Supporting Statement - Crowdfunding Rules 400-404 (Funding Portals) - 2022

Supporting Statement - Crowdfunding Rules 400-404 (Funding Portals) - 2022.pdf

Crowdfunding Rules 400-404 (Funding Portals)

OMB: 3235-0727

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SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Crowdfunding Rules 400-404 (Funding Portals)
OMB Control No. 3235-0727
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C.
§ 3501 et seq. (2012).
A.

JUSTIFICATION
1.

Information Collection Necessity

The Jumpstart Our Businesses Act of 2012 (the “JOBS Act”) added new Securities Act of
1933 (“Securities Act”) Section 4(a)(6),1 which provides an exemption from the registration
requirements of Securities Act Section 5 for certain crowdfunding transactions. To qualify for
the exemption under Section 4(a)(6), crowdfunding transactions by an issuer must meet specified
requirements, including that transactions must be conducted through an intermediary that either
is registered as a broker or is registered as a new type of entity called a “funding portal.” Title
III adds Securities Exchange Act of 1934 (“Exchange Act”) Section 3(h), which requires the
Commission to adopt rules to exempt, either conditionally or unconditionally, “funding portals”
from having to register as brokers or dealers pursuant to Exchange Act 15(a)(1).
Pursuant to Title III, the Commission adopted Exchange Act Rules 400 through 404 and
Form Funding Portal on October 30, 2015, in order to create a regulatory scheme for funding
portals and to exempt funding portals from having to register as brokers or dealers.2
The collections of information required under Rules 400 through 404 is mandatory for all
funding portals.
Rule 400 requires each person applying for registration with the Commission as a
funding portal to file electronically with the Commission Form Funding Portal.
Rule 400(a) requires a funding portal to become a member of a national securities
association registered under Section 15A of the Exchange Act.
Rule 400(b) requires a funding portal to file an amendment to Form Funding Portal if any
information previously submitted on Form Funding Portal becomes inaccurate for any reason.

Title III amended Securities Act Section 4 to add Section 4(6); however, Title II of the
JOBS Act also amended Securities Act Section 4 and inserted subsections (a) and (b).
The U.S. Code implemented the amendment by adding paragraph (6) at the end of
subsection (a).

See Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71387, 71545-49
(Nov. 16, 2015) (“Regulation Crowdfunding”).

Rule 400(c) provides that a funding portal can succeed to the business of a predecessor
funding portal upon the successor filing a registration on Form Funding Portal and the
predecessor filing a withdrawal on Form Funding Portal.
Rule 400(d) requires a funding portal to promptly file a withdrawal of registration on
Form Funding Portal upon ceasing to operate as a funding portal.
Rule 400(e) states that duplicate originals of the applications and reports provided for in
this section must be filed with surveillance personnel designated by any registered national
securities association of which the funding portal is a member.
Rule 400(f) requires a nonresident funding portal to: (1) obtain a written consent and
power of attorney appointing an agent for service of process in the United States; (2) furnish the
Commission with the name and address of its agent for services of process on Schedule C of
Form Funding Portal; (3) certify that it can, as a matter of law, and will provide the Commission
and any registered national securities association of which it becomes a member with prompt
access to its books and records and can, as a matter of law, and will submit to onsite inspection
and examination by the Commission and any registered national securities association of which
it becomes a member; and (4) provide the Commission with an opinion of counsel and certify on
Schedule C on Form Funding Portal that the firm can, as a matter of law, provide the
Commission and registered national securities association of which it becomes a member with
prompt access to its books and records and can, as a matter of law, submit to onsite inspection
and examination by the Commission and any registered national securities association of which
it becomes a member.3
Rule 403(a) requires a funding portal to implement written policies and procedures
reasonably designed to achieve compliance with the federal securities laws and the rules and
regulations thereunder relating to its business as a funding portal.
Rule 403(b) provides that a funding portal must comply with privacy rules.
Rule 404 requires all registered funding portals to maintain certain books and records
relating to their funding portal activities, for not less than five years, the first two in an easily
accessible place. Rule 404(e) requires funding portals to furnish promptly to the Commission, its
representatives, and the registered national securities association of which the funding portal is a
member true, correct, complete and current copies of such records of the funding portal that are
requested by the representatives of the Commission and the registered national securities
association.
2.

