Supporting Statement for Rules 147(f)(1)(iii).2023.Final

SUPPORTING STATEMENT FOR THE PAPERWORK REDUCTION ACT
INFORMATION COLLECTION SUBMISSION FOR
RULE 147(f)(1)(iii)
A.

JUSTIFICATION
1.

CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY

Rule 147 contains “collection of information” requirements within the meaning of the PRA.
Specifically, Rules 147(f)(1)(iii) contains a provision requiring issuers relying on the rule to
“obtain a written representation from each purchaser as to his or her residence
Rule 147(f)(1)(iii) will require the issuer to obtain from the purchaser a written
representation as to the purchaser’s residency. The representation is not required to be presented in
any particular format, although it must be in writing. Representations obtained by the issuer are
not required to be kept confidential, and there is no mandatory retention period.
2.

PURPOSE AND USE OF THE INFORMATION COLLECTION

In order to qualify for the exemptions under Rule 147, the purchaser in the offering must be
a resident of the same state or territory in which the issuer is resident. Under the rule, an issuer
will satisfy this requirement by either the existence of the fact that the purchaser is a resident of the
applicable state or territory, or by establishing that the issuer has a reasonable belief that the
purchaser of the securities in the offering is a resident of such state or territory.
In addition, issuers will be required to obtain a written representation from each purchaser
as to his or her residence. While the formal representation of residency by itself is not sufficient to
establish a reasonable belief that such purchasers are in-state residents, the representation
requirement, together with the reasonable belief standard, may result in better compliance with the
final rules.
3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

The collection of information requirements will not be provided to the Commission, either
electronically or otherwise.
4.

DUPLICATION OF INFORMATION

We are not aware of any rules that conflict with or substantially duplicate Rule
147(f)(1)(iii).

1

5.

REDUCING THE BURDEN ON SMALL ENTITIES

Rule 147(f)(1)(iii) is designed to streamline and modernize the intrastate offering
exemption for all issuers, both large and small. The written representation requirement contained
in Rule 147(f)(1)(iii) will apply to all issuers, including small entities. While the Commission does
not collect data on the number and size of Rule 147 offerings or the type of issuers currently
relying on the Rule 147 safe harbor, the nature of the eligibility requirements and other restrictions
of the rule lead us to believe that the adopted rules will be used by U.S. incorporated entities that
are likely small businesses seeking to raise small amounts of capital locally without incurring the
costs of registering with the Commission.
In connection with amended Rule 147, we do not think it feasible or appropriate to establish
different compliance or reporting requirements or timetables for small entities. The rule is
designed to facilitate access to capital for both large and small issuers, but particularly smaller
issuers who may satisfy their financing needs by limiting the sales of their securities only to
residents of the state or territory in which the issuers are resident. The written representation
requirement contained in Rule 147(f)(1)(iii) is designed with the limited resources of smaller
issuers in mind.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The purpose of the written representation requirement contained in Rule 147(f)(1)(iii) is to
require all issuers conducting these intrastate offerings to obtain a consistent piece of evidence of
each purchaser’s residency. Obtaining a written representation from a purchaser of in-state
residency status will not, without more, be sufficient to establish a reasonable belief that such
purchaser is an in-state resident.
In addition to the written representation, other facts and circumstances could include, but
will not be limited to, for example, a pre-existing relationship between the issuer and the
prospective purchaser that provides the issuer with sufficient knowledge about the prospective
purchaser’s principal residence or principal place of business so as to enable the issuer to have a
reasonable basis to believe that the prospective purchaser is an in-state resident. An issuer may
also consider other facts and circumstances when establishing the residency of a prospective
purchaser, such as evidence of the home address of the prospective purchaser, as documented by a
recently dated utility bill, pay-stub, information contained in state or federal tax returns, any
documentation issued by a federal, state, or local government authority, such as a driver’s license
or identification card, or a public or private database that the issuer has determined is reasonably
reliable, including credit bureau databases, directory listings, and public records.
7.

SPECIAL CIRCUMSTANCES

There are no special circumstances with this information collection.

2

8.

CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY

No comments were received during the 60-day comment period prior to OMB’s review of
this submission.
9.

PAYMENT OR GIFT TO RESPONDENTS

No payment or gift to respondents.
10.

CONFIDENTIALITY

Rule 147(f)(1)(iii) is not filed with the Commission.
11.

