forms/formadv-instructions.pdf.

4

See Electronic Submission of Applications for Orders under the Advisers Act and the
Investment Company Act, Confidential Treatment Requests for Filings on Form 13F, and
Form ADV-NR; Amendments to Form 13F, Advisers Act Release No. 5903 (Nov. 4,
2021) (“Proposing Release”).
2

resident managing agents to meet this filing requirement electronically without the need for
specialized software or hardware. In addition, IARD would not charge a separate fee for filing
the Form ADV-NR or accessing the filing system apart from what IARD charges for filing Form
ADV.
The Commission also proposed to amend Form ADV-NR to require non-resident general
partners and non-resident managing agents to amend their Form ADV-NR within 30 days
whenever any information contained in the form becomes inaccurate by filing with the
Commission a new Form ADV-NR. The current form does not specify when a new Form ADVNR becomes inaccurate.
2.

Purpose and Use of the Information Collection

Rule 0-2 and Form ADV-NR facilitate service of process on a non-resident general
partner or non-resident managing agent of an investment adviser. Form ADV–NR designates the
Secretary, among others, as the agency for service of process for non-resident general partners or
non-resident managing agents. The collection of information is necessary for us to obtain
appropriate consent to permit the Commission and other parties to bring actions against nonresident partners and agents for violations of the federal securities laws and to enable the
commencement of legal and/or regulatory actions against investment advisers that are doing
business in the United States, but are not residents. Respondents include non-resident general
partners and non-resident managing agents of both SEC-registered investment advisers and
exempt reporting advisers.
3.

Consideration Given to Information Technology

The proposed amendments would require an investment adviser’s non-resident general
partners and non-resident managing agents to file Form ADV-NR electronically through the
3

IARD, rather than in paper format, as is currently required. The IARD is an Internet-based
system that investment advisers access through computers in their offices, without the need for
specialized software or hardware. The information investment advisers submit to the IARD is
stored in a database, and the general public has Internet-access to the data.
4.

Duplication

The collection of information requirements of the form are not duplicated elsewhere.
5.

Effect on Small Entities

All SEC-registered investment advisers and exempt reporting advisers, regardless of their
size, are equally subject to the collection requirements of Rule 0-2 and Form ADV-NR. If we
were to exempt small entities, it would be much more difficult to obtain appropriate consent
from such small entities to permit the Commission and other parties to bring actions against their
non-resident partners and agents for violations of the federal securities laws and to enable the
commencement of legal and/or regulatory actions against investment advisers that are small
entities and doing business in the United States, but are not residents. Therefore, it would defeat
the purpose of Rule 0-2 and Form ADV-NR to exempt small entities from the information
collection requirements. The information collection requirements will not affect most investment
advisers that are small entities because they are generally registered with one or more state securities
authorities and not with the Commission.5 Investment advisers that manage less than $100 million

5

Under Advisers Act Rule 0-7, for purposes of the Regulatory Flexibility Act an
investment adviser generally is a small entity if it: (i) has assets under management of
less than $25 million; (ii) did not have total assets of $5 million or more on the last day of
its most recent fiscal year; and (iii) does not control, is not controlled by, and is not under
common control with another investment adviser that has assets under management of
$25 million or more, or any person (other than a natural person) that had total assets of $5
million or more on the last day of its most recent fiscal year. 17 CFR 275.0-7.
4

in regulatory assets under management generally are prohibited from registering with the
Commission and register with state securities authorizes.6
6.

Consequences of Not Conducting Collection

If we did not require a non-resident general partner or non-resident managing agent to file
Form ADV-NR, which appoints an agent for service of process, it would be much more difficult for
both advisory clients and financial service regulators to effectively bring a lawsuit against a nonresident investment adviser.
7.

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

Not applicable.
8.

Consultation Outside the Agency

The Commission requested public comment on the proposed amendments to the
collection of information requirements in Form ADV-NR. 7 Comments are due 30 days after
publication in the Federal Register. The Commission and the staff of the Division of Investment
Management continue to participate in an ongoing dialogue with representatives of the
investment adviser 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 facing the industry.
9.

Payment or Gift

None.

6

See 15 U.S.C. 80b-3a.

7

See Proposing Release, supra footnote 4.
5

10.

Confidentiality

The information collected pursuant to Rule 0-2 and Form ADV-NR are filings with the
Commission. These disclosures are not kept confidential.
11.