Information Collection Purpose and Use

Form Funding Portal helps ensure that the Commission can make information about
funding portals transparent and easily accessible to the investing public, including issuers and
3

Exchange Act Section 3(h)(1)(C) permits us to impose, as part of our authority to exempt
funding portals from broker registration, “such other requirements under [the Exchange
Act] as the Commission determines appropriate.”
2

obligated persons who engage funding portals; investors who may purchase securities through
offerings on funding portals; and other regulators. Further, the information provided on Form
Funding Portal expands the amount of publicly available information about funding portals,
including disciplinary history. Consequently, the rules and forms allows issuers and the
investing public, as well as others, to become more fully informed about funding portals in a
more efficient manner.
In addition, the requirement that each funding portal register with the Commission on
Form Funding Portal helps ensure that the Commission has information to oversee respondents
and their activities in the crowdfunding securities market effectively. In particular, the
information provided in Form Funding Portal is used in oversight of funding portals, including,
among other things, assessing a funding portal’s application and performing examinations of
funding portals. Moreover, Form Funding Portal enables the Commission to obtain an accurate
estimate of the number of funding portals; analyze data regarding the various types of funding
portals; and evaluate the disciplinary history of funding portals and associated persons, including
regulatory, civil, and criminal proceedings.
The requirement that a funding portal file amendments to Form Funding Portal helps
ensure the availability of up-to-date information about funding portals and their associated
persons. In addition, the requirement that a funding portal file Form Funding Portal-W to
withdraw from registration informs the Commission that a funding portal is no longer engaging
in funding portal activities.
The requirement that a funding portal make and keep books and records helps to ensure
that records of the respondent’s funding portal activities, as well as the activities of its associated
persons, exist. The Commission and other regulators could potentially request books and records
during an examination to evaluate the funding portal’s compliance with the Exchange Act and
the rules thereunder, as well as for other regulatory purposes.
The requirement that a nonresident funding portal complete Schedule C of Form Funding
Portal, furnish an agent for service of process, and make certain certifications helps minimize
legal or logistical obstacles that the Commission may encounter when attempting to effect
service, conserve Commission resources, and avoid potential conflicts of law. The requirement
that a nonresident funding portal provide an opinion of counsel on Form Funding Portal helps
ensure that such nonresident funding portal can provide access to its books and records and
submit to inspection and examination by the Commission.
3.

Consideration Given to Information Technology

The rules require respondents and registered funding portals to electronically file Forms
Funding Portal, Funding Portal/A, and Funding Portal-W through the Commission’s Electronic
Data Gathering, Analysis, and Retrieval System (“EDGAR”). By requiring submission of
information through EDGAR, Commission staff can efficiently retrieve and analyze the data it
needs, which enhances the Commission’s ability to carry out its mission with respect to funding
portal activities effectively. Issuers, the general public, and others will also be able to access
information about funding portals electronically through the Commission’s EDGAR system.
Information submitted on Form Funding Portal is also ASCII or HTML format, which may
3

improve the Commission staff’s ability to retrieve and analyze data and could allow funding
issuers, the general public, and others to perform better research into funding portals.
The rules also require funding portals to make and keep books and records relating to its
funding portal activities. Rule 404(c) permits funding portals to maintain and preserve the
required records on electronic storage media.
4.

Duplication

In adopting these rules, the Commission sought to design a registration process that is
similar to other registration processes administered by the Commission. The rules are based on
rules applicable to broker-dealers and investment advisers; similarly, Form Funding Portal is
based on Form BD. To the extent market participants are familiar with these existing registration
processes, the Commission believes that using similar processes to register funding portals
creates efficiencies for market participants.
Form Funding Portal, while modeled primarily on Form BD, is designed to capture
information regarding the activities of funding portals and the markets that they serve that is not
otherwise captured in other forms. This information permits the Commission to decide whether
to accept an application for registration; to manage the Commission’s regulatory and
examination programs; and to make such information available to FINRA to better inform its
regulation of funding portals. In addition, having information about funding portals in a single
location could improve the funding portal selection process.
In addition, requiring funding portals to file a registration form specifically tailored to
their funding portal activities is consistent with the broader public interest to make available to
the public information about funding portals. The Commission believes that persons seeking to
compile, compare, and analyze data pertaining to the entire universe of registered funding
portals, and regulators overseeing compliance with the rules and regulations applicable to
funding portals, should be able to access relevant information easily within one system.
With respect to the recordkeeping requirements, the Commission has requested
documents that are not duplicative to any other Commission requests of funding portals.
5.

Effect on Small Entities

The Commission notes that funding portals are required by statute to register with the
Commission. As such, the rules and forms affect funding portals required to register with the
Commission, including small entities. The Commission does not believe differing compliance or
reporting requirements or an exemption from coverage of the final rules and forms, or any part
thereof, for small funding portals is appropriate or consistent with investor protection. Because
the Commission believes that the protections of Title III of the JOBS Act are intended to apply
equally to clients of both large and small funding portals, it would be inconsistent with the
purposes of the Exchange Act to specify different requirements for small funding portals under
the final rules and forms. Thus, the rules and forms are designed to impose only those burdens
necessary to accomplish the objectives of the JOBS Act and minimize any significant adverse
impact on small funding portals.
4

Consequences of Not Conducting Collection

The collection of information under the rules and forms is designed to establish a
permanent registration regime and establish certain recordkeeping requirements for funding
portals, as provided in Title III of the JOBS Act. The permanent registration regime allows the
Commission to retrieve and analyze the data it needs more efficiently, which enhances the
Commission’s ability to carry out its mission with respect to funding portal activities effectively.
In addition, the permanent registration regime improves the process through which issuers and
investors select funding portals and incentivize funding portals not to engage in misconduct.
Absent the collection of information, funding portals would not have a permanent mechanism
through which to satisfy the requirement in Section 3(h) of the Exchange Act that the
Commission exempt, conditionally or unconditionally, a registered funding portal from the
requirement to register as a broker-dealer under Section 15(a)(1) of the Exchange Act. In
addition, less frequent collection of this information would not allow the Commission and other
regulators, issuers, or investors to access up-to-date information about funding portals.
7.