SENSITIVE QUESTIONS

No information of a sensitive nature is required under this collection of information. The
information collection for the written representation requirement contained in Rule 147(f)(1)(iii)
collects basic Personally Identifiable Information (PII) that may include name, business address,
and residential address.
12. ESTIMATE OF RESPONDENTS REPORTING BURDEN

Information
Collection Title
(A)
Rule 147(f)(1)(iii)

Estimated Reporting Burden
OMB
Current
Issuers
Control
Annual
Burden
Number
Responses
Hours
(B)
(C)
(D)
3235-0756
700
175

Purchasers
Burden
Hours
(E)
1,750

Total
Burden
Hours
(F=D+E)
1,925

We estimate that approximately 700 respondents (i.e., issuers) will conduct offerings under
Rule 147 each year, and therefore must comply with Rule 147(f)(1)(iii) by obtaining written
representations from each purchaser in the offering as to his or her residence. We estimate that it
takes approximately 0.25 hours (15 minutes) for issuers to obtain written representations from all
purchasers in each offering as to their residence for an aggregate annual burden of 175 issuer
burden hours for compliance with the requirement in Rule 147(f)(1)(iii) (700 issuers x 0.25 hours
per response). We derived our burden hour estimates by estimating the average number of hours it
would take an issuer to compile the necessary information and data, prepare and review disclosure,
file documents and retain records. In connection with rule amendments to the rule, we
occasionally receive PRA estimates from public commenters about incremental burdens that are
used in our burden estimates. We recognize that the burden will likely vary among issuers based
on the size of their offerings and the number of purchasers acquiring securities in their offerings
and between natural person and legal entity purchasers
Similarly, we anticipate that the written representation required by purchasers, including
the obligation to determine the state or territory of their residence, as required under Rule
3

147(f)(1)(iii), will result in a burden incurred by purchasers in order to purchase securities in an
exempt intrastate offering pursuant to Rule 147(f)(1)(iii). For purposes of the PRA, we estimate
that the total annual paperwork burden for all affected purchasers arising from these collections of
information requirements will be 1,750 hours of purchaser time and no cost incurred for the
services of outside professionals. Specifically, we estimate each purchaser will spend an average
of approximately fifteen minutes preparing a written statement of residency to provide to the issuer
and will incur no cost for the services of outside professionals to satisfy this requirement, resulting
in an aggregate of 2.5 hours of purchaser time per offering and an aggregate annual burden of
1,750 purchaser hours (an average of 2.5 hours for each of the estimated 700 offerings per year
pursuant to Rule 147) for compliance with the requirement in Rule 147(f)(1)(iii).
Based on our estimates, there are approximately 700 issuers, and we calculated the total
reporting burden to be 1,925 hours (175 issuers reporting burden hours + 1,750 purchaser reporting
burden). For administrative convenience, the presentation of the total related to the paperwork
burden hours have been rounded to the nearest whole number. The estimated burden hours are
made solely for the purpose of the Paperwork Reduction Act
13. ESTIMATE OF TOTAL ANNUALIZED COST BURDEN
Estimated Cost Burden
Information
Collection Title

OMB Control
Number

Rule 147(f)(1)(iii)

3235-0756

Current
Number of
Responses
700

Current Cost
Burden

Requested
Cost Burden

$70,000

$105,000

We estimate each of the approximately 700 issuers will retain outside professional firms to
spend an average of fifteen minutes helping the issuer comply with the requirement in Rule
147(f)(1)(iii) to obtain and collect the written statement of residency from each purchaser in the
offering at an average cost of $600 per hour, resulting in a cost of $150 per issuer ($600 cost per
hour x 0.25 hours per response) and an aggregate annual cost of $105,000 ($600 cost per hour x
0.25 hours per response x 700 issuers) for all issuers to comply with this requirement of Rule 147
no cost to the purchaser to provide the issuer with a written statement of residency. We estimate
an hourly cost of $600 for outside legal and accounting services used in connection with public
company reporting. This estimate is based on our consultations with registrants and professional
firms who regularly assist registrants in preparing and filing disclosure documents with the
Commission. Our estimates reflect average burdens, and therefore, some companies may
experience costs in excess of our estimates and some companies may experience costs that are
lower than our estimates. For administrative convenience, the presentation of the total related to
the paperwork cost burden total has been rounded to the nearest dollar. The cost estimate is made
solely for the purpose of the Paperwork Reduction Act.

4

14.

COSTS TO FEDERAL GOVERNMENT

The annual cost of reviewing and processing disclosure documents, including registration
statements, post-effective amendments, proxy statements, annual reports and other filings of
operating companies amounted to approximately $125,800,170 in fiscal year 2021, based on the
Commission’s computation of the value of staff time devoted to this activity and related overhead.
15.

REASON FOR CHANGE IN BURDEN
Change In Burden
Information
Collection Title

OMB Control
Number

Cost per
Hour

Change in
Burden
Increase
(Adjustment)

Rule 147(f)(1)(iii)

3235-0756

$600

$35,000

The increase in cost burden of $35,0000 is due an adjustment in how the cost burden is
calculated. We recognize that the costs of retaining outside professionals may vary depending on
the nature of the professional services, but for purposes of this PRA analysis, we estimate that such
costs would be an average of $600 per hour. We are increasing the cost estimate to $600 per hour
to adjust the estimate for inflation from August 2006 to the present.
16.
INFORMATION COLLECTION PLANNED FOR STATISTICAL
PURPOSES
The information collection is not planned for statistical purposes.
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 FOR PAPERWORK
REDUCTION ACT SUBMISSIONS

There are no exceptions to certification for Paperwork Reduction Act submissions.
B.

STATISTICAL METHODS
The information collection does not employ statistical methods.

5