Form N-4 (P-Cyber) Supporting Statement

OMB CONTROL NUMBER: 3235-0318
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
FORM N-4
A.

JUSTIFICATION
1.

Necessity for the Information Collection

Form N-4 (17 CFR 239.17b and 274.11c) is the form used by insurance company
separate accounts organized as unit investment trusts that offer variable annuity contracts
to register as investment companies 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”). 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 registration statement be effective before
any securities are sold, and Section 8 of the Investment Company Act (15 U.S.C. 80a-8)
provides for the registration of investment companies. Pursuant to Form N-4, separate
accounts organized as unit investment trusts that offer variable annuity contracts provide
investors with a prospectus and a statement of additional information (“SAI”) covering
essential information about a separate account. 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.
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-4 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-4 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 a 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.
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

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-4, 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

information, generating benefits to investors and financial markets. Form N-4 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-4 generally are not 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-1A 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 imposing different requirements
on smaller investment companies would not be consistent with investor protection and
the purposes of the registration statement requirements.

3

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

4

5 U.S.C. 601 et seq.

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6.

Consequences of Not Conducting Collection

The purpose of Form N-4 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 a 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-4, including the collection of
information requirements resulting from the proposed amendments. Before adopting
these amendments, the Commission will receive and 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.
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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. In our most recent Paperwork Reduction Act submission for Form N-4, we
estimated for Form N-4 a total aggregate annual hour burden of 292,487 hours, and a
total annual aggregate annual external cost burden of $33,348,866. 6 Compliance with the
disclosure requirements of Form N-4 is mandatory, and the responses to the disclosure
requirements will not be kept confidential. The table below summarizes our PRA initial

5

44 U.S.C. 3501 et seq.

On October 26, 2021, the Office of Management and Budget approved without change a revision
of the currently approved information collection estimate for Form N-4.

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and ongoing annual burden estimates associated with the proposed amendments to Form
N-4.

6

Table 1: Burden Estimates for Initial and Ongoing Registration Statements Filed on
Form N-4
Internal
initial
burden hours

Internal annual
burden hours1

Wage rate2

Internal time
costs

Annual external
cost burden

$5,340

$9925

PROPOSED FORM N-4 ESTIMATES
$356
Cybersecurity incident
disclosures3

21 hours

15 hours4

(blended rate for
compliance attorney and
senior programmer)

Number of funds

× 418 funds

× 418 funds

x 2096

Total new aggregate annual
burden

6,270 hours

$2,232,120

$207,328

TOTAL ESTIMATED BURDENS INCLUDING AMENDMENTS
Current aggregate annual
burden estimates

+ 292,487
hours

+ $33,348,866

Revised aggregate annual
burden estimates

298,757 hours7

$33,556,194

Notes:
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.
7. The revised aggregate annual burden estimate from the Cybersecurity Risk Governance and Incident Disclosure Proposal was corrected for
this estimate.

13.

Cost to Respondents

Cost burden is the cost of goods and services purchased to prepare and amend
registration statements on Form N-4, such as for the services of independent auditors and
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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-4, Commission staff estimated about $33,348,866 in external cost
burden per year. We estimate that the annual cost of outside services associated with
these proposed amendments to Form N-4 is approximately $992 per fund and the total
annual external cost burden for the Form N-4 proposed amendments is $207,328. 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 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-4 has
increased as follows:

7

This estimate is based on the following calculation: 209 funds x $992 per filing = $207,328.

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Table 2: Comparison of Current and Revised Burden Hours and External Cost for
Registration Statements Filed on Form N-4
Annual Time Burden (hours)

Form N-4

External Cost Burden (dollars)

Currently
Approved

Revised
Estimate

Change

Currently
Approved

Revised
Estimate

Change

292,487

298,757

6,270

$33,348,866

$33,556,194

$207,328

The changes in annual burden hours and external cost burden are due to our proposed
amendments to Form N-4 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.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

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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