FR 2021-00733

The document discusses a request from the Securities and Exchange Commission (SEC) to continue using Form N-54C. This form is crucial for business development companies that wish to withdraw from certain regulatory obligations, as outlined by the Investment Company Act of 1940. The SEC seeks to extend the current usage of this form, which is subject to review under the Paperwork Reduction Act of 1995.

General Summary

The SEC has approached the Office of Management and Budget (OMB) to extend the use of Form N-54C. This document informs the withdrawal process for business development companies that choose to relinquish specific regulatory commitments. The process involves these companies filing the form, with an estimated eight filings annually. Each filing is anticipated to take about one hour. The SEC notes costs associated with these filings, including fees for third-party vendors and employee time.

Significant Issues and Concerns

One concern the document raises is the additional cost burden stemming from the use of third-party vendors in filing Form N-54C. The necessity of using these vendors is not clarified, suggesting that companies incur extra expenses that might be avoidable. Moreover, the estimation of the hourly wage for compliance attorneys seems high, calculated at $368 per hour, based on data from 2013. This outdates the estimation and may not be reflective of current market rates. Furthermore, using such an hourly rate could pose a significant burden for smaller companies with fewer resources.

Broad Public Impact

For the general public, this document reinforces the transparency and process required for financial regulation. It highlights checks and balances in place to ensure that financial entities adhere to defined regulations or formally opt-out if suitable. Public commentary is invited, showing a participative approach which is essential in democratic oversight of regulations impacting the economy.

Impact on Specific Stakeholders

Business Development Companies (BDCs): For these entities, the requirement to file Form N-54C is part of regulatory compliance. While this ensures thorough documentation, concerns arise about the financial burden this places on them, especially when third-party vendors are involved.

Small Businesses: Smaller companies might find the costs associated with filing and compliance prohibitive. The high estimated wage rates and third-party involvement could pose challenges for these entities, requiring them to allocate significant resources towards compliance.

In conclusion, while the continuation of Form N-54C supports a structured approach for regulatory compliance and withdrawal for business development companies, the concerns about outdated wage data, extra costs, and their impact on smaller stakeholders are valid. Addressing these concerns could strengthen the regulatory framework and facilitate a more equitable environment for all stakeholders involved.

In this Federal Register document, financial matters primarily revolve around the costs associated with the filing of Form N-54C, which pertains to business development companies that wish to withdraw their election under specific provisions of the Investment Company Act of 1940.

Summary of Financial References

The document states that the Securities and Exchange Commission (SEC) estimates the total cost to the business development company industry for complying with Form N-54C to be approximately $2,944. This figure represents the industry burden based on an estimated hourly wage rate for compliance attorneys or other employees in similar roles. The estimated wage rate is noted as $368 per hour. Additionally, there is an increased cost of $560 associated with outside professionals, likely due to the use of third-party vendors for compliance purposes.

Relation to Identified Issues

Several issues arise from the financial references made in the document:

1. Use of Third-Party Vendors:

   • The document alludes to an increased cost burden of $560 for outside professionals, which results from the belief that companies are using third-party vendors to assist with the filing. However, it does not clarify why third-party services are necessary, leaving room for confusion regarding the justification for this additional expense.

2. Complexity and Currency of Wage Rate Estimations:

   • The effective hourly rate of $368 for compliance attorneys is derived from data sourced from the Securities Industry and Financial Markets Association's Report on Management & Professional Earnings in the Securities Industry from 2013. The document mentions modifications for inflation and other factors, but there is concern that relying on older data might not accurately represent current wage standards. This raises questions about the appropriateness of using potentially outdated figures for contemporary financial calculations.

3. Potential Impact on Smaller Entities:

   • The high estimated hourly wage rate of $368 might pose a significant financial burden, particularly for smaller businesses. Understanding whether this estimate reflects a broad industry standard or represents more specialized, high-cost urban markets might help in assessing its broader impact.

4. Complexity of Financial Language:

   • The document's language relating to costs and wage calculations may obscure understanding for individuals unfamiliar with industry-specific terms. Simplifying this information could improve accessibility and assist stakeholders in better appreciating the financial implications.

Addressing these issues may enhance transparency and fairness in how financial burdens associated with regulatory compliance are distributed among different-sized entities in the industry.