Form N-3 (P-Cyber) Supporting Statement

OMB CONTROL NUMBER: 3235-0316
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-3
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-3 (17 CFR 239.17a and 274.11b) is the form used by insurance company
separate accounts offering variable annuity contracts that are organized as management
investment companies to register under the Investment Company Act of 1940 (15 U.S.C. 80a-1
et seq.) (“Investment Company Act”) and/or to register their securities under the Securities Act
of 1933 (15 U.S.C. 77a et seq.) (“Securities Act”). Form N-3 is also the form used to file a
registration statement under the Securities Act (and any amendments thereto) for variable
annuity contracts funded by separate accounts that would be required to be registered under the
Investment Company Act as management investment companies, except for the exclusion
provided by Section 3(c)(11) of the Investment Company Act (15 U.S.C. 80a-3(c)(11)).
Section 5 of the Securities Act (15 U.S.C. 77e) requires the filing of a registration
statement prior to the offer of securities to the public and that the statement be effective before
any securities are sold, and section 8 of the Investment Company Act (15 U.S.C. 80a-8) requires
a separate account to register as an investment company. Section 5(b) of the Securities Act
requires that investors be provided with a prospectus containing the information required in a
registration statement prior to the sale or at the time of confirmation or delivery of the securities.
Form N-3 permits separate accounts offering variable annuity contracts organized as investment
companies to provide investors with a prospectus and a statement of additional information
(“SAI”) covering essential information about the separate account when it makes an initial or
additional offering of its securities.

On February 9, 2022, the Commission proposed rules related to cybersecurity risk
management for registered investment advisers, registered investment companies, and business
development companies as well as amendments to certain rules that govern investment adviser
and fund disclosures under the Investment Advisers Act of 1940 and the Investment Company
Act. 1 The Commission proposed several amendments to Form N-3 to require a description of
any significant fund cybersecurity incident that has occurred in its last two fiscal years, using a
structured data language. 2 These amendments are designed to enhance investor protection by
ensuring cybersecurity incident-related information is available to increase understanding and
insight into a fund’s cybersecurity history.
2.

Purpose and Use of the Information Collection

The purpose of Form N-3 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors with
information necessary to evaluate an investment in the security. This information collection
differs significantly from many other federal information collections, which are primarily for the
use and benefit of the collecting agency. The information required to be filed with the
Commission permits verification of compliance with securities law requirements and assures the
public availability and dissemination of the information.

1

Cybersecurity Risk Governance and Incident Disclosure, Securities Act Release No. 11028 (Feb. 9, 2022)
available at https://www.sec.gov/rules/proposed/2022/33-11028.pdf (“Cybersecurity Risk Governance and
Incident Disclosure Proposal”).

2

Although the interactive data filing requirements are included in the instructions to Form N-3, we are
separately reflecting the hour and cost burdens for these requirements in the burden estimate for Investment
Company Interactive Data (OMB control number 3235-0642) and not in this estimate.
2

3.

Consideration Given to Information Technology

The Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”)
system automates the filing, processing, and dissemination of full disclosure filings. This
automation has increased the speed, accuracy, and availability of information, generating
benefits to investors and financial markets. Form N-3 is required to be filed with the Commission
electronically on EDGAR. 3 The public may access filings on EDGAR through the Commission’s
website (http://www.sec.gov) or at EDGAR terminals located at the Commission’s public
reference rooms.
4.

Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication and reevaluates them whenever it proposes a rule or a change in a
rule. The requirements of Form N-3 generally are not generally duplicated elsewhere.
5.

Effect on Small Entities

The Commission reviews all rules periodically, as required by the Regulatory Flexibility
Act, 4 to identify methods to minimize recordkeeping or reporting requirements affecting small
businesses. The proposed disclosure requirements for registration statements on Form N-3 do not
distinguish between small entities and other investment companies. The burden on smaller
investment companies of preparing and filing registration statements may be proportionately
greater than for larger investment companies. This burden includes the cost of producing,
printing, filing, and disseminating prospectuses. The Commission believes, however, that

3

17 CFR 232.101(a)(1)(i) and (iv).

4

5 U.S.C. 601 et seq.
3

imposing different requirements on smaller investment companies would not be consistent with
investor protection and the purposes of the registration statement requirements.

6.

Consequences of Not Conducting Collection

The purpose of Form N-3 is to meet the filing and disclosure requirements of the
Securities Act and the Investment Company Act and to enable filers to provide investors with
information necessary to evaluate an investment in the security. Less frequent filing would be
inconsistent with the filing and disclosure requirements of the Securities Act and the Investment
Company Act. In addition, if the form were to be filed less frequently, investors may not be
provided with the information necessary to evaluate an investment in the security.
7.

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

This collection is not inconsistent with 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

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 staff with a means of ascertaining and acting upon paperwork burdens confronting the
industry. In addition, the Commission has requested public comment on the proposed
amendments to Form N-3, including the collection of information requirements resulting from
the proposed amendments. Before adopting these amendments, the Commission will receive and

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evaluate public comments on the proposed amendments and their associated collection of
information requirements.
9.

