80 FR 60082 - Amendments to the Commission's Rules of Practice

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 192 (October 5, 2015)

Page Range		60082-60091
FR Document		2015-24705

The Securities and Exchange Commission (``Commission'') is proposing for public comment amendments to its Rules of Practice that would require persons involved in administrative proceedings to submit all documents and other items electronically. The proposed amendments are intended to enhance the accessibility of administrative proceedings by ensuring that filings and other information concerning administrative proceedings are more readily available to the public.

Federal Register, Volume 80 Issue 192 (Monday, October 5, 2015)

[Federal Register Volume 80, Number 192 (Monday, October 5, 2015)]
[Proposed Rules]
[Pages 60082-60091]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-24705]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 201

[Release No. 34-75977; File No. S7-19-15]
RIN 3235-AL87

Amendments to the Commission's Rules of Practice

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is
proposing for public comment amendments to its Rules of Practice that
would require persons involved in

[[Page 60083]]

administrative proceedings to submit all documents and other items
electronically. The proposed amendments are intended to enhance the
accessibility of administrative proceedings by ensuring that filings
and other information concerning administrative proceedings are more
readily available to the public.

DATES: Comments should be received on or before December 4, 2015.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number S7-19-15 on the subject line; or
Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

Send paper comments to Secretary, Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number S7-19-15. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method of submission. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec/gov/rules/proposed.shtml). Comments are also available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. All comments received will be posted without change; we
do not edit personal identifying information in submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Adela Choi, Senior Counsel, and Laura
Jarsulic, Associate General Counsel, Office of the General Counsel,
(202) 551-5150, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission proposes to amend its Rules
of Practice. The amendments are being proposed as a result of the
Commission's experience with its existing rules.

I. Introduction

The Commission proposes to make targeted amendments to its Rules of
Practice that would automate and modernize aspects of the filing
process in administrative proceedings to facilitate the flow of
information to the public. The Commission recognizes the need to ensure
that public administrative proceeding records are made available to the
public as quickly as possible. Roughly 100 requests for records related
to administrative proceedings were made each year over the last three
years, and certain records were requested by multiple members of the
public.
The Commission currently is developing a comprehensive Internet-
based electronic system that would, among other things, allow persons
in administrative proceedings to file and serve documents
electronically and facilitate the prompt distribution of public
information regarding administrative proceedings. In conjunction with
the development of this system, the Commission proposes to require
electronic submissions. The Commission believes that electronic
submissions will enhance the transparency of administrative proceedings
by providing a quicker way for the Commission to make records available
to the public. In addition, the Commission believes that the electronic
system will increase its ability to efficiently process filings, and
may decrease costs for parties who may file and serve submissions
electronically, rather than in paper format.\1\
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\1\ As part of the ongoing effort to make records available to
the public promptly, the Commission now posts on its Web site more
types of documents associated with administrative proceedings, such
as significant pleadings filed by parties. Previously, only
documents issued by the Commission and Administrative Law Judges,
such as adjudicatory initial decisions, opinions, and orders, were
posted on the Web site.
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There are three main components to the proposed approach. First,
persons involved in administrative proceedings who currently are
required to file documents under Rules 151 and 152 of the Commission's
Rules of Practice would be required to file such documents
electronically through a secure system on the Commission's Web site at
www.sec.gov that is designed to receive uploads of documents and
attachments. Filing by facsimile and in paper format would no longer be
permitted absent the filing of a certification that the person
reasonably cannot comply with the electronic filing requirement.
However, as discussed further below, for the first 90 days after the
proposed amendments become final, the Commission intends to administer
a phase-in period that would require all filings to be made both
electronically and in paper format. Second, parties that are required
to serve documents under Rule 150 would be required to serve each other
electronically in the form and manner that is prescribed in the
guidance posted on the Commission's Web site.
The third component would require filers to exclude or redact
sensitive personal information from electronic filings and submissions
in accordance with the Commission's obligation to protect such
information under the Privacy Act of 1974, as amended.\2\ Sensitive
personal information would be defined as a Social Security number,
taxpayer identification number, financial account number, credit card
or debit card number, passport number, driver's license number, state-
issued identification number, home address (other than city and state),
telephone number, date of birth (other than year), names and initials
of minor children, as well as any sensitive health information
identifiable by individual, such as an individual's medical records.
There are exceptions to this proposed definition. Specifically, persons
need not redact the last four digits of a taxpayer identification
number, financial account number, credit card or debit card number,
passport number, driver's license number, and state-issued
identification number. Nor would persons need to redact home addresses
and telephone numbers of parties and persons filing documents with the
Commission; business telephone numbers; and copies of unredacted
filings by regulated entities or registrants that are available on the
Commission's public Web site. The definition of sensitive personal
information would not include a personal email address. We seek
comments about whether the disclosure of personal email addresses
generally and home addresses of parties and persons filing documents
with the Commission could have an adverse

[[Page 60084]]

effect on persons or parties, and whether, as a result, these terms
should be included in the definition of sensitive personal information
that must be excluded or redacted.
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\2\ 5 U.S.C. 552a. Federal courts and certain federal agencies
require the exclusion or redaction of certain sensitive personal
information contained in filings. See, e.g., Fed. R. Civ. P. 5.2
(Privacy Protection for Filings Made with the Court); Consumer
Financial Protection Bureau, Rules of Practice for Adjudication
Proceedings, Rule 112, 12 CFR 1081.112 (Formal Requirements as to
Papers Filed); National Labor Relations Board, E-Filing Terms for
Selected Documents in Unfair Labor Practice and Representation
Cases, available at http://www.nlrb.gov/sites/default/files/attachments/basic-page/node-1673/electronic_filings.pdf (last
visited Sept. 10, 2015). The electronic filings and submissions
discussed herein are systems of records that the Commission has
previously identified as covered by the Privacy Act.
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If the person making a filing believes that sensitive personal
information is necessary to the proceeding, the person would need to
file a motion for a protective order in accordance with Rule 322 to
limit disclosure of the sensitive personal information. In accordance
with the proposed amendments to Rule 322, and only if review of the
documents is necessary to a ruling on the motion, the person would be
required to file an unredacted version of the submission to be used by
the hearing officer and the Commission for purposes of the proceeding,
and a redacted version to be used for distribution to the public. A
redacted version would not need to be filed if the submission would be
redacted in its entirety. This reflects current practice when parties
file motions for protective orders pursuant to the Rules of Practice.
As a corollary to incorporating electronic filings into the Rules
of Practice, self-regulatory organizations and the Public Company
Accounting Oversight Board (``PCAOB'') would be required to file
electronically with the Commission a copy of a record that is the
subject of an appeal.

II. Discussion of Proposed Amendments

The proposed amendments are as follows:

A. Proposed Amendments to Rule 140

Rule 140 \3\ requires the Secretary or other authorized person to
sign Commission orders and decisions. The proposed amendment would
clarify that the signature may be an electronic signature. An
electronic signature could consist of an ``/s/'' notation or any other
digital signature.
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\3\ 17 CFR 201.140.
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B. Proposed Amendments to Rule 151

