| Page Range | 81439-81736 | |
| FR Document |
| Page and Subject | |
|---|---|
| 80 FR 81601 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding NASDAQ Last Sale Plus | |
| 80 FR 81541 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated Authority | |
| 80 FR 81542 - Information Collections Being Submitted for Review and Approval to the Office of Management and Budget | |
| 80 FR 81495 - Treatment of Data Influenced by Exceptional Events | |
| 80 FR 81581 - Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Y-Exchange, Inc. | |
| 80 FR 81576 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding NASDAQ Last Sale Plus | |
| 80 FR 81584 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding NASDAQ Last Sale Plus | |
| 80 FR 81612 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NOM Rules at Chapter XV, Section 2 | |
| 80 FR 81650 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Adopt FINRA Rule 2030 and FINRA Rule 4580 To Establish “Pay-To-Play” and Related Rules | |
| 80 FR 81551 - Advisory Council on Alzheimer's Research, Care, and Services; Meeting | |
| 80 FR 81529 - Extension of Deep Seabed Exploration Licenses: Response to Comments | |
| 80 FR 81558 - Idaho: Filing of Plats of Survey | |
| 80 FR 81539 - Combined Notice of Filings | |
| 80 FR 81533 - Environmental Management Site-Specific Advisory Board, Nevada | |
| 80 FR 81555 - Government-Owned Inventions; Availability for Licensing | |
| 80 FR 81552 - Government-Owned Inventions; Availability for Licensing and Co-Development | |
| 80 FR 81553 - Government-Owned Inventions; Availability for Licensing | |
| 80 FR 81556 - Agency Information Collection Activities: Affidavit of Support, FormI-134; Extension, Without Change, of a Currently Approved Collection | |
| 80 FR 81470 - Defense Federal Acquisition Regulation Supplement: Trade Agreements Thresholds (DFARS Case 2016-D003) | |
| 80 FR 81496 - Defense Federal Acquisition Regulation Supplement: Defense Contractors Performing Private Security Functions (DFARS Case 2015-D021) | |
| 80 FR 81499 - Defense Federal Acquisition Regulation Supplement: Multiyear Contract Requirements (DFARS Case 2015-D009) | |
| 80 FR 81494 - Extension of Comment Period on the Proposed Rule on Roadless Area Conservation; National Forests System Lands in Colorado | |
| 80 FR 81465 - Drawbridge Operation Regulation; Des Allemands Bayou, Des Allemands, LA | |
| 80 FR 81467 - Defense Federal Acquisition Regulation Supplement: Taxes-Foreign Contracts in Afghanistan (DFARS Case 2014-D003) | |
| 80 FR 81472 - Defense Federal Acquisition Regulation Supplement: Network Penetration Reporting and Contracting for Cloud Services (DFARS Case 2013-D018) | |
| 80 FR 81503 - Parts and Accessories Necessary for Safe Operation: Federal Motor Vehicle Safety Standards Certification for Commercial Motor Vehicles Operated by United States-Domiciled Motor Carriers; Withdrawal | |
| 80 FR 81529 - New England Fishery Management Council; Public Meeting | |
| 80 FR 81528 - Mid-Atlantic Fishery Management Council (MAFMC); Public Meeting | |
| 80 FR 81670 - Agency Information Collection Activities; Emergency Revision of a Currently-Approved Information Collection: Licensing Applications for Motor Carrier Operating Authority | |
| 80 FR 81545 - Application Procedures for Broadcast Incentive Auction Scheduled To Begin on March 29, 2016; Updates and Other Supplemental Information | |
| 80 FR 81667 - Qualification of Drivers; Exemption Applications; Diabetes | |
| 80 FR 81557 - Public Land Order No. 7847; Partial Revocation of a Public Land Order No. 1378; Colorado | |
| 80 FR 81558 - Public Land Order No. 7845; Extension of Public Land Order No. 7177; Alaska | |
| 80 FR 81540 - Information Collection Request Submitted to OMB for Review and Approval; Comment Request; National Water Quality Inventory Reports (Reinstatement) | |
| 80 FR 81671 - Agency Information Collection Activities: Request for Comments; Clearance of a New Information Collection(s): Voluntary Web-Based Questionnaire of Disadvantaged Business Enterprise Firms | |
| 80 FR 81667 - Petition for Exemption; Summary of Petition Received; The Visual Arts Group, LLC | |
| 80 FR 81666 - Petition for Exemption; Summary of Petition Received; Astraeus Aerial | |
| 80 FR 81666 - Petition for Exemption; Summary of Petition Received; Charles Franklin, Inc. | |
| 80 FR 81475 - Revision of Regulations To Allow Federal Contractors, Subcontractors, and Grantees To File Whistleblower Disclosures With the U.S. Office of Special Counsel; Withdrawal of Proposed Rule | |
| 80 FR 81541 - Notice of Request for Comments on Opening Balances for General Property, Plant, and Equipment | |
| 80 FR 81664 - Agency Information Collection Activities: Proposed Request and Comment Request | |
| 80 FR 81507 - Information Collection; Recreation Fee and Wilderness Program Administration | |
| 80 FR 81508 - Ski Area Water Clause | |
| 80 FR 81559 - Information Collection: NRC Form 398, Personal Qualification Statement-Licensee | |
| 80 FR 81561 - Product Change-Priority Mail Negotiated Service Agreement | |
| 80 FR 81562 - Product Change-Priority Mail Negotiated Service Agreement | |
| 80 FR 81547 - Guidance Regarding License Assignments and Transfers of Control During the Reverse Auction, Auction 1001 | |
| 80 FR 81548 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
| 80 FR 81548 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding Company | |
| 80 FR 81560 - Information Collection: NRC Generic Letter 2016-XX, Monitoring of Neutron-Absorbing Materials in Spent Fuel Pools | |
| 80 FR 81528 - Notice of Public Meeting of the Michigan Advisory Committee for a Meeting To Discuss Preparations for a Public Hearing Regarding the Civil Rights Impact of Civil Forfeiture Practices in the State | |
| 80 FR 81527 - Notice of Public Meeting of the Illinois Advisory Committee to Discuss Approval of a Project Proposal to Study Civil Rights and Environmental Justice in the State | |
| 80 FR 81534 - Revised Critical Infrastructure Protection Reliability Standards; Supplemental Notice of Agenda and Discussion Topics for Staff Technical Conference | |
| 80 FR 81536 - Public Utility District No. 1 of Snohomish County, Washington; Notice of Application Accepted for Filing, Soliciting Comments, Motions To Intervene, and Protests | |
| 80 FR 81539 - Breitburn Operating LP; Notice of Request for Temporary Waiver | |
| 80 FR 81537 - Notice of Effectiveness of Exempt Wholesale Generator Status | |
| 80 FR 81537 - Texas Gas Transmission, LLC; Notice of Schedule for Environmental Review of the Northern Supply Access Project | |
| 80 FR 81534 - Combined Notice of Filings #2 | |
| 80 FR 81538 - Combined Notice of Filings #1 | |
| 80 FR 81645 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Proprietary Trader and Proprietary Trader Principal Registration Categories, Securities Trader and Securities Trader Principal Registration Categories, and Establishing the Series 57 Examination | |
| 80 FR 81611 - Notice of Applications for Deregistration Under Section 8(f) of the Investment Company Act of 1940 | |
| 80 FR 81709 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Consisting of Proposed Amendments to Rule G-37, on Political Contributions and Prohibitions on Municipal Securities Business, Rule G-8, on Books and Records, Rule G-9, on Preservation of Records, and Forms G-37 and G-37x | |
| 80 FR 81564 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the REX Gold Hedged S&P 500 ETF and the REX Gold Hedged FTSE Emerging Markets ETF Under NYSE Arca Equities Rule 8.600 | |
| 80 FR 81562 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Participant Fee | |
| 80 FR 81642 - Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Proprietary Trader and Proprietary Trader Principal Registration Categories, Securities Trader and Securities Trader Principal Registration Categories, and Establishing the Series 57 Examination | |
| 80 FR 81640 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change to the Co-Location Services Offered by the Exchange (the Offering of a Wireless Connection To Allow Users To Receive Market Data Feeds From Third Party Markets) and to Reflect Changes to the NYSE Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees and Charges Related to These Services | |
| 80 FR 81609 - Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Rule Change to the Co-Location Services Offered by the Exchange (the Offering of a Wireless Connection To Allow Users To Receive Market Data Feeds From Third Party Markets) and To Reflect Changes to the Exchange's Price List Related to These Services | |
| 80 FR 81590 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Adopt FINRA Rule 2273 (Educational Communication Related to Recruitment Practices and Account Transfers) | |
| 80 FR 81637 - Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Proprietary Trader and Proprietary Trader Principal Registration Categories, Securities Trader and Securities Trader Principal Registration Categories, and Establishing the Series 57 Examination | |
| 80 FR 81606 - Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Proprietary Trader and Proprietary Trader Principal Registration Categories, Securities Trader and Securities Trader Principal Registration Categories, and Establishing the Series 57 Examination | |
| 80 FR 81589 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Participant Fee | |
| 80 FR 81614 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1 and Amendment No. 2, Consisting of Proposed New Rule G-42, on Duties of Non-Solicitor Municipal Advisors, and Proposed Amendments to Rule G-8, on Books and Records To Be Made by Brokers, Dealers, Municipal Securities Dealers, and Municipal Advisors | |
| 80 FR 81648 - Self-Regulatory Organizations; NYSE MKT LLC; Order Approving Proposed Rule Change to the Co-location Services Offered by the Exchange (the Offering of a Wireless Connection to Allow Users to Receive Market Data Feeds from Third Party Markets) and to Reflect Changes to the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule Related to These Services | |
| 80 FR 81531 - Proposed Collection; Comment Request | |
| 80 FR 81576 - Investor Advisory Committee Meeting | |
| 80 FR 81441 - Energy Conservation Program: Test Procedures for Commercial Prerinse Spray Valves | |
| 80 FR 81559 - Notice of Lodging of Proposed Consent Decree Under the Clean Air Act | |
| 80 FR 81547 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated Authority | |
| 80 FR 81546 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated Authority | |
| 80 FR 81454 - Allocation and Disbursement of Royalties, Rentals, and Bonuses-Oil and Gas, Offshore | |
| 80 FR 81550 - Acidified Foods; Draft Guidance for Industry; Withdrawal of Draft Guidance | |
| 80 FR 81549 - Contractors Performing Private Security Functions Outside the United States | |
| 80 FR 81532 - Information Collection; Economic Purchase Quantity-Supplies | |
| 80 FR 81533 - Information Collection; Price Redetermination | |
| 80 FR 81556 - National Institute on Aging; Notice of Closed Meeting | |
| 80 FR 81554 - National Institute on Aging; Notice of Closed Meeting | |
| 80 FR 81551 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meetings | |
| 80 FR 81555 - Center for Scientific Review; Notice of Closed Meeting | |
| 80 FR 81554 - National Institute of Biomedical Imaging and Bioengineering; Notice of Closed Meeting | |
| 80 FR 81554 - Office of the Director; Amended Notice of Meeting | |
| 80 FR 81552 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meetings | |
| 80 FR 81555 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meetings | |
| 80 FR 81552 - National Center for Advancing Translational Sciences; Notice of Closed Meeting | |
| 80 FR 81475 - Occupational Exposure to Beryllium | |
| 80 FR 81466 - Determination of Attainment; Texas; Houston-Galveston-Brazoria 1997 Ozone Nonattainment Area; Determination of Attainment of the 1997 Ozone Standard | |
| 80 FR 81463 - Offset of Tax Refund Payments To Collect Past-Due Support | |
| 80 FR 81439 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Technical Amendments | |
| 80 FR 81501 - Hazardous Materials: Safety Requirements for External Product Piping on Cargo Tanks Transporting Flammable Liquids | |
| 80 FR 81573 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of a Proposed Rule Change To Amend Rules 5810(4), 5810(c), 5815(c) and 5820(d) To Provide Staff With Limited Discretion To Grant a Listed Company That Failed To Hold Its Annual Meeting of Shareholders an Extension of Time To Comply With the Requirement | |
| 80 FR 81454 - Regulation Systems Compliance and Integrity; Correction | |
| 80 FR 81550 - Agency Information Collection Activities: Submission for OMB Review; Comment Request | |
| 80 FR 81477 - Impact Aid Programs | |
| 80 FR 81673 - Medicare Program; Prior Authorization Process for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies | |
| 80 FR 81558 - National Register of Historic Places; Notification of Pending Nominations and Related Actions |
Forest Service
National Oceanic and Atmospheric Administration
Defense Acquisition Regulations System
Federal Energy Regulatory Commission
Centers for Medicare & Medicaid Services
Food and Drug Administration
National Institutes of Health
Coast Guard
U.S. Citizenship and Immigration Services
Land Management Bureau
National Park Service
Ocean Energy Management Bureau
Office of Natural Resources Revenue
Occupational Safety and Health Administration
Federal Aviation Administration
Federal Motor Carrier Safety Administration
Pipeline and Hazardous Materials Safety Administration
Fiscal Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.thefederalregister.org and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions.
Department of Labor.
Final rule; technical amendment.
This final rule implements technical amendments to the Department of Labor's (Department or DOL) adoption of the Office of Management and Budget (OMB) Guidance in the
Adele Gagliardi, Administrator, Office of Policy Development and Research (OPDR), at 202-693-3700 (voice); or 202-693-2766 (facsimile). These are not toll-free numbers.
The Preamble to this rule is organized as follows:
The Department implements, in this final rule, technical amendments to 2 CFR 2900 which supplemented the final guidance
The Uniform Guidance followed on a notice of proposed guidance issued February 1, 2013, (available at 78 FR 7282), and an advanced notice of proposed guidance issued February 28, 2012, (available at 77 FR 11778). The final guidance incorporated feedback received from the public in response to those earlier issuances. Additional supporting resources are available from the Council on Financial Assistance Reform at
The Uniform Guidance delivered on two presidential directives; Executive Order 13520 on Reducing Improper Payments (74 FR 62201; November 15, 2009), and February 28, 2011, Presidential Memorandum on Administrative Flexibility, Lower Costs, and Better Results for State, Local, and Tribal Governments, (Daily Comp. Pres. Docs.;
The Department provided additional language in 2 CFR part 2900 beyond that included in 2 CFR part 200, consistent with the Department's existing policy, to provide more detail with respect to how the Department intended to implement the policy, where appropriate. The Department is not making any new policy with the technical amendments in this final rule; all regulatory language included here is consistent with either the policies in the Uniform Guidance or the Department's existing policies and practices as explained in 2 CFR part 2900.
This final rule incorporates minor changes to 2 CFR part 2900 to add citations or correct citation errors in §§ 2900.1, 2900.5, 2900.7, and 2900.13. In addition, non-substantive deletions and additions of a word or phrase were made to §§ 2900.3, 2900.13, 2900.15, 2900.16, and 2900.21 to clarify the language in the section. Finally, typographical errors were corrected in §§ 2900.5 and 2900.20.
Accordingly, the regulations in 2 CFR part 2900 are amended to include updated information.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Ch. 3506; 5 CFR 1320 Appendix A.1) (PRA), the Department reviewed this final rule and determined that there are no new collections of information contained within the rule.
The Regulatory Flexibility Act (RFA) requires an agency that is issuing a final rule to provide a final regulatory flexibility analysis or to certify that the rule will not have a significant economic impact on a substantial number of small entities. This final rule implements technical amendments to 2 CFR 2 part 900 which supplemented OMB final guidance issued on December 26, 2013. Therefore, this final rule and will not have a significant economic impact beyond the impact of the December 2013 guidance.
Pursuant to Executive Order 12866, OMB's Office of Information and Regulatory Affairs (OIRA) designated the joint interim final rule at 2 CFR 200, which included Department specific policies and procedures for financial assistance administration at 2 CFR part 2900, published on December 19, 2014, (Interim Final Rule, available at 79 FR 75867) not to be significant. This final rule implements technical amendments to 2 CFR part 2900 and introduces no new policy issues, economic impacts, or new burdens; therefore, pursuant to Executive Order 12866, this action is not a significant regulatory action and was not submitted to OMB for review.
Under the Administrative Procedure Act (APA), the Department generally is required to publish a notice of proposed rulemaking and provide the public with an opportunity to comment on proposed regulations prior to establishing a final rule. However, as noted earlier in the background preamble, OMB offered the public two opportunities to comment on the Uniform Guidance, first through an advanced notice of proposed guidance and, second, through a notice of proposed guidance. OMB considered over 300 comments submitted in response to each of these notices. OMB has directed agencies to adopt the uniform guidance in part 200 without change, except to the extent that an agency can demonstrate that any conflicting agency requirements are required by statute or regulations, or consistent with longstanding practice and approved by OMB. As explained above, the Department published agency specific supplemental information that was approved by OMB in 2 CFR part 2900. This final rule only makes technical amendments to 2 CFR part 2900. Finally, OMB made clear that the requirements in 2 CFR part 200 (including the audit requirements in subpart F) and 2 CFR part 2900, will apply, starting on December 26, 2014, giving recipients of all types of financial assistance advance notice of when the regulations would become effective. Therefore, under 5 U.S.C. 553(b)(B), there is good cause for waiving proposed rulemaking as unnecessary.
Generally, the Department is subject to the APA requirement to delay the effective date of its final regulations by 30 days after publication, as required under 5 U.S.C. 553(d), unless an exception under subsection (d) applies.
Under 5 U.S.C. 553(d), the Department may waive the delayed effective date requirement if it finds good cause and explains the basis for the waiver in the final rulemaking document or if the regulations grant or recognize an exemption or relieve a restriction. In the present case, there is good cause to waive the delayed effective date for three reasons.
First, OMB informed the public on December 26, 2013, that agencies would be required to adopt the Uniform Guidance and make it effective by December 26, 2014. The public had significant time to prepare for the promulgation of those interim final regulations.
Second, while those interim final regulations were based on a new, more effective method for establishing government-wide requirements, the substance of the regulations are, in most cases, virtually identical to the requirements that exist in current agency regulations. Finally, this final rule makes technical changes to the Department's agency-specific supplemental information at 2 CFR part 2900 that was made effective along with 2 CFR part 200 on December 27, 2014. Delaying the implementation of these technical amendments would cause errors that were discovered in 2 CFR part 2900 to be in effect for an additional 30 days causing unnecessary confusion to recipients of Federal financial assistance. Based on these considerations, the Department has determined that there is good cause to waive the delayed effective date for these final regulations.
Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded Mandates Act) (2 U.S.C. 1532) requires that covered agencies prepare a budgetary impact statement before promulgating a rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires covered agencies to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. OMB has determined that this final rule will not result in expenditures by State, local, and tribal governments, or by the private sector, of $100 million or more in any one year. Accordingly, the Department has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered.
The Department has determined that this final rule does not have any Federalism implications, as required by Executive Order 13132.
The Department drafted this rule in plain language.
Accounting, Administrative practice and procedure, Appeal procedures, Auditing, Audit requirements, Cost principles, Grant programs, Grant programs—labor, Grants administration, Labor, Reporting and recordkeeping requirements.
Under the authority of the 5 U.S.C. 301, the Department of Labor amends 2 CFR part 2900 as follows:
5 U.S.C. 301; 2 CFR 200.
In the DOL, approval of the budget as awarded does not constitute prior approval of those items requiring prior approval, including those items the Federal Awarding agency specifies as requiring prior approval. See § 200.407 and § 2900.16 for more information about prior approval. (See 2 CFR 200.8)
In the DOL, in addition to the guidance contained in 2 CFR 200.84, a
In the DOL, audits and monitoring reports containing findings, issues of non-compliance or questioned costs are in addition to reports and findings from audits performed under Subpart F—Audit Requirements of 2 CFR 200 or the reports and findings of any other available audits. (See 2 CFR 200.205(c)(4))
In addition to the guidance set forth in 2 CFR 200.305(b), for Federal awards from the Department of Labor, the non-Federal entity should liquidate existing advances before it requests additional advances.
In addition to the guidance set forth in 2 CFR 200.315(d), the Department of Labor requires intellectual property developed under a competitive Federal award process to be licensed under a Creative Commons Attribution license. This license allows subsequent users to copy, distribute, transmit and adapt the copyrighted work and requires such users to attribute the work in the manner specified by the recipient.
In addition to the guidance set forth in 2 CFR 200.343(b), for Federal awards from the Department of Labor, the non-Federal entity must liquidate all obligations and/or accrued expenditures incurred under the Federal award. For non-Federal entities reporting on an accrual basis and operating on an expenditure period, unless otherwise noted in the grant agreement, the only liquidation that can occur during closeout is the liquidation of accrued expenditures (NOT obligations) for goods and/or services received during the grant period.
In addition to the guidance set forth in 2 CFR 200.407, for Federal awards from the Department of Labor, the non-Federal entity must request prior written approval which should include the timeframe or scope of the agreement and be submitted not less than 30 days before the requested action is to occur. Unless otherwise noted in the grant agreement, the Grant Officer is the only official with the authority to provide prior written approval (prior approval). Items included in the statement of work or budget as awarded does not constitute prior approval.
In the DOL, in addition to 2 CFR 200.513, the department employs a collaborative resolution process with non-federal entities.
In the DOL, ordinarily, a management decision is issued within six months of receipt of an audit from the audit liaison of the Office of the Inspector General and is extended an additional six months when the audit contains a finding involving a subrecipient of the pass-through entity being audited. The pass-through entity responsible for issuing a management decision must do so within twelve months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and should begin corrective action no later than upon receipt of the audit report. (See 2 CFR 200.521(d))
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Final rule.
On June 23, 2015, the U.S. Department of Energy (DOE) issued a notice of proposed rulemaking (NOPR) to amend the test procedure for commercial prerinse spray valves. That proposed rulemaking serves as the basis for this final rule. Specifically, this final rule incorporates by reference relevant portions of the latest version of the industry testing standard from the American Society for Testing and Materials (ASTM) Standard F2324-13, “Standard Test Method for Prerinse Spray Valves,” including the procedure for measuring spray force. This final rule also adopts a revised definition of “commercial prerinse spray valve,” clarifies the test procedure for products with multiple spray settings, establishes rounding requirements for flow rate and spray force measurements, and removes irrelevant portions of statistical methods for certification, compliance, and enforcement.
The effective date of this rule is January 29, 2016. The final rule changes will be mandatory for representations starting June 27, 2016. The incorporation by reference of certain material listed in this rule is approved by the Director of the Federal Register as of January 29, 2016.
A link to the docket Web page can be found at DOE's rulemaking Web page at:
For further information on how to review the docket, contact Ms. Brenda Edwards at (202) 586-2945 or by email:
This final rule incorporates by reference into part 431 the following industry standard: ASTM Standard F2324-13, (“ASTM F2324-13”), Standard Test Method for Prerinse Spray Valves, approved June 1, 2013.
Copies of ASTM Standard F2324-13 can be obtained from ASTM International, 100 Barr Harbor Drive, West Conshohocken, PA 19428, or by going to
See section IV.M. for additional information about this standard.
Title III of the Energy Policy and Conservation Act of 1975 (EPCA),
Under EPCA, the energy conservation program consists essentially of four parts: (1) Testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. The testing requirements consist of a test procedure that manufacturers of covered products must use as the basis for (1) certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA, and (2) making representations about the efficiency of those products. Similarly, DOE must use the test procedure to determine whether the products comply with any relevant standards promulgated under EPCA.
EPCA sets forth the current maximum flow rate of not more than 1.6 gallons per minute for commercial prerinse spray valves. (42 U.S.C. 6295(dd)) EPCA also requires DOE to use the ASTM Standard F2324 as the basis for the test procedure for measuring flow rate. (42 U.S.C. 6293(b)(14))
In the December 8, 2006 final rule, DOE incorporated by reference ASTM Standard F2324-03 into regulatory text under section 431.263 of Title 10 of the Code of Federal Regulations, Part 431 (10 CFR part 431), and prescribed it as the uniform test method to measure flow rate of commercial prerinse spray valves under 10 CFR 431.264. 71 FR 71340, 71374. Later, on October 23, 2013, DOE published a final rule (October 2013 final rule) that incorporated by reference ASTM Standard F2324-03 (2009) for testing commercial prerinse spray valves, which updated the 2003 version to the 2009 version of the same test standard. 78 FR 62970, 62980.
Since the October 2013 final rule, ASTM has published a revised version of the F2324 test standard, ASTM F2324-13. In addition, DOE has initiated a rulemaking to consider amended water conservation standards for commercial prerinse spray valves (Docket No. EERE-2014-BT-STD-0027). DOE published a notice of proposed rulemaking (NOPR) for the test procedure on June 23, 2015, presenting DOE's proposals to amend the CPSV test procedure (80 FR 35874-5886) (hereafter, the “2015 CPSV TP NOPR”). DOE held a public meeting related to this NOPR on July 28, 2015 (hereafter, the “NOPR public meeting”).
EPCA sets forth in 42 U.S.C. 6293 the criteria and procedures DOE must follow when prescribing or amending test procedures for covered products. EPCA provides that any test procedures prescribed or amended under this section shall be reasonably designed to produce test results which measure energy efficiency, energy use or estimated annual operating cost of a covered product during a representative average use cycle or period of use and shall not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3))
In addition, if DOE determines that a test procedure amendment is warranted, it must publish proposed test procedures and offer the public an opportunity to present oral and written comments on them. (42 U.S.C. 6293(b)(2)) Finally, in any rulemaking to amend a test procedure, DOE must determine to what extent, if any, the proposed test procedure would alter the measured energy efficiency of any covered product as determined under the existing test procedure. (42 U.S.C. 6293(e)(1))
In this final rule, DOE amends the commercial prerinse spray valve test procedure to be based on the current industry standard, ASTM Standard F2324-13, “Standard Test Method for Prerinse Spray Valves,” which continues to measure water use based on a maximum flow rate. By incorporating the newest version of ASTM Standard F2324-13, DOE is adding testing requirements for spray force. In addition, DOE is also specifying provisions governing representations of commercial prerinse spray valves with multiple spray settings. In addition, DOE concludes that amendments adopted in this final rule do not change the measured energy and water use of commercial prerinse spray valves compared to the current test procedure. As such, all test procedure amendments adopted in this final rule are effective 30 days after publication in the
This final rule fulfills DOE's obligation to periodically review its test procedures under 42 U.S.C. 6293(b)(1)(A). DOE anticipates that its next evaluation of this test procedure will occur in a manner consistent with the timeline set out in this provision.
In this final rule, DOE amends 10 CFR 431.264, “Uniform test method for the measurement of flow rate for commercial prerinse spray valves,” as follows:
• Modifies the definition of “commercial prerinse spray valve,” and adds a definition for “spray force;”
• Incorporates by reference certain provisions (sections 6.1-6.9, 9.1-9.5.3.2, 10.1-10.2.5, 10.3.1-10.3.8, and 11.3.1) of the current revision to the applicable industry standard—ASTM Standard F2324-13, “Standard Test Method for Prerinse Spray Valves”—pertaining to flow rate and spray force measurement;
• Adds clarification addressing minor inconsistencies between the proposed test procedure and ASTM Standard F2324-13, and sources of ambiguity within ASTM Standard F2324-13;
• Modifies the current test method for measuring flow rate to reference sections 10.1-10.2.5 and 11.3.1 of ASTM Standard F2324-13;
• Adds a test method for measuring spray force that references sections 10.3.1-10.3.8 of ASTM Standard F2324-13;
• Adds a requirement for measuring the flow rate and spray force of each spray setting for commercial prerinse spray valves with multiple spray settings;
• Modifies the rounding requirement for flow rate measurement and specifies the rounding requirement for spray force measurement; and
• Modifies the existing CPSV sampling requirements to remove the provisions related to determining represented values where consumers would favor higher values.
The following sections describe DOE's amendments to the test procedure, including definitions, industry standards incorporated by reference, modifications to the test procedure, additional test measurements, rounding requirements, and certification and compliance requirements.
In this final rule, DOE amends the definition of “commercial prerinse spray valve” and adds a definition for the term “spray force.” A detailed discussion of these terms follows.
EPCA currently defines a “commercial prerinse spray valve” as a handheld device designed and marketed for use with commercial dishwashing and ware washing equipment that sprays water on dishes, flatware, and other food service items for the purpose of removing food residue before cleaning the items. (42 U.S.C. 6291(33)(A), 10 CFR 431.262) EPCA allows DOE to modify the CPSV definition to include products (1) that are used extensively in conjunction with commercial dishwashing and ware washing equipment, (2) to which the application of standards would result in significant energy savings, and (3) to which the application of standards would not be likely to result in the unavailability of any covered product type currently available on the market. (42 U.S.C. 6291(33)(B)(i)) EPCA also allows DOE to modify the CPSV definition to exclude products (1) that are used for special food service applications, (2) that are unlikely to be widely used in conjunction with commercial dishwashing and ware washing equipment, and (3) to which the application of standards would not result in significant energy savings. (42 U.S.C. 6291(33)(B)(ii))
As described in the 2015 CPSV TP NOPR, DOE has observed the existence of products distributed in the U.S. with brochures describing them as “prerinse spray” or “prerinse spray valve;” these are often marketed (usually by third parties) to rinse dishes before washing, to pre-rinse items in a dish room in preparation for running them through a commercial dishwasher, or to be used with pre-rinse assemblies and/or as ware washing equipment. 80 FR 35874, 35876-77 (June 23, 2015). DOE has also observed products marketed as “pull-down kitchen faucets” or “commercial style prerinse,” which, generally speaking, are handheld devices that can be used for commercial dishwashing or ware washing regardless of installation location. Further, DOE has observed instances where products designed by the manufacturer for other specific applications are marketed on retailer's Web sites for commercial dishwashing and ware washing. In DOE's view, this illustrates that such products are also “suitable for use” as commercial prerinse spray valves and are marketed and used in commercial dishwashing and ware washing applications.
To ensure a level and fair playing field for all products serving commercial prerinse spray valve applications, all products that are used in such an application should be held to the same standard. As a result, in the 2015 CPSV TP NOPR, DOE proposed to modify the CPSV definition such that these categories of products would meet the definition of commercial prerinse spray valve and would be subject to the associated regulations.
Although DOE understands that manufacturers may market different categories of spray valves for various uses, such as cleaning floors or walls or filling glasses, DOE believes any such device that is suitable for use in conjunction with commercial dishwashing and ware washing equipment to spray water for the purpose of removing food residue should fall within the CPSV definition. Similarly, DOE believes products that are appropriate for removing food residue in dishwashing and ware washing applications should be subject to DOE standards and certification requirements, even if they are marketed without the term “commercial dishwashing and ware washing equipment.” Therefore, after reviewing the current CPSV definition and products currently being distributed in the market as appropriate for dishwashing and ware washing applications, DOE proposed to replace the phrase “designed and marketed for use” with the phrase “suitable for use” in the CPSV definition. 80 FR 35874, 35876-77 (June 23, 2015).
During the NOPR public meeting, T&S Brass stated that manufacturers can only control what they design, intend, or market their product for. Specifically, T&S Brass stated that manufacturers generally use the words “designed” or “intended for” when they qualify commercial prerinse spray valves. (T&S Brass, Public Meeting Transcript, No. 3 at p. 13)
DOE also received written comments related to the term “suitable” in the proposed definition. Plumbing Manufacturers International (PMI) and Fisher Manufacturing Co. (Fisher) stated that the DOE proposed term “suitable”
During the NOPR public meeting, DOE clarified its proposal and requested additional information regarding the specific design changes that manufacturers implement to distinguish products that are “intended” for commercial dishwashing and ware washing applications from products that are never “intended” for those applications. DOE explained it has experienced instances where the term “designed and marketed” in a definition creates ambiguity and inequitable equipment coverage, since such coverage is subject to marketing materials rather than objective design criteria. (DOE, Public Meeting Transcript, No. 3 at pp. 14-16) DOE has seen instances in the market where a manufacturer's self-declaration of intent varies greatly from how products are sold by retailers. DOE urged manufacturers to provide distinct design information or product characteristics that could be used to clearly distinguish products that are manufactured for dishwashing and ware washing installations. Thus, because the suggestion from T&S Brass of using “designed and/or intended for” does not differ functionally from the current definition of “designed and marketed for,” it would still perpetuate a fundamental problem DOE seeks to remedy. In fact, by removing the term “marketed,” T&S Brass's suggestion would increase ambiguity by requiring DOE or other parties to divine intent, without any express tie to objective criteria.
In response to T&S Brass's observation that certain products exist that are identical to commercial prerinse spray valves, but are advertised and/or intended to perform in different applications, such as pet grooming, DOE reviewed the comments from interested parties and different models of spray valves available on the market. DOE could not identify any differentiating characteristics among commercial prerinse spray valves and spray valves intended for other applications that would indicate that such products were not regularly used as commercial prerinse spray valves or that such products serve a unique utility in those applications. In addition, DOE has found spray valves that manufacturers market for specific applications listed on retailer's Web sites as appropriate for commercial dishwashing and ware washing.