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

Since Rule 400(b) requires registered funding portals to file amendments to Form
Funding Portal if certain information contained in the forms becomes inaccurate, it is possible
for a registered funding portal to report information to the Commission more often than
quarterly. However, this collection of information is necessary to ensure that the Commission
and obligated persons, as well as the public, have access to current information regarding
funding portals registered with the Commission.
Rule 404(a) requires funding portals to maintain and preserve books and records for a
period of not less than five years, the first two in an easily accessible place. This rule is modeled
on Exchange Act Rules 17a-3 and 17a-4, and Rule 204-2 under the Investment Advisers Act, and
OMB has previously approved that collection with the same five-year retention period. This
collection of information helps to ensure that records exist of the respondent’s business activities
and of its associated persons, and that the records could potentially be requested by the
Commission and other regulators during an examination to evaluate the funding portal’s
compliance with the Exchange Act, the rules thereunder, and FINRA rules, as well as for other
regulatory purposes.
8.

Consultations Outside the Agency

The required Federal Register notice with a 60-day comment period soliciting comments
on this collection of information was published. No public comments were received.
9.

Payment or Gift

Not applicable.
10.

Confidentiality

To the extent the Commission receives confidential information pursuant to submissions
on Form Funding Portal, such information is kept confidential, subject to the provisions of
5

applicable law (e.g., Freedom of Information Act, 5 U.S.C. § 552 (2012)). In particular, the
collection of information may include social security numbers of sole proprietors in Form
Funding Portal that do not have an EIN number, as well as the social security numbers and dates
of birth of direct owners and executive officers that do not have a CRD number. This
information is necessary in connection with the Commission’s enforcement and examination
functions pursuant to Section 15B(c) of the Exchange Act. Guidance is provided in the forms
stating that information, such as social security numbers or dates of births, is not included in
publicly available versions of the form.
11.

Sensitive Questions

The information collection collects personally identifiable information (“PII”) that may
include name, job title, and work address. While the information collection may include social
security numbers (“SSNs”) of funding portals that do not have an EIN number, as well as the
SSNs and dates of birth of direct owners and executive officers that do not have a CRD number,
the agency has determined that a SORN is not required because information is retrieved by a
non-personal identifier. The EDGAR PIA will cover this collection of information.
12.

Burden of Information Collection
a.

Rule 400: Registration of Funding Portals
i.

Form Funding Portal: Application for Funding Portal Registration

The initial application for funding portals under Form Funding Portal is a one-time
reporting burden. Based on the data as reported in EDGAR filings and by FINRA, we estimate
that there were 74 registered funding portals as of December 31, 2021. Based on EDGAR
filings, we estimate that from inception (January 29, 2016) through December 31, 2021, 303
unique portals have filed a new Form Funding Portal, including those that have not, or are not,
currently registered. For purposes of this PRA, the Commission estimates approximately 50
companies will submit Form Funding Portal each year.4 Of those funding portals applicants,
over three years we estimate approximately one will be a nonresident funding portal.5 Of those
funding portal applicants, the Commission estimates that the number of new funding portals that
complete the registration process each year will be approximately 25.6

303 / approximately 6 years = approximately 50 companies a year.

Based on data collected from Form Funding Portal, we estimate the total number of
previously or currently registered nonresident funding portals to be 3. (3/7) x 3 = 1.28.

The number of funding portals expected to complete the registration process is much
lower than the number of funding portals who apply. Based on EDGAR filings, we
estimate that during the past three years (calendar years 2019-2021), 149 unique portals
have filed a new Form Funding Portal, including those that have not, or are not, currently
registered. Based on EDGAR filings, we estimate that during the past three years
6

We estimate the burden for registering as a funding portal with us based upon the existing
burdens for completing and filing Form BD.7 Consequently, we estimate that it takes a resident
funding portal 2.75 hours to complete Form Funding Portal. The total hours required for resident
funding portals to register with us is approximately 137.5 hours.8
In summary, the Commission estimates that, over a three-year period, the total
reporting burden for the completion and submission of Form Funding Portal will be 412.5
hours, or 137.5 hours per year9 when annualized over three years. The total burden per
respondent will be 2.75 hours, or 0.92 hours per year10 when annualized over three years
(IC1).
ii.