Rule 151(a) \4\ currently sets forth the procedural requirements
for filing papers with the Commission. The proposed amendment would
require a person to make filings electronically pursuant to the
requirements of Rule 152(a).\5\ Filing by facsimile and in paper format
would no longer be permitted absent a certification filed under Rule
152(a)(1) that explains why the person reasonably cannot comply with
the electronic filing requirement. During a 90-day phase-in period
after adoption, filings would have to be made in both paper and
electronic format.
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\4\ 17 CFR 201.151(a).
\5\ 17 CFR 201.152(a).
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Rule 151(d) \6\ would be amended to include an email address in the
certificate of service for those parties served by email.
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\6\ 17 CFR 201.151(d).
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Proposed new Rule 151(e) \7\ would require persons to exclude or
redact sensitive personal information, which would be defined as a
Social Security number, taxpayer identification number, financial
account number, credit card or debit card number, passport number,
driver's license number, state-issued identification number, home
address (other than city and state), telephone number, date of birth
(other than year), names and initials of minor children, as well as any
sensitive health information identifiable by individual, such as an
individual's medical records. There would be three exceptions to the
definition. First, persons may, but would not be required to, exclude
or redact the last four digits of a taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, and state-issued identification
number. Second, persons would not be required to redact home addresses
and telephone numbers of parties and persons filing documents with the
Commission. Third, persons would not be required to redact any
information from copies of filings by regulated entities or registrants
that are available on the Commission's public Web site. All filings
must include a certification that any sensitive personal information
has been excluded or redacted from the filing or, if necessary to the
filing, has been filed under seal pursuant to Rule 322.
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\7\ 17 CFR 201.151(e).
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If the person making a filing believes that sensitive personal
information is necessary to the proceeding, the person would need to
file a motion for a protective order in accordance with Rule 322 \8\ to
limit disclosure of the sensitive personal information. If review of
the documents that are the subject of a motion for a protective order
is necessary to a ruling on the motion, the proposed amendment to Rule
322 would require a person to file an unredacted version of the
submission to be used by the hearing officer and the Commission for
purposes of the proceeding, and a redacted version to be used for
distribution to the public. The unredacted version would be required to
have the confidential information marked and include the words ``Under
Seal'' on the first page of the document. The redacted version would be
required to be identical in all other respects to the unredacted
version. A person would not be required to file a redacted version if
the submission would be redacted in its entirety. This process would be
required for all kinds of motions for protective orders made pursuant
to Rule 322, i.e., not just those motions filed regarding sensitive
personal information.
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\8\ 17 CFR 201.322.
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C. Proposed Amendments to Rule 152

Like Rule 151, the proposed amendments to Rule 152(a) would make
clear that all filings shall be made electronically. Rule 152(a) would
direct persons to follow guidance issued by the Secretary on the
Commission's Web site at www.sec.gov. For example, the guidance would
provide instructions on how to file electronically through a secure
system on the Commission's Web site or other means; information about
the Commission's Privacy Act obligations, including information about a
filer's responsibilities to redact sensitive personal information; and
the terms and conditions of using the Web site. Generally speaking,
persons would use the secure system on the Commission's Web site
pursuant to Rule 152 to file documents, such as briefs and motions and
their attachments, petitions for review, and applications for review.
Under Rule 152(a), papers would need to be filed on the secure system
before midnight Eastern Time, as opposed to 5:30 p.m. Eastern Time, the
current deadline for filing papers.
The Commission recognizes that a person involved in an
administrative proceeding may be unable to submit documents
electronically during either the entire proceeding or a portion
thereof. For example, a person who is incarcerated at the time of the
proceeding may not have access to the Internet or other electronic
media necessary to file documents through the Commission's secure
system. There may be other reasons why a person reasonably cannot
comply with the electronic filing requirement.
A person who reasonably cannot comply with the requirement must
file a certification under Rule 152(a)(1) that explains why the person
reasonably cannot comply. The filing also must indicate the expected
duration of the person's reasonable inability to comply, such as
whether the certification is intended to apply to a solitary filing or
all filings made during the proceeding. The certification is
immediately effective. Upon filing the certification, it will be part
of the record of the proceeding, and the person may file

[[Page 60085]]

paper documents by any additional method listed in Rule 152(d).
Rule 152(a) would be amended to provide additional methods of
filing if a person reasonably cannot comply with the electronic filing
requirements. Filers should take note that the Commission would need to
receive mailed, couriered, or hand-delivered filings by 5:30 p.m.
Eastern Time because the Commission is unable to accept such filings
after that time. The Commission would need to receive facsimile
transmissions by midnight Eastern Time.
The proposed amendment also would provide that electronic filings
that require a signature pursuant to Rule 153 \9\ may be signed with an
``/s/'' notation, which shall be deemed the signature of the person
making the filing for purposes of Rule 153.
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\9\ 17 CFR 201.153.
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D. Proposed Amendments to Rule 351

Rule 351 \10\ currently sets forth the requirements regarding the
transmittal of documents to the Secretary and the preparation,
issuance, and certification of a record index. Rule 351(b) \11\
requires the hearing officer to transmit to the Secretary an index of
the originals of any motions, exhibits or any other documents filed
with or accepted into evidence by the hearing officer that have not
been previously transmitted to the Secretary. The Secretary then shall
prepare a record index and transmit it to the hearing officer and serve
a copy on each party. Any person may file proposed corrections to the
record index with the hearing officer within fifteen days of service of
the record index. The proposed amendment to Rule 351(b) would reduce
that amount of time to three days but would provide persons who oppose
the proposed corrections three days to file an opposition.
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\10\ 17 CFR 201.351.
\11\ 17 CFR 201.351(b).
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Proposed new Rule 351(c) \12\ would state that, no later than five
days after the Secretary serves a final record index, the parties shall
submit electronically, through the same secure system used for filings
under Rules 151 and 152, copies of all exhibits that were admitted, or
offered and not admitted, during the hearing, and any other exhibits
that were admitted after the hearing. The parties shall submit such
evidence in the form and manner that is prescribed in the guidance
posted on the Commission's Web site and shall certify that exhibits and
other documents or items submitted to the Secretary are true and
accurate copies of exhibits that were admitted, or offered and not
admitted, during the hearing. Generally speaking, parties would follow
Rule 351 to submit record exhibits and other documents or items that
are not attached to filings, i.e., materials accepted into evidence by
a hearing officer under Rule 351 in connection with an in-person
hearing. As under Rule 151(a), the submission deadline depends on the
method of delivery that is used.
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\12\ 17 CFR 201.351(c).
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As under Rule 151(e), the proposed amendment to Rule 351(c) would
set forth the same definition of sensitive personal information,
require its redaction or omission from all submissions under Rule 351,
provide a process for seeking a protective order under Rule 322 with
respect to sensitive personal information that is necessary to the
proceeding, and require a certification that sensitive personal
information has been excluded or redacted or filed under seal. A person
who reasonably cannot submit exhibits electronically must file a
certification under Rule 351(c)(2) that explains why the person
reasonably cannot comply. The filing also must indicate the expected
duration of the person's reasonable inability to comply, such as
whether the certification is intended to apply to a solitary submission
or all submissions made during the proceeding. The certification is
immediately effective. Upon filing the certification, it will be part
of the record of the proceeding, and the person shall submit originals
of any exhibits that have not already been submitted to the Secretary
by other means. Rule 351(c) also would state that electronic
submissions that require a signature pursuant to Rule 153 may be signed
with an ``/s/'' notation, which shall be deemed the signature of the
person making the filing for purposes of Rule 153.

E. Phase-In Period

For the first 90 days after the proposed amendments become final,
the Commission intends to administer a phase-in period that would
require all filings to be made both electronically and in paper format.
The Commission preliminarily believes that a 90-day phase-in period is
a reasonable amount of time for persons to become proficient in the
electronic filing procedures while ensuring that the Commission
receives the filing should there be an electronic transmission failure.
However, it may be appropriate to extend the phase-in period if persons
are experiencing substantial difficulties with the electronic filing.

F. Other Proposed Amendments

Rule 150(c) \13\ would be amended to require parties to serve each
other electronically in the form and manner that is prescribed in the
guidance posted on the Commission's Web site. Electronic service by
email is a practice that appears to occur already in administrative
proceedings. Electronic service would need to occur contemporaneously
with filing, and the timing of service would therefore differ depending
on the filing method. As with electronic filing, a party who reasonably
cannot comply with the electronic service requirement must file a
certification under Rule 150(c)(1) that explains why the person
reasonably cannot comply. The filing also must indicate the expected
duration of the person's reasonable inability to comply, such as
whether the certification is intended to apply to a solitary instance
of service or all instances of service made during the proceeding. The
certification is immediately effective. Upon filing the certification,
it will be part of the record of the proceeding, and the person may
serve paper documents by any additional method listed in Rule 150(d).
Rule 150(d) would be amended to provide additional methods of service
if a person reasonably cannot comply with the electronic service
requirements, or if service is of an investigative subpoena pursuant to
17 CFR 203.8. Under Rule 150(e),\14\ electronic service would be deemed
complete upon transmission.
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\13\ 17 CFR 201.150(c).
\14\ 17 CFR 201.150(e).
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Rule 141(b) \15\ would be amended to allow the Secretary to serve
orders and decisions, other than an order instituting proceedings,
electronically.
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\15\ 17 CFR 201.141(b).
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Currently, Rule 102(d) \16\ requires a person to provide to the
Commission certain contact information that may be used during an
administrative proceeding. The proposed amendment clarifies that a
mailing address and an email address shall be provided under paragraphs
(d)(1), (d)(2), and (d)(4).\17\
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\16\ 17 CFR 201.102(d).
\17\ 17 CFR 201.102(d)(1), (d)(2), (d)(4).
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Rule 193 \18\ currently provides that an original and three copies
of an application shall be filed under Rules 151, 152, and 153, and
that such application shall be supported by a manually signed
affidavit. The proposed amendment would delete the term ``manually,''
delete the reference to one original and three copies, and leave the