Conversely, in a joint comment, Pacific Gas and Electric (PG&E), Southern California Gas Company (SCGC), Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E) company (referred to as the California Investor Owned Utilities, or CA IOUs), pointed out that there are products currently marketed as pot fillers, which have very high flow rates (greater than 3 gallons per minute (gpm)), that can be used in a similar function to CPSVs. According to the CA IOUs, because these products are listed as “pot fillers,” they would not be subject to standards. The CA IOUs stated that the definition of commercial prerinse spray valve should ensure that any product that may be used as a commercial prerinse spray valve is appropriately covered by the standard. The CA IOUs cautioned that there is a loophole that allows manufacturers to sell commercial prerinse spray valves that do not meet the flow rate standard and encouraged DOE to define the products carefully to eliminate the loophole. (EERE-2014-BT-STD-0027, CA IOUs, No. 34 at p. 2)
DOE is aware that “pot fillers” that have many of the same physical characteristics as commercial prerinse spray valves. However, DOE does not agree that most of these products can be used extensively in commercial dishwashing. Under the definition proposed in the CPSV TP NOPR, a pot filler would not be considered a commercial prerinse spray valve because it is not suitable to be used for rinsing dishware before washing in a commercial dishwasher. A pot filler is used to fill a container with water, while a commercial prerinse spray valve is used to remove food residue from dishware. DOE believes that a reasonable consumer would not install a pot filler to be used as a commercial prerinse spray valve. In addition, most pot fillers are usually rigidly mounted to a wall with a swing arm, and are thus not handheld devices. Therefore, DOE believes that the proposed definition is adequate in distinguishing pot fillers from commercial prerinse spray valves.
When evaluating whether a spray valve model is suitable for removing food residue from food service items before cleaning them in commercial dishwashing or ware washing equipment, DOE would consider various factors including channels of marketing and sales, product design and descriptions, and actual sales to determine whether the spray valve is used extensively in conjunction with commercial dishwashing and ware washing equipment. For example, a product marketed or sold through outlets that market or sell to food service entities such as restaurants or commercial or institutional kitchens is more likely to be used as a commercial prerinse spray valve than one marketed or sold through outlets catering to pet care. Similarly, a product marketed outside of the United States as a commercial prerinse spray valve, or for similar use in a kitchen-type setting, would be considered suitable for use as a commercial prerinse spray valve. In evaluating whether a spray valve is suitable for use as a commercial prerinse spray valve, DOE would consider how a product is marketed and sold to end-users, including how the product is identified and described in product catalogs, brochures, specification sheets, and communications with prospective purchasers. DOE would also consider actual sales, including whether the end-users are restaurants or commercial or institutional kitchens, even if those sales are indirectly through an entity such as a distributor.
For the reasons stated previously, DOE is modifying the CPSV definition in part by replacing the term “designed and marketed for use” with the phrase “suitable for use.” By relying on suitability, DOE effectively differentiates products that are used in commercial dishwashing applications (and therefore fall under the DOE regulations) from products that are unlikely to be used to wash dishes. DOE believes that such a definition also removes the loophole noted by the CA IOUs in its comment by avoiding the ambiguity associated with determining
DOE also reviewed the prerinse spray valve definition in ASTM Standard F2324-13, which defines the term “prerinse spray valve” as “a handheld device containing a release to close mechanism that is used to spray water on dishes, flatware, etc.” The “release-to-close” mechanism included in the ASTM definition means a manually actuated, normally closed valve, which is a typical feature of commercial prerinse spray valves. In the 2015 CPSV TP NOPR, DOE proposed a different definition that would include the term normally closed; that is DOE proposed to define commercial prerinse spray valve as “a handheld device containing a normally closed valve that is suitable for use with commercial dishwashing and ware washing equipment for the purpose of removing food residue before cleaning items.” 80 FR 35874, 35877 (June 23, 2015).
DOE received one written comment regarding including the term “normally closed” in its proposed definition. The Alliance for Water Efficiency (AWE) does not support the inclusion of the phrase “normally closed valve” in the CPSV definition. AWE commented that many non-dishwashing products, similar to prerinse spray valves, include “normally closed valves,” and that the proposed phrase would not distinguish commercial prerinse spray valves from other similar devices. Additionally, AWE stated that products sold and used to prerinse dishware could be deemed not subject to the proposed rule because the valve is not a “normally closed” valve. (AWE, No. 6, p. 2)
DOE is not currently aware of any commercial prerinse spray valves that lack a release to close valve, but agrees with AWE that including the term “normally closed valve” in the definition could result in a CPSV model not being considered a covered product if its design does not include such a valve. Therefore, DOE is not including the term “normally closed valve” in the definition and is instead replacing it with the term “release-to-close,” consistent with the definition in ASTM F2324−13.
In summary, in this final rule, DOE adopts a modified version of the definition of “commercial prerinse spray valve” than what was proposed in the 2015 CPSV TP NOPR. 80 FR 35874, 35877 (June 23, 2015). Specifically, DOE defines “commercial prerinse spray valve” as “a handheld device that has a release-to-close valve and is suitable for removing food residue from food service items before cleaning them in commercial dishwashing or ware washing equipment.” DOE has concluded that this definition satisfies the requirements at 42 U.S.C. 6291(33)(B) because (1) the products covered by this definition are used extensively in conjunction with commercial dishwashing and ware washing equipment, (2) the application of standards to such products would result in significant energy savings, and (3) the application of standards to such products would not be likely to result in the unavailability of any covered product type currently available on the market.
In the 2015 CPSV TP NOPR, DOE proposed adding a definition for the term “spray force,” as “the amount of force exerted onto the spray disc, measured in ounce-force (ozf).” 80 FR 35874, 35878-79, 35886 (June 23, 2015). DOE understands spray force to be an important differentiating feature in commercial prerinse spray valves.
DOE received several written comments about adding a definition for spray force. DOE will finalize its decision regarding the use of spray force as it relates to the proposed amended energy conservation standards, and will address any comments related to spray force and product classes, in the ongoing CPSV standards rulemaking (Docket No. EERE-2014-BT-STD-0027).
During the NOPR public meeting, Pacific Gas and Electric (PG&E) supported adding spray force requirements because doing so could aid in saving water and energy. (PG&E, Public Meeting Transcript, No. 3 at p. 17) The Natural Resources Defense Council (NRDC) asked if DOE would be adding a definition for the term ounce-force. (NRDC, Public Meeting Transcript, No. 3 at p. 17) In this final rule, DOE does not include a definition for the unit ounce-force. Ounce-force is used by ASTM Standard F2324-13 and is a commonly understood unit of measurement.
As such, in this final rule, DOE adopts the term “spray force,” defined as “the amount of force exerted onto the spray disc, measured in ounce-force (ozf).” Adopting this new term in the CPSV test procedure does not affect any amended CPSV energy conservation standards and does not guarantee or require its use in such standards.
EPCA prescribes that the test procedure for measuring flow rate for commercial prerinse spray valves be based on ASTM Standard F2324, “Standard Test Method for Pre-Rinse Spray Valves.” (42 U.S.C. 6293(14)) Pursuant to this statutory requirement, DOE incorporated by reference ASTM Standard F2324-03 in a final rule published on December 8, 2006. 71 FR 71340, 71374. DOE last updated its CPSV test procedure to reference the updated ASTM Standard F2324-03 (2009) in a final rule published on October 23, 2013. 78 FR 62970, 62980. The 2009 version was a reaffirmation of the 2003 standard and contained no changes to the test method. The current version of the ASTM industry standard for CPSVs is the version published in 2013, ASTM Standard F2324-13.
In the 2015 CPSV TP NOPR, DOE noted that the most significant difference between ASTM Standard F2324-13 and the ASTM standard currently referenced by the DOE test procedure (ASTM Standard F2324-03 (2009)) is that ASTM Standard F2324-13 replaces the cleanability test with a spray force test and moves the cleanability test to a normative (
DOE also identified minor differences between ASTM Standard F2324-03 (2009) and ASTM Standard F2324-13, which include (1) tolerance on water pressure required for testing, (2) minimum flow rate of flex tubing, (3) water temperature for testing, and (4) length of water pipe required to be insulated.
Table III.1 summarizes changes between ASTM Standard F2324-03 (2009) and F2324-13 as they apply to DOE's test procedure.
DOE discussed the rationale for the changes between the ASTM Standards and the effects on testing results in the 2015 CPSV TP NOPR. 80 FR 35874, 35878-79 (June 23, 2015). In the 2015 CPSV TP NOPR, DOE concluded that the updates do not affect the measurement of flow rate for commercial prerinse spray valves. However, in this final rule, DOE is clarifying that the water temperature measurement for both spray force and flow rate tests is an instantaneous temperature measurement of the water at the start of the test, not the average temperature of the water over the duration of the test. Additionally, DOE clarifies that the water temperature will have no impact on the measured value of flow rate and spray force.
DOE received a written comment concerning the incorporation by reference of ASTM Standard F2324-13. AWE supports, in part, the use of this ASTM standard as a method to test commercial prerinse spray valves. However, AWE opposes this test method as the sole means to determine compliance with a maximum flow rate of 1.28 gallons per minute (gpm). AWE stated that the ASTM Standard F2324-13 was developed and modified for flow rates not exceeding 1.6 gpm. AWE expressed concern whether the same test criteria would be adequate for testing commercial prerinse spray valves operating at flows significantly less than 1.28 gpm, because as water flow is reduced, the margin of error for performance narrows. (AWE, No. 6, p. 3)
Currently, section 10 from ASTM Standard F2324-13 is the generally accepted test procedure for the CPSV industry, and is used to certify commercial prerinse spray valves at all flow rates, including flow rates at less than 1.28 gpm. The ASTM flow rate test method specifies an allowable range of supply water temperature and pressure, which are the two physical parameters that would have the biggest effect on the accuracy and repeatability of the water flow rate measurement of a commercial prerinse spray valve. DOE has no evidence that the accuracy or repeatability of flow rate measurements lower than 1.28 gpm would be significantly different than flow rate measurements greater than 1.28 gpm. Additionally, DOE tested a range of commercial prerinse spray valves as part of the ongoing CPSV energy conservation standards rulemaking, and found the test method to be sufficiently accurate for spray valves with low flow rates. In a comment submitted by the Alliance to Save Energy (ASE), ASAP, and NRDC in response to the energy conservation standard NOPR, the commenters stated that they support incorporating provisions of ASTM Standard F2324-13 pertaining to flow rate and spray force into the DOE test procedure, including test methods and definitions. (EERE-2014-BT-STD-0027, ASE, ASAP, NRDC, No. 32 at p. 2) Finally, EPCA requires DOE to use the ASTM Standard F2324 as a basis for the test procedure for measuring flow rate. (42 U.S.C. 6293(b)(14)) Therefore, DOE incorporates by reference the specified sections of ASTM Standard F2324-13 in this final rule.
DOE also received comments regarding its proposal to incorporate by reference elements of the water supply pressure specified in sections 9.3, 10.2.2 and 10.3.2 of ASTM Standard F2324-13. In the 2015 CPSV TP NOPR, DOE proposed to test commercial prerinse spray valves at a water pressure of 60 ± 2 psi when water is flowing through the commercial prerinse spray valve, as required by ASTM Standard F2324-13. As part of that proposal, DOE included a discussion on reports on water pressure across the country and the different aspects of testing at multiple water pressures. 80 FR 35873, 35878 (June 23, 2015). DOE also acknowledged that supply pressure will affect the flow rate of a commercial prerinse spray valve once installed. Typically, lower pressures result in lower flow rates and higher pressures result in higher flow rates. Nevertheless, DOE noted that testing at a single specific supply pressure to demonstrate compliance with the maximum allowable flow rate would create a consistent and standardized reference that would be comparable across all products.
In comments provided for the related CPSV energy conservation standards rulemaking, AWE supported the use of the ASTM Standard F2324-13 test procedure and testing at a supply pressure of 60 psi. (Docket No. EERE-2014-BT-STD-0027, AWE, No. 8 at p. 2) During the NOPR public meeting, the Appliance Standards Awareness Project (ASAP) and NRDC both requested that DOE test at multiple water pressure values. (ASAP, Public Meeting Transcript, No. 3 at p. 27; NRDC, Public Meeting Transcript, No. 3 at pp. 19-20) In response to the 2015 CPSV TP NOPR, AWE commented that water pressure can vary from one water utility service area to another, impacting the performance of commercial prerinse spray valves. (AWE, No. 6 at p. 2) AWE also suggested that DOE suspend its rulemaking efforts until a comprehensive study is conducted to determine the effects of water pressure on performance of commercial prerinse spray valves. (AWE, No. 6 at p.4)
In response to AWE's comment regarding the effect of varied water pressures on performance, DOE acknowledged in the 2015 CPSV TP NOPR that supply pressures have an impact on flow rate. Consistent with what was described in Chapter 5 of the Technical Support Document (TSD) for the CPSV energy conservation standards NOPR (Docket EERE-2014-BT-STD-0027), DOE observed that flow rate increases with the square root of pressure. DOE compiled data from various field studies that demonstrated the performance of prerinse spray valves rated between 0.51 gpm and 1.88 gpm installed in commercial kitchen locations. While the water pressure measured in these locations ranged between 38 psi and 83 psi, the average water pressure observed in the commercial kitchens included in the studies was 55 psi, which is very close to the 60 psi supply pressure specified in ASTM Standard F2324-13. DOE provides the full results of its data analysis in a separate report accompanying this final rule, titled “Analysis of Water Pressure for Testing Commercial Prerinse Spray Valves Final Report.”
Specifically, DOE is incorporating by reference the following sections of ASTM Standard F2324-13: 6.1-6.9, 9.1-9.5.3.2, 10.1-10.2.5, 10.3.1-10.3.8, 11.3.1 (replacing the plural “nozzles” with “nozzle”), and excluding references to “Annex A1.”
In the 2015 CPSV TP NOPR, DOE proposed replacing the plural “nozzles” with “nozzle” because “nozzles” refers to Section 8.1 of the ASTM Standard F2324-13, which requires three representative production units to be selected for all performance testing. DOE did not receive any comments regarding this proposal, therefore DOE is incorporating this change in this final rule. DOE also clarifies in this final rule that the term “nozzle” means a CPSV unit. Also, DOE is retaining the existing CPSV sampling plan at 10 CFR 429.51(a), and therefore is not incorporating by reference Section 8.1 of ASTM Standard F2324-13. Section III.E of this document provides more details on the selection of units to test.
DOE is also excluding any references to “Annex A1” from incorporation by reference because the annex provides a procedure for determining the uncertainty in reported test results. DOE's required statistical methods for determination of the representative value of flow rate for each basic model is in 10 CFR 429.51(a)(2). Therefore, DOE is not incorporating by reference Annex A1 in this test procedure, and any references to the annex in the incorporated ASTM Standard F2324-13 sections are invalid. The referenced sections describe the testing apparatus, test method, and calculations pertaining to flow-rate measurement.
In analyzing ASTM Standard F2324-13 and DOE's proposed test provisions when responding to comments submitted by interested parties and formulating the final test procedure adopted in this document, DOE noticed several minor inconsistencies and sources of ambiguity in the proposed test procedure and industry standard. As such, in this final rule, DOE is also clarifying several minor issues regarding terminology and conducting the amended DOE test procedure, so as to improve the repeatability and consistency of the test procedure.
Throughout ASTM F2324-13, various terms are used to refer to flow rate: water consumption flow rate, water consumption, water flow rate, flow rate, and nozzle flow rate. Additionally, regulatory text in 10 CFR 429.51, 10 CFR 431.264, and 10 CFR 431.266 refers to flow rate using both the terms water consumption flow rate and flow rate. For this final rule, DOE is clarifying that all of the aforementioned terms are equivalent to the term flow rate.
Section 9.1 of ASTM Standard F2324-13, instructs the test lab to attach the prerinse spray valve to a 36-inch, spring-style (flex tubing) prerinse spray valve in accordance with the manufacturer's instructions. DOE is clarifying that the second instance of “prerinse spray valve” refers to the spring-style deck-mounted prerinse unit that is previously defined in section 6.8 of ASTM F2324-13. DOE is also clarifying that it does not believe that using the manufacturer's instructions or packaging are necessary to connect the nozzle for testing as the manufacturer's instructions typically describe how to install the entire prerinse spray valve, not just the nozzle.
Section 10.1.1 of ASTM Standard F2324-13 directs the test lab to record the water temperature (°F), dynamic water pressure (psi), time (min) and the flow rate (gpm) for each run of every test. For this final rule, DOE is clarifying that water temperature and dynamic water pressure values must be recorded one time at the start of each run when testing for both flow rate and spray force. The time is measured throughout the flow rate test and recorded after the test to indicate the duration of testing. DOE clarifies that the flow rate is calculated afterwards using the normalized weight of the carboy, as discussed in the next paragraph, and the measured time of testing.
In section 10.2.4 of ASTM F2324-13, the flow rate test requires that the water flow be stopped at the end of one minute. However, section 6.9 of ASTM F2324-13 requires time measurement instruments accurate ± 0.1 second and it will likely be difficult for an operator to stop the stopwatch and CPSV at precisely 1:00.0 min every test. Therefore, DOE is clarifying that the recorded weight of the water will be normalized to 60.0 seconds for every test, to ensure that each flow rate is calculated using the same time period. Normalize the weight using Equation 1, where W
In the 2015 CPSV TP NOPR, DOE proposed a test procedure for measuring the spray force of a commercial prerinse spray valve. DOE discussed how the test is conducted, the apparatus used, a review of the procedure, the applicable sections of ASTM F2324-13 to incorporate by reference. DOE also explained that it proposed the test to support the forthcoming proposed revisions to the CPSV product class structure in the ongoing energy conservation standard for commercial prerinse spray valves (Docket No. EERE-2014-BT-STD-0027). 80 FR 35874, 35879 (June 23, 2015).
As discussed previously in this final rule, DOE received several written comments about using spray force to define product classes. Specifically, in a joint comment submitted by ASE, ASAP, and NRDC and in the CA IOUs joint comment, the parties stated that they support incorporating provisions of ASTM Standard F2324-13 pertaining to spray force into the DOE test procedure, including test methods and definitions. The commenters additionally supported a requirement to measure and report spray force. (EERE-2014-BT-STD-0027, ASE, ASAP, NRDC, No. 32 at p. 2; EERE-2014-BT-STD-0027, CA IOUs, No. 34 at p. 3)
In this final rule, DOE clarifies how to record average spray force. Section 10.3.6 of ASTM F2324-13 requires the average spray force to be recorded over a 15-second time period after the prerinse spray valve has flowed for at least 5 seconds. DOE interprets “average” spray force to require at least two spray force readings during the test. Therefore, in this final rule, DOE clarifies that this requires recording at least two spray force readings to calculate the average spray force over the 15-second time period.
In the 2015 CPSV TP NOPR, DOE proposed adding a requirement at 10 CFR 431.264(b)(3) to measure and record each available spray pattern if a sample unit has multiple spray patterns or spray settings. DOE identified several commercial prerinse spray valves on the market with multiple spray patterns that can be selected by the end user. Additionally, section 10.3.7 of ASTM Standard F2324-13, which DOE proposed in the 2015 CPSV TP NOPR to incorporate by reference, specifies that force shall be tested for each mode (
In this final rule, DOE intended the term “spray pattern” mean a user-selectable setting on a commercial prerinse spray valve; however, DOE realizes that some people might interpret the term “spray pattern” to mean the shape of the water spray as it exits the unit, such as shower, knife, solid stream, etc. For this final rule, DOE clarifies that the term “spray pattern” refers to a user-selectable setting on a commercial prerinse spray valve and uses the term “spray setting” instead of “spray pattern.” Although DOE used the term “spray pattern” in the 2015 CPSV TP NOPR, for clarity, DOE is using the term “spray setting” throughout this discussion of comments received in response to the 2015 CPSV TP NOPR and in the regulatory text.
During the NOPR public meeting, Chicago Faucet sought clarification related to testing of multiple settings. Specifically, Chicago Faucet asked whether each setting on a model with multiple settings would need to be tested and meet a minimum spray force value. (Chicago Faucet, Public Meeting Transcript, No. 3, pp. 25-26) DOE clarified during the public meeting that DOE was not proposing mandatory minimum spray force requirements, but rather was proposing to use the spray force measurement to define product classes. DOE further confirmed that a unit with multiple settings would need to be tested at each spray setting, and each spray setting would need to meet the applicable flow rate requirements.
In its written comments, AWE agreed that all of the emitters of a valve must comply with maximum allowable flow requirements. AWE added that it is only necessary for at least one of the emitters to meet a minimum spray force requirement. AWE stated that requiring all emitters to meet a certain minimum spray force will likely result in excessive water use when used in applications that do not require high force. (AWE, No. 6, p. 3) As previously mentioned, DOE is not establishing a mandatory minimum spray force requirement but, rather, has proposed using the spray force measurement to define product classes. Further discussion on how DOE proposed to use spray force to define product classes is presented in the forthcoming CPSV standards rulemaking final rule (Docket No. EERE-2014-BT-STD-0027).
T&S Brass stated that if the “suitable for use” language in DOE's proposed definition (based on suitability) were finalized, only one of the spray patterns would need to be tested and meet the requirements of a commercial prerinse spray valve. According to T&S Brass, one setting on the spray valve could meet the proposed definition even though the rest of the spray pattern selections may be non-compliant. T&S Brass also recommended that all spray modes of the commercial prerinse spray valve be tested for compliance. (T&S Brass, No. 7 at p. 2)
As stated in the 2015 CPSV TP NOPR, DOE is aware that some commercial prerinse spray valves may have multiple flow rate settings (which may or may not have the same water spray shape) or multiple, exchangeable faces to alter the spray force and flow rate of the product. 80 FR 35873, 35880 (June 23, 2015). In this final rule, DOE adopts its proposal in the 2015 CPSV TP NOPR to require testing of spray force and flow rate for each of the spray settings in CPSVs with multiple settings. Similarly, in this final rule, DOE is also adopting a definition of basic model to clarify how spray settings can be grouped for the purposes of making representations and certifying compliance to the Department. The basic model definition allows manufacturers to group spray settings within a given product class as long as the individual spray settings have similar physical and functional (or hydraulic) characteristics that affect water consumption or water efficiency for the purposes of testing and certifying compliance with the applicable standard. DOE also notes that consistent with DOE's basic model grouping provisions discussed in the certification, compliance, and enforcement final rule, manufacturers may elect to certify multiple spray settings under the same basic model, provided that (1) all individual spray settings identified as the same basic model have the same certified flow rate, (2) all representations are based on the tested performance of the least efficient individual model in that basic model, and (3) all spray settings are in the same product class. 76 FR 12422, 12429 (March 7, 2011). Specifically, for commercial prerinse spray valves, manufacturers may certify a CPSV unit with multiple spray settings as a single basic model if all the spray settings fall into the same product class and all
In addition, if the spray settings on a CPSV unit fall into multiple product classes, manufacturers must certify separate basic models for each product class and may only group individual spray settings into basic models within each product class. In the ongoing energy conservation standard rulemaking (Docket No. EERE-2014-BT-STD-0027), DOE proposed to adopt amended standards for commercial prerinse spray values and establish different product classes and standards for commercial prerinse spray valves as a function of spray force. 80 FR 39486 (July 9, 2015). As such, a commercial prerinse spray value that contains multiple spray settings, or is sold with multiple spray faces, may fall into different product classes. In such a case, the commercial prerinse spray valve would meet both product class definitions and, as such, would be required to meet an appropriate energy conservation standard for both product classes. For example, if product classes were differentiated at 5-ozf and 8-ozf, the maximum flow rate setting with a spray force below 5-ozf would have to meet the standard associated with a spray force below 5-ozf, and the maximum flow rate setting between 5- and 8-ozf would have to meet the standard associated with a spray force between 5- and 8-ozf. This is consistent with DOE's treatment of other products and equipment that fall into multiple product classes or equipment categories. For example, dual-temperature commercial refrigeration equipment that can operate as both a commercial refrigerator and a commercial freezer must be tested as, and meet the energy conservation standard for, both equipment categories. 77 FR 10292 (February 21, 2012). Similarly, if a spray valve has at least one setting that meets the definition of a commercial prerinse spray valve, then the entire unit is a commercial prerinse spray valve and all settings must meet the flow rate standard.
In the 2015 CPSV TP NOPR, DOE proposed to change the rounding requirements for recording flow rate measurements from one decimal place to two decimal places. 80 FR 35873, 35880 (June 23, 2015). During the NOPR public meeting, T&S Brass agreed with this proposal and stated that the WaterSense program also requires flow rate to be rounded to two decimal places. (T&S Brass, Public Meeting Transcript, No. 3 at p. 23) DOE did not receive any comments objecting to this proposal. Therefore, DOE amends the flow rate measurement rounding requirements to two decimal places in 10 CFR 431.264(b)(1).
In the 2015 CPSV TP NOPR, DOE proposed to adopt Section 11.4.2 of the ASTM Standard F2324-13 that specifies that the spray force be rounded to one decimal place. 80 FR 35873, 35880 (June 23, 2015). DOE received no comments related to this proposal. Therefore, DOE adopts spray force rounding requirements of one decimal place in 10 CFR 431.264(b)(2).
In the 2015 CPSV TP NOPR, DOE proposed retaining the existing CPSV sampling plan at 10 CFR 429.51(a). 80 FR 35874, 35880 (June 23, 2015). Although Section 8.1 of ASTM Standard F2324-13 requires three representative production units to be selected for all performance testing, in the 2015 CPSV TP NOPR, DOE proposed not to adopt this requirement. DOE only proposed to adopt the testing methodology (
CPSV testing is subject to DOE's general certification regulations at 10 CFR 429.11. These require a manufacturer to randomly select and test a sample of sufficient size to ensure that the represented value of water consumption adequately represents performance of all of the units within the basic model, but no fewer than two units. (10 CFR 429.11(b)) The purpose of these requirements is to achieve a realistic representation of the water consumption of the basic model, and to mitigate the risk of noncompliance, without imposing undue test burden. DOE did not receive any comments related to this proposal.
In the 2015 CPSV TP NOPR, DOE proposed to revise the statistical methods for determination of the representative value of flow rate for each basic model of commercial prerinse spray valve in 10 CFR 429.51(a)(2). 80 FR 35874, 35880 (June 23, 2015). Specifically, DOE proposed to remove the lower confidence limit (LCL) formula from the sampling plan for the selection of units for testing and retain only the provision for an upper confidence limit (UCL) under 10 CFR 429.51(a)(2)(i). The original statistical methods allowed for two options that were exclusive; however, because the energy conservation standard for commercial prerinse spray valves specifies a maximum water flow rate, only the UCL provision is used for certification and compliance purposes. DOE received no comments related to this proposal. Therefore, DOE removes the LCL formula from the sampling plan in this final rule and retains the remainder of the sampling plan at 10 CFR 429.51(a).
The Office of Management and Budget (OMB) has determined that test procedure rulemakings do not constitute “significant regulatory actions” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 58 FR 51735 (October 4, 1993). Accordingly, this action was not subject to review under the Executive Order by the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB).
DOE reviewed this final rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. DOE has concluded that the rule would not have a significant impact on a substantial number of small entities. The factual basis for this certification is as follows.
The Small Business Administration (SBA) considers a business entity to be a small business, if, together with its affiliates, it employs less than a threshold number of workers specified in 13 CFR part 121. These size standards and codes are established by the North American Industry Classification System (NAICS). The threshold number for NAICS classification code 332919, which applies to “other metal valve and pipe fitting manufacturing” and includes CPSV manufacturers, is 500 employees.
Based on a search of DOE's Compliance and Certification Database, individual company Web sites, and various marketing research tools (
DOE estimated the labor burden associated with testing, in view of the 2012 (most recent) median annual pay for (1) environmental engineering technicians ($45,350), (2) mechanical engineering technicians ($51,980), and (3) plumbers, pipefitters, and steamfitters ($49,140) for an average annual salary of $48,823.
Currently, 10 CFR 431.264 prescribes measurements for flow rate and requires commercial prerinse spray valves with multiple spray settings to comply with the applicable Federal energy conservation standard. DOE is clarifying in this final rule that CPSV models with multiple spray patterns must demonstrate compliance through certifying each discrete spray pattern or through the application of the basic model concept (see section III.C.2).
The amendments to the test procedures adopted in today's final rule do not modify the time or burden associated with conducting the CPSV test procedure, except for including an additional test for spray force. During the NOPR public meeting, T&S Brass commented that only the manufacturers participating in the WaterSense program typically perform this test. (T&S Brass, Public Meeting Transcript, No. 3 at pp. 24-25) Out of 13 total CPSV manufacturers that DOE identified, only 2 currently participate in the WaterSense program. DOE concludes, therefore, that most manufacturers do not currently test for spray force. DOE estimates that an additional hour of labor time per basic model is required to conduct the spray force test.
In addition to the labor time, DOE assumed that manufacturers would have to either construct or purchase an apparatus to measure spray force. DOE researched the materials necessary for the spray force test and estimates the cost of these materials to be $575.
Another amendment to the test procedure includes clarifying that all spray settings must be tested on units that offer multiple spray settings. While CPSV models with multiple spray settings are currently required to demonstrate compliance, which requires testing of all spray settings, DOE understands that testing multiple spray settings requires more testing time than testing units with only one spray setting and that some manufacturers may not have been testing each spray setting. Therefore, DOE is also estimating the cost associated with testing units with multiple spray settings. DOE's review of commercial prerinse spray valves with multiple spray settings indicates that these units
Based on this analysis, DOE estimated that up to 3 hours of total testing time is required for each basic model. Therefore, up to 6 hours of total testing time might be required to test two production units per basic model in the final test procedure, which results in a total labor cost of $199.88. As previously stated, DOE estimated that the cost of complying with the current test procedure is $66.63. Therefore, the amended test procedure reflects an increase in cost of $133.25 per basic model, and an additional one-time equipment setup cost of $575, compared to the current test procedure.
AWE commented that the additional manufacturer cost burden for requiring multiple spray force tests would negatively affect product innovation and consumer choice. (AWE, No. 6, p. 3). As described earlier, DOE has accounted for the multiple spray force tests costs by determining the added cost for increased testing time, labor, and purchase of equipment for the spray force test.
DOE's analysis determined that 69-percent of all CPSV manufacturers could be classified as small entities according to SBA classification guidelines. DOE believes that small manufacturers would not be differentially affected by the proposed amendments to the test procedure. In fact, DOE does not believe the amendments adopted in today's final rule as they relate to testing will result in any significant differential impact as compared to the testing currently required by DOE's regulations. Therefore, DOE concludes that the cost effects accruing from the final rule would not have a “significant economic impact on a substantial number of small entities,” and that the preparation of an FRFA is not warranted. DOE has submitted a certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the Small Business Administration for review under 5 U.S.C. 605(b).
Manufacturers of commercial prerinse spray valves must certify to DOE that their products comply with any applicable energy conservation standards. To certify compliance, manufacturers must first obtain test data for their products according to the DOE test procedures, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including commercial prerinse spray valves.
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
In this final rule, DOE amends its test procedure for commercial prerinse spray valves. DOE has determined that this rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE examined this final rule and determined that it will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this final rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.
Regarding the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a clear legal standard for affected conduct rather than a general standard; and (4) promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in sections 3(a) and 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this final rule
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a regulatory action resulting in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820; also available at
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This final rule will not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights” 53 FR 8859 (March 18, 1988), that this regulation will not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed this final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use if the regulation is implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
This regulatory action is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.
Under section 301 of the Department of Energy Organization Act (Pub. L. 95-91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; FEAA) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (FTC) concerning the impact of the commercial or industry standards on competition.
The modifications to the test procedure addressed by this action incorporate testing methods contained in the following commercial standards: ASTM F2324-13, Standard Test Method for Prerinse Spray Valves, sections 6.1-6.9, 9.1-9.5.3.2, 10.1-10.2.5, 10.3.1-10.3.8, 11.3.1 (replacing “nozzles” with “nozzle”), and disregarding references to Annex A1. DOE has evaluated these standards and is unable to conclude whether they fully comply with the requirements of section 32(b) of the FEAA (
In this final rule, DOE incorporates by reference the test standard published by ASTM, titled, “Standard Test Method for Prerinse Spray Valves,” ASTM Standard F2324-13. ASTM Standard F2324-13 is an industry-accepted test procedure that measures water flow rate and spray force for prerinse spray valves, and is applicable to products sold in North America. ASTM Standard F2324-13 specifies testing conducted in accordance with other industry accepted test procedures (already incorporated by reference). The test procedure in this final rule references various sections of ASTM Standard F2324-13 that address test setup, instrumentation, test conduct, and calculations. ASTM Standard F2324-13 is readily available at ASTM's Web site at
As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation
The Secretary of Energy has approved publication of this final rule.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Reporting and recordkeeping requirements.
Administrative practice and procedure, Confidential business information, Energy conservation test procedures, Incorporation by reference, and Reporting and recordkeeping requirements.
For the reasons stated in the preamble, DOE amends parts 429 and 431 of Chapter II of Title 10, Code of Federal Regulations as set forth below:
42 U.S.C. 6291-6317.
(a)
(2) For each basic model of commercial prerinse spray valve, a sample of sufficient size must be randomly selected and tested to ensure that any represented value of flow rate must be greater than or equal to the higher of:
(i) The mean of the sample, where:
(ii) The upper 95-percent confidence limit (UCL) of the true mean divided by 1.10, where:
42 U.S.C. 6291-6317.
As used in this subpart:
(b) * * *
(1) ASTM Standard F2324-13, (“ASTM F2324-13”), Standard Test Method for Prerinse Spray Valves, approved June 1, 2013; IBR approved for § 431.264.