Registered National Securities Association Membership

The requirement that newly-registered intermediaries be required to become members of
a registered national securities association is a one-time third party disclosure burden. The
Commission does not believe the hour burdens and costs associated with FINRA’s membership
constitute paperwork burdens and costs attributable to the Commission’s rules.”11 Therefore, we
are not providing estimates of burdens and costs resulting from membership in a registered
national securities association.
iii.

Form Funding Portal/A: Amendment to Registration

Once registered, funding portals need to file an amended Form Funding Portal when
information it originally reported on Form Funding Portal changes or becomes inaccurate. Such
amendments are an on-going reporting burden. The Commission estimates that each funding
portal registrant will need to submit approximately one amendment per year.12

(calendar years 2019-2021), 74 unique portals have become registered with the
Commission on Form Funding Portal, including those that are no longer registered/have
since withdrawn their registration.
7

See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526
n.1657.

2.75 hours/respondent × 50 funding portals = 137.5 hours. In addition, those entities that
register as nonresident funding portals will face an additional burden, which is accounted
for below. See infra A.12.v.

(2.75 hours × 50 new funding portals) × 3 = 412.5 hours ÷ 3 = 137.5 hours per year.

412.5 hours (total annual reporting burden) ÷ 150 (total funding portals applicants by end
of Y3) = 2.75 hours ÷ 3 = .92 hours per respondent.

See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526.

According to data collected from Form Funding Portal, there have been 252 amendments
to Form Funding Portal filed in the past three years—84 per year on average. As of the
end of 2021, there were 74 registered funding portals. For purposes of this PRA, we have
assumed each funding portal files approximately 1.1 amendments a year and only fully
7

We estimate that the average time necessary to complete an amended Form Funding
Portal is approximately 0.33 hours (i.e., 20 minutes per amendment). This figure is based on
previous estimates of the average time necessary to complete an amended Form BD, which is a
similar form.13 Thus, we estimate that the total annual burden hours for funding portals to
complete and file amended Forms Funding Portal will be approximately 35.9 hours for each
year.14
In summary, the Commission estimates that the total ongoing reporting burden will
be 35.9 hours per year. The total reporting burden per respondent to amend Form
Funding Portal will be 1.1 hours per year (IC2).
iv.

Form Funding Portal-W: Notice of Withdrawal from Registration as
a Funding Portal

We take into consideration funding portals that register to engage in crowdfunding
transactions conducted in reliance on Section 4(a)(6) may eventually decide to withdraw their
registration. Withdrawal from Form Funding portal is a one-time reporting burden requiring the
entity to complete and file with us Form Funding Portal-W. We estimate that approximately five
funding portals may choose to withdraw from registration each year.15
The Commission estimates that the average amount of time for a funding portal to
complete Form Funding Portal-W is 0.25 hours. This figure is based on the burden estimate for
completing Form BDW.16 Thus, the Commission estimates a total burden of 1.25 hours for each
year.17

registered funding portals have filed amendments. 84/74=1.1. We estimate that the
number of funding portals will be 74 in Y1, 99 in Y2, and 124 in Y3. For purposes of
this PRA calculation, we assume that there are 99 funding portals each year.
13

See Regulation Crowdfunding, Exchange Act Release No. Exchange Act Release No.
76324, 80 Fed. Reg. at 71526 n.1663 (“We currently estimate that the average time
necessary to complete an amended Form BD to be approximately 20 minutes, or 0.33
hours. We estimate that an amendment to Form Funding Portal will take the same
amount of time as an amendment to Form BD because the forms are similar. ”).

(99 funding portals) × 1.1 (amendments per year) × 0.33 hours (estimated time per
amendment) = 35.9 hours.

We estimate that of funding portals applicants participating in crowdfunding transactions
in reliance on Section 4(a)(6), approximately five will withdraw from registration
annually.

See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71526
n.1658.

0.25 hours (burden for Form Funding Portal-W) × 5 funding portals (estimated number of
Form Funding Portal-W applicants per year) = 1.25 hours.

In summary, the Commission estimates that, over a three-year period, the total
reporting burden for the completion of Form Funding Portal-W will be 3.75 hours, or
approximately 1.25 hours per year18 when annualized over three years. The total one-time
reporting burden will be 0.25 hours per respondent, or 0.08 hours per year19 when
annualized over three years (IC3).
v.