[[Page 60086]]

cross reference to Rules 151, 152, and 153 to account for electronic
filing.
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\18\ 17 CFR 201.193.
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Rule 420 \19\ sets forth the requirements regarding appeals of
determinations by self-regulatory organizations. Currently, Rule 420(e)
\20\ requires a self-regulatory organization to certify and file with
the Commission one copy of the record upon which the action complained
of was taken, to file with the Commission three copies of an index to
such record, and to serve upon each party one copy of the index within
fourteen days after receiving an application for review or a Commission
order for review. The proposed amendment would require the self-
regulatory organization to file such information electronically.
Further, if such information contains sensitive personal information,
the self-regulatory organization would be required to file
electronically a copy of the record and index that redacts or omits the
sensitive personal information and to certify that any sensitive
personal information has been excluded or redacted. The requirements
for filing and serving would continue to be governed by Rules 150-152.
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\19\ 17 CFR 201.420.
\20\ 17 CFR 201.420(e).
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Rule 440 \21\ sets forth the requirements regarding appeals of
determinations by the PCAOB. Rule 440(d) \22\ currently requires the
PCAOB to certify and file with the Commission one copy of the record
upon which it took the complained of action, to file with the
Commission three copies of an index to such record, and to serve upon
each party one copy of the index within fourteen days after receiving
an application for review. The proposed amendment would require the
PCAOB to file such information electronically. Further, if such
information contains sensitive personal information, the PCAOB would be
required to file electronically a redacted copy of the record and index
that redacts or omits the sensitive personal information and to certify
that any sensitive personal information has been excluded or redacted.
The requirements for filing and serving would continue to be governed
by Rules 150-152.
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\21\ 17 CFR 201.440.
\22\ 17 CFR 201.440(d).
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The United States Postal Service changed the name of the product
known as Express Mail to Priority Mail Express. Rule 141(a)(2)(i),
(ii), (iii), (vi), (a)(3) and Rule 150(a)(2), (d) would be amended to
refer generically to ``express mail.''

III. Request for Public Comment

We request and encourage any interested person to submit comments
regarding: (1) The definition of sensitive personal information, (2)
the potential adverse effects, if any, of disclosing personal email
addresses and home addresses of parties and persons filing documents
with the Commission, (3) alternative approaches to handling personal
email addresses and home addresses of parties and persons filing
documents with the Commission, (4) the other proposed changes that are
the subject of this release, (5) additional or different changes, or
(6) other matters that may have an effect on the proposals contained in
this release.

IV. Administrative Procedure Act, Regulatory Flexibility Act, and
Paperwork Reduction Act

The Commission finds, in accordance with Section 553(b)(3)(A) of
the Administrative Procedure Act,\23\ that these revisions relate
solely to agency organization, procedure, or practice. They are
therefore not subject to the provisions of the Administrative Procedure
Act requiring notice, opportunity for public comment, and publication.
The Regulatory Flexibility Act \24\ therefore does not apply.\25\
Nonetheless, the Commission has determined that it would be useful to
publish these proposed rules for notice and comment before adoption.
Because these rules relate to ``agency organization, procedure or
practice that does not substantially affect the rights or obligations
of non-agency parties,'' they are not subject to the Small Business
Regulatory Enforcement Fairness Act.\26\ To the extent these rules
relate to agency information collections during the conduct of
administrative proceedings, they are exempt from review under the
Paperwork Reduction Act.\27\
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\23\ 5 U.S.C. 553(b)(3)(A).
\24\ 5 U.S.C. 601-612.
\25\ See 5 U.S.C. 603.
\26\ 5 U.S.C. 804(3)(C).
\27\ See 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR 1320.4 (exempting
collections during the conduct of administrative proceedings or
investigations).
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V. Economic Analysis

The Commission is sensitive to the costs and benefits of its rules.
The current processes and filing requirements for administrative
proceedings serve as the baseline against which the economic impacts of
the proposed rules are measured. At present, submissions are permitted
to be filed with the Commission in paper format or by facsimile
followed by a paper submission. The Commission's current Rules of
Practice do not identify sensitive personal information that must be
redacted from these documents by those who file them. Instead, such
redaction is undertaken by the Commission when necessary in responding
to document requests from the public or posting documents on the
Commission's public Web site. Service by email is already generally an
accepted practice by parties to administrative proceedings who mutually
agree to it, although it is not expressly permitted by rule.
The scope of the benefits and costs of the proposed rules depends
on the expected volume of administrative proceedings and the number of
filed documents and document requests associated with these
proceedings. In fiscal year 2014, 230 new administrative proceedings
were initiated and not settled immediately. New proceedings initiated
and not immediately settled in fiscal years 2013 and 2012 totaled 202
and 207 respectively.\28\ From 2011 to 2013, an average of
approximately 1,900 filings were submitted per fiscal year in relation
to litigated proceedings, including filings by outside parties as well
as Commission staff. These filings consist of one or more documents,
such as motions, briefs, and record exhibits, and the length of the
filings generally ranges from one page to a few thousand pages. The
Commission also received numerous requests from the public to release
documents related to these proceedings. Requests for records related to
administrative proceedings (both settled and litigated) numbered 127,
83, and 100 for fiscal years 2013, 2012, and 2011 respectively.
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\28\ The total number of administrative proceedings initiated
and not immediately settled each fiscal year encompasses a variety
of types of proceedings, including proceedings instituted pursuant
to Section 12(j) of the Securities Exchange Act of 1934 seeking to
determine whether it is necessary and appropriate for the protection
of investors to suspend or revoke the registration of an issuer's
securities and proceedings instituted under Section 15(b) of the
Exchange Act or Section 203(f) of the Investment Advisers Act of
1940 seeking to determine what, if any, remedial action is
appropriate in the public interest.
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The implementation of electronic filing and the related proposed
rules are intended to improve the efficiency and transparency of the
Commission's operations and to modernize the document management
process to be consistent with common practice in other tribunals.
Benefits of the proposed rules are anticipated to accrue to the public
and outside parties to administrative proceedings as well as the
Commission.
Specifically, the proposed rules may benefit members of the public
with an interest in the Commission's administrative proceedings by
permitting the Commission to more

[[Page 60087]]