(a)
(b)
(ii) Perform calculations in accordance with section 11.3.1 (Calculation and Report). Record the water temperature (°F) and dynamic water pressure (psi) once at the start for each run of the test. Record the time (min), the normalized weight of water in the carboy (lb) and the resulting flow rate (gpm) once at the end of each run of the test. Record flow rate measurements of time (min) and weight (lb) at the resolutions of the test instrumentation. Perform three runs on each unit, as specified in section 10.2.5 of ASTM F2324-13, but disregard any references to Annex A1. Then, for each unit, calculate the mean of the three flow rate values determined from each
(2)
(c)
(1) Measure both the flow rate and spray force according to paragraphs (b)(1) and (2) of this section (including calculating the mean flow rate and mean spray force) for each spray setting; and
(2) Record the mean flow rate for each spray setting, rounded to two decimal places. Record the mean spray force for each spray setting, rounded to one decimal place.
Commercial prerinse spray valves manufactured on or after January 1, 2006, shall have a flow rate of not more than 1.6 gallons per minute. For the purposes of this standard, a
Securities and Exchange Commission.
Final rule; correction.
The Securities and Exchange Commission (“Commission”) is making a technical correction to its rules concerning Regulation Systems Compliance and Integrity (“Regulation SCI”) under the Securities Exchange Act of 1934 (“Exchange Act”) and conforming amendments to Regulation ATS under the Exchange Act, which applies to certain self-regulatory organizations (including registered clearing agencies), alternative trading systems (“ATSs”), plan processors, and exempt clearing agencies (collectively, “SCI entities”).
Effective December 30, 2015.
Sara Hawkins, Special Counsel, Office of Market Supervision, at (202) 551-5523 and Alexander Zozos, Attorney-Adviser, Office of Market Supervision, at (202) 551-6932, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-7010.
The Commission is making a technical correction to final rules that were published in the
Brokers; Confidential business information; Reporting and recordkeeping requirements; and Securities.
Accordingly, 17 CFR Part 242 is corrected by making the following correcting amendment:
15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78g(c)(2), 78i(a), 78j, 78k-1(c), 78l, 78m, 78n, 78o(b), 78o(c), 78o(g), 78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 78mm, 80a-23, 80a-29, and 80a-37.
Bureau of Ocean Energy Management and Office of Natural Resources Revenue, Interior.
Final rule.
In this final rule, the Department of the Interior moves the Gulf of Mexico Energy Security Act of 2006's Phase I regulations from the Bureau of Ocean Energy Management's (BOEM) title 30 of the
For questions, contact Karen Osborne, Supervisory Management & Program Analyst, Office of the Deputy Director, ONRR, at
President George W. Bush signed the Gulf of Mexico Energy Security Act of 2006 (GOMESA or Act) into law on December 20, 2006 (Pub. L. 109-432, 120 Stat. 2922; 43 U.S.C. 1331 note), as part of H.R. 6111, The Tax Relief and Health Care Act of 2006. With regard to the Gulf of Mexico (GOM) Outer Continental Shelf (OCS) provisions (Division C, Title 1, 120 Stat. 3000), GOMESA:
• Provided for sharing of leasing revenues with Gulf producing States, coastal political subdivisions (CPSs) within those States, and the Land and Water Conservation Fund (LWCF), for coastal protection, conservation, and restoration projects.
• Lifted the congressional moratorium on oil and gas leasing and development in a portion of the Eastern and Central GOM.
• Mandated lease sales for 8.3 million acres in the Eastern and Central GOM, including 5.8 million acres in the Central GOM previously under Congressional moratoria.
• Barred, until June 30, 2022, oil and gas leasing within 125 miles of the Florida coastline in the Eastern Planning Area, and 100 miles of the Florida coastline in the Central Planning Area, as well as in all areas in the GOM east of the Military Mission Line (86°41′ W. longitude).
• Established a process for lessees to exchange with the Federal Government certain existing leases in moratorium areas for bonus or royalty credits to use on other GOM leases.
This final rule sets forth the Department of the Interior's (DOI, hereafter “We”) plan to implement the second phase of GOMESA revenue sharing in fiscal year 2017 and beyond. In addition, we add several clarifications and conforming modifications to the GOMESA Phase I revenue-sharing regulations, currently available in BOEM's regulations at part 519, subpart D, of 30 CFR chapter V. We add these changes to differentiate between the two GOMESA revenue-sharing phases. We also move the Phase I regulations from 30 CFR chapter V, part 519, subpart D, to ONRR's regulations at 30 CFR chapter XII.
We published a final rule (73 FR 78622, December 23, 2008) in the
We have drawn on the experience that we gained during the first few years of GOMESA Phase I revenue sharing, along with comments and questions that we received, to refine the definitions. We have worked to eliminate any uncertainty, consistent with the Secretary's authority under GOMESA.
For each of the fiscal years 2017 and thereafter, GOMESA directs the Secretary of the Interior to deposit 50 percent of qualified OCS revenues (Phase II) that we receive on or after October 1, 2016, from certain OCS oil and gas leases in the 181 Area, the 181 South Area, and the 2002-2007 Planning Area, into a special account in the U.S. Treasury. From that account, we distribute 25 percent of the qualified revenues to the LWCF and distribute the remaining 75 percent to the States of Alabama, Louisiana, Mississippi, and Texas (which we collectively identify as the “Gulf producing States”) and their eligible CPSs. Under GOMESA Phase II, we share the revenues from leases that the Department issued on or after December 20, 2006, in the 181 Area, the 181 South Area, and the 2002-2007 Planning Area. You can find the definition of these Phase II revenue-sharing areas in Section 102 of GOMESA, and you can also locate them on the map available at
We allocate the GOMESA Phase II qualified OCS revenues among the Gulf producing States based upon proportional inverse distance calculations from applicable leased tracts (Phase II) in the 181 Area and the 181 South Area, as well as historical lease sites in the 2002-2007 Planning Area, in accordance with GOMESA. The result of this inverse distance calculation is that States closest to the most applicable leased tracts (Phase II)—as well as historical lease sites—will receive the greatest share of revenues. In determining each individual Gulf producing State's share of the GOMESA Phase II qualified OCS revenues, GOMESA provides that no State receives less than 10 percent of the revenues that we disburse to the Gulf producing States, regardless of the amount that the application of the proportional inverse distance formula establishes. Additionally, the shared revenues from certain GOMESA Phase II areas are subject to a cap of $500 million for each of fiscal years 2016 through 2055.
The CPSs located in the States' coastal zone and within 200 nautical miles of the geographic center of any OCS leased tract receive 20 percent of the qualified OCS revenues (Phase II) that GOMESA allocates to the State. We allocate revenues to the CPSs based upon their in-State relative population, coastline length, and proportional inverse distance from applicable leased tracts (Phase II) in the 181 Area and historical lease sites in the 2002-2007 Planning Area.
There are a few substantive differences between GOMESA Phase I and Phase II revenue sharing. First, the GOM acreage and resulting qualified revenues will be greater in GOMESA Phase II because Phase II acreage consists of the entire 181 Area, the 181 South Area, and the 2002-2007 Planning Area, whereas Phase I acreage consists of only the 181 Area in the Eastern Planning Area and the 181 South Area. Second, GOMESA Phase II requires that the proportional inverse
Qualified OCS revenues under GOMESA Phase II are revenues from leases that the Department issued after the passage of GOMESA (December 20, 2006) in the 181 Area, the 181 South Area, and the 2002-2007 Planning Area, as GOMESA delineates.
Selected acreage in the De Soto Canyon Protraction Area does not fall within the 181 Area, the 181 South Area, or the 2002-2007 Planning Area, as defined by GOMESA. You can locate the 21 blocks in the De Soto Canyon Protraction area bordering the Eastern Planning Area and not covered under GOMESA on the “Call for Information and Nominations Map, Central Planning Area Lease Sale 213,” available at
ONRR and BOEM published the proposed rule on March 31, 2014 (79 FR 17948), with a 60-day comment period. We received two comment letters on the proposed rule: One from a Gulf producing State, and one from a coastal political subdivision. We have analyzed the comments contained in the letters and discuss them below:
Beginning in Fiscal Year 2009, the Appropriations Acts for the Department of the Interior have contained language that excludes certain rental receipts from GOMESA qualified OCS revenues, which Congress has appropriated to fund certain Departmental operations. Appropriations legislation for Fiscal Year 2012 made that exclusion permanent.
Additionally, we collect fees for cost recovery of special services, such as the transfer of a record title, based on the cost of providing those services. We collect these fees under the authority of the Independent Offices Appropriations Act (31 U.S.C. 9701) and the Office of Management and Budget's Circular A-25. We do not derive these fees from the lease. For these reasons, Congress designates such fees as part of the Department's appropriation, and they do not qualify as qualified OCS revenues under GOMESA. See Pub. L. 111-88, October 30, 2009.
The State of Louisiana requested that States and their CPSs be allowed to direct all or a specified portion of their payments directly to a trustee.
GOMESA specifically enumerates the four States, CPSs, and the LWCF as the recipients of GOMESA revenue-sharing funds. ONRR's standard practice is to disburse revenue-sharing funds to the Government entity with which the Department shares the revenues. In order to maintain consistency between this standard practice and the revenue sharing under GOMESA, ONRR will disburse revenues to the States, CPSs, and the LWCF, and not directly to trustees.
This final rule also makes non-substantive technical or clarifying changes to the proposed rule. In the interim, between development of the proposed rule and the final rule, we made a technical update in § 1219.102 due to the United States Department of the Treasury disbursing monies only by Electronic Funds Transfer (EFT).
Executive Order (E.O.) 12866 provides that the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget (OMB) will review all significant rulemakings. OIRA determined that this rule is not significant.
Executive Order 13563 reaffirms the principles of E.O. 12866, while calling for improvements in the Nation's regulatory system to promote predictability; to reduce uncertainty; and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. E.O. 13563 directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.
DOI certifies that this rule will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
This rulemaking is not a major rule under 5 U.S.C. 801
(a) Does not have an annual effect on the economy of $100 million or more. This rule's provisions specify how we will allocate qualified OCS revenues to States and CPSs during the second phase of GOMESA revenue sharing. This rule has no effect on the amount of royalties, rents, or bonuses that lessees, operators, or payors owe, regardless of size and, consequently, does not have a significant adverse economic effect on offshore lessees or operators, including those classified as small businesses. The Gulf producing States and CPS recipients of the revenues will likely fund contracts that will benefit the local economies, small entities, and the environment. We believe that these annual effects will be less than $100 million.
(b) Does not cause a major increase in costs or prices for consumers, individual industries, Federal, State, local government agencies, or geographic regions.
(c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises. We project that the effects, if any, of distributing revenues to the States and CPSs, will be beneficial.
This rule does not impose an unfunded mandate on State, local, or Tribal governments or the private sector of more than $100 million per year. This rule does not have a significant or unique effect on State, local, or Tribal governments or the private sector. We are not required to provide a statement containing the information that the Unfunded Mandates Reform Act (2 U.S.C. 1501
Under the criteria in section 2 of E.O. 12630, this rule does not have significant takings implications. This rule will not be a governmental action capable of interference with constitutionally protected property rights. This rule does not require a Takings Implication Assessment.
Under the criteria in section 1 of E.O. 13132, this rule does not have sufficient federalism implications to warrant the preparation of a Federalism summary impact statement. This rule does not substantially and directly affect the relationship between the Federal and State governments. To the extent that State and local governments have a role in OCS activities, this rule does not affect that role.
This rule complies with the requirements of E.O. 12988. Specifically, this rule:
a. Meets the criteria of section 3(a), which requires that all regulations undergo review to eliminate errors and ambiguity and are written to minimize litigation.
b. Meets the criteria of section 3(b)(2), which requires that we write regulations in clear language using clear legal standards.
The Department of the Interior strives to strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Indian Tribes and recognition of their right to self-governance and Tribal sovereignty. Under the Department's consultation policy and the criteria in E.O. 13175, we have evaluated this rule and determined that it has no substantial direct effects on Federally recognized Indian Tribes.
This rule:
(1) Does not contain any information collection requirements.
(2) Does not require a submission under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
This rule does not constitute a major Federal action significantly affecting the quality of the human environment. We are not required to provide a detailed statement under the National Environmental Policy Act of 1969 (NEPA) because this rule qualifies for categorical exclusion under 43 CFR 46.210(c) and (i) and the DOI Departmental Manual, part 516, section 15.4.D: “
This rule is not a significant energy action under the definition in E.O. 13211. A Statement of Energy Effects is not required.
Government contracts, Mineral royalties, Oil and gas exploration, Public lands—mineral resources.
Government contracts, Mineral royalties, Oil and gas exploration, Public lands—mineral resources.
For the reasons stated in the preamble, under the authority provided by the Reorganization Plan No. 3 of 1950 (64 Stat. 1262) and Secretarial Order Nos. 3299, 3302, and 3306, the Department of the Interior amends part 519 of title 30 CFR chapter V and part 1219 of 30 CFR chapter XII as follows:
Section 104, Pub. L. 97-451, 96 Stat. 2451 (30 U.S.C. 1714), Pub. L. 109-432, Div. C, Title I, 120 Stat. 3000.
ONRR will pay a State's share of mineral leasing revenues to the State not later than the last business day of the month in which the U.S. Treasury issues a warrant authorizing the disbursement, except for any portion of such revenues which is under challenge and placed in a suspense account pending resolution of a dispute.
(a) Subject to the availability of appropriations, the Office of Natural Resources Revenue (ONRR) will pay the
(b) Upon resolution of any matters that may disallow distribution and disbursement, ONRR will disburse the suspended monies found due in paragraph (a) of this section, plus interest, to the State, under the provisions of § 1219.100.
(c) ONRR will apply paragraph (a) of this section to revenues that ONRR cannot disburse to the State because the payor/lessee provided to ONRR incorrect, inadequate, or incomplete information, which prevented ONRR from identifying the proper recipient of the payment.
ONRR will disburse monies to a State by Electronic Funds Transfer (EFT).
ONRR will transfer mineral revenues received from Indian leases to the appropriate Indian accounts that the Bureau of Indian Affairs (BIA) manages for allotted and Tribal revenues. These accounts are specifically designated Treasury accounts. ONRR will transfer these revenues to the Indian accounts at the earliest practicable date after such funds are received, but in no case later than the last business day of the month in which ONRR receives these revenues.
(a) ONRR will describe the payments to States and BIA, on behalf of Indian Tribes or Indian allottees, discussed in this part, in ONRR-prepared Explanation of Payment reports. ONRR will prepare these reports at the lease level and will include a description of the type of payment made, the period covered by the payment, the source of the payment, sales amounts upon which the payment is based, the royalty rate, and the unit value. If any State or Indian Tribe needs additional information pertaining to mineral revenue payments, the State or Tribe may request this information from ONRR.
(b) ONRR will provide these reports to:
(1) States, not later than the 10th day of the month following the month in which ONRR disburses the State's share of royalties and related monies.
(2) BIA, on behalf of Tribes and Indian allottees, not later than the 10th day of the month following the month in which ONRR disburses the funds.
(c) ONRR will not include in these reports revenues that we cannot distribute to States, Tribes, or Indian allottees because the payor/lessee provided incorrect, inadequate, or incomplete information about the proper recipient of the payment, until the payor/lessee has submitted to ONRR the missing information.
Terms that ONRR uses in this subpart will have the same meaning as in 30 U.S.C. 1702.
(a) The Gulf of Mexico Energy Security Act of 2006 (GOMESA) directs the Secretary of the Interior to disburse a portion of the rentals, royalties, bonus bids, and other sums derived from certain Outer Continental Shelf (OCS) leases in the Gulf of Mexico (GOM) to the States of Alabama, Louisiana, Mississippi, and Texas (collectively identified as the Gulf producing States); to eligible coastal political subdivisions (CPSs) within those States; and to the Land and Water Conservation Fund (LWCF). Shared GOMESA revenues are reserved for the following purposes:
(1) Projects and activities for the purpose of coastal protection, including conservation, coastal restoration, hurricane protection, and infrastructure directly affected by coastal wetland losses;
(2) Mitigation of damage to fish, wildlife, or natural resources;
(3) Implementation of a federally-approved marine, coastal, or comprehensive conservation management plan;
(4) Mitigation of the impact of OCS activities through the funding of onshore infrastructure projects; and
(5) Planning assistance and administrative costs not-to-exceed 3 percent of the amounts received.
(b) This subpart sets forth the formula and methodology ONRR uses to determine the amount of revenues allocated and disbursed to each Gulf producing State and each eligible CPS for each of fiscal years 2007 through 2016. Leasing revenues disbursed under this subpart originate from leases issued on or after December 20, 2006, in the 181 Area in the Eastern Planning Area and the 181 South Area, subject to restrictions identified in GOMESA. We collectively refer to the revenue sharing from these areas for these fiscal years as GOMESA Phase I revenue sharing. For questions related to the revenue-sharing provisions in this subpart, please contact: Program Manager, Financial Management, Office of Natural Resources Revenue, P.O. Box 25165, Denver Federal Center, Building 85, Denver, CO 80225-0165.
For purposes of this subpart:
(1) Located:
(i) South of the 181 Area;
(ii) West of the Military Mission Line; and
(iii) In the Central Planning Area;
(2) Excluded from the “Proposed Final Outer Continental Shelf Oil and Gas Leasing Program for 1997-2002,” dated August 1996, of the Bureau of Ocean Energy Management; and
(3) Included in the areas considered for oil and gas leasing, as identified in map 8, page 84, of the document entitled, “Revised Outer Continental Shelf Oil and Gas Leasing Program 2007-2012,” approved December 2010.
(1) Within the coastal zone (as defined in section 304 of the Coastal Zone Management Act of 1972 (16 U.S.C. 1453)) of the Gulf producing State as of December 20, 2006; and
(2) Not more than 200 nautical miles from the geographic center of any leased tract.
(1) In the case of each of the fiscal years 2007 through 2016, all rentals, royalties, bonus bids, and other sums received by the United States from leases issued on or after December 20, 2006, located:
(i) In the 181 Area in the Eastern Planning Area.
(ii) In the 181 South Area.
(2) For applicable leased tracts intersected by the planning area administrative boundary line (
(3) Exclusions from the term qualified OCS revenues
(i) Revenues from the forfeiture of a bond or other surety securing obligations other than royalties;
(ii) Civil penalties;
(iii) Royalties “taken by the Secretary in-kind and not sold.” (Pub. L. 109-432, Dec. 20, 2006);
(iv) Revenues generated from leases subject to section 8(g) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(g));
(v) User fees; and
(vi) Lease revenues explicitly excluded from GOMESA revenue sharing by statute or appropriations law.
For each of the fiscal years 2007 through 2016, the Secretary of the Treasury will deposit 50 percent of the qualified OCS revenues (Phase I) into a special U.S. Treasury account, from which ONRR will disburse 75 percent to the Gulf producing States and 25 percent to the Land and Water Conservation Fund (LWCF). Of the revenues disbursed to a Gulf producing State, we will disburse 20 percent directly to the CPSs within that State. Each Gulf producing State will receive at least 10 percent of the qualified OCS revenues (Phase I) available for allocation to the Gulf producing States each fiscal year. The following table summarizes the resulting revenue shares (adding to 100 percent):
(a) ONRR will determine the great circle distance between:
(1) The geographic center of each applicable leased tract (Phase I); and
(2) The point on the coastline of each Gulf producing State that is closest to the geographic center of each applicable leased tract (Phase I).
(b) Based on these distances, we will calculate the qualified OCS revenues (Phase I) to disburse to each Gulf producing State as follows:
(1) For each Gulf producing State, we will calculate and total, over all applicable leased tracts (Phase I), the mathematical inverses of the distances between the points on the State's coastline that are closest to the geographic centers of the applicable leased tracts (Phase I), and the geographic centers of the applicable leased tracts (Phase I). For applicable leased tracts intersected by the planning area administrative boundary line, we will use the geographic center of the entire lease for the inverse distance determination.
(2) For each Gulf producing State, we will divide the sum of each State's inverse distances from all applicable leased tracts (Phase I) calculated under paragraph (1), by the sum of the inverse distances from all applicable leased tracts (Phase I) across all four Gulf producing States. In the formulas below,
(3) If, in any fiscal year, this calculation results in less than a 10-percent allocation of the qualified OCS revenues (Phase I) to any Gulf producing State, we will recalculate the distribution. We will allocate 10 percent of the qualified OCS revenues (Phase I) to the affected State and recalculate the other States' shares of the remaining qualified OCS revenues (Phase I), omitting from the calculation the State receiving the 10-percent minimum share.
(a) Of the qualified OCS revenues (Phase I) allocated to a Gulf producing State's CPSs, ONRR will allocate 25 percent based on the proportion that each CPS's population bears to the population of all CPSs in the State.
(b) Of the qualified OCS revenues (Phase I) allocated to a Gulf producing State's CPSs, we will allocate 25 percent based on the proportion that each CPS's miles of coastline bears to the total miles of coastline across all CPSs in the State. However, for the State of Louisiana, we will deem CPSs without a coastline to each have a coastline one-third the average length of the coastline of all CPSs within Louisiana that have a coastline.
(c)(1) Of the qualified OCS revenues (Phase I) allocated to a Gulf producing State's CPSs, we will allocate 50 percent in amounts that are inversely
(i) The point in each CPS that is closest to the geographic center of each applicable leased tract (Phase I); and
(ii) The geographic center of each applicable leased tract (Phase I).
(2) However, we will exclude distances to an applicable leased tract (Phase I) from this calculation if any portion of the tract is located in a geographic area that was subject to a leasing moratorium on January 1, 2005, unless the leased tract was in production on that date.
If, during any fiscal year, there are no applicable leased tracts in the 181 Area in the Eastern Gulf of Mexico Planning Area, ONRR will allocate revenues to the CPSs in accordance with the following criteria:
(a) Of the qualified OCS revenues (Phase I) allocated to a Gulf producing State's CPSs, we will allocate 50 percent based on the proportion that each CPS's population bears to the population of all CPSs in the State.
(b) Of the qualified OCS revenues (Phase I) allocated to a Gulf producing State's CPSs, we will allocate 50 percent based on the proportion that each CPS's miles of coastline bears to the total miles of coastline across all CPSs within the State. However, for the State of Louisiana, we will deem CPSs without a coastline to each have a coastline one-third the average length of the coastline of all CPSs within Louisiana that have a coastline.
ONRR will disburse GOMESA revenues as soon as authorized and practicable within the fiscal year following the year that we collect qualified OCS revenues (Phase I).
(a) GOMESA directs the Secretary of the Interior to disburse a portion of the rentals, royalties, bonus bids, and other sums derived from certain OCS leases in the GOM to the States of Alabama, Louisiana, Mississippi, and Texas (collectively identified as the Gulf producing States); to eligible CPSs within those States; and to the LWCF. GOMESA directs the Gulf producing States and CPSs to use the shared revenues for the following purposes:
(1) Projects and activities for the purpose of coastal protection, including conservation, coastal restoration, hurricane protection, and infrastructure directly affected by coastal wetland losses;
(2) Mitigation of damage to fish, wildlife, or natural resources;
(3) Implementation of a federally-approved marine, coastal, or comprehensive conservation management plan;
(4) Mitigation of the impact of OCS activities through the funding of onshore infrastructure projects; and
(5) Planning assistance and administrative costs not-to-exceed 3 percent of the amounts received.
(b) This subpart sets forth the formula and methodology ONRR will use to determine the amount of revenues allocated and disbursed to each Gulf producing State and each eligible CPS for fiscal year 2017 and each fiscal year thereafter. Leasing revenues disbursed under this subpart (also referred to as GOMESA Phase II) originate from leases issued on or after December 20, 2006, in the 181 Area, the 181 South Area, and the GOM 2002-2007 Planning Area, subject to restrictions and caps identified in GOMESA. For questions related to the revenue-sharing provisions in this subpart, please contact: Program Manager, Financial Management, Office of Natural Resources Revenue, P.O. Box 25165, Denver Federal Center, Building 85, Denver, CO 80225-0165, or at (303) 231-3217.
For purposes of this subpart:
(1) Located in—
(i) The Eastern Planning Area, as designated in the “Proposed Final Outer Continental Shelf Leasing Program 2002-2007,” dated April 2002;
(ii) The Central Planning Area, as designated in the “Proposed Final Outer Continental Shelf Leasing Program 2002-2007,” dated April 2002; or
(iii) The Western Planning Area, as designated in the “Proposed Final Outer Continental Shelf Leasing Program 2002-2007,” dated April 2002; and
(2) Not located in—
(i) An area in which no funds may be expended to conduct offshore preleasing, leasing, and related activities under sections 104 through 106 of the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2006 (Pub. L. 109-54; 119 Stat. 521) (as in effect on August 2, 2005);
(ii) An area withdrawn from leasing under the “Memorandum on Withdrawal of Certain Areas of the United States Outer Continental Shelf from Leasing Disposition,” from 34 Weekly Comp. Pres. Doc. 1111, dated June 12, 1998; or
(iii) The 181 Area or 181 South Area.
(1) In the case of fiscal year 2017 and each fiscal year thereafter, all rentals, royalties, bonus bids, and other sums received by the United States from leases that lessees enter(ed) into on or after December 20, 2006, located:
(i) In the 181 Area;
(ii) In the 181 South Area;
(iii) In the 2002-2007 Planning Area.
(2) Exclusions from the term
(i) Revenues from the forfeiture of a bond or other surety instrument securing obligations other than royalties;
(ii) Civil penalties;
(iii) Royalties “taken by the Secretary in-kind and not sold” (Pub. L. 109-432, Dec 20, 2006);
(iv) Revenues generated from leases subject to section 8(g) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(g));
(v) User fees; and
(vi) Lease revenues explicitly excluded from GOMESA revenue sharing by statute or appropriations law.
(3) The term
(i)
(A) In the 181 Area in the Central Planning Area; or
(B) In the 2002-2007 Planning Area.
(ii)
(A) In the 181 Area in the Eastern Planning Area, or
(B) In the 181 South Area.
(a) For fiscal year 2017 and each fiscal year thereafter, the Secretary of the Treasury will deposit 50 percent of the qualified OCS revenues (Phase II—uncapped) into a special U.S. Treasury account, from which ONRR will disburse 75 percent to the Gulf producing States and 25 percent to the LWCF. Of the revenues disbursed to a Gulf producing State, we will disburse 20 percent directly to the CPSs within that State. Each Gulf producing State will receive at least 10 percent of the qualified OCS revenues (Phase II—uncapped) available for allocation to the Gulf producing States each fiscal year. The following table summarizes the resulting revenue shares (adding to 100 percent):
(b) For fiscal year 2017 and each fiscal year thereafter, the Secretary of the Treasury will deposit 50 percent of the qualified OCS revenues (Phase II—capped) into a special U.S. Treasury account. The total amount of qualified OCS revenues (Phase II—capped) deposited in the special U.S. Treasury account and available for allocation to the Gulf producing States, the CPSs and the LWCF, under this subpart, cannot exceed $500,000,000 for each of the fiscal years 2017 through 2055. After applying the cap, if applicable, ONRR will disburse 75 percent to the Gulf producing States and 25 percent to the LWCF. Of the revenues disbursed to a Gulf producing State, we will disburse 20 percent directly to the CPSs within that State. Each Gulf producing State will receive at least 10 percent of the qualified OCS revenues (Phase II—capped) available for allocation to the Gulf producing States each fiscal year.
(a) ONRR will determine the great circle distance between:
(1) The geographic center of each applicable leased tract (Phase II) or historical lease site; and
(2) The point on the coastline of each Gulf producing State that is closest to the geographic center of each applicable leased tract (Phase II) or historical lease site.
(b) Based on a specific subset of these distances, we will calculate the qualified OCS revenues (Phase II—uncapped) to disburse to each Gulf producing State as follows:
(1) For each Gulf producing State, we will calculate and total, over all applicable leased tracts (Phase II) located in the 181 Area in the Eastern Planning Area or the 181 South Area, the mathematical inverses of the distances between the points on the State's coastline that are closest to the geographic centers of the applicable leased tracts (Phase II) located in the 181 Area in the Eastern Planning Area or the 181 South Area, and the geographic centers of the applicable leased tracts (Phase II) located in the 181 Area in the Eastern Planning Area or the 181 South Area.
(2) For each Gulf producing State, we will divide the sum of each State's inverse distances from all applicable leased tracts (Phase II) located in the 181 Area in the Eastern Planning Area or the 181 South Area calculated under paragraph (1), by the sum of the inverse distances from all applicable leased tracts (Phase II) located in the 181 Area in the Eastern Planning Area or the 181 South Area across all four Gulf producing States. In the formulas below,
(3) If, in any fiscal year, this calculation results in less than a 10-percent allocation of the qualified OCS revenues (Phase II—uncapped) to any Gulf producing State, we will recalculate the distribution. We will allocate 10 percent of the qualified OCS revenues (Phase II—uncapped) to the affected State and recalculate the other States' shares of the remaining qualified OCS revenues (Phase II—uncapped), omitting from the calculation the State receiving the 10-percent minimum share.
(c) Based on a specific subset of these distances, we will calculate the qualified OCS revenues (Phase II—capped) to disburse to each Gulf producing State as follows:
(1) For each Gulf producing State, we will calculate and total, over all applicable leased tracts (Phase II) located in the 181 Area in the Central Planning Area and historical lease sites, the mathematical inverses of the distances between the points on the State's coastline that are closest to the geographic centers of the applicable leased tracts (Phase II) located in the 181 Area in the Central Planning Area and historical lease sites, and the geographic centers of the applicable leased tracts (Phase II) located in the 181 Area in the Central Planning Area and historical lease sites.
(2) For each Gulf producing State, we will divide the sum of each State's inverse distances from all applicable leased tracts (Phase II) located in the 181 Area in the Central Planning Area and historical lease sites calculated under paragraph (1), by the sum of the inverse distances from all applicable leased tracts (Phase II) located in the
(3) If, in any fiscal year, this calculation results in less than a 10-percent allocation of the qualified OCS revenues (Phase II—capped) to any Gulf producing State, we will recalculate the distribution. We will allocate 10 percent of the qualified OCS revenues (Phase II—capped) to the affected State and recalculate the other States' shares of the remaining qualified OCS revenues (Phase II—capped), omitting from the calculation the State receiving the 10-percent minimum share.
(a) Of the qualified OCS revenues (Phase II) allocated to a Gulf producing State's CPSs, ONRR will allocate 25 percent based on the proportion that each CPS's population bears to the population of all CPSs in the State.
(b) Of the qualified OCS revenues (Phase II) allocated to a Gulf producing State's CPSs, we will allocate 25 percent based on the proportion that each CPS's miles of coastline bears to the total miles of coastline across all CPSs in the State. However, for the State of Louisiana, we will deem CPSs without a coastline to each have a coastline one-third the average length of the coastline of all CPSs within Louisiana that have a coastline.
(c)(1) Of the qualified OCS revenues (Phase II) allocated to a Gulf producing State's CPSs, we will allocate 50 percent in amounts that are inversely proportional to the respective distances between:
(i) The point in each CPS that is closest to the geographic center of the applicable leased tract (Phase II) or historical lease site; and
(ii) The geographic center of each applicable leased tract (Phase II) or historical lease site.
(2) However, we will exclude distances to an applicable leased tract (Phase II) from this calculation if any portion of the tract is located in a geographic area that was subject to a leasing moratorium on January 1, 2005, unless the leased tract was in production on that date.
(a) As GOMESA directs, ONRR will update the group of historical lease sites in the 2002-2007 Planning Area as follows:
(1) On December 31, 2015, we will freeze the group of historical lease sites, subject to the adjustment under paragraph (a)(2) of this section.
(2) Beginning January 1, 2022, and every fifth year thereafter, we will extend the ending date for determining the group of historical lease sites for an additional five calendar years by adding any new historical lease sites to the existing group.
(b) Each year we will update the group of applicable leased tracts (Phase II) to include only leases that were in effect at any time during the previous fiscal year.
ONRR will disburse GOMESA revenues as soon as authorized and practicable within the fiscal year following the year that we collect qualified OCS revenues (Phase II).
Bureau of the Fiscal Service, Fiscal Service, Treasury.
Interim final rule with request for comments.
The Department of the Treasury (Treasury), Bureau of the Fiscal Service (Fiscal Service), is amending its regulation governing the offset of tax refund payments to collect past-due support obligations. This rule will limit the time period during which Treasury may recover certain tax refund offset collections from States, when the States have already forwarded such funds to custodial parents as required or as authorized by applicable laws. This change will limit the time period during which Treasury may require States to return the offset funds to six months from the date of such collection, if Treasury has determined that the underlying refund was not due to the taxpayer.
This interim final rule is effective January 1, 2016.
You can download this interim rule at the following Web site:
In accordance with the U.S. government's eRulemaking Initiative, Fiscal Service publishes rulemaking information on
Comments on this rule, identified by docket FISCAL-2014-0005, should only be submitted using the following methods:
•
•
The fax and email methods of submitting comments on rules to Fiscal Service have been discontinued.