Form Funding Portal: Completion of Schedule C, Designation of
U.S. Agent for Service of Process and Opinion of Counsel for
Nonresident

The designation of a U.S. agent for service of process is a one-time reporting burden.
The Commission estimates that there will be approximately one nonresident funding portal
respondent each year. This nonresident funding portal respondent need to complete Schedule C
of Form Funding Portal (including the required certifications), provide an opinion of counsel,
and document the appointment of an agent for service of process.
The Commission estimates that the average amount of time to complete Schedule C of
Form Funding Portal and make the required certifications is half an hour, to provide an opinion
of counsel on Form Funding Portal is one hour, and to document the appointment of an agent for
service of process is a half an hour.20 Therefore, the total one-time reporting burden for each
nonresident funding portal respondent is two hours.
In summary, the Commission estimates that, over a three-year period, the total
reporting burden for nonresident funding portal respondents will be 2 hours, or
approximately .66 hours per year21 when annualized over three years. The average burden
for each nonresident funding portal will be approximately 2 hours, or 0.67 hours per year22
when annualized over three years (IC4).
b.

Rule 404: Books and Records to Be Made and Maintained by Funding
Portals

The maintenance of books and records is an ongoing annual recordkeeping burden. The
18

(5 funding portals × 0.25 hours) × 3 years = 3.75 hours ÷ 3 = 1.25 hours per year.

3.75 hours (total burden to complete Form Funding Portal-W, over three years) ÷ 15
(total estimated number of entities withdrawing from Form Funding Portal registration by
end of Y3) = 0.25 hours ÷ 3 = 0.08 hours per respondent.

See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71526.

1 (nonresident funding portal expected to register at the end of Y3) × 2 hours (average
estimated time to complete Schedule C, provide opinion of counsel, and document the
appointment of an agent for service of process) = 2 hours ÷ 3 = .66 hours per year.

6 (estimated additional burden to register over three years) ÷ 3 (estimated number of
nonresident funding portals to register over three years) = 2 hours ÷ 3 = 0.67 hours per
respondent.

Commission estimates that this collection of information will apply to 74 funding portals in the
first year, 25 additional funding portals in the second year, and 25 additional funding portals in
the third year, or an average of 99 funding portals for years one through three.
The Commission estimates that the average annual burden for funding portals to comply
with the recordkeeping requirements is approximately 325 hours per respondent.23 The
Commission currently estimates the annual recordkeeping burden for broker-dealer compliance
with Rule 17a-3 to be 394.16 hours per respondent, and the most recently approved annual
recordkeeping burden for broker-dealer compliance with Rule 17a-4 to be 249 hours per
respondent.24 We expect the burden of the rules will likely be less than that of Rules 17a-3 and
17a-4. For the purposes of the PRA, we assume that the recordkeeping burden, on average, for a
funding portal to comply with the rules will be 50% of the burdens of a broker-dealer to comply
with Rules 17a-3 and 17a-4. Therefore, we estimate the burden to be 325 hours per respondent,
or 32,175 hours per year.25
In summary, the Commission estimates that the total recordkeeping burden will be
32,175 hours per year. The total recordkeeping burden per respondent will be 325 hours
per year (IC5).
c.

Rule 403: Compliance Policies and Procedures

All registered funding portals will be required to implement written policies and
procedures reasonably designed to achieve compliance with the federal securities laws and the
rules and regulations thereunder. We estimate that the 75 new funding portals will each spend
approximately 40 hours to establish written policies and procedures to achieve compliance with
these requirements. This will result in an initial recordkeeping burden of 3,000 hours for new
funding portals.26
We estimate that, on an ongoing basis, funding portals will spend approximately 5 hours
per year updating, as necessary, the policies and procedures required by the rules. This will
result in an aggregate ongoing recordkeeping burden of 784 hours.27
In summary, the Commission estimates that, over a three-year period, the total
recordkeeping burden to establish compliance policies and procedures will be 3,000 hours,

394.16 hours (recordkeeping burden for Rule 17a-3) + 249 hours (recordkeeping burden
for Rule 17a-4) × 50% = 321.58.

See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. 71531.

325 hours × 99 funding portals = 32,175 hours.

40 hours ×75 funding portals = 3,000 hours.

Y1 ongoing burden (5 hours × 74 funding portals) + Y2 ongoing burden (5 hours × 99
funding portals) + Y3 ongoing burden (5 hours × 124 funding portals) = 1,485 hours ÷ 3
= 495 hours per year.

or 1,000 per year28 when annualized over three years (IC6). The total estimated burden
per funding portal will be 40 hours, or 13.33 hours per year29 when annualized over three
years. The total recordkeeping burden to maintain compliance policies and procedures
will be 495 hours per year. The total estimated burden per funding portal will be 5 hours
per year (IC7).
d.

Rule 403: Compliance Privacy
i.