quickly make public the documents relating to these proceedings. The
proposed rules may increase the speed at which information from
administrative proceedings is transmitted as well as the overall
transparency of these proceedings. Additionally, parties to
administrative proceedings may benefit from the increased flexibility
enabled by the changes, such as the Commission's acceptance of
electronic and facsimile submissions until midnight rather than the
close of business on a given day. These parties may also benefit from
savings on printing and mailing costs because, after the phase-in
period, filing paper copies generally will not be required. In
addition, the changes expressly require service by electronic means,
which may increase further the savings in printing and mailing. The
Commission's response to document requests is expected to be more time-
and cost-effective due to the efficiency of electronic retrieval and
the fact that sensitive information will have been redacted in advance.
However, the magnitude of the above benefits is difficult to quantify
due to the limitations of existing data.
The costs of the proposal will be borne by the Commission as well
as the outside parties to administrative proceedings. The proposed
rules place the primary burden of redacting sensitive personal
information on the parties submitting documents in administrative
proceedings--either outside parties or Commission staff--following
common practice in federal courts. The Commission believes that parties
filing documents are well positioned to redact the documents--or
initially draft documents to avoid the use of sensitive personal
information--and that the proposed narrow definition of sensitive
personal information will limit the burden on parties required to
redact documents. The Commission recognizes, however, that the costs of
reviewing and editing the content to protect sensitive information
might be significant for some parties. Additionally, when sensitive
personal information is necessary to the proceedings, outside parties
or the Commission may expend additional resources filing a motion for a
protective order in accordance with Rule 322 to limit disclosure of the
sensitive information and to prepare a redacted and unredacted version
of the documents.
Parties to administrative proceedings will also bear any
incremental burden of electronic filings over the current practice of
facsimile or paper transmissions. The magnitude of costs will depend
primarily on whether the original format of the documents to be
submitted is electronic or whether they must be scanned or otherwise
converted to an electronic format. Other factors that may affect these
costs include the ease of access the party has to the internet and to
any hardware and software that may be involved in processing the
documents. For most parties, we do not expect these costs to be
significant because, among other things, most parties already are
subject to similar requirements in other kinds of legal proceedings or
have access to the Internet and conversion programs at a reasonable
cost. Further, these potential burdens may be mitigated for some
parties as the proposed rules provide for relief from the electronic
filing requirements in situations in which a party certifies a
reasonable inability to comply with the electronic filing requirements.
As an alternative to the proposed rules, the Commission could
implement electronic filing with different requirements. In particular,
the Commission could continue to allow the filing of unredacted
documents--requiring that redaction be undertaken by Commission staff
when necessary--or could permit electronic filing on a voluntary,
rather than mandatory, basis. Relative to these alternatives, or to the
existing paper format and facsimile document submission and management
system for administrative proceedings, the Commission believes that the
proposed changes achieve the benefits described above in a cost-
efficient manner. The Commission does not expect significant effects on
efficiency, competition, or capital formation to result from the
proposed changes. And to the extent that the changes impose any burden
on competition, the Commission believes that such burden would be
necessary and appropriate in furtherance of the purposes of the
Exchange Act.\29\
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\29\ See 15 U.S.C. 78w(a)(2).
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The Commission requests comment on all aspects of the economic
effects of the proposal, including any anticipated impacts that are not
mentioned here. We are particularly interested in quantitative
estimates of the benefits and costs, in general or for particular types
of participants in administrative proceedings, including smaller
entities. We also request comment on reasonable alternatives to the
proposed rules and on any effect the proposed rules may have on
efficiency, competition, and capital formation.

VI. Statutory Basis and Text of Proposed Amendments

These amendments to the Rules of Practice are being proposed
pursuant to statutory authority granted to the Commission, including
section 3 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7202; section 19
of the Securities Act, 15 U.S.C. 77s; sections 4A, 19, and 23 of the
Exchange Act, 15 U.S.C. 78d-1, 78s, and 78w; section 319 of the Trust
Indenture Act of 1939, 15 U.S.C. 77sss; sections 38 and 40 of the
Investment Company Act, 15 U.S.C. 80a-37 and 80a-39; and section 211 of
the Investment Advisers Act, 15 U.S.C. 80b-11.

List of Subjects in 17 CFR Part 201

Administrative practice and procedure.

Text of the Amendments

For the reasons set out in the preamble, 17 CFR part 201 is
proposed to be amended as follows:

PART 201--RULES OF PRACTICE

0
4. The authority citation for Part 201, subpart D, is revised to read
as follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u,
78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-2, 78u-
3, 78v, 78w, 77sss, 77ttt, 80a-8, 80a-9, 80a-37, 80a-38, 80a-39,
80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 80b-12, 7202, 7215,
and 7217.

0
5. Section 201.102 is amended by revising paragraphs (d)(1), (d)(2),
and (d)(4) to read as follows:

Sec. 201.102 Appearance and practice before the Commission.

* * * * *
(d) Designation of address for service; notice of appearance; power
of attorney; withdrawal--(1) Representing oneself. When an individual
first makes any filing or otherwise appears on his or her own behalf
before the Commission or a hearing officer in a proceeding as defined
in Sec. 201.101(a), he or she shall file with the Commission, or
otherwise state on the record, and keep current, a mailing address and
email address at which any notice or other written communication
required to be served upon him or her or furnished to him or her may be
sent and a telephone number where he or she may be reached during
business hours.
(2) Representing others. When a person first makes any filing or
otherwise appears in a representative capacity before the Commission or
a hearing officer in a proceeding as defined in Sec. 201.101(a), that
person shall file with the Commission, and

[[Page 60088]]

keep current, a written notice stating the name of the proceeding; the
representative's name, business address, email address, and telephone
number; and the name, email address, and address of the person or
persons represented.
* * * * *
(4) Withdrawal. Any person seeking to withdraw his or her
appearance in a representative capacity shall file a notice of
withdrawal with the Commission or the hearing officer. The notice shall
state the name, mailing address, email address, and telephone number of
the withdrawing representative; the name, address, and telephone number
of the person for whom the appearance was made; and the effective date
of the withdrawal. If the person seeking to withdraw knows the name,
mailing address, email address, and telephone number of the new
representative, or knows that the person for whom the appearance was
made intends to represent him- or herself, that information shall be
included in the notice. The notice must be served on the parties in
accordance with Sec. 201.150. The notice shall be filed at least five
days before the proposed effective date of the withdrawal.
* * * * *
0
6. Section 201.140 is amended by revising paragraph (a) to read as
follows:

Sec. 201.140 Commission orders and decisions: Signature and
availability.

* * * * *
(a) Signature required. All orders and decisions of the Commission
shall be signed by the Secretary or any other person duly authorized by
the Commission. The signature may be an electronic signature that
consists of an ``/s/'' notation or any other digital signature.
* * * * *
0
7. Section 201.141 is amended by:
0
a. Removing the words ``Express Mail'' each time they appear and adding
in their place the words ``express mail''; and
0
b. Revising the first sentence of paragraph (b).
The revision reads as follows:

Sec. 201.141 Orders and decisions: Service of orders instituting
proceedings and other orders and decisions.

* * * * *
(b) Service of Orders or Decisions Other than an Order Instituting
Proceedings. Written orders or decisions issued by the Commission or by
a hearing officer shall be served promptly on each party pursuant to
any method of service authorized under paragraph (a) of this section or
Sec. 201.150(c) and (d). * * *
0
8. Section 201.150 is amended by:
0
a. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e);
0
b. Adding new paragraph (c);
0
c. Revising newly redesignated paragraphs (d) introductory text and
(d)(4);
0
d. Revising newly redesignated paragraph (e); and
0
e. Removing the words ``Express Mail'' each time they appear and adding
in their place the words ``express mail''.
The revisions and addition read as follows:

Sec. 201.150 Service of papers by parties.

* * * * *
(c) How made. Service shall be made electronically in the form and
manner that is prescribed in the guidance posted on the Commission's
Web site. Persons serving each other shall have provided the Commission
and the parties with notice of an email address.
(1) Certification of inability to serve electronically. If a person
reasonably cannot serve electronically, due to a lack of access to
electronic transmission devices (due to incarceration or otherwise),
the person promptly shall file a certification under this paragraph
that explains why the person reasonably cannot comply. The filing also
must indicate the expected duration of the person's reasonable
inability to comply, such as whether the certification is intended to
apply to a solitary instance of service or all instances of service
made during the proceeding. The certification is immediately effective.
Upon filing the certification, it will be part of the record of the
proceeding, and the person may serve paper documents by any additional
method listed in Rule 150(d).
(d) Additional methods of service. If a person reasonably cannot
serve electronically, or if service is of an investigative subpoena
pursuant to 17 CFR 203.8, service may be made by delivering a copy of
the filing. Delivery means:
* * * * *
(4) Transmitting the papers by facsimile transmission to the person
required to be served. The persons so serving each other shall have
provided the Commission and the parties with notice of a facsimile
machine telephone number.
(e) When service is complete. Electronic service is complete upon
transmission. Personal service, service by U.S. Postal Service express
mail or service by a commercial courier or express delivery service is
complete upon delivery. Service by mail is complete upon mailing.
Service by facsimile is complete upon confirmation of transmission.
0
9. Section 201.151 is amended by revising paragraphs (a) and (d) and
adding paragraph (e) to read as follows:

Sec. 201.151 Filing of papers with the Commission: Procedure.