All submissions received must include the agency name (“Bureau of the Fiscal Service”) and docket number FISCAL-2014-0005 for this rulemaking.
Thomas Kobielus, Manager, at (202) 874-6810, or Tricia Long, Senior Counsel, at (202) 874-6680.
When a tax refund payment is issued and offset through the Treasury Offset Program (TOP) to collect a delinquent child support debt owed by the taxpayer, the taxpayer receives the benefit of the payment in the form of a credit on the amount of debt owed. If the Internal Revenue Service (IRS) subsequently determines that the taxpayer was not entitled to that tax refund, the taxpayer is accordingly not entitled to the credit on the debt owed. Currently, IRS has unlimited time during which to require Fiscal Service to recover such erroneous offset funds from the Federal or State agency which collected the funds. Fiscal Service requires return of monies representing the offset from State agencies notwithstanding the fact that the State agency may have already forwarded such funds to the custodial parent.
States submit past-due support obligations to TOP both for collection of support debts which have been assigned to the State pursuant to 42 U.S.C. 608(a)(3) and on behalf of custodial parents, pursuant to 42 U.S.C. 654(4). Collections for support debts collected on behalf of custodial parents pursuant to 42 U.S.C. 654(4) are required by 42 U.S.C. 657 to be forwarded by the States to the custodial parent. By regulation, any of those collections resulting from tax refund offsets must be forwarded within 30 calendar days of initial receipt (unless the refund offset is based upon a joint return, in which case, the State has six months).
Following implementation of this rule, IRS and Fiscal Service will continue to work with the Federal Office of Child Support Enforcement (OCSE) and State child support agencies to assess the impact of this interim final rule and to identify potential improvements in the tax offset process, including the practice of recouping from States erroneous offset funds that have been forwarded to custodial parents. Once sufficient data respecting implementation of this new rule is available, but in no case later than 2 years, Treasury will work with OCSE to consider further reduction in the time limit placed upon it for seeking recoupment from States.
The six-month limitation in this rule applies only to the offset of tax refund payments to collect past-due support obligations when States have forwarded the collected funds to the custodial parent. This rule does not apply when States have retained the funds. This rule does not apply to any other type of debt being collected by tax refund offset under 31 CFR part 285. This rule does not affect Treasury's rights to seek recovery of the erroneous offset funds from any person through any other means permitted by law.
Fiscal Service developed this interim final rule in consultation with the IRS and the Department of Health and Human Services (HHS) and appreciates their assistance. As required by 42 U.S.C. 664(b)(1), HHS has approved this interim final rule.
Executive Order 12866 requires each agency in the Executive branch to write regulations that are simple and easy to understand. We invite comment on how to make this interim rule clearer. For example, you may wish to discuss: (1) Whether we have organized the material to suit your needs; (2) whether the requirements of the rule are clear; or (3) whether there is something else we could do to make this rule easier to understand.
The interim rule does not meet the criteria for a “significant regulatory action” as defined in Executive Order 12866. Therefore, the regulatory review procedures contained therein do not apply.
It is hereby certified that the interim rule will not have a significant economic impact on a substantial number of small entities. This rule merely provides a time frame for Treasury to require States to return collections. Moreover, the provisions contained in this interim rule impose no additional costs to small entities. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. 601
Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532 (Unfunded Mandates Act), requires that an agency prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires the agency to identify and consider a reasonable number of regulatory alternatives before promulgating the rule. We have determined that this interim rule will not result in expenditures by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, we have not prepared a budgetary impact statement or specifically addressed any regulatory alternatives.
This rule has been reviewed under Executive Order (EO) 13132, Federalism. This rule relieves the States of an obligation to return funds to the Federal Government after a certain time period when the States have already forwarded the funds to custodial parents, as required or authorized by applicable laws, and they no longer have such funds. Treasury, with assistance from the Office of Child Support Enforcement at the Department of Health and Human Services, consulted with the States when developing this interim rule. Therefore, in accordance with Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.
This rule is being issued without prior public notice and comment because under 5 U.S.C. 553(b) good cause exists to determine that prior notice and comment rulemaking is unnecessary and contrary to the public interest. The policy being implemented through this rule imposes a time limitation on Treasury for recovering erroneous offset funds from States that have forwarded such funds onto families. It relieves the States of the burden of having to pay such amounts to Treasury from their own funds and does not adversely affect the rights of the public.
Administrative practice and procedure, Child support, Child welfare, Claims, Credits, Debts, Disability benefits, Federal employees, Garnishment of wages, Hearing and appeal procedures, Loan programs, Privacy, Railroad retirement, Railroad unemployment insurance, Salaries, Social Security benefits, Supplemental Security Income (SSI), Taxes, Veterans' benefits, Wages.
For the reasons set forth in the preamble, 31 CFR part 285 is amended as follows:
5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 3716, 3719, 3720A, 3720B, 3720D; 3720E; 42 U.S.C. 664; E.O. 13019, 61 FR 51763, 3 CFR, 1996 Comp., p. 216.
The revision and addition read as follows:
(g)
(h)
Coast Guard, DHS.
Delay of effective date without notice for temporary deviation from regulations.
The Coast Guard is modifying the effective dates of a published temporary deviation from the operating schedule that governs the Burlington Northern Santa Fe Railroad swing span drawbridge across Des Allemands Bayou, mile 14.0, at Des Allemands, St. Charles and Lafourche Parishes, Louisiana. This modification of the dates is necessary due to weather delaying the scheduled rehabilitations. This deviation allows the bridge to remain in its closed-to-navigation position for three eight-hour periods during three consecutive days on two separate occasions.
The deviation published December 11, 2015 (80 FR 76860) is effective from 7 a.m. on January 20, 2016 through 3 p.m. on January 29, 2016.
The docket mentioned in the preamble as being available in the docket are part of the docket USCG-2015-0974 and are available at
If you have questions on this temporary deviation, call or email Donna Gagliano, Bridge Specialist, Coast Guard; telephone 504-671-2128, email
On December 11, 2015, the Coast Guard published a notice of temporary deviation from regulations entitled, “Drawbridge Operation Regulation; Des Allemands Bayou, Des Allemands, LA” in the
The bridge has a vertical clearance of three feet above mean high water in the closed-to-navigation position and unlimited in the open-to-navigation position.
The draw currently operates under 33 CFR 117.440(b). For purposes of this deviation, the bridge will not be required to open from 7 a.m. to 3 p.m. daily for two three-day periods, January 20 through 22 and January 27 through 29, 2016. At all other times, the bridge will operate in accordance with 33 CFR 117.440(b).
The Burlington Northern Santa Fe Railroad requested a modification to the effective dates of the temporary deviation for the operation of the drawbridge to delay the previously approved deviation to accommodate rehabilitation work involving rest pivot
The Coast Guard has coordinated the closure with waterway users, industry, and other Coast Guard units and determined that this closure will not have a significant effect on vessel traffic.
During this deviation for bridge rehabilitation, vessels will not be allowed to pass through the bridge during the eight-hour closures each day as stated above. Many of the vessels that currently require an opening of the draw will be able to pass using the opposite channel from 3 p.m. to 7 a.m. when the deviations are not in effect. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) has determined that the Houston-Galveston-Brazoria (HGB) 8-hour ozone nonattainment area is currently attaining the 1997 ozone National Ambient Air Quality Standard (NAAQS). This determination is based upon certified ambient air monitoring data that show the area has monitored attainment of the 1997 ozone NAAQS for the 2012-2014 monitoring period and continues to monitor attainment of the NAAQS based on preliminary 2015 data. Thus, the requirements for this area to submit an attainment demonstration, a reasonable further progress (RFP) plan, contingency measures, and other State Implementation Plan (SIP) documents related to attainment of the 1997 ozone NAAQS shall be suspended for so long as the area continues to attain the 1997 ozone NAAQS.
This final rule is effective on January 29, 2016.
The EPA has established a docket for this action under Docket No. EPA-R06-OAR-2015-0117. All documents in the docket are listed on the
Wendy Jacques, (214) 665-7395,
Throughout this document, “we,” “us,” and “our” means the EPA.
The background for today's action is discussed in detail in our Proposal (80 FR 49187, August 17, 2015). In that document, we proposed to determine that the HGB ozone nonattainment area is currently in attainment of the 1997 ozone standard based on the most recent 3 years of quality-assured air quality data. Certified ambient air monitoring data show that the area has monitored attainment of the 1997 ozone NAAQS for the 2012-2014 monitoring period and continues to monitor attainment of the NAAQS based on preliminary 2015 data.
Our Proposal provides our rationale for this rulemaking. Please see the docket for this and other documents regarding our Proposal. The public comment period for our Proposal closed on September 16, 2015.
We received no adverse comments. We received one letter dated September 2, 2015, from the Texas Commission on Environmental Quality (TCEQ or the Commenter) supporting our Proposal. A summary of the comment and our response follows.
In accordance with our Clean Data Policy as codified in 40 CFR 51.1118, a determination of attainment suspends the requirements for the TCEQ to submit the attainment demonstration and associated reasonably available control measures, RFP plans, contingency measures for failure to attain or make reasonable progress and other planning SIPs related to attaining the 1997 ozone NAAQS in the HGB area for so long as the area continues to attain the standard. However, should the area violate the 1997 ozone standard after this Clean Data Determination is finalized, the EPA would rescind the CDD.
Based on the Proposal
This action makes a determination of attainment based on air quality, and would, if finalized, result in the suspension of certain Federal requirements, and it would not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 29, 2016. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposed of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
40 CFR part 52 is amended as follows:
42 U.S.C. 7401
(k)
Defense Acquisition Regulations System, Department of Defense (DoD).
Final rule.
DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to notify contractors of requirements relating to Afghanistan taxes for contracts performed in Afghanistan.
Effective December 30, 2015.
Ms. Julie Hammond, telephone 571-372-6174.
DoD published a proposed rule in the
DoD reviewed the public comments in the development of the final rule. A discussion of the comments is provided below:
The final rule amends DFARS clause 252.229-7014, Taxes—Foreign Contracts in Afghanistan, to reference the bilateral security agreement entitled “The Security and Defense Cooperation Agreement between the Islamic Republic of Afghanistan and the United States of America” signed on September 30, 2014. The reference to the bilateral security agreement replaces the reference to the prior Agreement entered into between the United States and Afghanistan on May 28, 2003, regarding the “Status of United States Military and Civilian Personnel of the U.S. Department of Defense Present in
The final rule also amends DFARS clause 252.229-7015, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement), to reference the North Atlantic Treaty Organization (NATO) Status of Forces Agreement (SOFA) signed on September 30, 2014, instead of the Military Technical Agreement (MTA) entered into between the NATO International Security Assistance Force (ISAF) and Interim Administration of Afghanistan in April 2002. As a result of the new SOFA, the reference to the 2011 NATO ISAF Letter of Interpretation that modified the MTA's tax exemption is also removed, including the language allowing contractors to include taxes on profits earned by local contractors in the contract price.
The final rule also clarifies at DFARS 212.301 that the clauses apply to solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items.
This rule creates two new clauses: (1) DFARS 252.229-7014, Taxes—Foreign Contracts in Afghanistan, and (2) DFARS 252.229-7015, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement). The objective of the rule is to exempt DoD contracts performed in Afghanistan from payment liability for Afghan taxes pursuant to the bilateral security agreement entitled “The Security and Defense Cooperation Agreement between the Islamic Republic of Afghanistan and the United States of America” signed on September 30, 2014, and the North Atlantic Treaty Organization (NATO) Status of Forces Agreement (SOFA) signed on September 30, 2014.
DoD is applying these two clauses to solicitations and contracts below the SAT and to the acquisition of commercial items, including COTS items, as defined at FAR 2.101. This rule clarifies the application of requirements relating to treatment of taxes for contracts performed in Afghanistan. Not applying this guidance to contracts below the SAT and for the acquisition of commercial items, including COTS items, would exclude contracts intended to be covered by this rule and undermine the overarching purpose of the rule. Consequently, DoD is applying the rule to contracts below the SAT and for the acquisition of commercial items, including COTS items.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic,
A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601,
DoD is amending the Defense Federal Acquisition Regulation Supplement (DFARS) to add two new clauses in order to notify DoD contractors of requirements relating to Afghanistan taxes when DoD contracts are being performed in Afghanistan. The clause at DFARS 252.229-7014, Taxes-Foreign Contracts in Afghanistan, will be required to be included in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, with performance in Afghanistan, unless the clause at 252.229-7015 is used. The clause at DFARS 252.229-7015, Taxes-Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement), will be required to be included in all solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, with performance in Afghanistan awarded on behalf of NATO, which are governed by the NATO Status of Forces Agreement, if approval from the Director, Defense Procurement and Acquisition Policy, Office of the Under Secretary of Defense for Acquisitions, Technology, and Logistics, is obtained prior to each use.
No comments were received from the public relative to the initial regulatory flexibility analysis.
DoD does not expect this proposed rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,
There are no new projected reporting, recordkeeping, or other compliance requirements projected for this rule.
There are no known significant alternatives to the rule. The impact of this rule on small business is not expected to be significant.
The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
Government procurement.
Therefore, 48 CFR parts 212, 229, and 252 are amended as follows:
41 U.S.C. 1303 and CFR chapter 1.
The addition reads as follows:
(f) * * *
(xiii)
(A) Use the clause at 252.229-7014, Taxes—Foreign Contracts in Afghanistan, as prescribed at 229.402-70(k).
(B) Use the clause at 252.229-7015, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement), as prescribed at 229.402-70(l).
(k) Use the clause at 252.229-7014, Taxes—Foreign Contracts in Afghanistan, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, with performance in Afghanistan, unless the clause at 252.229-7015 is used.
(l) Use the clause at 252.229-7015, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement), instead of the clause at 252.229-7014, Taxes—Foreign Contracts in Afghanistan, in solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, with performance in Afghanistan awarded on behalf of the North Atlantic Treaty Organization (NATO), which are governed by the NATO Status of Forces Agreement (SOFA), if approval from the Director, Defense Procurement and Acquisition Policy, Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, has been obtained prior to each use.
As prescribed in 229.402-70(k), use the following clause:
(a) This acquisition is covered by the Security and Defense Cooperation Agreement (the Agreement) between the Islamic Republic of Afghanistan and the United States of America signed on September 30, 2014, and entered into force on January 1, 2015.
(b) The Agreement exempts the Department of Defense (DoD), and its contractors and subcontractors (other than those that are Afghan legal entities or residents), from paying any tax or similar charge assessed on activities associated with this contract within Afghanistan. The Agreement also exempts the acquisition, importation, exportation, reexportation, transportation, and use of supplies and services in Afghanistan, by or on behalf of DoD, from any taxes, customs, duties, fees, or similar charges in Afghanistan.
(c) The Contractor shall exclude any Afghan taxes, customs, duties, fees, or similar charges from the contract price, other than those charged to Afghan legal entities or residents.
(d) The Agreement does not exempt Afghan employees of DoD contractors and subcontractors from Afghan tax laws. To the extent required by Afghan law, the Contractor shall withhold tax from the wages
(e) The Contractor shall include the substance of this clause, including this paragraph (e), in all subcontracts, including subcontracts for commercial items.
As prescribed in 229.402-70(l), use the following clause:
(a) This acquisition is covered by the Status of Forces Agreement (SOFA) entered into between the North Atlantic Treaty Organization (NATO) and the Islamic Republic of Afghanistan issued on September 30, 2014, and entered into force on January 1, 2015.
(b) The SOFA exempts NATO Forces and its contractors and subcontractors (other than those that are Afghan legal entities or residents) from paying any tax or similar charge assessed within Afghanistan. The SOFA also exempts the acquisition, importation, exportation, reexportation, transportation and use of supplies and services in Afghanistan from all Afghan taxes, customs, duties, fees, or similar charges.
(c) The Contractor shall exclude any Afghan taxes, customs, duties, fees or similar charges from the contract price, other than those that are Afghan legal entities or residents.
(d) Afghan citizens employed by NATO contractors and subcontractors are subject to Afghan tax laws. To the extent required by Afghan law, the Contractor shall withhold tax from the wages of these employees and remit those withholdings to the Afghanistan Revenue Department. These withholdings are an individual's liability, not a tax against the Contractor.
(e) The Contractor shall include the substance of this clause, including this paragraph (e), in all subcontracts including subcontracts for commercial items.
Defense Acquisition Regulations System, Department of Defense (DoD).
Final rule.
DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to incorporate increased thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, as determined by the United States Trade Representative.
Ms. Amy G. Williams, telephone 571-372-6106.
Every two years, the trade agreements thresholds are escalated according to a predetermined formula set forth in the agreements. The United States Trade Representative has specified the following new thresholds in the
This final rule implements the new thresholds in DFARS part 225, Foreign Contracting, for sections that include trade agreements thresholds (
The statute that applies to the publication of the Federal Acquisition Regulation (FAR) is 41. U.S.C. entitled “Publication of Proposed Regulations.” Paragraph (a)(1) of the statute requires that a procurement policy, regulation, procedure or form (including an amendment or modification thereof) must be published for public comment if it relates to the expenditure of appropriated funds, and has either a significant effect beyond the internal operating procedures of the agency
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
The Regulatory Flexibility Act does not apply to this rule because this final rule does not constitute a significant FAR revision within the meaning of FAR 1.501-1, and 41 U.S.C. 1707 does not require publication for public comment.
The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply, because the final rule affects the prescriptions for use of the certification and information collection requirements in the provision at DFARS 252.225-7035 and the certification and information collection requirements in the provision at DFARS 252.225-7018 (both currently approved under OMB Control #0704-0229), Defense Federal Acquisition Regulation Supplement Part 225, Foreign Acquisition and Related Clauses. However, there is no impact on the estimated burden hours, because the threshold changes are in line with inflation and maintain the status quo.
Government procurement.
Therefore, 48 CFR parts 225 and 252 are amended as follows:
41 U.S.C. 1303 and CFR chapter 1.
Defense Acquisition Regulations System, Department of Defense (DoD).
Interim rule.
DoD is issuing an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to provide contractors with additional time to implement security requirements specified by a National Institute of Standards and Technology Special Publication.
Submit comments identified by DFARS Case 2013-D018, using any of the following methods:
○
○
○
○
Comments received generally will be posted without change to
Mr. Dustin Pitsch, telephone 571-372-6090.
DoD published an interim rule under this case number in the
To address concerns from industry with regard to implementation of the first interim rule, DoD held a public meeting on Monday, December 14, 2015 (80 FR 72712, November 20, 2015). There were 85 registered attendees. Various topics were discussed with industry at the public meeting, such as scope, applicability, training, subcontractor flowdown, and implementation issues. Industry representatives specifically expressed to DoD, both prior to and at the public meeting, the need for additional time to implement the security requirements specified by NIST SP 800-171.
This second interim rule amends DFARS provision 252.204-7008, Compliance with Safeguarding and Covered Defense Information Controls, and DFARS clause 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, to provide offerors additional time to implement the security requirements specified by NIST SP 800-171, which will be required to be in place not later than December 31, 2017. The clause is also amended to require contractors to notify the DoD Chief Information Officer (CIO) of any NIST SP 800-171 security requirements that are not implemented at the time of contract award, within 30 days of contract award. The status provided by the contractor to the DoD CIO on implementation of the NIST SP 800-171 security requirements will enable the Department to monitor progress across the Defense industrial base, identify trends in the implementation of these requirements and, in particular, identify issues with industry implementation of specific requirements that may require clarification or adjustment. Additionally, this information will inform the Department in assessing the overall risk to DoD covered defense information on unclassified contractor systems and networks.
The second interim rule makes the following additional changes:
• The subcontractor flowdown requirements in DFARS provision 252.204-7009 and clause 252.204-7012 are amended to require, when applicable, inclusion of the clause without alteration, except to identify the parties.
• The subcontractor flowdown requirement in DFARS clause 252.204-7012 is further amended to limit the requirement to flow down the clause only to subcontractors where their efforts will involve covered defense information or where they will provide operationally critical support.
• DFARS clause 252.204-7012 is amended to remove the requirement for DoD CIO acceptance of alternative but equally effective security measures prior to award.
This rule is part of DoD's retrospective plan, completed in August 2011, under Executive Order 13563, “Improving Regulation and Regulatory Review.” DoD's full plan and updates can be accessed at:
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and
DoD expects that the additional implementation period provided by this interim rule may have a significant beneficial economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act 5 U.S.C. 601,
This rule allows contractors until December 31, 2017, to implement the security requirements specified by the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, “Protecting Controlled Unclassified Information in Nonfederal Information Systems and organizations,” for safeguarding sensitive information residing in contractor information systems, contained in Defense Federal Acquisition Regulation Supplement clause 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting.
The objective of this rule is to allow contractors additional time to implement the security requirements necessary to improve protection for DoD information stored on or transiting contractor systems.
This rule will apply to all contractors with covered defense information transiting their information systems. DoD estimates that this rule may apply to 10,000 contractors and that less than half of those are small businesses.
This second interim rule requires contractors, within 30 days of contract award, to notify the DoD Chief Information Officer of any NIST SP 800-171 security requirements that are not implemented at the time of contract award. This new reporting requirement affects the existing information collection requirements approved under the first interim rule under OMB Control number 0704-0478, titled “Enhanced Safeguarding and Cyber Incident Reporting of Unclassified DoD Information Within Industry,” but the effect on the total burden hours is negligible.
The rule does not duplicate, overlap, or conflict with any other Federal rules.
No significant alternatives, that would minimize the economic impact of the rule on small entities, were determined.
DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.
DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2013-D018), in correspondence.
This rule affects the information collection requirements in the clause at DFARS 252.204-7012, currently approved under OMB Control Number 0704-0478, titled “Enhanced Safeguarding and Cyber Incident Reporting of Unclassified DoD Information Within Industry,” in accordance with the Paperwork Reduction Act (44 U.S.C. chapter 35). The impact, however, is negligible, because the new reporting requirement is not anticipated to increase the estimate of total burden hours.
A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment.
The proliferation of information technology and increased information access has exposed DoD and DoD contractor information systems and networks to greater vulnerability of attacks. The first interim rule under this case number and title was necessary because of the urgent need to protect covered defense information and gain awareness of the full scope of cyber incidents being committed against defense contractors. That rule addressed the requirement for contractors and subcontractors to report cyber incidents that result in an actual or potentially adverse effect on a covered contractor information system or covered defense information residing therein, or on a contractor's ability to provide operationally critical support. However, since issuance of the first interim rule, industry has expressed to DoD the need for additional time to implement one part of the first interim rule, specifically the NIST SP 800-171 security requirements for covered contractor information systems.
This second interim rule is being issued without the benefit of public comment to provide immediate relief from the requirement to have NIST 800-171 security requirements implemented at the time of contract award. Contractors are at risk of not being able to comply with the terms of contracts that require the handling of covered defense information. Contractors will be given until December 31, 2017 for implementation of the NIST 800-171 security requirements, thereby limiting the burden imposed on industry in the first interim rule. This rule grants additional time for contractors to assess their information systems and to set forth an economically efficient strategy to implement the new security requirements at a pace that fits within normal information technology lifecycle timelines. However, pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), DoD will consider public comments received in response to this interim rule in the formation of the final rule.
Government procurement.
Therefore, 48 CFR part 252 is amended as follows:
41 U.S.C. 1303 and CFR chapter 1.
The revision reads as follows:
(c) For covered contractor information systems that are not part of an information technology (IT) service or system operated on behalf of the Government (see 252.204-7012(b)(1)(ii))—
(1) By submission of this offer, the Offeror represents that it will implement the security requirements specified by National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, “Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations” (see
(2)(i) If the Offeror proposes to vary from any of the security requirements specified by NIST SP 800-171 that is in effect at the time the solicitation is issued or as authorized by the Contracting Officer, the Offeror shall
(A) Why a particular security requirement is not applicable; or
(B) How an alternative but equally effective, security measure is used to compensate for the inability to satisfy a particular requirement and achieve equivalent protection.
(ii) An authorized representative of the DoD CIO will adjudicate offeror requests to vary from NIST SP 800-171 requirements in writing prior to contract award. Any accepted variance from NIST SP 800-171 shall be incorporated into the resulting contract.
The addition and revision read as follows:
(a)
(c)
The revisions read as follows:
(b) * * *
(1) * * *
(ii) * * *
(A) The security requirements in National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, “Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations,”
(B) Alternative but equally effective security measures used to compensate for the inability to satisfy a particular requirement and achieve equivalent protection accepted in writing by an authorized representative of the DoD CIO; and
(m)
(1) Include this clause, including this paragraph (m), in subcontracts, or similar contractual instruments, for operationally critical support, or for which subcontract performance will involve a covered contractor information system, including subcontracts for commercial items, without alteration, except to identify the parties; and
(2) When this clause is included in a subcontract, require subcontractors to rapidly report cyber incidents directly to DoD at
U.S. Office of Special Counsel.
Withdrawal of proposed rulemaking.
In the
The proposed rule that appeared on January 22, 2015 at 80 FR 3182 is withdrawn as of December 30, 2015.
Lisa V. Terry, General Counsel, U.S. Office of Special Counsel, by telephone at (202) 254-3600, by facsimile at (202) 254-3711, or by email at
The U.S. Office of Special Counsel (OSC) proposed revising its regulations to expand who may file a whistleblower disclosure with OSC. The proposed revision would have allowed employees of Federal contractors, subcontractors, and grantees to disclose wrongdoing within the Federal government if they work at or on behalf of a U.S. government component for which OSC has jurisdiction to accept disclosures. In response to the proposed rule, published in the
Occupational Safety and Health Administration (OSHA), Labor.
Proposed rule; notice of informal public hearing.
OSHA is scheduling an informal public hearing on its proposed rule “Occupational Exposure to Beryllium and Beryllium Compounds.” The proposed rule was published in the
Electronic copies of this
On August 7, 2015, OSHA published a proposed rule to amend its existing exposure limits for occupational exposure in general industry to beryllium and beryllium compounds (80 FR 47565). The proposed rule would promulgate a substance-specific standard for general industry, regulating occupational exposure to beryllium and beryllium compounds. OSHA accepted comments concerning the proposed rule during the comment period, which ended on November 5, 2015. Commenters shared information and suggestions on a variety of topics, and the Non-Ferrous Founders' Society also requested that OSHA schedule an informal public hearing on the proposed rule.
Pursuant to 29 CFR 1911.15(a) and 5 U.S.C. 553(c), members of the public have an opportunity at the informal public hearing to provide oral testimony and evidence on issues raised by the proposal. An administrative law judge (ALJ) will preside over the hearing and will resolve any procedural matters relating to the hearing.
OSHA's regulation governing public hearings (29 CFR 1911.15) establishes the purpose and procedures of informal public hearings. Although the presiding officer of the hearing is an ALJ and questioning of witnesses is allowed on crucial issues, the proceeding is largely informal and essentially legislative in purpose. Therefore, the hearing provides interested persons with an opportunity to make oral presentations in the absence of rigid procedures that could impede or protract the rulemaking process. The hearing is not an adjudicative proceeding subject to the Federal rules of evidence. Instead, it is an informal administrative proceeding convened for the purpose of gathering and clarifying information. Accordingly, questions of relevance, procedure, and participation generally will be resolved in favor of developing a clear, accurate, and complete record.
Conduct of the hearing will conform to 29 CFR 1911.15. In addition, pursuant to 29 CFR 1911.4, the Assistant Secretary may, on reasonable notice, issue additional or alternative procedures to expedite the proceedings, to provide greater procedural protections to interested persons, or to further any other good cause consistent with applicable law. Although the ALJ presiding over the hearing makes no decision or recommendation on the merits of the proposal, the ALJ has the responsibility and authority necessary to ensure that the hearing progresses at a reasonable pace and in an orderly manner. To ensure a full and fair hearing, the ALJ has the power to regulate the course of the proceedings; dispose of procedural requests, objections, and comparable matters; confine presentations to matters pertinent to the issues the proposed rule raises; use appropriate means to regulate the conduct of persons present at the hearing; question witnesses and permit others to do so; limit the time for such questioning; and leave the record open for a reasonable time after the hearing for the submission of additional data, evidence, comments, and arguments from those who participated in the hearing (29 CFR 1911.16).
If you submit scientific or technical studies or other results of scientific research, OSHA requests (but is not requiring) that you also provide the following information where it is available: (1) Identification of the funding source(s) and sponsoring organization(s) of the research; (2) the extent to which the research findings were reviewed by a potentially affected party prior to publication or submission to the docket, and identification of any such parties; and (3) the nature of any financial relationships (
• Name, address, email address, and telephone number of each individual who will give oral testimony;
• Name of the establishment or organization each individual represents, if any;
• Occupational title and position of each individual testifying;
• Approximate amount of time required for each individual's testimony;
• A brief statement of the position each individual will take with respect to the issues raised by the proposed rule; and
• A brief summary of documentary evidence each individual intends to present.
Participants who need projectors and other special equipment for their testimony must contact Gretta Jameson at OSHA's Office of Communications, telephone (202) 693-2176, no later than one week before the hearing begins.
OSHA emphasizes that the hearing is open to the public; however, only individuals who file a notice of intention to appear may question witnesses and participate fully at the hearing. If time permits, and at the discretion of the ALJ, an individual who did not file a notice of intention to appear may be allowed to testify at the hearing, but for no more than 10 minutes.
The Agency will review each submission and determine if the information it contains warrants the amount of time the individual requested for the presentation. If OSHA believes the requested time is excessive, the Agency will allocate an appropriate amount of time for the presentation. The Agency also may limit to 10 minutes the presentation of any participant who fails to comply substantially with these procedural requirements, and may request that the participant return for questioning at a later time. Before the hearing, OSHA will notify participants of the time the Agency will allow for their presentation and, if less than requested, the reasons for its decision. In addition, before the hearing, OSHA will provide the hearing procedures and hearing schedule to each participant who filed a notice of intention to appear.
This document was prepared under the direction of David Michaels, Ph.D., MPH, Assistant Secretary of Labor for Occupational Safety and Health, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210, pursuant to section 6(b) of the Occupational Safety and Health Act of 1970 (29 U.S.C. 655(b)), Secretary of Labor's Order 1-2012 (77 FR 3912), and 29 CFR part 1911.
Office of Elementary and Secondary Education, Department of Education.
Notice of proposed rulemaking.
The Secretary proposes to amend the Impact Aid Program regulations issued under title VIII of the Elementary and Secondary Education Act of 1965, as amended (ESEA or “the Act”). The proposed regulations govern Impact Aid payments to local educational agencies (LEAs). The program, in general, provides assistance for maintenance and operations costs to LEAs that are affected by Federal activities. These proposed regulations would update, clarify, and improve the current regulations.
We must receive your comments on or before February 16, 2016.
Submit your comments through the Federal eRulemaking Portal or via postal mail, commercial delivery, or hand delivery. We will not accept comments submitted by fax or by email or those submitted after the comment period. To ensure that we do not receive duplicate copies, please submit your comments only once. In addition, please include the Docket ID at the top of your comments.
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Kristen Walls-Rivas, U.S. Department of Education, 400 Maryland Avenue SW., Room 3C103, Washington, DC 20202-6244. Telephone: (202) 260-3858 or by email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.
• Are there alternative methods for counting federal-connected children besides the parent-pupil survey form or source check collection tools, either in use or that you propose?
• What types of technical assistance would you like the Department to provide to properly educate and inform LEAs on the two regulatory methods of data collection, or on other methods?
• Can you propose ways in which online or electronic data collection might be used to facilitate the data collection process? This may include but is not limited to the electronic collection of parent-pupil survey forms and the use of student information systems for Impact Aid data collection.
To ensure that your comments have maximum effect in developing the final regulations, we urge you to identify clearly the specific section or sections of the proposed regulations that each of your comments addresses and to arrange your comments in the same order as the proposed regulations.
We invite you to assist us in complying with the specific requirements of Executive Orders 12866 and 13563 and their overall requirement of reducing regulatory burden that might result from these proposed regulations. Please let us know of any further ways we could reduce potential costs or increase potential benefits while preserving the effective and efficient administration of the Department's programs and activities.
During and after the comment period, you may inspect all public comments about these proposed regulations by accessing Regulations.gov. You may also inspect the comments in person at 400 Maryland Avenue SW., Washington, DC, between 8:30 a.m. and 4:00 p.m., Washington, DC time, Monday through Friday of each week except Federal holidays. Please contact the person listed under
The Secretary proposes to amend certain regulations in part 222 of title 34 of the Code of Federal Regulations (CFR). The regulations in 34 CFR part 222 pertain to the Impact Aid Program and implement Title VIII of the ESEA. The purpose of this regulatory action is to update the current regulations in response to statutory changes and related issues that have arisen, as many of the regulations for this section have not been updated since 1995; to improve clarity and transparency regarding Federal program operations; and to improve the LEA's application processes to generate a more accurate data collection, which will facilitate more timely Impact Aid payments. The Department published final technical amendments for this program on June 11, 2015, deleting obsolete provisions and incorporating statutory changes that did not require notice and comment. These proposed regulations contain provisions on which we seek comment from the public.