Payment or Gift

No payment or gift to respondents was provided.
10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be required
under this collection of information. The information collection collects basic Personally
Identifiable Information (PII) that may include names, job titles and work addresses. However,
the agency has determined that the information collection does not constitute a system of record
for purposes of the Privacy Act. Information is not retrieved by a personal identifier. In
accordance with Section 208 of the E-Government Act of 2002, the agency has conducted a
Privacy Impact Assessment (PIA) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on February 5, 2020, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy.
12.

Estimate of Hour and Cost Burden of Information Collection

The following estimates of average burden hours and costs are made solely for purposes
of the Paperwork Reduction Act of 1995 5 and are not derived from a comprehensive or even
representative survey or study of the cost of Commission rules and forms. Form N-3 generally
imposes two types of reporting burdens on investment companies: (1) the burden of preparing

5

44 U.S.C. 3501 et seq.
5

and filing the initial registration statement; and (2) the burden of preparing and filing posteffective amendments to a previously effective registration statement. In our most recent
Paperwork Reduction Act submission for Form N-3, we estimated for Form N-3 a total
aggregate annual hour burden of 2,836 hours, and a total annual aggregate annual external cost
burden of $123,114. 6 Compliance with the disclosure requirements of Form N-3 is mandatory,
and the responses to the disclosure requirements will not be kept confidential. The table below
summarizes our PRA initial and ongoing annual burden estimates associated with the proposed
amendments to Form N-3.
Table 1: Burden Estimates for Initial and Ongoing Registration Statements Filed on Form N-3
Internal
initial
burden hours

Internal annual
burden hours1

Wage rate2

Internal time
costs

Annual external
cost burden

$5,340

$9925

PROPOSED FORM N-3 ESTIMATES
$356
Cybersecurity incident
disclosures3

21 hours

15 hours4

(blended rate for
compliance attorney and
senior programmer)

Number of funds

× 14 funds

× 14 funds

x 76

Total new aggregate annual
burden

210 hours

$74,760

$6,944

TOTAL ESTIMATED BURDENS INCLUDING AMENDMENTS
Current aggregate annual
burden estimates

+ 2,836 hours

+ $123,114

Revised aggregate annual
burden estimates

3,046 hours

$130,058

Notes:

6

On August 13, 2020, the Office of Management and Budget approved without change a revision of the
currently approved information collection estimate for Form N-3.
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1. Includes initial burden estimates annualized over a 3-year period.
2. The Commission’s estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated figures are modified by firm
size, employee benefits, overhead, and adjusted to account for the effects of inflation.
3. This estimate represents the average burden for a filer. Filers that experience one or several fund cybersecurity incidents are expected to incur
higher burdens.
4. Includes initial burden estimates annualized over a three-year period, plus 8 ongoing annual burden hours. The estimate of 15 hours is based
on the following calculation: ((21 initial hours /3) + 8 additional ongoing burden hours) = 15 hours.
5. This estimated burden is based on the estimated wage rate of $496/hour, for 2 hours, for outside legal services. The Commission’s estimates
of the relevant wage rates for external time costs, such as outside legal services, take into account staff experience, a variety of sources
including general information websites, and adjustments for inflation.
6. We estimate that 50% of funds will use outside legal services for these collections of information. This estimate takes into account that funds
may elect to use outside legal services (along with in-house counsel), based on factors such as fund budget and the fund’s standard practices for
using outside legal services, as well as personnel availability and expertise.

13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and amend registration
statements on Form N-3, such as for the services of independent auditors and outside counsel.
The cost burden does not include the hour burden discussed in Item 12 above. Estimates are
based on the Commission’s experience with the filing of registration forms.
As summarized in Table 1 above, in our most recent Paperwork Reduction Act submission
for Form N-3, Commission staff estimated about $123,114 in external cost burden per year. We
estimate that the annual cost of outside services associated with these proposed amendments to
Form N-3 is approximately $992 per fund and the total annual external cost burden for the Form
N-3 proposed amendments is $6,944. 7
14.

Cost to the Federal Government

The annual cost of reviewing and processing disclosure documents, including new
registration statements, post-effective amendments, proxy statements, shareholder reports, and
other filings of investment companies amounted to approximately $25.7 million in fiscal year

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This estimate is based on the following calculation: 7 funds x $992 per filing = $6,944.
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2020, based on the Commission’s computation of the value of staff time devoted to this activity
and related overhead.
15.

Change in Burden

The estimated hourly burden and external cost associated with Form N-3 has increased as
follows:
Table 2: Comparison of Current and Revised Burden Hours and External Cost for Registration Statements
Filed on Form N-3
Annual Time Burden (hours)

Form N-3

External Cost Burden (dollars)

Currently
Approved

Revised
Estimate

Change

Currently
Approved

Revised
Estimate

Change

2,836

3,046

210

$123,114

$130,058

$6,944

The changes in annual burden hours and external cost burden are due to our proposed
amendments to Form N-3 requiring a description of any significant fund cybersecurity incident
that has occurred in the fund’s last two fiscal years.
16.

Information Collection Planned for Statistical Purposes

The results of any information collection will not be published.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date for OMB approval.
18.
Submission

Exceptions to Certification Statement for Paperwork Reduction Act

The Commission is not seeking an exception to the certification statement.
B. COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
The collection of information will not employ statistical methods.

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