(a) When to file. All papers required to be served upon any person
shall also be filed contemporaneously with the Commission
electronically pursuant to the requirements of Sec. 201.152(a). The
person making such filing is responsible for ensuring that the
Commission receives a complete and legible filing within the time limit
set for such filing. Documents that are attached to filings shall be
filed in accordance with this Rule. Documents or items that are not
attached to filings (i.e., are admitted by the hearing officer at an
in-person hearing), shall be submitted in accordance with Sec.
201.351.
* * * * *
(d) Certificate of service. Papers filed with the Commission or a
hearing officer shall be accompanied by a certificate stating the name
of the person or persons served, the date of service, the method of
service, and the mailing address or email address to which service was
made, if not made in person.
(e) Sensitive personal information. Sensitive personal information
is defined as a Social Security number, taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, state-issued identification number,
home address (other than city and state), telephone number, date of
birth (other than year), names and initials of minor children, as well
as any sensitive health information identifiable by individual, such as
an individual's medical records. Sensitive personal information shall
not be included in, and must be redacted or omitted from, all filings
subject to:
(1) Exceptions. The following information may be included and is
not required to be redacted from filings:
(i) The last four digits of a taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, and state-issued identification
number;
(ii) Home addresses and telephone numbers of parties and persons
filing documents with the Commission;
(iii) Business telephone numbers; and
(iv) Copies of unredacted filings by regulated entities or
registrants that are available on the Commission's public Web site.

[[Page 60089]]

(2) Confidential treatment of information. If the person making any
filing believes that sensitive personal information (as defined above)
contained therein is necessary to the proceeding, the person shall file
unredacted documents, along with a motion for a protective order in
accordance with Sec. 201.322 to limit disclosure of unredacted
sensitive personal information.
(3) Certification. Any filing must include a certification that any
sensitive personal information as defined in Sec. 201.151(e) has been
excluded or redacted from the filing or, if necessary to the filing,
has been filed under seal pursuant to Sec. 201.322.
0
10. Section 201.152 is amended by:
0
a. Removing paragraph (d);
0
b. Redesignating paragraphs (b) and (c) as paragraphs (c) and (d);
0
c. Redesignating paragraph (a) as paragraph (b) and revising it;
0
d. Adding new paragraph (a);
0
e. Removing newly redesignated paragraph (b)(6);
0
f. Revising newly designated paragraph (c); and
0
g. Removing the phrase ``or microfilming'' from newly redesignated
paragraph (d).
The revisions and addition read as follows:

Sec. 201.152 Filing of papers: Form.

(a) Electronic filing. Papers filed in connection with any
proceeding as defined in Sec. 201.101(a) shall be filed electronically
in the form and manner that is prescribed in the guidance posted on the
Commission's Web site. Papers filed electronically must be received by
the Commission by midnight Eastern Time on the date the filing is due.
(1) Certification of Inability to File Electronically. If a person
reasonably cannot comply with the requirements of this section, due to
a lack of access to electronic transmission devices (due to
incarceration or otherwise), the person promptly shall file a
certification under this paragraph that explains why the person
reasonably cannot comply. The filing also must indicate the expected
duration of the person's reasonable inability to comply, such as
whether the certification is intended to apply to a solitary filing or
all filings made during the proceeding. The certification is
immediately effective. Upon filing the certification, it will be part
of the record of the proceeding, and the person may file paper
documents by any additional method listed in Sec. 201.152(a)(2).
(2) Additional methods of filing. If a person reasonably cannot
file electronically, filing may be made by hand delivering the filing
by 5:30 p.m. Eastern Time through a commercial courier service or
express delivery service; mailing the filing through the U.S. Postal
Service by first class, certified, registered, or express mail delivery
so that it is received by the Commission by 5:30 p.m. Eastern Time; or
transmitting the filing by facsimile transmission so that it is
received by the Commission by midnight Eastern Time.
(b) Form. Papers filed in connection with any proceeding as defined
in Sec. 201.101(a) shall:
(1) Reflect a page, electronically or otherwise, that measures 8\1/
2\ x 11 inches when printed, except that, to the extent that the
reduction of larger documents would render them illegible when printed,
such documents may be filed on larger paper;
(2) Use 12-point or larger typeface;
(3) Include at the head of the paper, or on a title page, the name
of the Commission, the title of the proceeding, the names of the
parties, the subject of the particular paper or pleading, and the file
number assigned to the proceeding;
(4) Be paginated with left hand margins at least 1 inch wide, and
other margins of at least 1 inch; and
(5) Be double-spaced, with single-spaced footnotes and single-
spaced indented quotations.
(c) Signature required. All papers must be dated and signed as
provided in Sec. 201.153. Electronic filings that require a signature
pursuant to Sec. 201.153 may be signed with an ``/s/'' notation, which
shall be deemed the signature of the person making the filing for
purposes of Sec. 201.153.
(d) Suitability for recordkeeping. Documents which, in the opinion
of the Commission, are not suitable for computer scanning may be
rejected.
* * * * *
0
11. Section 201.193 is amended by revising paragraph (b) introductory
text to read as follows:

Sec. 201.193 Applications by barred individuals for consent to
associate.

* * * * *
(b) Form of application. Each application shall be supported by an
affidavit, signed by the applicant, that addresses the factors set
forth in paragraph (d) of this section. The application shall be filed
pursuant to Sec. Sec. 201.151, 201.152 and 201.153. Each application
shall include as exhibits:
* * * * *
0
12. Section 201.322 is amended by revising paragraph (a), redesignating
paragraphs (b), (c), and (d) as paragraphs (c), (d), and (e), and
adding new paragraph (b).
The revision and addition read as follows:

Sec. 201.322 Evidence: Confidential information, protective orders.

(a) Procedure. In any proceeding as defined in Sec. 201.101(a), a
party, any person who is the owner, subject or creator of a document
subject to subpoena or which may be introduced as evidence, or any
witness who testifies at a hearing may file a motion requesting a
protective order to limit from disclosure to other parties or to the
public documents or testimony that contain confidential information.
The motion should include a general summary or extract of the documents
without revealing confidential details.
(b) If review of the documents that are the subject of a request
for a protective order is necessary to a ruling on the motion and the
information as to which a protective order is sought is available to
the movant, the motion shall be accompanied by:
(1) A complete, sealed copy of the materials containing the
information as to which a protective order is sought, with the
allegedly confidential information marked as such, and with the first
page of the document labeled ``Under Seal.'' If the movant seeks a
protective order against disclosure to other parties as well as the
public, copies of the documents shall not be served on other parties;
and
(2) A redacted copy of the materials containing the information as
to which a protective order is sought, with the allegedly confidential
information redacted. The redacted version shall indicate any omissions
with brackets or ellipses, and its pagination and depiction of text on
each page shall be identical to that of the sealed version. A redacted
copy need not accompany a motion requesting a protective order if the
materials would be redacted in their entirety.
* * * * *
0
13. Section 201.351 is amended by revising paragraph (b), redesignating
paragraph (c) as paragraph (d), and adding new paragraph (c).
The revision and addition read as follows:

Sec. 201.351 Transmittal of documents to Secretary; record index;
electronic copy of exhibits; certification.

* * * * *
(b) Preparation, certification of record index. Promptly after the
close of the hearing, the hearing officer shall transmit to the
Secretary an index of the originals of any motions, exhibits or any
other documents filed with or accepted into evidence by the hearing
officer that have not been previously transmitted to the Secretary, and
the Secretary shall prepare a record index. Prior to issuance