There was a concern among many consultation participants that LEAs are not implementing IPPs with the degree of seriousness intended by the law and Impact Aid program regulations. Commenters wished to see LEAs focus more attention on equal participation of Indian students in all educational programs, including Advanced Placement courses, sports, and other extra-curricular activities. Some participants were concerned that LEAs do not provide sufficient time for tribes or parents to review data regarding participation of Indian children in the LEAs' programs; others stated that some LEAs provide outdated data to tribal leaders.
In addition, participants sought more guidance on the standard for meaningful input from tribal officials and parents of Indian children. Commenters were further concerned that there is no requirement in the current Impact Aid regulations that tribes review and affirm that an LEA is in compliance with the content in the IPP before it is submitted to the Department for review. Others stated that tribes are not receiving copies of IPPs at all. Many commenters felt that some LEAs provide tribal leaders and parents of Indian children insufficient notice of meetings.
There was also a general concern among many participants that the current remedy for non-compliance with IPPs, the withholding of an LEA's Impact Aid payments, is unhelpful, because withholding all funds would have a negative effect on Indian children. Others stated that the IPP complaint process is highly adversarial; they wished to see an intermediate step, such as a requirement that the LEA and tribal leaders attend a mediation session before a complaint is submitted to the Department. Commenters indicated that tribes would also like to be informed when the Department finds that an LEA serving children on the tribe's land is out of compliance with the IPP requirements.
With regard to the current program regulations regarding an LEA's ability to submit a waiver from a tribe in lieu of IPPs, commenters expressed the concern that tribes may be waiving rights without informed knowledge about what they are waiving.
The Impact Aid Program also heard comments about the verification of students living on Indian lands. Participants were concerned that LEAs were not providing sufficient time for tribal officials to confirm that the students in question resided on Indian land. Participants also stated that it would be helpful for them and for the officials certifying Indian land to have customized training that focuses on the Impact Aid program's requirements.
The Department considered the views gathered during the tribal consultation process in developing these proposed regulations. Specifically, proposed provisions regarding IPPs and waivers of IPPs (§§ 222.91, 222.94, and 222.95) reflect this input.
On December 10, 2015, the President signed the Every Student Succeeds Act (ESSA), Public Law 114-95, 129 Stat. 1802 (2015), which amends the Elementary and Secondary Education Act of 1965 (ESEA). The ESSA includes Impact Aid amendments (see new title VII of the ESEA, formerly title VIII), which take effect starting with fiscal year 2017 payments. Pub. L . 114-95, § 5(d). These proposed regulations are not directly affected by the ESSA. The statutory provisions underlying each regulatory provision in this document
These proposed changes would:
• Amend the definition of “membership” in § 222.2 to clarify that an eligible student in membership must live in the same State as the LEA except in certain circumstances.
• Amend §§ 222.3 and 222.5 to change the date by which an LEA may amend its application from September 30 to June 30 of the year preceding the Federal fiscal year for which it seeks assistance.
• Amend § 222.22 to reflect a statutory change that would include payments in lieu of taxes (PILTs) and revenues from other Federal sources in the calculation of compensation from Federal activities, for purposes of determining eligibility and payments under section 8002 of the ESEA.
• Amend § 222.23 to replace the current provision with a new provision that describes how LEAs formerly eligible for section 8002 grants, that have consolidated with another LEA, are treated with respect to section 8002 grant payments.
• Amend § 222.30 to exclude Federal charter school startup funds from the analysis of whether Federal funds provide a substantial portion of the educational program, for purposes of determining an LEA's eligibility.
• Amend § 222.35 to specify certain unusual circumstances in which someone other than a parent or legal guardian may sign a parent-pupil survey form and to require the use of source check forms to document children residing on Indian lands or in low-rent housing.
• Amend § 222.37 to clarify the options for reporting average daily attendance and to make them available to all States.
• Amend § 222.40 to require that an SEA submit the rationale for the additional factors selected to identify generally comparable districts and describe how those factors affect the cost of educating students.
• Amend § 222.91 to add a requirement for an LEA claiming children residing on Indian lands to include with its application an assurance that the LEA has responded in writing to input from the tribes and parents of Indian children received during the IPP consultation process, prior to submitting the application for Impact Aid.
• Amend § 222.94 to add a requirement that LEAs claiming children residing on Indian lands respond in writing to input obtained from parents of Indian children and tribal officials during the IPP consultation process, disseminate these responses to the parents of Indian children and tribal officials prior to submission of the Impact Aid application, and provide a copy of the IPPs to the tribe; and changing from 60 to 90 days the time period in which an LEA must amend its IPPs based on its own determination after obtaining tribal input.
• Amend § 222.95 to allow the Department to withhold all or part of the Impact Aid payment from an LEA that is not in compliance with the requirements of § 222.94, and changing from 60 to 90 days the time within which LEAs must revise IPPs in response to Department notification.
• Amend § 222.161 to give the SEA the ability to request permission from the Secretary to make estimated State aid payments that consider an LEA's Impact Aid payment in the event that the Department does not make an equalization determination before the start of an SEA's fiscal year.
We discuss substantive issues under the sections of the proposed regulations to which they pertain. Generally, we do not address proposed regulatory changes that are technical or otherwise minor in effect.
Paragraph (1)(ii) would not change; paragraph (1)(iii) would be deleted. Finally, paragraph (2) of the definition would be amended to further clarify that children whose parent's job includes providing services on a Federal property, but who are not Federal employees and whose duty station is not on the Federal property, are not eligible to be counted for Impact Aid.
The regulation would also provide that an eligible consolidated LEA receives only a foundation payment and not any “remaining funds.” Remaining funds require submission of data by LEAs to calculate a maximum payment, and a consolidated LEA's payment is based only on the last payment received by a former LEA, so there is no documentation available with which to calculate a maximum payment. The provisions that are proposed in this section reflect current Department practice.
The proposed regulation would also exclude charter school startup funds from the calculation of whether Federal funds provide a substantial portion of an LEA's program. These funds are generally available in the first two years of a charter school's operations; they can be used for a host of purposes other than current expenditures, and they are not long-term funding sources.
Under the proposed regulation, in analyzing the portion of the education program that is funded by Federal sources, the Department would compare the LEA's finances to other LEAs in the State to account for the circumstances unique to the State.
Proposed paragraph (b) pertains to source check documents, which are a data collection alternative to the parent-pupil survey form. The proposed regulations would require source check documents for children residing on Indian lands and for children residing in eligible low-rent housing. Under the proposed regulation, the source check forms must contain sufficient information to verify the eligibility of both the Federal property and the individual children claimed on the source check form.
Paragraph (b) would be revised to require that LEAs claiming children who reside on Indian lands, and children who reside in low-rent housing, use a source check document to obtain the data required to determine the children's eligibility. The parent-pupil survey form is insufficient to document the different types of eligible Indian lands property and low-rent housing property and confirm that property's eligibility, because parents are unlikely to have the necessary documentation or information. In order to ensure accurate and timely eligibility and payment determinations, LEAs need to reach out directly to the government entities (
The Department has taken these concerns into account and proposes to add to the Impact Aid section 8003 application package an assurance that the LEA has provided written responses to comments, concerns, or recommendations received through the IPP consultation process. This assurance does not mean that an LEA must adopt any specific recommendations; rather it will require the LEAs to explain in writing to the parents of Indian children and tribal officials why the LEA is not adopting the recommendations, or how it will implement or take into consideration those recommendations or concerns.
With regard to a waiver of IPPs, the proposed rules would clarify that a waiver must be voluntary and must reflect an understanding on the part of the tribal official of the rights being waived. The statutory option of a waiver was intended to be used only when a tribe is truly satisfied with an LEA's program and services, and not as a way for an LEA to avoid the IPP process. The proposed regulation would require that a waiver be submitted with the application and not later; in the past when the Department has reviewed IPPs, some LEAs have submitted a waiver as an application amendment in order to avoid amending the IPPs, under circumstances that call into question whether the waiver has been knowing and voluntary on the part of the tribe.
Based on the discussions during the consultation process, the Department is also considering administrative options, such as providing additional technical assistance to better support and assist LEAs, parents, and tribal officials as they negotiate the IPP consultation process.
Proposed § 222.94(b)(5) would add a requirement that the LEA provide written responses at least annually to comments and recommendations received through the IPP consultation process. This proposal stems from one of the most frequent concerns raised during the Indian consultation; that many LEAs have not considered the tribes or parents' comments, concerns or recommendations when creating the educational program or making decisions about school-sponsored activities. This provision would not require that an LEA adopt any specific recommendations; rather it would require the LEA to explain in writing to the parents of Indian children and tribal officials why the LEA is not adopting the recommendations, or how it will implement or take into consideration those recommendations or concerns. The LEA's response would demonstrate how the feedback has been thoughtfully considered in the development of the educational program, and would be reflected in the IPPs. Optimally, the outcome of the IPP consultation process would be a document that demonstrates to the tribe that the LEA has heard and acknowledged the feedback from the parents of Indian children and tribes.
In addition, we learned during consultations that tribes do not always have access to a copy of the IPPs; thus the revisions would require the LEA to provide a copy of the IPPs to the tribe annually.
Because LEAs are often required by State or local law to have the school board (or equivalent) certify any changes to the IPPs, extending the time that an LEA has to revise its IPPs from 60 to 90 days would allow time for both the revision and any necessary procedural steps. The provisions in proposed paragraph (c) were moved from current § 222.95(e)-(g) to keep the provisions related to the creation, content, and revision of IPPs under one regulatory section.
Current § 222.95(d) states that the Department may withhold all payments if the LEA fails to bring its IPPs into compliance within 60 days of receipt of the Department's formal notification.
Under the current withholding provisions, if an LEA does not correct deficiencies in its IPPs within 60 days, the Department's only sanction is to withhold all section 8003 payments, unless the withholding would substantially disrupt the LEA's education programs. As many LEAs rely heavily on Impact Aid funds, withholding all section 8003 funds would prevent some LEAs from being able to provide an adequate educational program to the students they serve. The Secretary's intent in proposing to amend this regulation is to adopt clear, fair, and flexible withholding procedures in the event a withholding action is required. We learned through the tribal consultation that tribes favor incentives to encourage LEAs to bring deficient IPPs into compliance with the law in a way that does not interrupt the educational services provided to their children. The proposed withholding procedure balances the need for compliance with the interests of ensuring the LEA has the resources needed to provide adequate educational services to the children they serve.
Regarding the comments we heard requesting a more informal process for resolving disputes about IPPs, we fully encourage school districts and tribes to use alternative methods of dispute resolution, such as mediation or arbitration. This could obviate the need for a formal complaint to the Department, and nothing in the proposed or current regulations would prevent such a step. In addition, a party, once it has initiated a formal complaint, may request the Department to stay the proceedings to pursue mediation, and the Department would do so if both parties agree. In addition, the Impact Aid Program is willing to provide technical assistance to both parties to facilitate a common understanding before a formal complaint is launched.
The proposed regulations would also clarify that if the Secretary has not previously certified a State's program of State aid and the State wishes to apply for certification, the State would submit projected data showing that it would meet the disparity standard if it were authorized to deduct Impact Aid under section 8009 of the Act.
Under Executive Order 12866, the Secretary must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities in a material way (also referred to as an “economically significant” rule);
(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.
This proposed regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866.
We have also reviewed these regulations under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—
(1) Propose or adopt regulations only upon a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;
(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and
(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.
Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”
We are issuing these proposed regulations only on a reasoned determination that their benefits would justify their costs. In choosing among alternative regulatory approaches, we selected those approaches that would maximize net benefits. Based on the analysis that follows, the Department believes that these proposed regulations are consistent with the principles in Executive Order 13563.
We also have determined that this regulatory action would not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.
In accordance with both Executive orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs associated with this regulatory action are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities. Upon review of the costs to the LEA, we have determined there is minimal financial or resource burden associated with these changes, and that the net impact of the changes would be a reduction in burden hours. Certain affected LEAs would need to respond in writing to comments from tribes and parents of Indian students, but this time burden would be balanced by other proposed regulatory changes that reduce the burden, which result in a net decrease of both burden hours and cost associated with these regulations.
Executive Order 12866 and the Presidential memorandum “Plain Language in Government Writing” require each agency to write regulations that are easy to understand.
The Secretary invites comments on how to make these proposed regulations easier to understand, including answers to questions such as the following:
• Are the requirements in the proposed regulations clearly stated?
• Do the proposed regulations contain technical terms or other wording that interferes with their clarity?
• Does the format of the proposed regulations (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce their clarity?
• Would the proposed regulations be easier to understand if we divided them into more (but shorter) sections? (A “section” is preceded by the symbol “§ ” and a numbered heading; for example,
• Could the description of the proposed regulations in the
• What else could we do to make the proposed regulations easier to understand? To send any comments that concern how the Department could make these proposed regulations easier to understand, see the instructions in the
The Secretary certifies that these proposed regulations would not have a significant economic impact on a substantial number of small entities.
The U.S. Small Business Administration Size Standards define institutions as “small entities” if they are for-profit or nonprofit institutions with total annual revenue below $5,000,000 or if they are institutions controlled by governmental entities with populations below 50,000. These proposed regulations would affect LEAs that meet this definition; therefore, these proposed regulations would affect small entities, but they would not have a significant economic impact on these entities.
The proposed regulations would benefit both small and large institutions, including those that qualify as small entities, by removing the paperwork burden for reporting average daily attendance, reducing the burden for collection of data for the LEAs reporting children residing on Indian lands and low-rent housing. Multiple children can
As part of its continuing effort to reduce paperwork and respondent burden, the Department provides the general public and Federal agencies with an opportunity to comment on proposed and continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public understands the Department's collection instructions, respondents can provide the requested data in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the Department can properly assess the impact of collection requirements on respondents.
Sections 222.35, 222.37, 222.40, 222.62, and 222.91 contain information collection requirements. Under the PRA the Department has submitted a copy of these sections to OMB for its review.
A Federal agency may not conduct or sponsor a collection of information unless OMB approves the collection under the PRA and the corresponding information collection instrument displays a currently valid OMB control number. Notwithstanding any other provision of law, no person is required to comply with, or is subject to penalty for failure to comply with, a collection of information if the collection instrument does not display a currently valid OMB control number.
In the final regulations we will display the control number assigned by OMB to any information collection requirement proposed in this NPRM and adopted in the final regulations.
The Department currently collects information from LEA applicants for the Impact Aid program using a program-specific grant application package (OMB Control Number 1810-0687). The application package, and some information grantees are required to submit, would change as a result of the proposed regulations.
We estimate the total burden for the collection of information through the application package to be 104,720 hours. Based on past experience with this program, we estimate that a total of 1,264 applications would be received annually for the grant program. We estimate that it would take each applicant 82.8 hours to complete the application package, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The proposed changes to the regulations would change the burden hours for this collection by −35,959.
The proposed regulations would require that LEAs claiming children who reside on Indian lands, and children who reside in low-rent housing, use a source check document to obtain the data required to determine the children's eligibility. The current burden hour estimation includes 500,000 parent respondents for the parent pupil survey form estimating 15 minutes per form for a total burden hours of 125,000 burden hours. The new provision would reduce the total number of parent respondents to 355,000 because the 145,000 children residing on Indian lands or low rent housing will no longer be surveyed using the parent pupil survey form. The burden hours for this category would reduce to 88,750 total burden hours. This is a reduction of 36,250 burden hours.
The 145,000 children are distributed across approximately 500 LEAs. The previous burden hour calculation included 500 LEAs at an average of 3 hours for source checks per LEA, resulting in 1,500 total burden hours. Under the proposed regulation, the number of LEAs would increase to 1,000 LEAs increasing the burden hours to 3,000 for source checks, an increase of 1,500 burden hours. The net change in burden hours between parent pupil survey forms and source checks is a decrease of −34,750 burden hours.
The program has also reduced the average number of hours per LEA to submit its application from 10 hours to 9 hours due to enhancements in the e-Application reporting system. This adjustment decreases the burden hours by −1,264, which results in a total decrease in this section of −36,014 burden hours.
Under existing regulations, the burden estimation of hours is 900 LEAs taking 20 minutes each to report ADA for a total of 300 hours total burden. Since the last estimation of burden hours, the number of LEAs that are required to submit this data has reduced and will reduce again to zero under the proposed regulations. An LEA may exercise the option to report ADA in order to try and increase its attendance rate above the State average. We estimate that approximately 100 LEAs may use this option and the amount of time would be 5 minutes to report the data as it is readily available and accessible to the LEA. The entire estimated hours for all applicants would be an insignificant 8.3 total hours for this component.
Proposed § 222.40 would require SEAs that opt to use special additional factors for the selection of GCDs to provide a rationale demonstrating how the special factors selected impact the cost of education.
In the past 10 years (2006-2016) there are 14 SEAs that have used the GCD provision. In those 10 years, only one SEA has used the special additional factors provision. The SEA already submits the data, they are simply now providing a very brief narrative justification. At a maximum, this should only take 20 minutes to complete as the majority of the work is already accounted for in the burden hour calculation. As a result, there is essentially no increase for this provision.
The burden hours associated with this activity have already been factored into the active data collection total burden hours; there is no increase to the burden hour calculation.
The proposed regulatory provision would require LEAs claiming children residing on Indian lands to respond in writing to comments, recommendations, and concerns from the parents of Indian children and tribal officials. There is an associated increase with this requirement for the LEA. There are approximately 800 LEAs that are required to comply with this new requirement. We estimate 1.3 hours for the completion of this requirement, which would result in an increase of 1,040 total burden hours.
The Impact Aid Program is extending the existing and approved 1810-0687, and renewing its section 8003 application package with this notice. The following charts identify the changes from the current information collection with the proposed substantive changes to this information collection. Some of the changes in burden hours are a result of the proposed regulations, while others are the result of more accurate numbers of
We have prepared an ICR for these information collection requirements. If you want to review and comment on the ICR, please follow these instructions:
In preparing your comments you may want to review the ICR, including the supporting materials, in
We consider your comments on this proposed collection of information in—
• Deciding whether the proposed collection is necessary for the proper performance of our functions, including whether the information will have practical use;
• Evaluating the accuracy of our estimate of the burden of the proposed collection, including the validity of our methodology and assumptions;
• Enhancing the quality, usefulness, and clarity of the information we collect; and
• Minimizing the burden on those who must respond. This includes exploring the use of appropriate automated, electronic, mechanical, or other technological collection techniques.
Between 30 and 60 days after publication of this document in the
When commenting on the ICR for these proposed regulations, please specify the Docket ID number and indicate “Information Collection Comments” on the top of your comments.
Written requests for information or comments submitted by postal mail or delivery related to the information collection requirements should be addressed to the Director of the Information Collection Clearance
This program is not subject to Executive Order 12372 and the regulations in 34 CFR part 79.
You may also access documents of the Department published in the
Administrative practice and procedure, Education of individuals with disabilities, Elementary and secondary education, Federally affected areas, Grant programs—education, Indians—education, Reporting and recordkeeping requirements, School construction.
For the reasons discussed in the preamble, the Assistant Secretary for Elementary and Secondary Education proposes to amend part 222 of title 34 of the Code of Federal Regulations as follows:
20 U.S.C. 7701-7714, unless otherwise noted.
The revisions and addition read as follows:
(c) * * *
(3) * * *
(iv) Attend the schools of the applicant LEA under a tuition arrangement with another LEA that is responsible for providing them a free public education; or
(v) Reside in a State other than the State in which the LEA is located, unless the student is covered by the provisions of—
(A) Section 8010(c) of the Act; or
(B) A formal State tuition or enrollment agreement.
(i) An employee of the Federal Government who reports to work on, or whose place of work is located on, Federal property, including a federal employee who reports to an alternative duty station on the survey date, but whose regular duty station is on Federal property.
(ii) A person not employed by the Federal Government but who spends more than 50 percent of his or her working time on Federal property (whether as an employee or self-employed) when engaged in farming, grazing, lumbering, mining, or other operations that are authorized by the Federal Government, through a lease or other arrangement, to be carried out entirely or partly on Federal property.
(2) Except as provided in paragraph (1)(ii) of this definition, the term does not include a person who is not employed by the Federal government and reports to work at a location not on Federal property, even though the individual provides services to operations or activities authorized to be carried out on Federal property.
(a) * * *
(2) By June 30 of the Federal fiscal year preceding the fiscal year for which the LEA seeks assistance.
(b) * * *
(1) Those data were not available at the time the LEA filed its application and are acceptable to the Secretary; and
(2) The LEA submits a written request to the Secretary with a copy to its SEA no later than June 30 of the Federal fiscal year preceding the fiscal year for which the LEA seeks assistance.
(b) * * *
(1) The LEA received revenue during the preceding fiscal year, including payments in lieu of taxes (PILOTS or PILTs) and other payments received from any other Federal Department or agency, generated directly from the eligible Federal property or activities in or on that property; and
(a)
(1) The consolidation occurred prior to fiscal year 1995 or after fiscal year 2005; and
(2) At least one of the former LEAs included in the consolidation:
(i) Was eligible for section 8002 funds in the fiscal year prior to the consolidation; and
(ii) Currently contains Federal property that meets the requirements of 222.21(a) within the boundaries of the former LEA or LEAs.
(b)
(c)
(2) Consolidated LEAs receive only a foundation payment and do not receive a payment from any remaining funds.
An LEA that has multiple tax rates for real property classifications derives a single tax rate for the purposes of determining its Section 8002 maximum payment by dividing the total revenues for current expenditures it received from local real property taxes by the total taxable value of real property located within the boundaries of the LEA. These data are from the fiscal year prior to the fiscal year in which the applicant seeks assistance.
(2) * * *
(ii) Federal funds, other than Impact Aid funds and charter school startup funds (Title V, part B, subpart I of the Act), do not provide a substantial portion of the educational program, in relation to other LEAs in the State, as determined by the Secretary.
The revision and addition reads as follows:
(c) The data resulting from the count in paragraph (b) must be complete by the application deadline.
(a) * * *
(1) The applicant shall conduct a parent-pupil survey by providing a form to a parent of each pupil enrolled in the LEA to substantiate the pupil's place of residence and the parent's place of employment.
(2) A parent-pupil survey form must include the following:
(i) Pupil enrollment information (this information may also be obtained from school records), including—
(A) Name of pupil;
(B) Date of birth of the pupil; and
(C) Name of public school and grade of the pupil.
(ii) Pupil residence information, including:
(A) The complete address of the pupil's residence, or other acceptable location information for that residence, such as a complete legal description, a complete U.S. Geological Survey number, or complete property tract or parcel number; and
(B) If the pupil's residence is on Federal property, the name of the Federal facility.
(3) If any of the following circumstances apply, the parent-pupil survey form must also include the following:
(i) If the parent is employed on Federal property, except for a parent who is a member of the uniformed services on active duty, parent employment information, including—
(A) Name (as it appears on the employer's payroll record) of the parent (mother, father, legal guardian or other person standing
(B) Name of employer, name and complete address of the Federal property on which the parent is employed (or other acceptable location information, such as a complete legal description).
(ii) If the parent is a member of the uniformed services on active duty, the name, rank, and branch of service of that parent.
(iii) If the parent is both an official of, and accredited by a foreign government, and a foreign military officer, the name, rank, and country of service.
(iv) If the parent is a civilian employed on a Federal vessel, the name of the vessel, hull number, homeport, and name of the controlling agency.
(4)(i) Every parent-pupil survey form must include the signature of the parent supplying the information and the date of such signature, except as provided in paragraph (a)(4)(ii) of this section.
(ii) An LEA may accept an unsigned parent-pupil survey form, or a parent-pupil survey form that is signed by a person other than a parent, only under unusual circumstances. In those instances, the parent-pupil survey form must show why the parent did not sign the survey form, and when, how, and from whom the residence and employment information was obtained. Unusual circumstances may include, but are not limited to:
(A) A pupil who, on the survey date, resided with a person without full legal guardianship of the child while the pupil's parent or parents were deployed for military duty. In this case, the person with whom the child is residing may sign the parent-pupil survey form.
(B) A pupil who, on the survey date, was a ward of the juvenile justice system. In this case, an administrator of the institution where the pupil was held on the survey date may sign the parent-pupil survey form.
(C) A pupil who, on the survey date, was an emancipated youth may sign his or her own parent-pupil survey form.
(D) A pupil who, on the survey date, was at least 18 years old but who was not past the 12th grade may sign his or her own parent-pupil survey form.
(iii) The Department does not accept a parent pupil survey form signed by an employee of the school district who is not the student's mother, father, legal guardian or other person standing
(b)
(1) A source check is required to document children residing on Indian lands and children residing in eligible low-rent housing.
(2) The source check must include sufficient information to determine the eligibility of the Federal property and the individual children claimed on the form.
(3) A source check may also include:
(i) Certification by a parent's employer regarding the parent's place of employment;
(ii) Certification by a military or other Federal housing official as to the residence of each pupil claimed; or
(iii) Certification by a military personnel official regarding the military active duty status of the parent of each pupil claimed as active duty uniformed services.
(b)(1) For purposes of this section, actual ADA means raw ADA data that have not been weighted or adjusted to reflect higher costs for specific types of students for purposes of distributing State aid for education.
(2) If an LEA provides a program of free public summer school, attendance data for the summer session are included in the LEA's ADA figure in accordance with State law or practice.
(3) An LEA's ADA count includes attendance data for children who do not attend the LEA's schools, but for whom it makes tuition arrangements with other educational entities.
(4) Data are not counted for any child—
(i) Who is not physically present at school for the daily minimum time period required by the State, unless the child is—
(A) Participating via telecommunication or correspondence course programs that meet State standards; or
(B) Being served by a State-approved homebound instruction program for the daily minimum time period appropriate for the child; or
(ii) Attending the applicant's schools under a tuition arrangement with another LEA.
(c) An LEA may calculate its average daily attendance calculation in one of the following ways:
(1) If an LEA is in a State that collects actual ADA data for purposes of distributing State aid for education, the Secretary calculates the ADA of that LEA's federally connected children for the current fiscal year payment as follows:
(i) By dividing the ADA of all the LEA's children for the second preceding fiscal year by the LEA's total membership on its survey date for the second preceding fiscal year (or, in the case of an LEA that conducted two membership counts in the second preceding fiscal year, by the average of the LEA's total membership on the two survey dates); and
(ii) By multiplying the figure determined in paragraph (c)(1)(i)(A) of this section by the LEA's total membership of federally connected children in each subcategory described in section 8003 and claimed in the LEA's application for the current fiscal year payment.
(2) An LEA may submit its total preceding year average daily attendance data. The Secretary uses these data to calculate the ADA of the LEA's federally connected children by—
(i) Dividing the LEA's preceding year's total ADA data by the preceding year's total membership data; and
(ii) Multiplying the figure determined in paragraph (c)(2)(i) of this section by the LEA's total membership of federally connected children as described in paragraph (c)(1)(i)(B) of this section.
(3) An LEA may submit attendance data based on sampling conducted during the previous fiscal year.
(i) The sampling must include attendance data for all children for at least 30 school days.
(ii) The data must be collected during at least three periods evenly distributed throughout the school year.
(iii) Each collection period must consist of at least five consecutive school days.
(iv) The Secretary uses these data to calculate the ADA of the LEA's federally connected children by—
(A) Determining the ADA of all children in the sample;
(B) Dividing the figure obtained in paragraph (c)(3)(iv)(A) of this section by the LEA's total membership for the previous fiscal year; and
(C) Multiplying the figure determined in paragraph (c)(3)(iv)(B) of this section by the LEA's total membership of federally connected children for the current fiscal year, as described in paragraph (c)(1)(i)(B) of this section.
(d) An SEA may submit data to calculate the average daily attendance calculation for the LEAs in that State in one of the following ways:
(1) If the SEA distributes State aid for education based on data similar to attendance data, the SEA may request that the Secretary use those data to calculate the ADA of each LEA's federally connected children. If the Secretary determines that those data are, in effect, equivalent to attendance data, the Secretary allows use of the requested data and determines the method by which the ADA for all of the LEA's federally connected children will be calculated.
(2) An SEA may submit data necessary for the Secretary to calculate a State average attendance ratio for all LEAs in the State by submitting the total ADA and total membership data for the State for each of the last three most recent fiscal years that ADA data were collected. The Secretary uses these data to calculate the ADA of the federally connected children for each LEA in the State by—
(i)(A) Dividing the total ADA data by the total membership data for each of the three fiscal years and averaging the results; and
(B) Multiplying the average determined in paragraph (d)(2)(i)(A) of this section by the LEA's total membership of federally connected children as described in paragraph (c)(1)(i)(B) of this section.
(e) The Secretary may calculate a State average attendance ratio in States with LEAs that would benefit from such calculation by using the methodology in paragraph (d)(2)(i) of this section.
The addition reads as follows:
(d) * * *
(1) * * *
(iii) The SEA must submit its rationale for selecting the additional factors and describe how they affect the cost of education in the LEA.
The addition reads as follows:
(a) An applicant that wishes to be considered to receive a heavily impacted payment must submit the required information indicating eligibility under §§ 222.63 or 222.64 with the annual section 8003 Impact Aid application.
(a) To receive a payment under section 8003 of the Act for children residing on Indian lands, a local educational agency (LEA) must—
(1) Meet the application and eligibility requirements in section 8003 and subparts A and C of these regulations;
(2) Except as provided in paragraph (b), develop and implement policies and procedures in accordance with § 222.94; and
(3) Include in its application for payments under section 8003—
(i) An assurance that the LEA established these policies and procedures in consultation with and based on information from tribal officials and parents of those children residing on Indian lands who are Indian children, except as provided in paragraph (b) of this section;
(ii) An assurance that the LEA has provided a written response to the comments, concerns and recommendations received through the Indian policy and procedures consultation process, except as provided in paragraph (b) of this section; and
(iii) Either a copy of the policies and procedures, or documentation that the LEA has received a waiver in accordance with the provisions of paragraph (b) of this section.
(b) An LEA is not required to comply with § 222.94 with respect to students from a tribe that has provided the LEA with a waiver that meets the requirements of this paragraph.
(1) A waiver must contain a voluntary written statement from an appropriate tribal official or tribal governing body that—
(i) The LEA need not comply with § 222.94 because the tribe is satisfied with the LEA's provision of educational services to the tribe's students; and
(ii) The tribe was provided a copy of the requirements in § 222.91 and § 222.94, and understands the requirements that are being waived.
(2) The LEA must submit the waiver at the time of application.
(3) The LEA must obtain a waiver from each tribe that has Indian children living on Indian lands claimed by the LEA on its application under section 8003 of the Act. If the LEA only obtains waivers from some, but not all, applicable tribes, the LEA must comply with the requirements of § 222.94 with respect to those tribes that did not agree to waive these requirements.
(a) An LEA that is subject to the requirements of § 222.91(a) must consult with and involve local tribal officials and parents of Indian children in the planning and development of:
(1) Its Indian policies and procedures (IPPs), and
(2) The LEA's general educational program and activities.
(b) An LEA's IPPs must include a description of the specific procedures for how the LEA will:
(1) Disseminate relevant applications, evaluations, program plans and information related to the LEA's education program and activities with sufficient advance notice to allow tribes and parents of Indian children the opportunity to review and make recommendations.
(2) Provide an opportunity for tribes and parents of Indian children to provide their views on the LEA's educational program and activities, including recommendations on the needs of their children and on how the LEA may help those children realize the benefits of the LEA's education programs and activities. As part of this requirement, the LEA will—
(i) Notify tribes and the parents of Indian children of the opportunity to submit comments and recommendations, considering the tribe's preference for method of communication, and
(ii) Modify the method of and time for soliciting Indian views, if necessary, to ensure the maximum participation of tribes and parents of Indian children.
(3) At least annually, assess the extent to which Indian children participate on an equal basis with non-Indian children in the LEA's education program and activities. As part of this requirement, the LEA will:
(i) Share relevant information related to Indian children's participation in the LEA's education program and activities with tribes and parents of Indian children; and
(ii) Allow tribes and parents of Indian children the opportunity and time to review and comment on whether Indian children participate on an equal basis with non-Indian children.
(4) Modify the IPPs if necessary, based upon the results of any assessment or input described in paragraph (b) of this section.
(5) Respond at least annually in writing to comments and recommendations made by tribes or parents of Indian children, and disseminate the responses to the tribe and parents of Indian children prior to the submission of the IPPs by the LEA.
(6) Provide a copy of the IPPs annually to the affected tribe or tribes.
(c)(1) An LEA that is subject to the requirements of § 222.91(a) must implement the IPPs described in paragraph (b) of this section.
(2) Each LEA that has developed IPPs shall review those IPPs annually to ensure that they comply with the provisions of this section, and are implemented by the LEA in accordance with this section.
(3) If an LEA determines, after input from the tribe and parents of Indian children, that its IPPs do not meet the requirements of this section, the LEA shall amend its IPPs to conform with those requirements within 90 days of its determination.
(4) An LEA that amends its IPPs shall, within 30 days, send a copy of the amended IPPs to—
(i) The Impact Aid Program Director for approval; and
(ii) The affected tribe or tribes.
The additions and revisions read as follows:
(a) * * *
(6)(i) If the Secretary has not made a determination 30 days before the
(ii) The State must include with its request an assurance that if the Secretary determines that the State does not meet the requirements of section 222.162 for that State fiscal year, the State must pay to each affected LEA, within 60 days of the Secretary's determination, the amount by which the State reduced State aid to the LEA.