Regulation S-P

We estimate that all funding portals will be subject to the requirements of Regulation S-P
under the regulation. In developing an estimate we have considered: (1) the minimal
recordkeeping burden imposed by Regulation S-P (Regulation S-P has no recordkeeping
requirement, and records relating to customer communications already must be made and
retained pursuant to other Commission rules); (2) the summary fashion in which information
must be provided to investors in the privacy and opt-out notices required by Regulation S-P (the
model privacy form adopted by the Commission and the other agencies in 2009, designed to
serve as both a privacy notice and an opt-out notice, is only two pages); and (3) the availability
of the model privacy form and online model privacy form builder. Given these considerations
and with the aid of our institutional knowledge, we estimate that each funding portal spends, on
an ongoing basis, an average of approximately 12 hours per year complying with the information
collection requirement of Regulation S-P.
In summary, the Commission estimates that the total third-party disclosure burden
for Regulation S-P is 1,188 hours per year.30 The reporting burden per respondent is 12
hours per year (IC8).
ii.

Regulation S-AM

Regulation S-AM will require funding portals to provide a notice to each affected
individual informing the individual of his or her right to prohibit such marketing before a
receiving affiliate may make marketing solicitations based on the communication of certain
consumer financial information from the broker. We estimate that approximately 30 funding
portals are already subject to the requirements of Regulation S-AM. For each subsequent year,
we estimate that approximately two new funding portals each year will also be subject to the

3,000 hours (total one-time burden) ÷ 3 = 1,000 hours per year.

40 hours ÷ 3 = 13.33 hours per respondent.

Y1 ongoing burden (12 hours × 74 funding portals) + Y2 ongoing burden (12 hours × 99
funding portals) + Y3 ongoing burden (12 hours × 124 funding portals) = 3,564 hours ÷ 3
= 1,188 hours per year.

requirements of Regulation S-AM. Accordingly, we estimate the total number of funding portals
subject to S-AM will be 36 over three years.31
We estimate that each new funding portal requires an average one-time burden of one
hour to review affiliate marketing practices, for a total of 6 hours over three years.32 Each new
funding portal is required to provide notice and opt-out opportunities to consumers pursuant to
the requirements of Regulation S-AM, and we estimate that they will incur an average one-time
burden of 18 hours in doing so, for a total estimated burden of 108 hours over three years.33
Therefore, the total one-time burden for new funding portals is 114 hours.34
We estimate that funding portals will incur an ongoing burden related to the requirements
of Regulation S-AM to provide notice and opt-out opportunities of approximately 4 hours per
respondent per year to create and deliver notices to new investors and record any opt-outs that
are received on an ongoing basis, for a total of approximately 136 burden hours per year.35
In summary, the Commission estimates that the total one-time third-party
disclosure burden for Regulation S-AM is 114 hours, or 38 hours per year36 when
annualized over three years (IC9). The total third-party disclosure burden for Regulation
S-AM is 136 hours per year, or four hours per respondent (IC10).
iii.

Regulation S-ID

Regulation S-ID generally requires funding portals to develop and implement a written
identity theft prevention program that is designed to detect, prevent and mitigate identity theft in
connection with certain existing accounts or the opening of new accounts. We estimate that all
funding portals need to comply with Regulation S-ID.
Based on our institutional knowledge, we estimate that the initial burden for funding
portals to comply with the applicable portions of Regulation S-ID is (1) 25 hours to develop and
obtain board approval of a program; (2) 4 hours to train staff; and (3) 2 hours to conduct an

30 funding portals + 2 (new funding portals Y1) + 2 (new funding portals in Y2) + 2 (new
funding portals in Y3) = 36.

Y1 initial burden to review marketing practices (1 hour × 2 new funding portals) + Y2
initial burden to review marketing practices (1 hour × 2 new funding portals) + Y3 initial
burden to review marketing practices (1 hour × 2 new funding portals) = 6 hours.

Y1 initial burden (18 hours × 2 new funding portals) + Y2 initial burden (18 hours × 2
new funding portals) + Y3 initial burden (18 hours × 2 new funding portals) = 108 hours.

6 hours + 108 hours = 114 hours.

Y1 ongoing burden (4 hours × 32 funding portals) + Y2 ongoing burden (4 hours × 34
funding portals) + Y3 ongoing burden (4 hours × 36 funding portals) = 408 hours ÷ 3 =
136 hours per year.

114 hours ÷ 3 = 38 hours per year.

initial assessment of relevant accounts, for a total of 31 hours per funding portal.37 We estimate
that all new funding portals incur this one-time burden, resulting in an aggregate time burden of
2,325 hours over three years.38
With respect to the requirements of Regulation S-ID, we estimate that the ongoing burden
per year will include: (1) 2 hours to periodically review and update the program, review and
preserve contracts with service providers and review and preserve any documentation received
from service providers; (2) 4 hours to prepare and present an annual report to a compliance
director; and (3) 2 hours to conduct periodic assessments to determine if the entity offers or
maintains covered accounts for a total of 8 hours,39 of which we estimate 7 hours will be spent
by internal counsel and 1 hour will be spent by a compliance officer. We estimate that all
funding portals will incur this ongoing time burden, resulting in an aggregate burden of 792
hours over three years.40
In summary, the Commission estimates that the initial recordkeeping burden for
funding portals to comply with the applicable portions of Regulation S-ID is 2,325 over a
three-year period, or 775 hours per year41 when annualized over three years (IC11). The
ongoing recordkeeping burden for Regulation S-ID is 792 hours per year, or 8 hours per
respondent (IC12).