[[Page 60090]]

of an initial decision, or if no initial decision is to be prepared,
within 30 days of the close of the hearing, the Secretary shall
transmit the record index to the hearing officer and serve a copy of
the record index on each party. Any person may file proposed
corrections to the record index with the hearing officer within three
days of service of the record index. Any opposition to the proposed
corrections shall be filed within three days of service of the proposed
corrections. The hearing officer shall, by order, direct whether any
corrections to the record index shall be made. The Secretary shall make
such corrections, if any, and issue a revised record index. If an
initial decision is to be issued, the initial decision shall include a
certification that the record consists of the items set forth in the
record index or revised record index issued by the Secretary.
(c) Electronic exhibits. Within two weeks after the close of a
hearing, the parties shall submit electronically to the Secretary a
copy of all exhibits that were admitted, or offered and not admitted,
during the hearing, and any other exhibits that were admitted after the
hearing. The parties shall submit such evidence in the form and manner
that is prescribed in the guidance posted on the Commission's Web site.
(1) Sensitive personal information. Sensitive personal information
is defined as a Social Security number, taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, state-issued identification number,
home address (other than city and state), telephone number, date of
birth (other than year), names and initials of minor children, as well
as any sensitive health information identifiable by individual, such as
an individual's medical records. Sensitive personal information shall
not be included in, and must be redacted or omitted from, all filings
subject to:
(i) Exceptions. The following information may be included and is
not required to be redacted from filings:
(A) The last four digits of a taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, and state-issued identification
number;
(B) Home addresses and telephone numbers of parties and persons
filing documents with the Commission;
(C) Business telephone numbers; and
(D) Copies of unredacted filings by regulated entities or
registrants that are available on the Commission's public Web site.
(ii) Confidential treatment of information. If the person
submitting record exhibits and other documents or items that are not
attached to filings believes that sensitive personal information (as
defined in Sec. 201.351(c)(1)) contained therein is necessary to the
proceeding, the person shall file unredacted documents, along with a
motion for a protective order in accordance with Sec. 201.322 to limit
disclosure of unredacted sensitive personal information.
(2) Certification of inability to submit exhibits electronically. A
person who reasonably cannot submit exhibits electronically must file a
certification under Sec. 201.351(c)(2) that explains why the person
reasonably cannot comply. The filing also must indicate the expected
duration of the person's reasonable inability to comply, such as
whether the certification is intended to apply to a solitary submission
or all submissions made during the proceeding. The certification is
immediately effective. Upon filing the certification, it will be part
of the record of the proceeding, and the person shall submit originals
of any exhibits that have not already been submitted to the Secretary
by other means.
(3) Signature requirement. Electronic submissions that require a
signature pursuant to Sec. 201.153 may be signed with an ``/s/''
notation, which shall be deemed the signature of the person making the
submission for purposes of Sec. 201.153.
(4) Certification. The parties shall certify that exhibits and
other documents or items submitted to the Secretary under this rule:
(i) Are true and accurate copies of exhibits that were admitted, or
offered and not admitted, during the hearing; and
(ii) That any sensitive personal information as defined in Sec.
201.351(c) has been excluded or redacted, or, if necessary, has been
filed under seal pursuant to Sec. 201.322.
* * * * *
0
14. Section 201.420 is amended by revising paragraph (e) to read as
follows:

Sec. 201.420 Appeal of determinations by self-regulatory
organizations.

* * * * *
(e) Certification of the record; service of the index. Fourteen
days after receipt of an application for review or a Commission order
for review, the self-regulatory organization shall certify and file
electronically in the form and manner that is prescribed in the
guidance posted on the Commission's Web site one unredacted copy of the
record upon which the action complained of was taken. If such record
contains any sensitive personal information, as defined in paragraph
(e)(1) of this section, the self-regulatory organization also shall
file electronically with the Commission one redacted copy of such
record, subject to the following:
(1) Sensitive personal information. Sensitive personal information
is defined as a Social Security number, taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, state-issued identification number,
home address (other than city and state), telephone number, date of
birth (other than year), names and initials of minor children, as well
as any sensitive health information identifiable by individual, such as
an individual's medical records. Sensitive personal information shall
not be included in, and must be redacted or omitted from, all filings
subject to:
(i) Exceptions. The following information may be included and is
not required to be redacted from filings:
(A) The last four digits of a taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, and state-issued identification
number;
(B) Home addresses and telephone numbers of parties and persons
filing documents with the Commission;
(C) Business telephone numbers; and
(D) Copies of unredacted filings by regulated entities or
registrants that are available on the Commission's public Web site.
(ii) [Reserved]
(2) Index. The self-regulatory organization also shall file
electronically with the Commission one copy of an index to such record,
and shall serve upon each party one copy of the index. If such index
contains any sensitive personal information, as defined in paragraph
(e)(1) of this section, the self-regulatory organization also shall
file electronically with the Commission one redacted copy of such
index, subject to the requirements of paragraphs (e)(1) introductory
text and (e)(1)(i).
(3) Certification. Any filing made pursuant to this section must
include a certification that any sensitive personal information as
defined in Sec. 201.420(e)(1) has been excluded or redacted from the
filing.
0
15. Section 201.440 is amended by revising paragraph (d) to read as
follows:

Sec. 201.440 Appeal of determinations by the Public Company
Accounting Oversight Board.

* * * * *

[[Page 60091]]

(d) Certification of the record; service of the index. Within
fourteen days after receipt of an application for review, the Board
shall certify and file electronically in the form and manner that is
prescribed in the guidance posted on the Commission's Web site one
unredacted copy of the record upon which it took the complained-of
action. If such record contains any sensitive personal information, as
defined in paragraph (d)(1) of this section, the Board also shall file
electronically with the Commission one redacted copy of such record,
subject to the following:
(1) Sensitive personal information. Sensitive personal information
is defined as a Social Security number, taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, state-issued identification number,
home address (other than city and state), telephone number, date of
birth (other than year), names and initials of minor children, as well
as any sensitive health information identifiable by individual, such as
an individual's medical records. Sensitive personal information shall
not be included in, and must be redacted or omitted from, all filings
subject to:
(i) Exceptions. The following information may be included and is
not required to be redacted from filings:
(A) The last four digits of a taxpayer identification number,
financial account number, credit card or debit card number, passport
number, driver's license number, and state-issued identification
number;
(B) Home addresses and telephone numbers of parties and persons
filing documents with the Commission;
(C) Business telephone numbers; and
(D) Copies of unredacted filings by regulated entities or
registrants that are available on the Commission's public Web site.
(ii) [Reserved]
(2) Index. The Board shall file electronically with the Commission
one copy of an index of such record, and shall serve one copy of the
index on each party. If such index contains any sensitive personal
information, as defined in paragraph (d)(1) of this section, the Board
also shall file electronically with the Commission one redacted copy of
such index, subject to the requirements of paragraphs (d)(1)
introductory text and (d)(1)(i).
(3) Certification. Any filing made pursuant to this section must
include a certification that any sensitive personal information as
defined in Sec. 201.440(d)(1) has been excluded or redacted from the
filing.

By the Commission.
Dated: September 24, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-24705 Filed 10-2-15; 8:45 am]
BILLING CODE 8011-01-P