(iii) In determining whether to grant permission, the Secretary may consider factors including whether—
(A) The Secretary certified the State under § 222.162 in the prior State fiscal year; and
(B) Substantially the same State aid program is in effect since the date of the last certification.
(b) * * *
(3) For a State that has not previously been certified by the Secretary under § 222.162, or if the last certification was more than two years prior, the State submits projected data showing whether it meets the disparity standard in § 222.162. The projected data must show the resulting amounts of State aid as if the State were certified to consider Impact Aid in making State aid payments.
(c)
The revision reads as follows:
(d)
(1)
(2)
(3)
(4)
(a) * * *
(2) Whenever a proceeding under this subpart is initiated, the party initiating the proceeding shall provide either the State or all LEAs with a complete copy of the submission required in paragraph (b) of this section. Following receipt of the submission, the Secretary shall notify the State and all LEAs in the State of their right to request from the Secretary, within 30 days of the initiation of a proceeding, the opportunity to present their views to the Secretary before the Secretary makes a determination.
Forest Service, USDA.
Notice of proposed rule; extension of comment period.
The Forest Service published a notice in the
The closing date for the proposed rule published on November 20, 2015 (80 FR 72665) has been extended. Comments must be received by January 15, 2016.
Comments may be submitted electronically via the Internet to
All comments, including names and addresses when provided, will be placed in the project record and available for public inspections and copying. The public may inspect comments received on this proposed rule at USDA, Forest Service, Ecosystem Management Coordination Staff, 1400 Independence Ave. SW., Washington, DC, between 8 a.m. and 4:30 p.m. on business days. Those wishing to inspect comments should call (202) 205-0895 ahead to facilitate an appointment and entrance to the building. Comments may also be inspected at USDA, Forest Service Rocky Mountain Regional Office, Strategic Planning Staff, 740 Simms, Golden, Colorado, between 8 a.m. and 4:30 p.m. on business days. Those wishing to inspect comments at the Regional Office should call (303) 275-5156 ahead to facilitate an appointment and entrance to the building.
Ken Tu, Interdisciplinary Team Leader, Rocky Mountain Regional Office at (303) 275-5156.
Individuals using telecommunication devices for the deaf may call the Federal Information Relay Services at 1-800-
The State of Colorado maintains that coal mining in the North Fork Coal Mining Area provides an important economic contribution and stability for the communities of the North Fork Valley. USDA and the Forest Service are committed to contributing to energy security, and carrying out the government's overall policy to foster and encourage orderly and economic development of domestic mineral resources.
All existing Federal coal leases within CRAs occur in the North Fork Valley near Paonia, Colorado on the GMUG National Forests. Coal from this area meets the Clean Air Act definition for compliant and super-compliant coal, which means it has high energy value and low sulphur, ash, and mercury content. There are two mines currently holding leases within CRAs. One is operating, producing approximately 5.2 million tons of coal annually. The second is currently idle due to a fire and flood within their mine operation. The final rule accommodates continued coal mining opportunities within the North Fork Coal Mining Area. At approximately 19,500 acres, this area is less than 0.5% of the total 4.2 million acres of CRAs. The North Fork Coal Mining Area exception allows for the construction of temporary roads for exploration and surface activities related to coal mining for existing and future coal leases. The reinstatement of this exception does not approve any future coal leases, nor does it make a decision about the leasing availability of any coal within the State. Those decisions would need to undergo separate environmental analyses, public input, and decision-making.
A Supplemental Environmental Impact Statement (SEIS) has been prepared to complement the 2012 Final EIS for the Colorado Roadless Rule. The SEIS is limited in scope to address the deficiencies identified by the District Court of Colorado in
The Forest Service wants to ensure that there is sufficient time for potentially affected parties, including States, to comment. Thus the Agency is providing an extended comment period for the proposed rule and Supplemental Environmental Impact Statement.
Reviewers may obtain a copy of the proposed rule and SEIS from the Forest Service Colorado Roadless staff Web site at
Environmental Protection Agency (EPA).
Proposed rule; notice of availability of related guidance; extension of comment period.
On November 20, 2015, the Environmental Protection Agency (EPA) proposed a rule titled, “Treatment of Data Influenced by Exceptional Events.” The EPA is extending the comment period on the proposed rule and the notice of availability of the related draft guidance that was scheduled to close on January 19, 2016. The new comment closing date will be February 3, 2016. We are extending the comment period at the request of several stakeholders to allow interested parties additional time to thoroughly review and analyze the noted documents and provide meaningful comments.
The public comment period for the proposed rule and notice of availability of related draft guidance published in the
The EPA has established separate dockets for the proposed rulemaking and the related draft guidance (available at
For additional submission methods, the full EPA public comment policy, and general guidance on making effective comments, please visit
For additional information on this action, contact Beth W. Palma, Office of Air Quality Planning and Standards, Environmental Protection Agency (C539-04), Research Triangle Park, North Carolina 27711; telephone number (919) 541-5432; email address:
After considering the request of several stakeholders, the EPA has decided to extend the public comment period for this action until February 3, 2016. This extension will allow interested parties additional time to thoroughly review and analyze the noted documents and provide meaningful comments.
Defense Acquisition Regulations System, Department of Defense (DoD).
Proposed rule.
DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to consolidate requirements that are applicable to DoD contracts for private security functions performed in designated areas outside the United States, make changes regarding applicability, and revise applicable quality assurance standards.
Comments on the proposed rule should be submitted in writing to the address shown below on or before January 29, 2016 to be considered in the formation of a final rule.
Submit comments identified by DFARS Case 2015-D021, using any of the following methods:
○
○
○
○
Comments received generally will be posted without change to
Ms. Julie Hammond, telephone 571-372-6174.
Requirements for Defense contractors performing private security functions outside of the United States are covered in the Federal Acquisition Regulation (FAR) at 25.302 and the clause at FAR 52.225-26, Contractors Performing Private Security Functions Outside the United States, and supplemented at DFARS 225.302 and the clause at DFARS 252.225-7039, Defense Contractors Performing Private Security Functions Outside the United States. DoD is proposing to consolidate all requirements for Defense contractors performing private security functions in certain designated operational areas in the DFARS at 225.302 and the clause 252.225-7039.
A proposed FAR rule, Contractors Performing Private Security Functions (FAR case 2014-018), was published in the
The rule also proposes to amend DFARS clause 252.225-7039 to add “International Standard ISO 18788, Management System for Private Security Operations-Requirements with Guidance” as an approved alternative to the ANSI/ASIS PSC.1-2012, American National Standard, Management System for Quality of Private Security Company Operations—Requirements with Guidance. Many foreign countries do not accept use of foreign national standards. As such, restricting compliance to the American National Standard may deter private security contractors from other countries from competing on DoD contracts overseas, thus restricting our ability to access security services from host countries or coalition partner states. This is contrary to the DoD policy of promoting effective competition through outreach in global markets (see Better Buying Power 3.0, September 19, 2014). In order to expand the contractor base and promote competition, this rule proposes to allow Defense contractors performing private security functions outside the United States to comply with either the American National Standard, ANSI/ASIS PSC.1-2012, or the International Standard, ISO 18788.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
DoD does not expect that this proposed rule will have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act 5 U.S.C. 601,
This rule proposes to amend the DFARS to consolidate all requirements for DoD contractors performing private security functions outside the U.S. from the FAR 25.302 and the clause at FAR 52.225-26, Contractors Performing Private Security Functions Outside the Unites States, in DFARS 225.302 and the clause at DFARS 252.225-7039, Defense Contractors Performing Private Security Functions Outside the United States.
The objectives of this rule are as follows:
• Provide DoD contracting officers and contractors a single clause covering all requirements related to the performance of private security functions outside the United States that may be updated by DoD as policies are issued that affect only defense contractors.
• Identify the international high-quality assurance standard “ISO 18788: Management System for Private Security
This proposed rule will apply to defense contractors performing private security functions outside of the United States in designated operational areas under DoD contracts. According to data available in the Federal Procurement Data System for fiscal year (FY) 2013, DoD awarded 159 contracts that required performance outside the United States, although not necessarily in a designated operation area, and cited the National American Industry Classification System code 561612, Security Guards and Patrol Services, of which 33 contracts (21%) were awarded to small businesses. In FY 2014, DoD awarded 123 such contracts, of which 31 contracts (25%) were to small businesses.
The private security contractors are required to report incidents when: (1) A weapon is discharged by personnel performing private security functions; (2) personnel performing private security functions are attacked, killed, or injured; (3) persons are killed or injured or property is destroyed as a result of conduct by Contractor personnel; (4) a weapon is discharged against personnel performing private security functions or personnel performing such functions believe a weapon was so discharged; or (5) active, non-lethal countermeasures (other than the discharge of a weapon) are employed by personnel performing private security functions in response to a perceived immediate threat. As a regular record keeping requirement, private security contractors are required to keep appropriate records of personnel by registering in the Synchronized Predeployment Operational Tracker the equipment and weapons used by its personnel. The complexity of the work to prepare these records requires the expertise equivalent to that of a GS-11, step 5 with clerical and analytical skills to create the documents.
The rule does not duplicate, overlap, or conflict with any other Federal rules. There are no known significant alternatives to the rule. The impact of this rule on small business is not expected to be significant.
DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.
DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2015-D021), in correspondence.
The rule contains information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35). Accordingly, DoD has submitted a request for approval of a new information collection requirement concerning “Defense Contractors Performing Private Security Functions Outside the United States” to the Office of Management and Budget.
A. Public reporting burden for this collection of information is estimated to average .5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
The annual reporting burden estimated as follows:
B. Request for Comments Regarding Paperwork Burden.
Written comments and recommendations on the proposed information collection, including suggestions for reducing this burden, should be sent to Ms. Jasmeet Seehra at the Office of Management and Budget, Desk Officer for DoD, Room 10236, New Executive Office Building, Washington, DC 20503, or email
Public comments are particularly invited on: Whether this collection of information is necessary for the proper performance of functions of the DFARS, and will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to the Defense Acquisition Regulations System, Attn: Ms. Julie Hammond, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060, or email
Government procurement.
Therefore, 48 CFR parts 216, 225, and 252 are amended as follows:
41 U.S.C. 1303 and CFR chapter 1.
The additions and revisions read as follows:
(a)
(1) Means disclosure to the Government of the information sufficient to identify the nature and extent of the incident and the individuals responsible for the conduct. It includes providing timely and complete response to Government auditors' and investigators' requests for documents and access to employees with information;
(2) Does not foreclose any contractor rights arising in law, the FAR or the terms of the contract. It does not require—
(i) The contractor to waive its attorney-client privilege or the protections afforded by the attorney work product doctrine; or
(ii) Any officer, director, owner or employee of the contractor, including a sole proprietor, to waive his or her attorney-client privilege or Fifth Amendment rights; and
(3) Does not restrict the contractor from—
(i) Conducting an internal investigation; or
(ii) Defending a proceeding or dispute arising under the contract or related to a potential or disclosed violation.
(1) Guarding of personnel, facilities, designated sites or property of a Federal agency, the contractor or subcontractor, or a third party.
(2) Any other activity for which personnel are required to carry weapons in the performance of their duties in accordance with the terms of this contract.
(b)
(1) Contingency operations;
(2) Combat operations, as designated by the Secretary of Defense;
(3) Other significant military operations (as defined in 32 CFR part 159), designated by the Secretary of Defense upon agreement of the Secretary of State;
(4) Peace operations, consistent with Joint Publication 3-07.3; or
(5) Other military operations or military exercises, when designated by the Combatant Commander.
(c)
(1) Ensure that all employees of the Contractor, who are responsible for performing private security functions under this contract, comply with 32 CFR part 159 and any orders, directives or instructions to contractors performing private security functions that are identified in the contract for—
(i) Registering, processing, accounting for, managing, overseeing and keeping appropriate records of personnel performing private security functions;
(ii) Authorizing, accounting for and registering in Synchronized Predeployment and Operational Tracker (SPOT), weapons to be carried by or available to be used by personnel performing private security functions;
(iii) Identifying and registering in SPOT armored vehicles, helicopters and other military vehicles operated by Contractors performing private security functions; and
(iv) In accordance with orders and instructions established by the applicable Combatant Commander, reporting incidents in which—
(A) A weapon is discharged by personnel performing private security functions;
(B) Personnel performing private security functions are attacked, killed, or injured;
(C) Persons are killed or injured or property is destroyed as a result of conduct by Contractor personnel;
(D) A weapon is discharged against personnel performing private security functions or personnel performing such functions believe a weapon was so discharged; or
(E) Active, non-lethal countermeasures (other than the discharge of a weapon) are employed by personnel performing private security functions in response to a perceived immediate threat;
(2) Ensure that the Contractor and all employees of the Contractor who are responsible for performing private security functions under this contract are briefed on and understand their obligation to comply with—
(i) Qualification, training, screening (including, if applicable, thorough background checks) and security requirements established by 32 CFR part 159;
(ii) Applicable laws and regulations of the United States and the host country and applicable treaties and international agreements regarding performance of private security functions;
(iii) Orders, directives and instructions issued by the applicable Combatant Commander or relevant Chief of Mission relating to weapons, equipment, force protection, security, health, safety, or relations and interaction with locals; and
(iv) Rules on the use of force issued by the applicable Combatant Commander or relevant Chief of Mission for personnel performing private security functions; and
(3) Provide full cooperation with any Government-authorized investigation of incidents reported pursuant to paragraph (c)(1)(iv) of this clause and incidents of alleged misconduct by personnel performing private security functions under this contract by providing—
(i) Access to employees performing private security functions; and
(ii) Relevant information in the possession of the Contractor regarding the incident concerned; and
(4) Comply with ANSI/ASIS PSC.1-2012, American National Standard, Management System for Quality of Private Security Company Operations—Requirements with Guidance or the International Standard ISO 18788, Management System for Private Security Operations—Requirements with Guidance (located at
(d)
(1) The Contracting Officer may direct the Contractor, at its own expense, to remove and replace any Contractor or subcontractor personnel performing private security functions who fail to comply with or violate applicable requirements of this clause or 32 CFR part 159. Such action may be taken at the Government's discretion without prejudice to its rights under any other provision of this contract;
(2) The Contractor's failure to comply with the requirements of this clause will be included in appropriate databases of past performance and considered in any responsibility determination or evaluation of past performance; and
(3) If this is an award-fee contract, the Contractor's failure to comply with the requirements of this clause shall be considered in the evaluation of the Contractor's performance during the relevant evaluation period, and the Contracting Officer may treat such failure to comply as a basis for reducing or denying award fees for such period or for recovering all or part of award fees previously paid for such period.
(e)
Defense Acquisition Regulations System, Department of Defense (DoD).
Proposed rule.
DoD is proposing to amend the DFARS to implement a section of the National Defense Authorization Act for Fiscal Year (FY) 2015 and a section of the Department of Defense Appropriations Act for FY 2015, which address various requirements for multiyear contracts.
Comments on the proposed rule should be submitted in writing to the address shown below on or before February 29, 2016 to be considered in the formation of a final rule.
Submit comments identified by DFARS Case 2015-D009, using any of the following methods:
○
○
○
○
Comments received generally will be posted without change to
Ms. Tresa Sullivan, telephone 571-372-6176.
DoD is proposing to amend the DFARS to implement section 816 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2015 (Pub. L. 113-291) and section 8010 of the Department of Defense Appropriations Act for FY 2015 (Division C, Title VII of Pub. L. 113-235), which address various requirements for multiyear contracts.
Section 816 of the NDAA amends subsection (i) of 10 U.S.C. 2306b to clarify that a multiyear contract may not be entered into for a defense acquisition program that has been specifically authorized by law to be carried out using multiyear authority unless the Secretary of Defense certifies in writing that certain conditions have been met not later than 30 days before award of the contract (10 U.S.C. 2306b(i)(3)).
Section 8010 makes the following additional changes:
• A multiyear contract may not be terminated without 30-day prior notification to the congressional defense committees.
• A multiyear contract may not be entered into unless the head of the agency ensures that—
○ Cancellation provisions in the contract do not include consideration of recurring manufacturing costs of the contractor associated with the production of unfunded units to be delivered under the contract;
○ The contract provides that payments to the contractor under the contract shall not be made in advance of incurred costs on funded units; and
○ The contract does not provide for a price adjustment based on a failure to award a follow-on contract.
DoD is proposing to make the following changes to the DFARS:
• Amend 217.170(b) to change “10 days before termination” to “30 days before termination” and remove the references to 10 U.S.C. 2306.
• Add the new section 8010 requirements for multiyear contracts to the list of requirements at 217.172(e).
• Clarify at 217.172(h) that the requirements are applicable to defense acquisition programs specifically authorized by law to be carried out using multiyear contract authority.
• Change 217.172(h)(2) to require the Secretary of Defense to certify to Congress by no later than “30 days before entry” into a contract, instead of no later than “March 1 of the year in which the Secretary requests legislative authority to enter” in such contract.
• Delete paragraph (7) at DFARS 217.172(h), which requires a notification to congressional defense committees 30 days prior to award, and redesignate paragraph (h)(8) as paragraph (7). Add to the newly redesignated paragraph (7), a reference to 10 U.S.C. 2306b(i)(4).
• Update cross references to 10 U.S.C. 2306b(i) throughout section 217.172.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
DoD does not expect this proposed rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,
The purpose of this proposed rule is to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to require the head of agency to—
• Provide written notice to the congressional defense committees at least 30 days before termination of any multiyear contract;
• For defense acquisition programs specifically authorized by law to be carried out using multiyear authority, ensure the Secretary of Defense certifies to Congress certain conditions for the multiyear contract have been met no
• Ensure prior to award of a multiyear contract that—
○ Cancellation provisions in the contract do not include consideration of recurring manufacturing costs associated with the production of unfunded units;
○ The contract provides that payments to the contractor shall not be made in advance of incurred costs on funded units; and
○ The contract does not provide for a price adjustment based on failure to award a follow-on contract.
The objective of this rule is to implement section 816 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2015 and section 8010 of the Department of Defense Appropriations Act for FY 2015, which address various requirements for multiyear contracts.
The rule is not expected to impact small entities, because the rule applies to multiyear contract authorities for specific major defense acquisition programs for which small entities would not have the capacity or infrastructure to fulfill or sustain. Small entities may perform under multiyear contracts as subcontractors; however, the rule invokes requirements that apply at the prime contract level.
This rule does not create any new reporting or recordkeeping requirements. The rule does not duplicate, overlap, or conflict with any other Federal rules. There are no known significant alternatives to the rule that will meet the requirements of the statute.
DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.
DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2015-D009), in correspondence.
The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
Government procurement.
Therefore, 48 CFR part 217 is proposed to be amended as follows:
41 U.S.C. 1303 and CFR chapter 1.
The additions read as follows:
(e) * * *
(3) Cancellation provisions in the contract do not include consideration of recurring manufacturing costs of the contractor associated with the production of unfunded units to be delivered under the contract;
(4) The contract provides that payments to the contractor under the contract shall not be made in advance of incurred costs on funded units; and
(5) The contract does not provide for a price adjustment based on a failure to award a follow-on contract (section 8008(a) of Pub. L. 105-56 and similar sections in subsequent DoD appropriations acts).
Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT.
Withdrawal of notice of proposed rulemaking.
PHMSA is withdrawing the notice proposing to stop the transportation of flammable liquid material in unprotected external product piping on DOT specification cargo tank motor vehicles as mandated by the “Fixing America's Surface Transportation Act” or the “FAST Act”. Although PHMSA is withdrawing its rulemaking proposal, the agency will continue to consider methods to improve the safety of transporting flammable liquid by cargo tank motor vehicle. PHMSA will also continue to analyze current incident data and improve the collection of future incident data to assist in making an informed decision on methods to address this issue further, if warranted.
The notice of proposed rulemaking published January 27, 2011 (76 FR 4847) is withdrawn as of December 30, 2015.
Dirk Der Kinderen, Office of Hazardous Materials Standards, Pipeline and Hazardous Materials Safety Administration, telephone (202) 366-8553; or Leonard Majors, Office of Hazardous Materials Technology, Pipeline and Hazardous Materials Safety Administration, telephone (202) 366-4545.
PHMSA is withdrawing notice of proposed rulemaking (NPRM) “Hazardous Materials: Safety Requirements for External Product Piping on Cargo Tanks Transporting Flammable Liquids” (HM-213D) published January 27, 2011 (76 FR 4847) under Docket No. PHMSA-2009-0303. This rulemaking proposed to stop flammable liquids from being transported in unprotected product piping (generally referred to as the “wetlines”) on the cargo tank of existing and newly manufactured DOT specification cargo tank motor vehicles.
PHMSA proposed to stop the transportation of flammable liquids in unprotected external product piping on DOT specification cargo tank motor vehicles (CTMVs) unless the piping was protected from accident or bottom damages or the piping was designed or emptied in a way to remove the hazard of containing flammable liquid. PHMSA proposed this change because exposed piping containing flammable liquid can contribute to the severity of accidents involving a CTMV and an automobile, and because we currently do not require external piping containing flammable liquid to be protected like other hazardous material. Except for flammable liquid, § 173.33(e) of the Hazardous Materials Regulations (HMR: Parts 171-180) does not allow the transport of liquid hazardous material in piping of a DOT specification cargo tank motor vehicle unless it is equipped with accident damage or bottom damage protection devices.
PHMSA is withdrawing the rulemaking in accordance with a congressional mandate. On December 4, 2015, President Obama signed into law the Fixing America's Surface Transportation Act, or “FAST Act”.
Although PHMSA is congressionally mandated to withdraw this rulemaking, below we discuss past and recent actions in development of this rulemaking.
PHMSA developed the assessment to evaluate regulatory action using data from hazardous materials incident reports over a 12.25-year time period (January 1999 to March 2011). PHMSA used a manual purging system
In developing an analysis of the benefits of the rulemaking, PHMSA considered avoided injuries, property damage, traffic delays, evacuations, emergency response, and environmental damage; in developing an analysis of the costs, we considered the installation, maintenance, and associated impacts of a equipping a CTMV with a manual purging system. PHMSA evaluated various implementation timelines ranging from a 5-year period to a 20-year period as the alternative actions. The
The MAP-21, enacted in July 2012, temporarily stopped PHMSA from issuing a final rule and required the GAO to examine the risks of, and alternatives to, transporting flammable liquids in wetlines. The GAO examined PHMSA's process for identifying wetlines incidents among its reported hazardous materials incidents, analyzed how useful PHMSA's incident data from January 1999 through March 2011 are for identifying such incidents, and examined whether the data accurately captured information about the incidents' consequences.
In its final report, the GAO concluded that because PHMSA does not specifically provide an option to indicate a wetlines incident on its incident reporting form, it is difficult to identify the number of wetlines incidents from PHMSA's incident data.
Following the GAO report, PHMSA examined the regulatory assessment, taking into account the GAO findings as well as industry comments to help make a determination on whether to withdraw the rulemaking. This analysis also took into account the updated VSL. The analysis considered five scenarios for calculating the estimated societal benefits and four scenarios for the estimated costs. This additional analysis served as a sensitivity analysis of the regulatory assessment for the NPRM. The different scenarios for estimated benefits were based on:
• The incident analysis data used in the regulatory assessment—
• the incident data, including only those incidents involving a fire;
• the incident data plus the Yonkers, NY fatal incident data;
• the incident data, adjusted to account for the GAO recommendations; and
• the incident data, adjusted to account for the GAO recommendations plus the Yonkers, NY fatal incident data.
PHMSA calculated a range of potential BCR outcomes, based on the five scenarios for estimated benefits and the two scenarios for estimated average costs. It is reasonable to assume that the BCR lies somewhere between the highest and lowest BCR outcomes from this analysis. Under the low average cost estimate, in four of the five estimated benefit scenarios the BCR at a 7 percent discount rate was not net beneficial. The BCRs ranged from 0.77 to 1.1 for the low average cost scenario. In comparison, under the high average cost estimate, in all five estimated benefit scenarios the BCR at a 7 percent discount rate was not net beneficial. The BCRs ranged from 0.47 to 0.67 for the high average cost scenario.
In general, most commenters to the NPRM opposed the proposed ban and indicated that they do not believe wetlines containing flammable liquid are a safety risk, citing PHMSA's own statistics that the frequency of wetlines incidents is low and the frequency of incidents that lead to injury or death is extremely low. They also expressed concerns regarding PHMSA's incident analyses, regulatory assessment, implementation of the rule, and safety impacts of the rule. The remaining commenters either supported the rulemaking on the basis of improved safety for the public or offered suggestions to strengthen or make clearer PHMSA's efforts to address the safety hazard. The opposition comments mainly address PHMSA's incident analysis and development of the costs and benefits of the regulatory assessment. PHMSA summarizes these concerns in greater detail below. This summary of comments is for the benefit of the reader for understanding of stakeholder information presented during the notice and comment portion of this rulemaking. The complete body of comments both in opposition to and support of the rule is available for review at the docket to the rulemaking (
Commenters questioned whether all incidents and their associated data used in PHMSA's preliminary analyses should be included in the assessment with respect to: (1) The criteria used to decide whether an incident qualified as a wetlines incident; (2) whether deaths, injuries, or any other costs were actually the result of the material contained in the wetlines; and (3) relevance of proposed requirements. For example, they asserted that any incident involving the release of more than fifty gallons
PHMSA agrees that only those costs associated with damages to the wetline and release of material from the wetlines should be counted. Unfortunately, under the current format of incident report information it is difficult to parse out the costs of wetlines-related damages from the total body of damages where damages occur beyond those associated with wetlines, unless some assumptions are made. For instance, in the case of an incident involving a fire, PHMSA assumed the fire was started and was propagated by the wetlines release.
Upon consideration of the comments, PHMSA conducted further review of the 172 incidents that were initially determined to be wetlines incidents in our preliminary analyses. Prior to this review, PHMSA became aware that some of the data in our original set of incidents was not accurate and likely led to the critical comments. This data had since been corrected and a revised list of incidents was placed in the docket (8/12/2011; PHMSA-2009-0303-0048). PHMSA also reviewed additional CTMV incidents that occurred from January 1, 2009 to March 31, 2011 to capture more recent data. This review resulted in a final determination of 132 wetlines incidents. A total of 59 incidents where removed after a review of the original 172 incidents, and 19 incidents were added after a review of more recent data.
(1) The belief that the fire in the incident was not caused by a wetlines release because the original NTSB accident report concluded that the fire was fed by fuel from the cargo tank compartments, implying a breach of the cargo tank;
(2) the incident predates the incident analysis period; and
(3) the uncertainty that such an event will ever occur again—no data supports the PHMSA assumption that this is a 20-year event.
Although a safety hazard exists, the regulatory assessment and further analysis indicate that prohibiting the transportation of flammable liquids in wetlines is unlikely to be cost beneficial. Additionally, the GAO report has pointed out a number of uncertainties with the data collection and analysis that would have a direct impact on PHMSA's ability to fully characterize the degree of risk that wetlines containing flammable liquids pose to the safety of transportation.
PHMSA is withdrawing this rulemaking in accordance with the FAST Act. PHMSA, however, will continue to examine this issue, particularly by monitoring flammable liquid wetlines incidents, in consideration of any future actions. Likely future actions include non-regulatory initiatives to improve the safety of transporting flammable liquid in unprotected external product piping on CTMVs.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice of withdrawal.
The Federal Motor Carrier Safety Administration (FMCSA) withdraws its June 17, 2015, notice of proposed rulemaking (NPRM), which would have required each commercial motor vehicle (CMV) operated by a
The NPRM “Parts and Accessories Necessary for Safe Operation: Federal Motor Vehicle Safety Standards Certification for Commercial Motor Vehicles Operated by United States-Domiciled Motor Carriers,” published on June 17, 2015 (80 FR 34588), is withdrawn as of December 30, 2015.
If you have questions on this Notice of withdrawal, contact Mr. Michael Huntley, Chief, Vehicle and Roadside Operations Division, Office of Policy, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE., Washington, DC 20590-0001, by telephone at (202) 366-9209 or via email at
On June 17, 2015, FMCSA published an NPRM to require motor carriers to display an FMVSS certification label (80 FR 34588).
The FMCSRs require that motor carriers operating CMVs in the U.S., including Mexico- and Canada-domiciled carriers, ensure that the vehicles are equipped with the applicable safety equipment and features specified in 49 CFR part 393, Parts and Accessories Necessary for Safe Operations, which includes cross references to safety equipment and features that must be installed at the time of production. The National Highway Traffic Safety Administration (NHTSA) requires vehicle manufacturers to certify that the vehicles they produce for sale and use in the U.S. meet all applicable FMVSSs in effect at the time of manufacture. In addition, they must affix an FMVSS certification label to each vehicle in accordance with the requirements of 49 CFR part 567.
As proposed, the NPRM would have required U.S.-domiciled motor carriers engaged in interstate commerce to use only CMVs that display an FMVSS certification label affixed by the vehicle manufacturer indicating that the vehicle: (1) Satisfied all applicable FMVSSs in effect at the time of manufacture; or (2) has been modified to meet those standards and legally imported by a DOT-Registered- Importer. In the absence of such a label (
FMCSA received 19 comments on the NPRM. The Commercial Vehicle Safety Alliance (CVSA), which represents State and Provincial agencies throughout North America responsible for motor carrier safety enforcement, supported the proposed rule, but stated “While CVSA supports the NPRM, it should be noted that, in our opinion, the best way to prevent non-FMVSS-compliant vehicles from operating in the U.S. by U.S.-domiciled motor carriers is to identify them at the point of titling, vehicle registration, or importation. Roadside inspections should be the secondary means of verifying that CMVs were FMVSS compliant at the time of manufacture.” One anonymous commenter also supported the proposed rule.
Each of the remaining commenters opposed the proposal, including six trade associations representing the trucking industry, equipment manufacturers, and dealers (One trade association submitted two comments each covering a different issue). These associations are the American Trucking Associations (ATA), the National Automobile Dealers Association (NADA), the National Propane Gas Association (NPGA), the Truckload Carriers Association (TCA), the Owner-Operator Independent Drivers Association (OOIDA), and the Truck and Engine Manufacturers Association (EMA). Three motor carriers submitted comments: Double D Distribution (Mark Droubay), United Parcel Service (UPS) and YRC Freight (YRC). Nine individuals submitted comments, including Congressman Richard L. Hanna from New York.
Commenters opposed the proposed rule for the following reasons:
• The rule would provide no safety benefits.
• FMVSS markings, particularly on trailers, are subject to damage, over-painting, and loss over the life of the vehicle. No certification marking is permanent.
• Many of the manufacturers have gone out of business, been purchased, or are overseas; obtaining a replacement certification or letter may not be possible.
• The proposal does not recognize the issues raised by interlining and other operational patterns.
• The rule would impose significant costs on carriers, which FMCSA has failed to estimate.
• The National Transportation Safety Board (NTSB) recommendation on which the proposal was based resulted from a bus crash that was unrelated to the standards to which the coach was manufactured.
Several of the industry associations, the three motor carriers, and seven individuals who opposed the proposed rule in general stated that it would not enhance safety and that FMCSA had provided no safety rationale for the rule. OOIDA stated that most small carriers and owner/operators purchase used equipment. OOIDA also stated that it failed to see how maintaining proof of a CMV's compliance at the time of manufacture would improve safety years later. ATA and TCA stated that original certification has little if anything to do with the condition and safe operation of a CMV after it is purchased. ATA stated that FMCSA had provided no evidence of any crashes where lack of certification was responsible for the crash. UPS stated that the proposal appeared to be for the convenience of inspectors, not to improve safety.
ATA and others stated that no external markings on a CMV are permanent. YRC stated that it was primarily concerned with markings on trailers, converter dollies, and container chassis, which are affixed to the outside of the vehicle and subject to wear and tear from road conditions and may be painted over or removed during refurbishment. ATA submitted
The industry associations stated that FMCSA had not understood the difficulty of obtaining a replacement certification. ATA, Congressman Richard L. Hanna and others stated that many of the vehicle manufacturers have gone out of business or have been sold. Those that are out of business could not produce a replacement; the new owners of the manufacturers that have been sold might not have the records or may be unwilling to be liable for vehicles produced by the original manufacturer. ATA provided a list of 21 manufacturers that are out of business or have been sold. It also noted that current manufacturers may be reluctant out of fear of liability to provide certificates for equipment that may not have been maintained or may have been altered. For intermodal chassis, many of which were manufactured overseas, ATA stated that it will not be possible to identify or find the manufacturer.
EMA raised a related issue: Multiple companies are involved in the manufacture and certification of most Class 3 through 7 vehicles and about half of the Class 8 vehicles. Under the proposal, EMA stated that a carrier would have to contact the final-stage manufacturer for a replacement, but the identity of that manufacturer may not be obvious as it is frequently not the nameplate company. EMA stated that its members charge a fee for replacement certificates.
YRC and UPS stated that the alternative of a letter, kept with the equipment, is problematic. YRC stated that trailers and converter dollies are routinely used by non-owners during interlining, intermodal agreements, and equipment leases. UPS stated that the requirement to keep the letter with the trailer would require a secure compartment, which trailers do not currently have. ATA stated that containers and trailers may be sealed and asked if FMCSA was expecting inspectors to break seals to review a letter that spoke to compliance years in the past. ATA also stated that the proposed rule would result in penalizing drivers and carriers for missing labels on equipment they did not own which was in safe operating condition. ATA stated that for intermodal chassis, a database exists that would provide a better source of the information for inspectors.