Sensitive Questions

Form ADV-NR collects information about the investment adviser’s name, SEC file
number, CRD number (if applicable), and the mailing address of the non-resident general partner
or non-resident managing agent of the investment adviser. Form ADV-NR does not collect
Social Security Numbers. A System of Records Notice has been published in the Federal
Register at 83 FR 6892 and can also be found at
http://www.sec.gov/about/privacy/secprivacyoffice.htm.
a.

No information of a sensitive nature will be required under this collection of

information.
b.

The information collection collects basic Personally Identifiable Information (PII)

that may include the investment adviser’s name, SEC file number, CRD number (if applicable),
and the mailing address of the non-resident general partner or non-resident managing agent of
the investment adviser. The agency has determined that the information collection constitutes a
system of record for purposes of the Privacy Act and is covered under System of Records Notice
(SORN) “System of Records.” The SORN is provided as a supplemental document and is also
available at https://www.sec.gov/privacy. A Privacy Act Statement is applicable for the
information collection and is available on the web form.
c.

The proposed amendments would require Form ADV-NR to be filed through

IARD, rather than in paper format, as is currently required. In accordance with Section 208 of
the E-Government Act of 2002, the agency has conducted a Privacy Impact Assessment (PIA) of
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the IARD system, in connection with this collection of information. The IARD PIA, published
on July 8, 2014, is provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
12.

Burden of Information Collection

We estimate that with the proposed amendments, Form ADV-NR would take an average
of one hour to complete, which is the same as our current time burden estimate. The currently
approved collection of information burden in Form ADV-NR is 53 hours, which is based on our
prior estimate of 53 annual responses at 1 hour per response. During 2018 to 2020 period, a total
of 147 registered investment advisers and exempt reporting advisers filed reports with the
Commission that included a Form ADV-NR, for an average of 49 reports per year. 8
Accordingly, we estimate that, based on the change in the estimate of number of filers of Form
ADV-NR, the annual aggregate information collection burden for Form ADV-NR will be 49
hours, a decrease of 4 hours under the currently approved burden of 53 hours.
An adviser would likely use a combination of compliance clerks and general clerks to
complete Form ADV-NR and file it with the Commission through IARD. The Commission staff
estimates the hourly wage for compliance clerks to be $71 per hour, including benefits, 9 and the

8

The number of Form ADV-NRs filed between 2018 and 2020 were as follows: for 2020
there were 5 filings; for 2019 there were 53 filings; and for 2018 there were 89 filings.
Three year average: (5 + 53 + 89) / 3 = 49.

9

Data from the SIFMA Office Salaries in the Securities Industry 2013 report, modified by
Commission staff to account for a 1,800-hour work-year and inflation, and multiplied by
2.93 to account for bonuses, firm size, employee benefits and overhead, suggest that the
cost for a compliance clerk is approximately $71 per hour.
7

hourly wage for general clerks to be $63 per hour, including benefits. 10 For each burden hour,
compliance clerks would perform an estimated 0.75 hours, and general clerks also would
perform an estimated 0.25 hours. Therefore, the total cost per response would be an estimated
$69, 11 for a total burden cost of $3,381. 12
Summary of the Aggregate Annual Number of Responses, Time Burden, and Monetized
Time Burden
Description

Requested

Previously
Approved

Change

Number of Responses

49

53

(4)

Time burden (Hours)

49

53

(4)

$3,381

$3,657

$(276)

Monetized Time Burden (Dollars)1

13.

Cost to Respondents

There is no cost burden other than the cost of the hour burden described above.
14.

Cost to the Federal Government

There are no additional costs to the federal government.
15.

Change in Burden

We estimate that the revised total annual collection of information burden for Rule 0-2
and Form ADV-NR would be 49 hours, which is a decrease of 4 hours from the current approved

10

Data from the SIFMA Office Salaries in the Securities Industry 2013 report, modified by
Commission staff to account for a 1,800-hour work-year and inflation, and multiplied by
2.93 to account for bonuses, firm size, employee benefits and overhead, suggest that the
cost for a general clerk is approximately $63 per hour.

11

(0.75 hours per compliance clerk x $71) + (0.25 hours per general clerk x $63) = $69.

12

$69 per adviser x 49 advisers = $3,381.
8

burden of 53 hours. This decrease appears to be primarily due to using updated data, which
shows that less persons have filed Form ADV-NR.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of the form,
although the OMB control number will be displayed. Including the expiration date on the
electronic version of this 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.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

Not applicable.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

9