60082 Federal Register / Vol. 80, No. 192 / Monday, October 5, 2015 / Proposed Rules

PART 107—SMALL BUSINESS § 107.720 Small Businesses that may be (4) Additional conditions for
INVESTMENT COMPANIES ineligible for financing. permitted passive business financings.
* * * * * Financings permitted under paragraphs
■ 1. The authority citation for part 107 (b) * * * (b)(2) or (b)(3) of this section must meet
is revised to read as follows: (2) Exception for pass-through of all of the following conditions:
Authority: 15 U.S.C. 681, 683, 687(c), proceeds to subsidiary. You may (i) For the purposes of this paragraph
687b, 687d, 687g, 687m. provide Financing directly to a passive (b), ‘‘substantially all’’ means at least
business, including a passive business ninety-nine percent of the Financing
§ 107.50 [Amended] that you have formed, if it is a Small proceeds after deduction of actual
■ 2. Amend § 107.50 by removing from Business and it passes substantially all application fees, closing fees, and
the definition of ‘‘Lending Institution’’ the proceeds through to (or uses expense reimbursements which may not
the term ‘‘Associates’s’’ and adding in substantially all the proceeds to acquire) exceed those permitted by § 107.860.
its place the term ‘‘Associate’s’’. one or more subsidiary companies, each (ii) If you and/or your Associate
■ 3. Amend § 107.210 by revising the of which is an eligible Small Business charge fees permitted by §§ 107.860
paragraph (a) introductory text to read that is not passive. For the purpose of and/or 107.900, the total amount of such
as follows: this paragraph (b)(2), ‘‘subsidiary fees charged to all passive and non-
company’’ means a company in which passive businesses that are part of the
§ 107.210 Minimum capital requirements
for Licensees.
the financed passive business either: same Financing may not exceed the fees
(i) Directly owns, or will own as a that would have been permitted if the
(a) Companies licensed on or after result of the Financing, at least 50
October 1, 1996. A company licensed on Financing had been provided directly to
percent of the outstanding voting a non-passive Small Business. Any such
or after October 1, 1996, must have securities; or
Leverageable Capital of at least fees received by your Associate must be
(ii) Indirectly owns, or will own as a
$2,500,000 and must meet the paid to you in cash within 30 days of
result of the Financing, at least 50
applicable minimum Regulatory Capital the receipt of such fees.
percent of the outstanding voting
requirement in this paragraph (a), unless (iii) For the purposes of this part 107,
securities (by directly owning the
lower Leverageable Capital and each passive and non-passive business
outstanding voting securities of another
Regulatory Capital amounts are passive Small Business that is the direct included in the Financing is a Portfolio
approved by SBA as part of a Wind-Up owner of the outstanding voting Concern. The terms of the financing
Plan in accordance with § 107.590(c): securities of the subsidiary company). must provide SBA with access to
* * * * * (3) Exception for certain Partnership Portfolio Concern information in
■ 4. Amend § 107.503 by revising the Licensees. If you are a Partnership compliance with this part 107,
last sentence of paragraph (a) to read as Licensee, you may form one or more including without limitation §§ 107.600
follows: wholly-owned corporations in and 107.620.
accordance with this paragraph (b)(3). * * * * *
§ 107.503 Licensee’s adoption of an
approved valuation policy.
The sole purpose of such corporation(s) § 107.1100 [Amended]
must be to provide Financing to one or
(a) * * * These guidelines may be ■ 8. Amend § 107.1100 by removing the
more eligible, unincorporated Small
obtained from SBA’s SBIC Web site at term ‘‘Yu’’ in the second to the last
Businesses. You may form such
www.sba.gov/inv. sentence of paragraph (b) and adding in
corporation(s) only if a direct Financing
* * * * * to such Small Businesses would cause its place ‘‘You’’, and by removing
■ 5. Amend § 107.610 by adding paragraph (c).
any of your investors to incur
paragraph (g) to read as follows: ‘‘unrelated business taxable income’’ Dated: September 21, 2015.
§ 107.610 Required certifications for Loans under section 511 of the Internal Maria Contreras-Sweet,
and Investments. Revenue Code (26 U.S.C. 511) or Administrator.
* * * * * ‘‘effectively connected income’’ to [FR Doc. 2015–25232 Filed 10–2–15; 8:45 am]
(g) For each passive business financed foreign investors under sections 871 and BILLING CODE 8025–01–P
under § 107.720(b)(3), a certification by 882 of the Internal Revenue Code (26
you, dated as of the closing date of the U.S.C. 871 and 882). Your ownership
Financing, as to the basis for the and investment of funds in such
corporation(s) will not constitute a SECURITIES AND EXCHANGE
qualification of the Financing under COMMISSION
§ 107.720(b)(3) and identifying one or violation of § 107.730(a). For each
more limited partners in which a direct passive business financed under this 17 CFR Part 201
Financing would cause those investors section 107.720(b)(3), you must provide
to incur ‘‘unrelated business taxable a certification to SBA as required under [Release No. 34–75977; File No. S7–19–15]
income’’ under section 511 of the § 107.610(g). The wholly-owned
RIN 3235–AL87
Internal Revenue Code (26 U.S.C. 511) corporation(s) formed under this
or ‘‘effectively connected income’’ to paragraph may provide Financing: Amendments to the Commission’s
foreign investors under sections 871 and (i) Directly to one or more eligible Rules of Practice
882 of the Internal Revenue Code (26 non-passive Small Businesses; or
(ii) Directly to a passive Small Securities and Exchange
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U.S.C. 871 and 882). AGENCY:
Business that passes substantially all the Commission.
§ 107.630 [Amended] proceeds directly to (or uses ACTION: Proposed rule.
■ 6. Amend § 107.630 by removing substantially all the proceeds to acquire)
paragraph (d) and redesignating one or more eligible non-passive Small SUMMARY: The Securities and Exchange
paragraph (e) as paragraph (d). Businesses which the passive Small Commission (‘‘Commission’’) is
■ 7. Amend § 107.720 by revising Business directly owns, or will own as proposing for public comment
paragraphs (b)(2) and (b)(3) and adding a result of the Financing, at least 50% amendments to its Rules of Practice that
paragraph (b)(4) to read as follows: of the outstanding voting securities. would require persons involved in

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Federal Register / Vol. 80, No. 192 / Monday, October 5, 2015 / Proposed Rules 60085

paper documents by any additional were admitted, or offered and not F. Other Proposed Amendments
method listed in Rule 152(d). admitted, during the hearing. Generally
Rule 152(a) would be amended to speaking, parties would follow Rule 351 Rule 150(c) 13 would be amended to
provide additional methods of filing if to submit record exhibits and other require parties to serve each other
a person reasonably cannot comply with documents or items that are not electronically in the form and manner
the electronic filing requirements. Filers attached to filings, i.e., materials that is prescribed in the guidance posted
should take note that the Commission accepted into evidence by a hearing on the Commission’s Web site.
would need to receive mailed, officer under Rule 351 in connection Electronic service by email is a practice
couriered, or hand-delivered filings by with an in-person hearing. As under that appears to occur already in
5:30 p.m. Eastern Time because the Rule 151(a), the submission deadline administrative proceedings. Electronic
Commission is unable to accept such depends on the method of delivery that service would need to occur
filings after that time. The Commission is used. contemporaneously with filing, and the
would need to receive facsimile As under Rule 151(e), the proposed timing of service would therefore differ
transmissions by midnight Eastern amendment to Rule 351(c) would set depending on the filing method. As
Time. forth the same definition of sensitive with electronic filing, a party who
The proposed amendment also would personal information, require its reasonably cannot comply with the
provide that electronic filings that redaction or omission from all electronic service requirement must file
require a signature pursuant to Rule submissions under Rule 351, provide a a certification under Rule 150(c)(1) that
153 9 may be signed with an ‘‘/s/’’ process for seeking a protective order explains why the person reasonably
notation, which shall be deemed the under Rule 322 with respect to sensitive cannot comply. The filing also must
signature of the person making the filing personal information that is necessary to indicate the expected duration of the
for purposes of Rule 153. the proceeding, and require a person’s reasonable inability to comply,
certification that sensitive personal such as whether the certification is
D. Proposed Amendments to Rule 351 intended to apply to a solitary instance
information has been excluded or
Rule 351 10 currently sets forth the redacted or filed under seal. A person of service or all instances of service
requirements regarding the transmittal who reasonably cannot submit exhibits made during the proceeding. The
of documents to the Secretary and the electronically must file a certification certification is immediately effective.
preparation, issuance, and certification under Rule 351(c)(2) that explains why Upon filing the certification, it will be
of a record index. Rule 351(b) 11 requires the person reasonably cannot comply. part of the record of the proceeding, and
the hearing officer to transmit to the The filing also must indicate the the person may serve paper documents
Secretary an index of the originals of expected duration of the person’s by any additional method listed in Rule
any motions, exhibits or any other reasonable inability to comply, such as 150(d). Rule 150(d) would be amended
documents filed with or accepted into whether the certification is intended to to provide additional methods of service
evidence by the hearing officer that have apply to a solitary submission or all if a person reasonably cannot comply
not been previously transmitted to the submissions made during the with the electronic service
Secretary. The Secretary then shall proceeding. The certification is requirements, or if service is of an
prepare a record index and transmit it immediately effective. Upon filing the investigative subpoena pursuant to 17
to the hearing officer and serve a copy certification, it will be part of the record CFR 203.8. Under Rule 150(e),14
on each party. Any person may file of the proceeding, and the person shall electronic service would be deemed
proposed corrections to the record index submit originals of any exhibits that complete upon transmission.
with the hearing officer within fifteen have not already been submitted to the Rule 141(b) 15 would be amended to
days of service of the record index. The Secretary by other means. Rule 351(c) allow the Secretary to serve orders and
proposed amendment to Rule 351(b) also would state that electronic decisions, other than an order
would reduce that amount of time to submissions that require a signature instituting proceedings, electronically.
three days but would provide persons pursuant to Rule 153 may be signed
who oppose the proposed corrections Currently, Rule 102(d) 16 requires a
with an ‘‘/s/’’ notation, which shall be person to provide to the Commission
three days to file an opposition. deemed the signature of the person
Proposed new Rule 351(c) 12 would certain contact information that may be
making the filing for purposes of Rule used during an administrative
state that, no later than five days after
153. proceeding. The proposed amendment
the Secretary serves a final record index,
the parties shall submit electronically, E. Phase-In Period clarifies that a mailing address and an
through the same secure system used for email address shall be provided under
For the first 90 days after the paragraphs (d)(1), (d)(2), and (d)(4).17
filings under Rules 151 and 152, copies proposed amendments become final, the
of all exhibits that were admitted, or Commission intends to administer a Rule 193 18 currently provides that an
offered and not admitted, during the phase-in period that would require all original and three copies of an
hearing, and any other exhibits that filings to be made both electronically application shall be filed under Rules
were admitted after the hearing. The and in paper format. The Commission 151, 152, and 153, and that such
parties shall submit such evidence in preliminarily believes that a 90-day application shall be supported by a
the form and manner that is prescribed phase-in period is a reasonable amount manually signed affidavit. The proposed
in the guidance posted on the of time for persons to become proficient amendment would delete the term
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Commission’s Web site and shall certify in the electronic filing procedures while ‘‘manually,’’ delete the reference to one
that exhibits and other documents or ensuring that the Commission receives original and three copies, and leave the
items submitted to the Secretary are true the filing should there be an electronic
and accurate copies of exhibits that transmission failure. However, it may be
13 17 CFR 201.150(c).
14 17 CFR 201.150(e).
9 17
appropriate to extend the phase-in
CFR 201.153. 15 17 CFR 201.141(b).
10 17 CFR 201.351.
period if persons are experiencing 16 17 CFR 201.102(d).
11 17 CFR 201.351(b). substantial difficulties with the 17 17 CFR 201.102(d)(1), (d)(2), (d)(4).
12 17 CFR 201.351(c). electronic filing. 18 17 CFR 201.193.