The industry associations and motor carriers stated that FMCSA had failed to consider or estimate the significant costs associated with the proposed rule. They listed the following potential costs:
• The time required to survey equipment to determine whether certificate information still existed on equipment.
• The time required to identify the manufacturer and obtain a replacement certificate or letter.
• The time required for a driver/carrier picking up equipment owned by another carrier to check for the label, certificate, or letter.
• The operational disruption if CMVs had to be removed from service until replacements could be obtained or replaced altogether if the manufacturer no longer exists.
• The fees charged for replacement certificates.
UPS estimated that of its 77,000 trailers, 10,000 no longer have the decals. It would need to identify the manufacturer, if it still exists, to request a replacement. YRC stated that the initial audit of its equipment would require hundreds of hours of time by drivers, mechanics, and others, followed by the process of obtaining a replacement label if possible. If the manufacturer no longer exists, the rule would require that the equipment be removed from service. One carrier (32 tractors with 70 trailers) estimated that it would cost $18,000 to add/replace labels currently missing and $4,000-$6,000 annually to audit the equipment to ensure that tags are still there. ATA cited a comment from a member that it was charged $150 for a replacement decal for a trailer. ATA provided data from 20 carriers on the number of pieces of equipment missing decals—8,411 out of 47,000 CMVs.
ATA also cited another member, a propane distributor, which had 29 trailers without certificates, most manufactured by companies that no longer exist. The proposal would require replacement of all of these trailers. NPGA stated that even when replacements could be obtained, taking the equipment out of service until the certificate or letter arrived would disrupt services and impose significant costs to lease replacements. NPGA and others noted that, even if the manufacturer is still in business, the carrier has no way to compel it to process a request quickly. EMA noted that completing a letter would take an hour or more of a manufacturer's expert's time. NADA's American Truck Dealers Division stated that any requirement that dealers not sell CMVs that lack certificates would be unacceptable and could cost dealers $3 million annually (assuming 1 hour/week to examine vehicles and obtain replacements), it also noted that small dealerships spend considerably more per employee on compliance than larger firms do.
OOIDA stated that FMCSA must do a cost-benefit analysis and then publish a supplemental notice.
NPGA stated that it could support the requirement if it applied only to CMVs manufactured after the effective date of the rule. In the alternative, FMCSA should set the compliance period at 24 months to give carriers enough time to implement the provision without disrupting operations. UPS and YRC stated that they would support a prospective requirement provided the label was a permanent plate. UPS stated that it understood that the data connecting serial number and status at manufacture are available in State databases. Although these data may not be accessible at roadside inspection, they are available electronically. OOIDA stated that the burden should be on the seller of used vehicles, not the purchaser.
Many of the industry commenters stated that the NTSB report did not provide a justification for the proposal.
After review and analysis of the public comments discussed in the preceding section, FMCSA has decided to withdraw the June 2015 NPRM. We will continue to uphold the operational safety of CMVs on the Nation's highways through continued enforcement of the FMCSRs, many of which cross-reference specific FMVSSs.
Generally, U.S.-domiciled motor carriers operating CMVs (as defined in 49 CFR 390.5) in interstate commerce have access only to vehicles that either were manufactured domestically for use in the United States with the required certification label or were properly imported into the United States in accordance with applicable NHTSA regulations, including certification documentation requirements of 49 CFR part 567. Furthermore, FMCSA's safety regulations incorporate and cross reference the FMVSSs critical to continued safe operation of CMVs.
FMCSA believes continued strong enforcement of the FMCSRs in real-world operational settings, coupled with existing regulations and enforcement measures, will ensure the safe operation of CMVs in interstate commerce. Under the Motor Carrier Safety Assistance Program, FMCSA and its State and local partners conduct more than 2.3 million roadside vehicle inspections each year of CMVs (domiciled in the United States, Canada, or Mexico) operating in interstate commerce. Enforcement of the FMCSRs, and by extension the FMVSSs they cross-reference, is the bedrock of these compliance assurance activities.
Simply requiring CMVs to bear FMVSS certification labels would not ensure their operational safety. An FMVSS label certifying compliance with performance standards applicable to lights, brakes, and other wear items does not ensure real-world safety in the absence of compliance with the operational and maintenance standards imposed by the FMCSRs, especially in the case of vehicles built many years ago. Although the presence or absence of an FMVSS compliance label can certainly provide a useful tool in this regard, inspection of the CMV's compliance with the FMCSRs remains the benchmark by which enforcement officials identify and remove from service vehicles likely to break down or cause a crash. The American public is better protected by the FMCSRs than solely through a label indicating a CMV was originally built to certain manufacturing performance standards.
Therefore, after careful consideration, FMCSA has concluded it is not necessary to amend the FMCSRs to require CMVs to display an FMVSS certification label in order to achieve effective compliance with the FMVCRSs.
In view of the foregoing, the NPRM concerning certification of compliance with the Federal Motor Vehicle Safety Standards is withdrawn.
Forest Service, USDA.
Notice; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Forest Service is seeking comments from all interested individuals and organizations on the extension to the information collection: Recreation Fee and Wilderness Program Administration.
Comments must be received in writing on or before February 29, 2016 to be assured of consideration. Comments received after that date will be considered to the extent practicable.
Comments concerning this notice should be addressed to Al Remley, USDA Forest Service, Recreation, Heritage, and Volunteer Resources Program, 1400 Independence Avenue SW., Mailstop 1125, Washington, DC 20250.
Comments also may be submitted via facsimile to Al Remley at 202-403-8986 or by email at
The public may inspect comments received at the USDA Forest Service Washington Office, during normal business hours. Visitors are encouraged to call ahead to facilitate entry to the building.
Al Remley, Fee Program Manager, at 202-403-8986 or via email at
Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Relay Service (FRS) at 1-800-877-8339 twenty-four hours a day, every day of the year, including holidays.
FS-2300-26,
FS-2300-26a,
FS-2300-30,
The Forest Service employee who completes the Visitor's Permit will note on the permit any special restrictions or important information the visitor should know. The visitor receives a copy of the permit and instructions to keep the permit with them for the duration of the visit.
FS-2300-32,
FS-2300-43,
FS-2300-47,
FS-2300-48,
This information is used to manage the application process and to issue permits for recreation uses of Federal recreational lands and waters. The information will be collected by Federal employees and agents who are authorized to collect recreation fees and/or issue recreation permits. Name and contact information will be used to inform applicants and permit holders of their success in securing a permit for a special area. Number in group, number and type of vehicles, water craft, or stock may be used to assure compliance with management area direction for recreational lands and waters and track visitation trends. A National Forest may use zip codes to help determine where the National Forest's visitor base originates. Activity information may be used to improve services. Personal information such as names, addresses, phone numbers, email addresses, and vehicle registration information will be secured and maintained in accordance with the system of records, National Recreation Reservation System (NRRS) USDA/FS-55.
All comments received in response to this notice, including names and addresses when provided, will be a matter of public record. Comments will be summarized and included in the request for Office of Management and Budget approval.
Forest Service, USDA.
Notice of final directive.
The U.S. Forest Service (Forest Service or Agency) is amending its internal directives for ski area concessions by adding two clauses to the Special Uses Handbook, Forest Service Handbook (FSH) 2709.11, Chapter 50, addressing the sufficiency of water for operation of ski areas on National Forest System (NFS) lands. The Forest Service recognizes the importance of winter sports opportunities on NFS lands and the need to address the sufficiency of water for ski areas operating on NFS lands. By addressing this need, this final directive will promote the long-term sustainability of ski areas on NFS lands and the economies of the communities that depend on revenue from those ski areas.
This directive is effective January 29, 2016.
The final directive will be available for inspection at the office of the Director, Recreation and Heritage Resources Staff, Forest Service, USDA, 4th Floor Central, Sidney R. Yates Federal Building, 1400 Independence Avenue SW., Washington, DC, during regular business hours (8:30 a.m. to 4:00 p.m.), Monday through Friday, except holidays. Those wishing to inspect these documents are encouraged to call ahead to facilitate access to the building. Copies of documents in the record may be requested under the Freedom of Information Act. The final directive will be posted on the Forest Service's Web site at
Sean Wetterberg, National Winter Sports Program Manager, Recreation, Heritage, and Volunteer Resources staff, 801-975-3793, or Jean Thomas, National Water Rights Program Manager, Watershed, Fish, Wildlife, Air, and Rare Plants staff, 202-205-1172. Individuals who use telecommunication devices for the deaf may call the Federal Information Relay Service at 800-877-8339 between 8:00 a.m. and 8:00 p.m., eastern daylight time, Monday through Friday.
The Forest Service's authority to manage lands under its jurisdiction derives from the Property Clause of the United States Constitution, which empowers Congress to “make all needful Rules and Regulations respecting the . . . Property belonging to the United States.” U.S. Const. art. IV, sec. 3, cl. 2. The Supreme Court has emphasized that Congressional authority over Federal lands is “without limitations.”
The Forest Service has broad authority to regulate and condition the use and occupancy of NFS lands under the Term Permit Act of 1915 (16 U.S.C. 497) (authorizing the Secretary of Agriculture to permit use and occupancy of National Forest land “upon such terms and conditions as he may deem proper”); Multiple Use—Sustained Yield Act (MUSYA) (16 U.S.C. 529) (authorizing the Secretary of Agriculture to develop and administer the surface resources of the National
Consistent with its constitutional and statutory authority, the Forest Service regulates the occupancy and use of NFS lands, including ski area operations, through issuance of special use authorizations (36 CFR part 251, subpart B). The Forest Service must include in special use authorizations terms and conditions that the Forest Service deems necessary to protect Federal property and economic interests (36 CFR 251.56(a)(ii)(A)); efficiently manage the lands subject to and adjacent to the use (36 CFR 251.56(a)(ii)(B)); protect the interests of individuals living in the general area of the use who rely on resources of the area (36 CFR 251.56(a)(ii)(E)); and otherwise protect the public interest (36 CFR 251.56(a)(ii)(G)).
One of the Forest Service's statutory duties is to provide the American public with outdoor recreation opportunities on NFS lands on a sustainable basis. One of these recreation opportunities is skiing, as many ski areas are operated on NFS lands under a permit issued by the Forest Service. Because water for snowmaking and other uses is critical to the continuation of ski areas on NFS lands, the Forest Service has a strong interest in addressing the long-term availability of water to operate permitted ski areas. This final directive will promote the long-term sustainability of ski areas on NFS lands by addressing the long-term availability of water to operate ski areas before permit issuance, during the permit term, and upon permit termination or revocation. Providing for the sustainability of ski areas on NFS lands will support jobs and the local economies that depend on revenue from ski areas on Federal lands. There are 122 ski areas that encompass about 180,000 acres of lands managed by the Forest Service. Ski areas receive roughly 23 million visitors annually, who contribute $3 billion yearly to local economies and support approximately 64,000 full- and part-time jobs in rural communities.
Additionally, the final directive will reduce administrative costs to the United States by providing for more effective administration of ski area permits. The final directive will provide Agency employees and ski area permit holders with a consistent and comprehensive understanding of how water rights and water facilities should be managed under a ski area permit. Specifically, the final directive will provide direction related to the treatment of ski area water rights and authorization of water facilities under ski area permits, including at permit issuance, during the permit term, and upon permit termination or revocation.
The final directive contains two clauses for ski area water rights, one for eastern States that follow the riparian doctrine for water rights and one for western States that follow the prior appropriation doctrine for water rights. Under a riparian doctrine system, water rights are appurtenant to the land, whereas under a prior appropriation doctrine system, water rights may be severed from the land. Most ski areas on NFS lands are in western states that adhere to the prior appropriation doctrine.
For the last 30 years, the Forest Service has required ownership by the United States, either solely or in narrow circumstances jointly with the permit holder, of water rights developed on NFS lands to support operation of ski areas in prior appropriation doctrine states. This policy was motivated by the concern that if water rights used to support ski area operations are severed from a ski area—for example, are sold for other purposes—the Forest Service would lose the ability to offer the area to the public for skiing.
The final directive does not provide for ski area water rights to be acquired in the name of the United States; instead, the final directive focuses on sufficiency of water to operate ski areas on NFS lands. This modified approach for ski areas is appropriate given the characteristics of ski area water rights and ski areas. Unlike water rights diverted from and used on NFS lands by holders of other types of special use permits, ski area water rights may involve long-term capital expenditures. In western States like Colorado and New Mexico, holders of ski area permits may have to purchase senior water rights at considerable expense to meet current requirements for snowmaking to maintain viability. Holders of ski area permits need to show the value of these water rights as business assets, particularly during refinancing or sale of a ski area. The value of these water rights is commensurate with the significant investment in privately owned improvements at ski areas. These investments were recognized by Congress in enactment of the National Forest Ski Area Permit Act, which authorizes permit terms of up to 40 years. 16 U.S.C. 497b(b)(1).
In addition to these financial issues, the land ownership patterns at ski areas—particularly the larger ones—often involve a mix of NFS and private lands inside and outside the ski area permit boundary, which makes it difficult to implement a policy of sole Federal ownership for ski area water rights. Much of the development at ski areas is on private land at the base of the mountains. As a result, water diverted and used on NFS lands in the ski area permit boundary is sometimes used on private land, either inside or outside the permit boundary.
With respect to sufficiency of water for ski area operations, the final directive includes a definition for the phrase, “sufficient quantity of water to operate the ski area,” and clarifies when and how the holder must demonstrate sufficiency of water to operate the permitted ski area and new ski area water facilities; addresses availability of Federally owned ski area water rights during the permit term; and addresses availability of holder-owned ski area water rights during the permit term and upon permit revocation or termination. In particular, the final directive:
• Requires applicants for a ski area permit to submit documentation prepared by a qualified hydrologist,
• Requires the permit holder to submit documentation prepared by a qualified hydrologist or licensed engineer demonstrating a sufficient quantity of water to operate a ski area water facility, as defined by paragraph F.1.a and b of the final directive, before it is installed;
• Requires the permit holder to demonstrate a sufficient quantity of water to operate the ski area before transferring or repurposing original water rights (water rights with a point of diversion and use inside the ski area permit boundary that were originally
• Addresses the availability of Federally owned ski area water rights during the permit term;
• Provides that Federally owned original water rights remain in Federal ownership;
• Requires the holder to maintain all ski area water rights, and reserves the right of the United States to maintain Federally owned original water rights;
• Requires the holder to offer to sell the holder's interest in original water rights to the succeeding permit holder upon permit termination or revocation; and
• If the succeeding permit holder declines to purchase the holder's interest in original water rights jointly owned by the United States, requires the holder to offer to sell that interest at market value to the United States.
Water clauses for special uses other than ski areas are not affected by this final directive.
Prior to publishing the proposed directive for public comment, the Forest Service conducted four listening sessions and three open houses in April 2013 to identify interests and views from a diverse group of stakeholders regarding a revised water clause for ski areas (78 FR 21343, Apr. 10, 2013). Two listening sessions were held in Washington, DC; one was held in Denver, Colorado; and one was held in the Lake Tahoe area in California. Additionally, open houses were held in Denver, Colorado; Salt Lake City, Utah; and the Lake Tahoe area in California. The Agency used input from these listening sessions and open houses in developing the proposed directive.
On June 23, 2014, the Forest Service published the proposed directive in the
Another commenter submitted that there are probably many ski area permits that have no provision for United States ownership or control of water rights. This commenter believed that holders of those permits have little incentive to request inclusion of the
Holders of existing ski area permits that are not being reissued or modified under 36 CFR 251.61 may opt to amend their permit to include the appropriate new clause within one year of the effective date of the final directive, provided they:
(1) Agree to have all water facilities on NFS lands that are used primarily for operation of the ski area and that are not authorized under a separate permit:
(a) Authorized by their ski area permit;
(b) designated on a map attached to the permit; and
(c) included in an inventory in an appendix to the permit; and
(2) submit documentation prepared by their qualified hydrologist or licensed engineer:
(a) Demonstrating that they hold or can obtain a sufficient quantity of water to operate the permitted portion of the ski area; and
(b) identifying all water sources, water rights, and water facilities necessary to demonstrate a sufficient quantity of water to operate the ski area, including all original water rights; all water facilities authorized by the ski area permit; and any existing restrictions on withdrawal or diversion of water that are required to comply with a statute or an involuntary court order that is binding on the Forest Service.
These requirements, which are enumerated in paragraphs 1 and 2 of the instructions for clauses D-30 and D-31, must be met to implement the new clauses.
Per
Only the first, second, fourth, and sixth paragraphs in the proposed instructions for clause D-30 received comment.
Paragraph 1 of the proposed instructions provided that clause D-30 supersedes all previous ski area water rights clauses in the Directive System. Paragraph 1 also provided that clause D-30 be included in ski area permits in prior appropriation doctrine States when these permits are issued, reissued, or modified under 36 CFR 251.61 and that clause D-30 not be included in Michigan, Vermont, and New Hampshire, which are riparian doctrine States.
The second paragraph of the proposed instructions for clause D-30 provided that before issuing a new or modified ski area permit in a prior appropriation doctrine State, the authorized officer would have to (1) ensure that the holder is in compliance with all water facility and water use requirements in clause D-30; (2) inventory ski area water rights; (3) classify the ski area's water rights consistent with the tables in clause D-30; and (4) ensure that the water rights inventory in paragraph 8 of clause D-30 is approved in writing by the Regional Forester.
The Agency has added a provision to the instructions requiring the applicant for a new or modified ski area permit to submit documentation prepared by the applicant's qualified hydrologist or licensed engineer demonstrating that the applicant holds or can obtain a sufficient quantity of water to operate the permitted portion of the ski area. The documentation submitted must identify all water sources, water rights, and water facilities necessary to demonstrate a sufficient quantity of water to operate the ski area, including all original water rights; all water facilities to be authorized by the ski area permit; and any existing restrictions on withdrawal or diversion of water that are required to comply with a statute or an involuntary court order that is binding on the Forest Service. This provision is consistent with the conceptual shift in the final directive from non-severability of ski area water rights to sufficiency of water to operate the ski area.
The Agency agrees that it is unnecessary for Regional Foresters to approve inventories in writing and therefore has removed that requirement from the instructions in the final directive.
Paragraph 4 of the proposed instructions for clause D-30 provided that only water facilities and water rights that are necessary for and that primarily support operation of the ski area being authorized may be included in the ski area permit. Comments received on the terms “necessary” and “primarily support” are addressed in the response to comments on proposed paragraph F. The standard for determining which water facilities should be included under a ski area permit is addressed in the response to comments on proposed paragraph F.1.d.
Paragraph 6 of the proposed instructions for clause D-30 provided that, prior to authorizing a permit amendment for a new water facility at a ski area, the authorized officer would have to ensure that sufficient water is available to operate the water facility. The comments received on the standard for determining sufficiency of water in this context are addressed in the response to comments on proposed paragraph F.
The remaining paragraphs in the proposed instructions for clause D-30 (paragraphs 3, 5, and 7) did not receive specific comment.
Proposed paragraph F provided that “necessary,” in relation to a water facility or water right, means that without that water facility or water right, the ski area would not be able to operate. Proposed paragraph F provided that “primarily supports” in relation to a water facility or water right means that the water facility or water right serves the ski area improvements on NFS lands significantly more than any other use.
Some commenters stated that to determine whether a water right “primarily supports” a ski area, a comparison would be made between water associated with a ski area use and any other use. Since water at ski areas is used for a wide assortment of purposes, these commenters believed it would be difficult to determine whether
Commenters noted that the amount of necessary water for a ski area is dynamic and that permit holders need flexibility to manage their water rights in the best interest of ski areas. Another commenter noted that there is variability from year to year as well as over the 40-year term of a ski area permit in the amount of water that is necessary to operate a ski area. These variations may be due to the amount of natural snowfall, levels of visitation, increases in snowmaking efficiency or other operational and technical advances in the use of water, availability of water based on seniority in appropriation, and changes in climate. This commenter stated that all these variables can result in decreases or increases in the amount of water necessary to support ski area operations.
One commenter stated that the proposed definition of “necessary” in paragraph F is too narrow because many water rights are important to the planned and approved operation of the ski area. According to this commenter, the ski area could still operate with a reduced level of service or quality of skiing experience in their absence. For example, the partial loss of snowmaking water supply during one year might not result in closing the ski area, but those snowmaking water rights should nonetheless be protected under the new clause. This commenter believed that, under the proposed directive, a “necessary” water facility or water right would be subject to the new clause only if it also “primarily supports” the ski area operation.
Another commenter believed that the combination of “necessary” and “primarily supports” was problematic and that a particular water right serving multiple purposes, such as domestic uses for condominiums and commercial operations at the base of a ski area and snowmaking inside the permit boundary, should not result in the exclusion of the entire water right from the protections of the new clause.
One commenter expressed concern that the term “sufficient water” was not defined, which would create ambiguity for States and permit holders. This commenter sought clarity as to whether water associated with water rights and water facilities that are “necessary for” and that “primarily support” a ski area would be deemed sufficient. Commenters requested that the Forest Service provide reasonable criteria and guidance for determining sufficiency of water for ski area operations because the concept is complex and could involve detailed hydrological analysis and projections of future climatic conditions. Commenters believed that establishing criteria would avoid disputes, unreasonable expense, and delay.
One commenter asserted that with respect to existing water rights, a water court has already determined sufficiency of water for ski area operations and approved water use for ski area purposes. This commenter encouraged Forest Service recognition of the water court's or State engineer's determinations of sufficiency of water and appropriateness of water use and acceptance of these findings. This commenter noted that the permit holder's water rights may be used at a ski area or they may be used at the holder's discretion to supply water for other purposes, provided that sufficient water remains to operate the ski area.
One commenter observed that the requirement for sufficient water to be available is an important tool for the Forest Service to determine whether new water facilities, such as snowmaking systems, will be able to operate in dry years. However, this requirement may not ensure that sufficient water is available to operate in dry years in every case, for example, where the facility is served by water diverted from a location off NFS lands. This commenter also stated that, as proposed, this requirement did not explicitly apply to the issuance of a permit, which would present an important opportunity to conduct a sufficiency analysis.
Another commenter was concerned that ensuring sufficient water to operate the ski area could conceivably dry up a stream and negatively affect flow-dependent resources and aquatic organisms, especially when water is withdrawn during low-flow periods in winter. This commenter recommended amending the second-to-last paragraph of the instructions to address the requirements of streamflow-dependent resources.
In addition, the Agency has added a definition for the term “sufficient quantity of water to operate the ski area.” This term means that under typical conditions, taking into account fluctuations in utilization of the authorized improvements, fluctuations in weather and climate, changes in technology, and other factors deemed appropriate by the applicant's qualified hydrologist or licensed engineer, the applicant has sufficient water rights or access to a sufficient quantity of water to operate the permitted facilities, and to provide for the associated activities authorized under the ski area permit in accordance with the approved operating plan. This new term and definition are consistent with the shift from non-severability of water rights to sufficiency of water to operate the ski area. The definition recognizes that the quanity of water is not static and allows for appropriate factors to be considered in the sufficiency determination. Before issuance of a new or modified ski area permit, applicants will be required to submit documentation demonstrating that they hold or can obtain a sufficient quantity of water to operate the permitted portion of the ski area. The submitted documentation will identify any existing restrictions on withdrawal or diversion of water that are required to comply with a statute or an involuntary court order that is binding on the Forest Service. Addressing streamflow-dependent resources generally is beyond the scope of this directive.
This provision defined the term “water facility” to mean a ditch, pipeline, reservoir, well, tank, spring, seepage, or any other facility or feature that withdraws, stores, or distributes water.
This proposed provision stated that no water facility for which the point of withdrawal, storage, or distribution is on NFS lands may be initiated, developed, certified, permitted, or adjudicated by the holder unless expressly authorized by a special use authorization.
Additionally, a commenter was concerned that the proposed restrictions on taking action regarding water facilities on NFS lands without a special use authorization would apply to water facilities that do not primarily support a ski area. One commenter observed that the proposed restrictions would affect diversions of water off NFS lands and would limit exercise of the associated water rights. A commenter also expressed concern that the permitting process can take a considerable amount of time, during which the priority date, and therefore the value of the water right, would be in jeopardy.
One commenter recommended limiting paragraph F.1.b to construction of water facilities on NFS lands and deleting the reference to “initiation, permitting, or adjudication of water rights on NFS lands.” Others suggested that the provision be revised to clarify that the appropriation and adjudication of a water right for ski area operations on NFS lands are subject to State law and are not pre-conditioned on the existence of Forest Service permission because the Forest Service has agreed to be bound by State water law.
Proposed paragraph F.1.c provided that the United States may place any conditions on installation, operation, maintenance, and removal of any water facility that are deemed necessary by the United States to protect public property, public safety, and natural resources on NFS lands. Numerous comments were received on this provision.
Another commenter observed that when the Forest Service has raised the possibility of imposing a bypass flow on an existing water facility, a solution has been negotiated that protects both the water user who is seeking approval to use Federal land and the national objectives and interests of taxpayers. This commenter observed that the proposed directive provides flexibility and represents a rededication and commitment to common-sense water policies on Federal lands without jeopardizing the legitimate interests of taxpayers, ordinary citizens who use and enjoy those lands, or corporate permit applicants like ski areas. Additionally, this commenter observed that regardless of disagreement over the Forest Service authority to impose bypass flow requirements, many water rights holders with water facilities on NFS lands have found innovative ways to accommodate their water rights while meeting the water needs of other forest resources. The commenter credited the Forest Service with showing a growing willingness to accept workable alternatives to the imposition of bypass flow conditions.
Several commenters favored the ability granted by proposed paragraph F.1.c to condition use of water facilities on NFS lands to protect aquatic and other environmental resources (
Some commenters were concerned generally about environmental and social impacts associated with ski area water rights. One commenter requested that the Forest Service first determine how much water is needed to meet public purposes, such as instream flows for aquatic life, the movement of wood and sediment through the stream system, and seasonal inundation of floodplains, before allowing ski areas to divert and appropriate water. Another commenter requested that the Forest Service ensure that the proposed directive protect all public rights and interests in water on NFS lands, including Federal reserved water rights that date back to the establishment of
The second sentence of paragraph F.1.c in the final directive states that clause D-30 does not expand or contract the Agency's authority to place conditions on the installation, operation, maintenance, and removal of water facilities at issuance or reissuance of the permit, throughout the permit term, or otherwise. Thus, clause D-30 does not affect the Agency's authority to place conditions on water facilities under existing legal authority.
The third sentence of paragraph F.1.c in the final directive states that the holder must comply with present and future laws, regulations and other legal requirements in accordance with section I of the ski area permit. This provision reinforces existing provisions in the ski area permit that provide protection for natural resources in connection with water facilities.
In response to concerns regarding environmental impacts associated with water facilities, the sufficiency documentation an applicant must submit before receiving a new or modified ski area permit must include any existing restrictions on withdrawal or diversion of water that are required to comply with a statute or an involuntary court order that is binding on the Forest Service. The Forest Service conducts environmental analysis, as appropriate, on a site-specific basis of the effects of water facilities on NFS lands. This type of site-specific analysis is beyond the scope of this notice of final directive.
Proposed paragraph F.1.d provided that only water facilities that are necessary for and that primarily support operation of a ski area may be authorized by a ski area permit.
One commenter believed this provision would impose unreasonable limitations on water facilities within the permit boundary. This commenter stated that “necessary” as proposed in paragraph F.1.d would impose an unreasonably high threshold and would include only facilities that are “mission-critical,” would create confusion at the field level, and would invite controversy and possibly third-party challenges regarding whether a proposed water facility met the applicable standard.
Proposed paragraph F.1.e provided that any change in the water facilities authorized by the permit would result in termination of the authorization for those water facilities, unless the change was expressly authorized by a permit amendment. Examples of changes to water facilities included (1) use of the water in a manner that does not primarily support operation of the ski area authorized by this permit; (2) a change in the ownership of associated water rights; or (3) a change in the beneficial use, location, or season of use of the water.
One commenter observed that proposed paragraph F.1.e does not clearly identify the types of actions that are prohibited without authorization and recommended specifically listing all changes to a water facility that, if not authorized by a permit amendment, would trigger termination of authorization for the water facility. Similarly, another commenter observed that it would be difficult to determine consistently which modifications require approval because States define water rights broadly and do not assign a percentage of the total water right dedicated to each use. This commenter noted that the purposes of a ski area water right might simply be listed as “commercial or domestic” or “irrigation, domestic water for condominiums and homes, restaurants, and snowmaking,” and the amount of water a ski area uses for each purpose could change.
Another commenter raised a concern that this clause would impose an undue burden on permit holders by placing restrictions on holders' ability to obtain, develop, maintain, or enhance water rights and thus would create additional impediments to the development of water resources to support permitted ski areas. Additionally, this commenter noted that the requirement for Forest Service approval of changes would delay compliance with State deadlines and could result in the forfeiture of water rights or impairment of their value.
Proposed paragraph F.1.f provided that the holder must obtain a separate special use authorization to initiate, develop, certify, or adjudicate any water facility on NFS lands that does not primarily support operation of the ski area authorized by the ski area permit.
One commenter was concerned that if a separate permit is required for water facilities on NFS lands that do not primarily support operation of the ski area, that permit would include water clauses for other special uses, which the commenter believed require transfer of water rights to the United States, or would provide for claiming a possessory interest in water rights in the name of the United States, consistent with FSM 2541.32. This commenter believed that Agency testimony before Congress is inconsistent with claiming a possessory interest in ski area water rights as provided in FSM 2541.32 and that the Agency should clarify in the final directive that it will not require ski areas to transfer ownership of water rights to the United States in any separate permit for water facilities on NFS lands that do not primarily support operation of a ski area.
The Forest Service agrees that it is inappropriate to use the words “initiate,” “develop,” “certify,” or “adjudicate” in connection with proper authorization of a new water facility and has removed these words from paragraph F.1.e in the final directive. However, it would be prudent for the permit holder to communicate with the Forest Service regarding the likelihood of approval of a proposed water facility, regardless of whether it is used primarily for operation of the ski area, before incurring expenses in acquiring associated water rights.
Neither the proposed nor the final directive provides for the United States to claim a possessory interest in ski area water rights. The instructions for clauses D-30 and D-31 provide that the possessory interest policy in FSM 2541.32, paragraph 2, will not apply to ski area permits. Moreover, under paragraph F.1.e in the final directive, when the water facilities continue to support approved ski area operations at any time of year, the separate permit will not contain the possessory interest provision, any waiver provision, or any power of attorney provision. The Agency will develop new or modified water clauses for these permits.
Proposed paragraph F.1.g provided for documentation of restrictions on withdrawal and use of water that are required by regulation or policy, an adjudication, or a settlement agreement or that are based on a decision document supported by environmental analysis.
Proposed paragraph F.2 defined the term “water right” to mean a right to use water that is recognized under State law under the prior appropriation doctrine. Additionally, proposed paragraph F.2 provided that the permit does not confer any water rights.
This proposed paragraph defined “NFS ski area water right” to mean “any water right acquired by the holder or a prior holder that is for water facilities that would divert or pump water from sources located on NFS lands, either inside or outside the permit boundary, for use that primarily supports operation of the ski area authorized by this permit.”
In addition, the Agency has added terms and definitions for two categories of ski area water rights: “original” water rights and “acquired” water rights. Using these terms of art simplifies the wording in subsequent clauses that differentiate between these two types of ski area water rights. An “original water right” is defined as “any existing or new ski area water right with a point of diversion that was or is, at all times during its use, located within the permit boundary for this ski area and originally established under State law through an application for a decree to State water court, permitting, beneficial use, or otherwise recognized method of establishing a new water right, in each case by the holder or a prior holder of the ski area permit.” The definition further clarifies that an original water right cannot become an acquired water right by virtue of sale of the water right to a subsequent ski area permit holder.
An “acquired water right” is defined as “any ski area water right that is purchased, bartered, exchanged, leased, or contracted by the holder or by any prior holder.” The distinguishing characteristics between these two types of ski area water rights is whether they were originally acquired from the State by a ski area permit holder to be used primarily for the operation of the ski area within the ski area permit boundary.
One commenter wanted to know the reason for treating water rights that arise from a point of diversion on NFS lands differently from water rights that arise from a point of diversion off NFS lands. This commenter also requested consideration of alternatives that would provide protection of all ski area water rights, regardless of land ownership at the point of diversion. Another commenter requested that further consideration be given to the effectiveness of the proposed directive in accomplishing its underlying policy objectives with respect to water rights for water that is stored, diverted, or pumped on non-NFS lands to support authorized ski area facilities within the permit area.
Proposed paragraph F.3.b provided that NFS ski area water rights must be acquired in accordance with applicable State law; that the holder must maintain NFS ski area water rights, including Federally owned NFS ski area water rights, for the term of the permit, as well as for the term of any subsequent permits that may be issued to the holder for the uses authorized by the permit; that the holder is responsible for submitting any applications or other filings that are necessary to protect those water rights in accordance with State law; and that the holder and not the United States must bear the cost of acquiring, maintaining, and perfecting NFS ski area water rights, including Federally owned NFS ski area water rights.