25 hours + 4 hours + 2 hours = 31 hours.

Y1 one-time burden (31 hours × 25 new funding portals) + Y2 one-time burden (31 hours
× 25 new funding portals) + Y3 one time burden (31 hours × 25 new funding portals) =
2,325 hours.

2 hours + 4 hours + 2 hours = 8 hours.

Y1 ongoing burden (8 hours × 74 funding portals) + Y2 ongoing burden (8 hours × 99
funding portals) + Y3 ongoing burden (8 hours × 124 funding portals) = 2,376 hours ÷ 3
= 792 hours per year.

2,325 hours ÷ 3 = 775 hours per year.
13

Summary of Hourly Burdens

The table below summarizes the Commission’s estimates of the total hourly reporting
burden for all respondents under Regulation Crowdfunding.
IC

Nature of Information
Collection Burden

Type of Burden

Number of
Respondents

Number of
Responses Per
Year

Annualized
Burden
Estimate Per
Respondent

Annualized
Hourly Burden
Estimate
Industry-Wide

Small
Business
Entities
Affected42

Rule 400: Registration of
Funding Portals

Form Funding Portal:
Application for Funding Portal
Registration

Reporting

150

.92

138

ii.

Registered National Securities
Association Membership

Third-Party
Disclosure

iii.

Form Funding Portal/A:
Amendment to Registration

Reporting

1.1

.36

iv.

Form Funding Portal-W: Notice
of Withdrawal from
Registration as a Funding Portal

Reporting

0.08

Form Funding Portal:
Designation of U.S. Agent for
Service of Process and Opinion
of Counsel for Nonresident

Reporting

.333

.67

Rule 404: Books and Records
to Be Made and Maintained by
Funding Portals
Initial
Ongoing

Recordkeeping

.333

Recordkeeping

325

32,175

Rule 403: Compliance Policies
and Procedures Initial Burden
Ongoing Burden

Recordkeeping

.333

1,000

Recordkeeping

495

7
d.

Rule 403: Compliance Privacy

Regulation S-P

Third-Party
Disclosure

1,188

ii.

Regulation S-AM –
Initial Burden

Third-Party
Disclosure

.333

6.33

Ongoing Burden

Third-Party
Disclosure

136

Regulation S-ID –
Initial Burden

Recordkeeping

.333

775

Ongoing Burden

Recordkeeping

792

10
11

iii.

36,775

13.

Costs to Respondents
a.

Rule 400: Registration of Funding Portals
i.

Form Funding Portal: Application for Funding Portal Registration

Not applicable.
42

For PRA purposes, the number of small business entities is calculated by multiplying the
number of respondents by the 30/50 percentage or 60%.
14

ii.

Registered National Securities Association Membership

As explained in further detail above, the Commission determined not to provide estimates of
burdens and costs resulting from membership in a registered national securities association.43
iii.

Form Funding Portal/A: Amendment to Registration

Not applicable.
iv.

Form Funding Portal-W: Notice of Withdrawal from Registration as
a Funding Portal

Not applicable.
v.

Form Funding Portal: Designation of U.S. Agent for Service of
Process and Obtain an Opinion of Counsel for Nonresident

The Commission estimates that one nonresident funding portal will register over the next
three years. These funding portals face an additional initial cost to retain an agent for the service
of process and provide an opinion of counsel to register as a nonresident funding portal.
The Commission estimates that this initial cost for nonresident funding portals will be
approximately $25,179 to retain an agent for the service of process and provide an opinion of
counsel.44 Over three years, the initial additional cost across all nonresident funding portals will
be approximately $25,179.45
In summary, the Commission estimates that, over a three-year period, the total
additional cost for all nonresident funding portals to retain an agent for service of process,
and provide an opinion of counsel is $25,179, or $8,393 per year46 when annualized over
three years. The total cost per respondent is $25,179, or $8,39347 when annualized over
three years (IC4).

See supra 12.a.ii.

See Regulation Crowdfunding, Exchange Act Release No. 76324, 80 Fed. Reg. at 71527
n.1665.

$25,179 × 1 (estimated new nonresident funding portals at the end of Y3) = $25,179. The
Commission originally estimated ongoing costs for retaining an agent for service of
process, but after closer review has determined it is not likely that there are ongoing costs
for retaining such an agent.

$25,179/3 = $8,393 per year.