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60086 Federal Register / Vol. 80, No. 192 / Monday, October 5, 2015 / Proposed Rules

cross reference to Rules 151, 152, and regarding: (1) The definition of sensitive those who file them. Instead, such
153 to account for electronic filing. personal information, (2) the potential redaction is undertaken by the
Rule 420 19 sets forth the requirements adverse effects, if any, of disclosing Commission when necessary in
regarding appeals of determinations by personal email addresses and home responding to document requests from
self-regulatory organizations. Currently, addresses of parties and persons filing the public or posting documents on the
Rule 420(e) 20 requires a self-regulatory documents with the Commission, (3) Commission’s public Web site. Service
organization to certify and file with the alternative approaches to handling by email is already generally an
Commission one copy of the record personal email addresses and home accepted practice by parties to
upon which the action complained of addresses of parties and persons filing administrative proceedings who
was taken, to file with the Commission documents with the Commission, (4) the mutually agree to it, although it is not
three copies of an index to such record, other proposed changes that are the expressly permitted by rule.
and to serve upon each party one copy subject of this release, (5) additional or The scope of the benefits and costs of
of the index within fourteen days after different changes, or (6) other matters the proposed rules depends on the
receiving an application for review or a that may have an effect on the proposals expected volume of administrative
Commission order for review. The contained in this release. proceedings and the number of filed
proposed amendment would require the documents and document requests
IV. Administrative Procedure Act,
self-regulatory organization to file such associated with these proceedings. In
Regulatory Flexibility Act, and
information electronically. Further, if fiscal year 2014, 230 new administrative
Paperwork Reduction Act
such information contains sensitive proceedings were initiated and not
personal information, the self-regulatory The Commission finds, in accordance settled immediately. New proceedings
organization would be required to file with Section 553(b)(3)(A) of the initiated and not immediately settled in
electronically a copy of the record and Administrative Procedure Act,23 that fiscal years 2013 and 2012 totaled 202
index that redacts or omits the sensitive these revisions relate solely to agency and 207 respectively.28 From 2011 to
personal information and to certify that organization, procedure, or practice. 2013, an average of approximately 1,900
any sensitive personal information has They are therefore not subject to the filings were submitted per fiscal year in
been excluded or redacted. The provisions of the Administrative relation to litigated proceedings,
requirements for filing and serving Procedure Act requiring notice, including filings by outside parties as
would continue to be governed by Rules opportunity for public comment, and well as Commission staff. These filings
150–152. publication. The Regulatory Flexibility consist of one or more documents, such
Rule 440 21 sets forth the requirements Act 24 therefore does not apply.25 as motions, briefs, and record exhibits,
regarding appeals of determinations by Nonetheless, the Commission has and the length of the filings generally
the PCAOB. Rule 440(d) 22 currently determined that it would be useful to ranges from one page to a few thousand
requires the PCAOB to certify and file publish these proposed rules for notice pages. The Commission also received
with the Commission one copy of the and comment before adoption. Because numerous requests from the public to
record upon which it took the these rules relate to ‘‘agency release documents related to these
complained of action, to file with the organization, procedure or practice that proceedings. Requests for records
Commission three copies of an index to does not substantially affect the rights or related to administrative proceedings
such record, and to serve upon each obligations of non-agency parties,’’ they (both settled and litigated) numbered
party one copy of the index within are not subject to the Small Business 127, 83, and 100 for fiscal years 2013,
fourteen days after receiving an Regulatory Enforcement Fairness Act.26 2012, and 2011 respectively.
application for review. The proposed To the extent these rules relate to The implementation of electronic
amendment would require the PCAOB agency information collections during filing and the related proposed rules are
to file such information electronically. the conduct of administrative intended to improve the efficiency and
Further, if such information contains proceedings, they are exempt from transparency of the Commission’s
sensitive personal information, the review under the Paperwork Reduction operations and to modernize the
PCAOB would be required to file Act.27 document management process to be
electronically a redacted copy of the V. Economic Analysis consistent with common practice in
record and index that redacts or omits other tribunals. Benefits of the proposed
The Commission is sensitive to the
the sensitive personal information and costs and benefits of its rules. The rules are anticipated to accrue to the
to certify that any sensitive personal current processes and filing public and outside parties to
information has been excluded or requirements for administrative administrative proceedings as well as
redacted. The requirements for filing proceedings serve as the baseline the Commission.
and serving would continue to be Specifically, the proposed rules may
against which the economic impacts of
governed by Rules 150–152. benefit members of the public with an
the proposed rules are measured. At
The United States Postal Service interest in the Commission’s
present, submissions are permitted to be
changed the name of the product known administrative proceedings by
filed with the Commission in paper
as Express Mail to Priority Mail Express. format or by facsimile followed by a permitting the Commission to more
Rule 141(a)(2)(i), (ii), (iii), (vi), (a)(3) and paper submission. The Commission’s 28 The total number of administrative proceedings
Rule 150(a)(2), (d) would be amended to current Rules of Practice do not identify initiated and not immediately settled each fiscal
refer generically to ‘‘express mail.’’ sensitive personal information that must
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year encompasses a variety of types of proceedings,
III. Request for Public Comment be redacted from these documents by including proceedings instituted pursuant to
Section 12(j) of the Securities Exchange Act of 1934
We request and encourage any 23 5 U.S.C. 553(b)(3)(A).
seeking to determine whether it is necessary and
interested person to submit comments 24 5
appropriate for the protection of investors to
U.S.C. 601–612. suspend or revoke the registration of an issuer’s
25 See 5 U.S.C. 603.
19 17
securities and proceedings instituted under Section
CFR 201.420. 26 5 U.S.C. 804(3)(C).
15(b) of the Exchange Act or Section 203(f) of the
20 17 CFR 201.420(e). 27 See 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR 1320.4 Investment Advisers Act of 1940 seeking to
21 17 CFR 201.440.
(exempting collections during the conduct of determine what, if any, remedial action is
22 17 CFR 201.440(d). administrative proceedings or investigations). appropriate in the public interest.

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Document Created: 2015-12-15 08:53:04
Document Modified: 2015-12-15 08:53:04

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Proposed rule.
Dates		Comments should be received on or before December 4, 2015.
Contact		Adela Choi, Senior Counsel, and Laura Jarsulic, Associate General Counsel, Office of the General Counsel, (202) 551-5150, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
FR Citation		80 FR 60082
RIN Number		3235-AL87