$25,179/3 = $8,393 per year.
15

Rule 404: Books and Records to be Made and Maintained by Funding
Portals

We assume that a funding portal’s initial recordkeeping cost associated with making and
keeping records by a funding portal is not significantly different from the ongoing recordkeeping
cost because maintaining such records is consistent each year. The annual recordkeeping cost for
broker-dealer compliance with Rule 17a-3 is currently estimated at $5,706.67 per respondent.
These ongoing recordkeeping costs reflect the costs of systems and equipment development. The
annual recordkeeping cost for broker-dealer compliance with Rule 17a-4 is currently estimated at
$5,000 per respondent. Given the more limited scope of a funding portal’s business as compared
to that of a broker, the more limited scope of the books and records rules, and the fact that
funding portals will be required to make, deliver, and store records electronically, we expect the
annual recordkeeping cost of the rule requirements is likely less than that of Rules 17a-3 and
17a-4. For purposes of the PRA, we assume that the annual recordkeeping cost on average for a
funding portal to comply with the rule requirements that records be made and kept is about 50%
less than burdens of a broker-dealer to comply with Rules 17a-3 and 17a-4.
Based on the above, we expect the initial recordkeeping cost for funding portals,
therefore, to be approximately $5,350 per respondent,48 or $401,250 total over three years.49 We
also estimate that the ongoing recordkeeping cost for funding portals will be approximately
$5,350 per respondent, or $529,650 per year.50
In summary, the Commission estimates that, over a three year period, the initial
total cost for funding portals to comply with Rule 404 is approximately $401,250, or
133,750 per year51 when annualized over three years (IC13). The cost per respondent is
$5,350, or $1,783 per year52 when annualized over three years. The ongoing cost is
$529,650 per year, or $5,350 per respondent (IC5).
c.

Rule 403: Compliance Policies and Procedures

Not applicable.
d.

Rule 403: Compliance Privacy

Not applicable.

$5,706.67 (recordkeeping cost for Rule 17a-3) + $5,000 (recordkeeping cost for Rule
17a-4) × 50% = $5,353, or approximately $5,350.

Y1 ($5,350 × 25 new funding portals in Y2) + Y2 ($5,350 × 25 new funding portals in Y2)
+ Y3 ($5,350 × 25 new funding portals in Y3) = $401,250.

Y1 ($5,350 × 74 funding portals) +Y2 ($5,350 × 99 funding portals) + Y3 ($5,350 × 124
funding portals) = $1,588,950 ÷ 3 = $529,650 per year.

$401,250 ÷ 3 = $133,750 per year.

$5,350 ÷ 3 = $1,783 per respondent.
16

Summary of Cost Burdens

The table below summarizes the Commission’s estimate of the annual cost burdens for
funding portals.
IC

Nature of Information
Collection Burden

Type of Burden

Number of
Respondents

Number of
Responses Per
Year

Annualized Cost
Estimate Per
Respondent

Annualized
Hourly Cost
Estimate
Industry-Wide

Small
Business
Entities
Affected

Rule 400: Registration of
Funding Portals

Form Funding Portal:
Application for Funding Portal
Registration

Reporting

ii.

Registered National Securities
Association Membership

Third-Party
Disclosure

iii.

Form Funding Portal/A:
Amendment to Registration

Reporting

1.1

iv.

Form Funding Portal-W: Notice
of Withdrawal from
Registration as a Funding Portal

Reporting

Form Funding Portal:
Designation of U.S. Agent for
Service of Process and Opinion
of Counsel for Nonresident

Reporting

.333

$8,383

$8,393

Rule 404: Books and Records
to Be Made and Maintained by
Funding Portals
Initial
Ongoing

Recordkeeping

.333

$1,783.33

$133,750

Recordkeeping

$5,350

$529,650

Rule 403: Compliance Policies
and Procedures –
Initial Burden
Ongoing Burden

Recordkeeping

.333

Recordkeeping

Rule 403: Compliance Privacy

Regulation S-P

Third-Party
Disclosure

ii.

Regulation S-AM –
Initial Burden

Third-Party
Disclosure

.333

Ongoing Burden

Third-Party
Disclosure

Regulation S-ID –
Initial Burden
Ongoing Burden

Recordkeeping

.333

Recordkeeping

iii.

$671,793

14.

Costs to Federal Government

There will be no additional costs to the Federal Government.
15.

Reason for Change

The burden has increased in terms of both hours and costs. This is because the number of
funding portals registered with the Commission has increased from 43 to 74. In addition, based
on filings in recent years, the Commission staff estimate that the number of companies that will
submit Form Funding Portal each year is 50 (down from the prior estimate of 74) and that the
number of successful registrations will increase 25 funding portals per year, from a previous
17

estimate of 5. Because the status quo number (the number of currently funding portals) is larger,
and the estimated number of new registrants per year has grown, the overall burden is
proportionally larger.
16.

Information Collection Planned for Statistical Purposes

Not applicable. The information collection is not used for statistical purposes.
17.

Display of OMB Approval 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

This collection complies with the requirements in 5 CFR 1320.9.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods.

File Type	application/pdf
File Modified	2022-03-10
File Created	2022-03-10