The Agency has added a new paragraph F.3.b in the final directive. This new provision requires that an inventory of all ski area water facilities and original water rights be included in an appendix to the ski area permit and that the inventory be updated by the holder upon reissuance of the permit, installation or removal of a ski area water facility, when a listed ski area water facility is no longer authorized by the ski area permit, or when an original water right is no longer used for operation of the ski area. This new paragraph is needed to administer the requirements in the new water clauses regarding ski area water facilities and original water rights.
Proposed paragraph F.3.c provided that NFS ski area water rights that are jointly or solely owned by the United States must remain in Federal ownership; that if the holder's ski area permit utilizes NFS ski area water rights acquired in the name of or transferred to the United States or held jointly with the United States, the holder must submit any applications or other filings that are necessary to protect those water rights as the agent of the United States in accordance with State law; and that notwithstanding the holder's obligation to maintain Federally owned NFS ski area water rights, the United States reserves the right to take any action necessary to maintain and protect those water rights, including submitting any applications or other filings that may be necessary to protect those water rights.
In the final directive, the Agency has moved proposed paragraph F.3.c to paragraph F.3.d and revised it to state that original water rights owned solely by the United States and the United States' interest in jointly owned original water rights shall remain in Federal ownership. In addition, paragraph F.3.d in the final directive provides that notwithstanding the holder's obligation to maintain original water rights owned by the United States, the United States reserves the right to take any action necessary to maintain and protect those water rights, including submitting any applications or other filings that may be necessary to protect the water rights.
Proposed paragraph F.3.d provided that if a water facility corresponding to an NFS ski area water right was or is initiated, developed, certified, permitted, or adjudicated by the holder on NFS lands without a special use authorization, then the water facility is in trespass; that the owner of the NFS ski area water right must apply for authorization of the water facility; and that if authorization is denied, the owner of the NFS ski area water right
In addition, under paragraph F.1.e in the final directive, when authorization for a water facility under the ski area permit terminates because a change in the water facility results in its ceasing to be used primarily for operation of the ski area, a separate special use authorization is required to operate that water facility or to develop a new water facility, unless the holder has a valid existing right for the water facility to be situated on NFS lands. A valid existing right in this context is a legal right, typically a statutory right, to use and occupy NFS lands. In the absence of a valid existing right, a separate special use authorization is required under these circumstances because it is not appropriate to utilize the National Forest Ski Area Permit Act to authorize water facilities that do not primarily support operation of a ski area. 16 U.S.C. 497b(a), (b). Paragraph F.1.e in the final directive also provides that unless the holder has a valid existing right for the water facility to be situated on NFS lands, if the holder does not obtain a separate special use authorization for these water facilities, the holder must remove them from NFS lands.
Proposed paragraph F.4.a provided that when the United States owns any NFS ski area water rights, the Forest Service may not take any action that would adversely affect availability of those water rights to support operation of the ski area during the term of the permit, unless deemed necessary by the Forest Service to satisfy legal requirements.
Paragraph F.1.c in the final directive states that clause D-30 does not expand or contract the Agency's authority to place conditions on the installation, operation, maintenance, and removal of water facilities at issuance or reissuance of the permit, throughout the permit term, or otherwise. Thus, paragraph F.4.a does not expand or contract the Agency's ability to place conditions on water facilities under existing legal authority.
Proposed paragraph F.4.b provided that when the holder has an interest in any NFS ski area water rights, or water rights that the holder has purchased or leased from a party other than a prior holder that are changed or exchanged to provide for diversion from sources on NFS lands for use that primarily supports operation of the ski area authorized by the permit (“changed or exchanged water rights”), the holder may not take any action during the permit term that would adversely affect the availability of those water rights to support operation of the ski area authorized by the permit, unless approved in writing in advance by the authorized officer. Actions that require advance written approval by the authorized officer included any division or transfer of ownership of the water rights and any modification of the type, place, or season of use of the water rights.
One commenter noted that the type of actions that would require approval by the authorized officer, including “any modification of the type, place, or season of use of the water rights,” would be difficult to determine consistently because frequently in decrees and certificates States define water rights very broadly or list every conceivable water use. For example, this commenter stated that a decree for one ski area might simply list the uses for a ski area water right as “commercial and domestic,” while another decree for a ski area water right might list the uses as “irrigation and domestic water for condominiums and homes, restaurants, and snowmaking.” This commenter further noted that the difficulty would be compounded by the fact that States frequently do not assign a percentage of the total water right that is dedicated to each use, which would essentially leave it to the holder to tell the Agency how much water is typically consumed for each use.
Commenters were concerned that the restriction in proposed paragraph F.4.b would apply to water rights that the holder does not own, in addition to water rights the holder has purchased or leased from a party other than a prior holder, and that the Forest Service lacks the authority to impose this restriction. One commenter noted that the Forest Service does not have sole discretion to determine whether it is legally entitled or required to interfere with a ski area water right. These commenters believed that State water administration authorities may also play a significant role in determining the appropriateness of the Forest Service's actions related to water rights. These commenters recommended that the directive recognize the need for the Forest Service to comply with State law and coordinate with State agencies before making any legal determination regarding ski area water rights. These commenters also suggested that the directive recognize the permit holder's right to seek judicial review of the accuracy of the Agency's determination that interference with a water right was required by law. Some commenters were concerned that the restriction in proposed paragraph F.4.b would have a retroactive effect because it would apply to water rights acquired many years ago.
One commenter suggested that the proposed definition for “changed or exchanged water rights” was too narrow, in that it would apply only to water rights “that the holder has purchased or leased from a party other than a prior holder.” This commenter noted that this proposed definition would not include water rights that (1) are located off NFS lands; (2) are used under a change or exchange decree to allow diversion of water on NFS lands; and (3) were originally appropriated by the current or prior holder of the ski area permit, rather than being “purchased or leased” from another party. The commenter believed there is no reason to exclude these water rights from the scope of clause D-30. Another commenter recommended reinforcing that the restriction in proposed paragraph F.4.b would apply not only to purchased or leased ski area water rights, but also to ski area water rights acquired by the holder or a prior holder through appropriation. This commenter also recommended clarifying that the directive would not apply to water purchased by a ski area permit holder from a municipality or other entity that retains ownership of the associated water right.
In the final directive paragraph F.4.b applies only to original water rights owned solely or jointly by the holder, which are critical to addressing sufficiency of water to operate a ski area on NFS lands. In addition, in deciding whether to approve division or transfer of or a change to an original water right, the authorized officer must consider any documentation prepared by the holder's qualified hydrologist or licensed engineer demonstrating that the proposed action will not result in a lack of a sufficient quantity of water to operate the permitted portion of the ski area.
Moreover, the Agency has added paragraph F.4.c in the final directive, which states that the holder may seek to change, abandon, lease, divide, or transfer ownership of or take other actions with respect to acquired water rights at any time and solely within its discretion. Paragraph F.4.c in the final directive also provides that, following these actions, paragraph F.1.e will apply to the associated ski area water facilities. Paragraph F.1.e in the final directive addresses proper authorization, and in certain circumstances removal, of water facilities after certain changes have been made in connection with those water facilities.
Paragraph F.4.b in the final directive applies only to original water rights that are owned solely or jointly by the holder, not to water that is purchased or leased from municipalities or other entities. The concerns regarding the definition for “changed or exchanged water rights” are moot because the Agency has removed that definition from the final directive. The Forest Service's authority to include a water clause in ski area permits to address availability of water for operation of ski areas on NFS lands is separate from prior appropriation doctrine States' authority to adjudicate and allocate water rights. Paragraph F.4.b in the final directive will not have retroactive effect because it will apply to the current holder of the ski area permit.
Proposed paragraph F.5.a provided that upon termination or revocation of the permit, the holder must sell the holder's interest in any NFS ski area water rights or changed or exchanged water rights to the purchaser of the ski area improvements. Proposed paragraph F.5.a also provided that the holder will
Additionally, commenters questioned whether the Agency's concern regarding insufficiency of water rights for ski area operations was valid. These commenters believed it was unlikely that the holder would sell a viable ski area with insufficient water rights to operate because it would not be in the best interests of the holder to do so. The commenters also asserted that the Forest Service's authority under special use permit regulations at 36 CFR 251.54 and 251.59 to require that succeeding permit holders have a sufficient quantity of water to operate a ski area before issuing a new ski area permit was adequate to address the Agency's concern in this context.
Three commenters believed that the existing permit holder should be required only to offer to sell certain types of ski area water rights at market value to the succeeding permit holder. These commenters believed that requiring the holder to offer to sell, rather than to sell, certain types of ski area water rights to the succeeding permit holder would maintain the value of the water rights while satisfying the Agency's interest in ensuring that sufficient water is available for ski area operations. The commenters believed this approach would be less likely to result in legal controversy because the approach would be more consistent with the ski area's property rights. These commenters recommended that the market value of these water rights be determined by appraisal and that the cost of the appraisal be split between the holder and the succeeding holder. Additionally, the commenters recommended that existing holders not be required to sell to the succeeding holder any water rights associated with undeveloped phases of a ski area's master development plan. Further, these commenters recommended that payment of the full price of ski area water rights purchased by the succeeding holder be due within 30 days of purchase or an otherwise agreed-upon timeframe.
Conversely, other commenters supported the transfer requirement in proposed paragraph F.5.a because the requirement is premised on the commercial reality that water rights associated with a ski area permit are customarily included in the assets that are transferred to a buyer as part of the overall asking price, and because the transfer requirement is consistent with the requirement under the special use regulations at 36 CFR 251.60(i) to remove privately owned improvements from NFS lands when they are no longer authorized. One commenter agreed that it is appropriate for the holder to retain the full amount of the consideration paid by the succeeding holder for the holder's interest in ski area water rights.
One commenter criticized the transfer requirement in proposed paragraph F.5.a as a perpetual allocation by the Federal government of Colorado's scarce water supply to an activity that could become economically marginal, but would be perpetuated as long as an individual or entity is willing to apply for a permit. This commenter believed that tying privately held water rights to a particular use in this manner could thwart the allocation of senior water rights to new and higher-value uses that are important for Colorado's future development.
Paragraph F.5.a in the final directive also provides that if the succeeding permit holder declines to purchase original water rights owned solely by the holder, the holder may transfer them to a third party. If the succeeding permit holder declines to purchase the holder's interest in original water rights jointly held with the United States, the holder must offer to sell that interest at market value to the United States. If the United States declines to purchase that interest, the holder may abandon, divide, lease, or transfer its interest at its sole discretion.
Paragraph F.5.a in the final directive imposes no restrictions on the transfer or abandonment of acquired water rights.
Paragraph F.5.a in the final directive provides that the holder will retain the full amount of any consideration paid for the holder's interest in original or acquired water rights. Paragraph F.5.a in the final directive does not prescribe a valuation mechanism or payment timeframe, as the Agency believes these issues are more appropriately addressed by the parties to the sale.
In addition, paragraph F.5.a in the final directive provides that following transfer or abandonment of water rights under that paragraph, paragraph F.1.e will apply to the associated ski area water facilities. Paragraph F.1.e in the final directive addresses proper authorization, and in certain circumstances removal, of water facilities after certain changes have been made in connection with those water facilities.
Proposed paragraph F.5.b provided that if the Forest Service does not reauthorize the ski area, the holder must promptly petition in accordance with State law to remove the point of diversion and water use from NFS lands for any changed or exchanged water rights and NFS ski area water rights owned solely by the holder, or the holder may relinquish those water rights. Proposed paragraph F.5.b further provided that the holder must relinquish its ownership interest in any water rights owned jointly by the holder and the United States.
One commenter was concerned that the requirement to relinquish to the United States the holder's interest in jointly owned water rights if the ski area is not reauthorized would eliminate any market for those water rights. Another commenter noted that water rights appropriated under State law in western states are not appurtenant to the land, and that the owner of these water rights can sever them from the land and transfer them to a different point of diversion and use, provided that the transfer does not impair other water rights. One commenter stated that there would be no impact on ski area recreation opportunities on NFS lands if the holder transferred its interest in jointly owned ski area water rights to a different point of diversion and use if the ski area is not reauthorized by the Forest Service.
Proposed paragraph F.6 provided that when the foregoing provisions in proposed clause D-30 require the holder to transfer the holder's interest in any NFS ski area water rights or changed or exchanged water rights to the holder of a subsequent permit, the holder or the holder's heirs and assigns must execute and properly file any documents necessary to transfer the holder's interest, including but not limited to executing a quit claim deed. Proposed paragraph F.6 also provided that by executing the permit, the holder grants a limited power of attorney to the authorized officer to execute, on behalf of the holder, any documents necessary to transfer ownership under the foregoing provisions.
Proposed paragraph F.7 provided that the holder waives any claims against the United States for compensation for any water rights the holder transfers, removes, or relinquishes as a result of the foregoing provisions in proposed clause D-30; any claims for compensation in connection with imposition of restrictions on severing any water rights; and any claims for compensation in connection with imposition of any conditions on installation, operation, maintenance, and removal of water facilities in support of the ski area authorized by the permit.
Proposed paragraph F.8 included 5 tables for recording certain information about water rights, including the state identification number; owner; purpose of use; decree, license, or certificate number; point of diversion; and point of use. Each table addressed a different category of water rights, including NFS ski area water rights that are owned solely by the United States; NFS ski area water rights that are owned solely by the holder; NFS ski area water rights that are owned jointly by the United States and the holder; changed or exchanged water rights; and water rights for points of diversion on non-NFS lands for use on NFS lands within the permit boundary.
Some commenters were concerned that inventorying water rights for points of diversion on non-NFS lands for use on NFS lands within the permit boundary per proposed paragraph F.8.e could be interpreted as imposing limitations on third-party water rights owned by entities that have no interest in the permitted ski area and that such restrictions would unreasonably interfere with the use of water that is located outside the permit area and is unrelated to the ski area. One commenter asserted that there is no connection between inventorying water rights for points of diversion on non-NFS lands and the Forest Service's interest in ensuring continuity of recreation opportunities for skiing on NFS lands and protecting water resources within the ski area permit boundary.
Some commenters generally supported inventorying NFS ski area water rights because the inventory would disclose water uses by ski areas on Federal land. One commenter requested that the final directive be revised to specify a procedure for updating the inventory of ski area water rights that primarily support operation of the ski area when a ski area permit is amended or reissued to a new holder. This commenter believed that an updated inventory would reflect any additions or deletions from the list of ski area water rights and that these changes should be subject to public notice and comment.
One commenter was concerned that focusing on ski area water rights in their entirety, rather than on the specific interest in water rights held by the permit holder for ski area purposes, would invite arguments about the scope of the inventory; risk excluding water supplies that are important to the continued operation of the ski area; and possibly create problems for third parties, such as a reservoir company and its shareholders, who also have ownership or other interests in the water rights. The commenter observed that ski area water rights in Colorado may be divided into fractional interests that are separately owned. In that case, different uses of the same water right may be subject to separate terms and conditions for purposes of administration by the State engineer. Alternatively, ski area water rights could be owned by nonprofit corporate entities such as ditch and reservoir companies, and the interests in those water rights could be represented by shares of stock in those companies.
The Agency does not believe that maintaining an inventory of original water rights will impose an unnecessary burden on the Forest Service or pose the risk of a conflict with the States' or permit holder's water rights records. Holders have a record of their ski area water rights and can provide the requisite information to the authorized officer to ensure that the inventory is accurate and updated as needed. Maintaining the inventory in the final directive will be simpler than maintaining the inventory in the proposed directive. In the final directive, the Agency has moved the inventory tables to an appendix and has reduced the 5 tables to 2, to track only original water rights and ski area water facilities authorized under the ski area permit. Finally, the Agency has removed the requirement for Regional Forester approval of the inventory before issuance of a new or modified ski area permit.
The Agency agrees that water rights for points of diversion off NFS lands for use on NFS lands inside the ski area permit boundary should not be tracked in the inventory. These water rights do not arise from a point of diversion on NFS lands and therefore do not meet the definition of “ski area water rights” in the final directive.
The Agency does not believe that changes to the inventory should be subject to public notice and comment. The inventory is a tracking mechanism. Prior appropriation doctrine States, not the Federal government, adjudicate and allocate water rights. Forest Service decisions regarding installation or removal of ski area water facilities will be subject to appropriate environmental analysis, including public involvement, as appropriate.
Proposed paragraph F.9 provided that when the holder owns any changed or exchanged water rights or solely owns any NFS ski area water rights, the holder must maintain a performance bond that fully covers the cost of removing all privately owned ski area improvements and restoring the site if the use is not reauthorized. Proposed paragraph F.9 also provided for the minimum amount of the bond to be specified and for the amount of the bond to be determined by the authorized officer.
Some commenters supported the performance bond requirement to ensure that the permit holder removes authorized water facilities when the permit terminates and suggested that the performance bond requirement be extended to all special use permits.
This provision stated that the holder has read and agrees to all terms and conditions of the permit, including the authorization provided in proposed paragraph F.6 that allows the authorized officer to act on the holder's behalf in executing all necessary documents to transfer ownership of NFS ski area water rights and changed or exchanged water rights as provided in the permit. No comments were received on this provision. Since proposed paragraph F.6 has been removed from the final directive, the acknowledgment of terms provision is moot and has also been removed from the final directive.
In several respects, the comments and responses on proposed clause D-30 apply to proposed clause D-31. Consequently, where applicable, the Agency has revised clause D-31 in the final directive, including the instructions, to track the changes to clause D-30 in the final directive, including the instructions.
Proposed paragraph F.1.d provided that the United States may place conditions on installation, operation, maintenance, and removal of any water facility that are deemed necessary by the United States to protect public property, public safety, and natural resources on NFS lands.
Proposed paragraph F.1.e provided that only water facilities that are necessary for and that primarily support operation of the ski area authorized by the permit may be included in the permit. No specific comments were received on proposed paragraph F.1.e in clause D-31. The Forest Service has redesignated proposed paragraph F.1.e as F.1.d and revised the paragraph to track the revisions made to the corresponding proposed paragraph in clause D-30.
The Agency has added a new paragraph F.1.e requiring an inventory of all ski area water facilities on NFS lands to be included in the appendix of the permit. The inventory must be updated by the holder upon reissuance of the ski area permit, installation or removal of a ski area water facility, or when a listed ski area water facility is no longer authorized by the ski area permit. This new paragraph corresponds to the new inventory provision in clause D-30 and is needed to track water facilities that are authorized under the ski area permit, both at permit issuance and during the permit term,
Proposed paragraph F.1.f provided that any change in water facilities authorized by this permit will result in termination of the authorization for those water facilities, unless the change is expressly authorized by a permit amendment. As examples of this type of change, proposed paragraph F.1.f listed use of the water in a manner that does not primarily support operation of the ski area authorized by the permit and a change in the beneficial use, location, or season of use of water.
Proposed paragraph F.1.g provided that the holder must obtain a separate special use authorization to initiate, develop, certify, or permit any water facility on NFS lands that does not primarily support operation of the ski area authorized by the permit.
Neither the proposed nor the final directive provides for Forest Service adjudication of water rights. The provisions governing use of water facilities have been clarified and narrowed consistent with the objectives of the final directive. When it becomes effective, the final directive will supersede prior ski area water clauses in the Forest Service's Directive System and standard ski area permit form.
Water clauses in existing ski area permits, other than the 2011 and 2012 water clauses that were invalidated by the court's order in
(1) agree to have all water facilities on NFS lands that are used primarily for operation of the ski area and that are not authorized under a separate permit:
(a) authorized by their ski area permit;
(b) designated on a map attached to the permit; and
(c) included in an inventory in an appendix to the permit; and
(2) submit documentation prepared by their qualified hydrologist or licensed engineer demonstrating that:
(a) they hold or can obtain a sufficient quantity of water to operate the permitted portion of the ski area; and
(b) identifying all water sources, water rights, and water facilities necessary to demonstrate a sufficient quantity of water to operate the ski area, including all original water rights; all water facilities authorized by the ski area permit; and any existing restrictions on withdrawal or diversion of water that are required to comply with a statute or an involuntary court order that is binding on the Forest Service.
Per paragraph F.3.d of the final directive, original water rights owned solely by the United States and the United States' interest in jointly owned original water rights will remain in Federal ownership.
Water clauses for special uses other than ski areas are beyond the scope of this directive.
The Agency has considered the final directive under the requirements of E.O. 13132 on federalism and has concluded that the final directive conforms to the federalism principles in the E.O. The final directive will not impose any compliance costs on the States and will not have substantial direct effects on the States, the relationship between the Federal Government and the States, or the distribution of power and responsibilities among the various levels of government. Therefore, the Agency has determined that no further assessment of federalism implications is necessary at this time.
This rule has been reviewed in accordance with the requirements of Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments.” Executive Order 13175 requires Federal agencies to consult and coordinate with tribes on a government-to-government basis on policies that have tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Forest Service has assessed the impact of this policy on Indian tribes and determined that this directive does not, to our knowledge, have tribal implications that require tribal consultation under E.O. 13175. However, the Forest Service provided a 120-day government-to-government consultation period for recognized Tribes starting July 28, 2014. Tribes were provided the
The summaries of those Tribes that did comment and the Agency's responses follow.
The Forest Service is committed to honoring Tribal treaty and other reserved rights, including Tribal water rights. Nothing in the final directive will infringe upon these rights. Water rights acquired under State law in connection with ski area permits are subject to the valid existing water rights of other water rights holders, including valid existing Tribal treaty and other reserved water rights, if any. Reference to the water rights of specific Tribes would be outside the scope of this directive, which sets forth water clauses for ski area permits.
This final directive revises national Forest Service policy governing water rights in ski area permits. Forest Service regulations at 36 CFR 220.6(d)(2) exclude from documentation in an environmental assessment or environmental impact statement “rules, regulations, or policies to establish Service-wide administrative procedures, program processes, or instructions.” The Agency has concluded that this final directive falls within this category of actions and that no extraordinary circumstances exist which would require preparation of an environmental assessment or environmental impact statement.
This final directive has been reviewed under USDA procedures and E.O. 12866 on regulatory planning and review. The Office of Management and Budget (OMB) has determined that this final directive is significant and therefore subject to OMB review under E.O. 12866. The final directive is not economically significant because it will not have an annual effect of $100 million or more on the economy; it will not adversely affect productivity, competition, jobs, the environment, public health and safety, or State or local governments; and it will not alter the budgetary impact of entitlement, grant, or loan programs or the rights and obligations of beneficiaries of those programs or interfere with an action taken or planned by another agency.
The cost-benefit analysis prepared by the Agency for the final directive concludes that the benefits of the final directive to the Forest Service substantially outweigh the costs because the Agency has corrected the procedural deficiencies associated with 2011 and 2012 ski area water clauses and because the final directive will enhance treatment of ski area water rights and administration of ski area water facilities under ski area permits. The cost-benefit analysis also concludes that the costs to permit holders associated with the final directive are minimal and are substantially outweighed by the benefits of enhanced sustainability of ski areas on NFS lands and improved administration of ski area permits.
The Agency has considered the final directive in light of the Regulatory Flexibility Act (5 U.S.C. 602
The Agency has analyzed the final directive in accordance with the principles and criteria contained in E.O.12630 and has determined that the final directive will not pose the risk of a taking of private property.
The Agency has reviewed the final directive under E.O. 12988 on civil justice reform. Upon adoption of the final directive, (1) all State and local laws and regulations that conflict with the final directive or that impede its full implementation will be preempted; (2) no retroactive effect will be given to the
The Agency has reviewed the final directive under E.O. 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.” The Agency has determined that the final directive does not constitute a significant energy action as defined in the E.O.
Pursuant to Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538), the Agency has assessed the effects of the final directive on State, local, and Tribal governments and the private sector. The final directive will not compel the expenditure of $100 million or more by any State, local, or Tribal government or anyone in the private sector. Therefore, a statement under section 202 of the act is not required.
The information collection associated with the final directive is different from the information collection associated with the proposed directive. In particular, rather than requiring an inventory of 5 different types of water rights, the final directive requires an inventory of only original water rights and ski area water facilities authorized by the permit. In addition, the final directive requires an applicant for a new or modified ski area permit to document a sufficient quantity of water to operate the ski area and an applicant for a new water facility to document a sufficient quantity of water to operate the proposed water facility.
Therefore, through this
The following summarizes the information collection associated with the final directive:
Comment is invited on (1) whether this information collection is necessary for the stated purposes and proper performance of the functions of the Agency, including whether the information will have practical or scientific utility; (2) the accuracy of the Agency's estimate of the burden associated with the information collection, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the information collection on respondents, including automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. All comments received in response to the notice of this information collection, including names and addresses when provided, will be included in the record for the final directive. The comments will be summarized and included in the package submitted to OMB for approval.
The Forest Service organizes its Directive System by alphanumeric codes and subject headings. The intended audience for this direction is Forest Service employees charged with issuing and administering ski area permits. To view the final directive, visit the Forest Service's Web site at
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the Illinois Advisory Committee (Committee) will hold a meeting on Friday, January 22, 2016, at 1:00 p.m. CST. The purpose of this meeting is to review and discuss approval of a project proposal to study civil rights and environmental justice in the State. The Committee met on November 20, 2015 and approved a study of this topic, particularly as it relates to coal ash disposal in communities of color in Illinois. This study is in support of the Commission's nationally focused 2016 statutory enforcement study on the same topic.
This meeting is available to the public through the following toll-free call-in number: 888-481-2844, conference ID: 2949512. Any interested member of the public may call this number and listen to the meeting. An open comment period will be provided to allow members of the public to make a statement at the end of the meeting. The conference call operator will ask callers to identify themselves, the organization they are affiliated with (if any), and an email address prior to placing callers into the conference room. Callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-977-8339 and providing the Service with the conference call number and conference ID number.
Member of the public are also entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be mailed to the Regional Programs Unit, U.S. Commission on Civil Rights, 55 W. Monroe St., Suite 410, Chicago, IL 60615. They may also be faxed to the Commission at (312) 353-8324, or emailed to Carolyn Allen at
Records and documents discussed during the meeting will be available for public viewing prior to and after the meeting at
The meeting will be held on Friday, January 22, 2016, at 1:00 p.m. CST.
Melissa Wojnaroski at
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the Michigan Advisory Committee (Committee) will hold a meeting on Tuesday, January 12, 2016, at 1:30 p.m. EST for the purpose of discussing preparations for a public hearing regarding the civil rights impact of civil forfeiture practices in the State.
This meeting is available to the public through the following toll-free call-in number: 888-576-4398, conference ID: 3486198. Any interested member of the public may call this number and listen to the meeting. An open comment period will be provided to allow members of the public to make a statement at the end of the meeting. The conference call operator will ask callers to identify themselves, the organization they are affiliated with (if any), and an email address prior to placing callers into the conference room. Callers can expect to incur charges for calls they initiate over wireless lines according to their regular wireless plans, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-977-8339 and providing the Service with the conference call number and conference ID number.
Member of the public are also entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be mailed to the Regional Programs Unit, U.S. Commission on Civil Rights, 55 W. Monroe St., Suite 410, Chicago, IL 60615. They may also be faxed to the Commission at (312) 353-8324, or emailed to Carolyn Allen at
Records and documents discussed during the meeting will be available for public viewing prior to and after the meeting at
The meeting will be held on Tuesday, January 12, 2016, at 1:30 p.m. EST.
Melissa Wojnaroski at
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The Mid-Atlantic Fishery Management Council will hold a public meeting of its Summer Flounder, Scup, and Black Sea Bass Advisory Panel (AP) and its Mackerel, Squid, and Butterfish AP.
The meeting will be held on Wednesday, January 20, 2016, from 1 p.m. to 5 p.m. For agenda details, see
The meeting will be held at the Ocean Place Resort, 1 Ocean Boulevard, Long Branch, NJ 07740; telephone: (732) 571-4000.
Christopher M. Moore, Ph.D., Executive Director, Mid-Atlantic Fishery Management Council, telephone: (302) 526-5255.
The MAFMC's Summer Flounder, Scup, and Black Sea Bass AP and Mackerel, Squid, and Butterfish AP will meet to provide input on a framework to modify the scup Gear Restricted Areas (GRAs). The scup GRAs are seasonally-effective areas where vessels fishing for or possessing black sea bass, longfin squid, or silver hake (also known as whiting) are
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aid should be directed to M. Jan Saunders, (302) 526-5251, at least 5 days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The New England Fishery Management Council (Council) is scheduling a public meeting of its Scientific & Statistical Committee to consider actions affecting New England fisheries in the exclusive economic zone (EEZ). Recommendations from this group will be brought to the full Council for formal consideration and action, if appropriate.
This meeting will be held on Wednesday, January 20, 2016 beginning at 9 a.m.
The meeting will be held at the Hilton Garden Inn, Boston Logan, 100 Boardman Street, Boston, MA 02128; phone: (617) 567-6789.
Thomas A. Nies, Executive Director, New England Fishery Management Council; telephone: (978) 465-0492.
The SSC will meet to: Consider identifying an ABC for witch flounder that is not bound by 75% of FMSY; comment on draft terms of reference for a 2016 benchmark stock assessment for witch flounder; receive an update on groundfish catch advice project; receive an update on the Council risk policy working group including an overview of current control rules. They will discuss other business as needed.
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Act, provided the public has been notified of the Council's intent to take final action to address the emergency.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Thomas A. Nies, Executive Director, at (978) 465-0492, at least 5 days prior to the meeting date.
16 U.S.C. 1801
Office for Coastal Management, National Ocean Service, National Oceanic and Atmospheric Administration (NOAA), Department of Commerce.
Response to comments.
Due to a clerical error, comments submitted by the Center for Biological Diversity on a requested extension of Deep Seabed Hard Mineral Resources Act exploration licenses were not considered until after the licenses were extended. After reviewing and considering those comments, NOAA has found that they provide no basis for reconsidering the requested license extensions or revising the now-extended licenses.
Contact Kerry Kehoe, Office for Coastal Management, National Ocean Service, 301-563-1151,
On February 28, 2012, the National Oceanic and Atmospheric Administration published a notice in the
Comments submitted by the Center for Biological Diversity (CBD), however, were not discussed in the July 10, 2012, notice. The CBD comments were received by NOAA but, due to a clerical error, the comments were not routed to the license extension reviewers who were unaware of CBD's comments until after an inquiry was received from CBD following the July 10, 2012, publication of the extension notice. Upon review and consideration of CBD's comments, NOAA determined that the extension of the exploration licenses should stand without modification as CBD's comments were based on a misunderstanding of the nature and scope of the license extensions.
Following the discovery of CBD's comments, the relevant Staff from NOAA discussed the substance of the comments with CBD and described why CBD's concerns as articulated in the comments were not relevant to the USA-1 and USA-4 license extensions. In addition, NOAA is now publishing a response to the CBD comments to address any public misconceptions about the extension of the deep seabed mining exploration Licenses USA-1 and USA-4.
The CBD comments pertain to activities not presently authorized pursuant to the license extensions. Instead, the CBD comments are relevant to at-sea exploration activities that, if pursued, would first require additional NOAA approvals.
As part of Lockheed Martin's request to extend the USA-1 and USA-4 exploration licenses, it submitted a two-phase exploration plan. This two-phased plan is consistent with all the previous exploration plans submitted since the issuance of these licenses. Phase I is a preparatory stage which includes activities for which no license would be required. Phase II includes activities for which an exploration license may be required. The current exploration plan includes statements anticipating that actual exploration activities might be conducted under Phase II during the requested five-year extension; however, those statements are qualified. Lockheed Martin has stated that before it will conduct at-sea activities requiring an exploration license (
Lockheed Martin also provided NOAA written confirmation that no at-sea exploration activities, which would require a license, would be conducted without additional authorization from NOAA. Such authorization would, at that time, be subject to all necessary environmental reviews. Although Lockheed Martin may ultimately conduct at-sea exploration activities pursuant to the USA-1 and USA-4 licenses, such activities would require additional environmental review and NOAA authorization before commencement of such exploration pursuant to these licenses.
Accordingly, upon review and consideration of the CBD comments, NOAA has found that the extension of the deep seabed mining exploration licenses should stand without modification. NOAA's specific responses to the CBD comments are provided below.
Comment 1:
Response: NOAA disagrees that the Agency has failed to fully comply with the requirements of NEPA.
NOAA has prepared a programmatic EIS in connection with potential deep ocean mining activities.
With respect to the instant license extensions, NOAA considered its environmental compliance obligations and determined that, in order for the Agency to conduct an environmental review, there must first be a proposed activity to review. As discussed above, there is no action triggered or authorized pursuant to the USA-1 and USA-4 license extensions that has the potential to significantly affect the environment. The extensions merely preserve any domestic or international priority of rights the licenses may confer. Lockheed Martin's revised exploration plan associated with the license extensions, which like each other exploration plan submitted for these licenses, has two phases with the first being preparatory land-side activities that do not require any authorizations and the second including actual at-sea exploration activities. Lockheed Martin has noted that its Phase II activities are contingent upon a U.S. accession to the Law of the Sea Convention and a substantial increase in the market prices for metals; two events which have not occurred and are not likely to occur prior to the end of the current term of the licenses. Should Lockheed Martin decide to conduct any Phase II, at-sea exploration in connection with USA-1 or USA-4, the terms of the licenses require additional authorizations from NOAA and other federal reviewing agencies prior to the commencement of any such activities.
Given the phased nature of these licenses and the uncertainty associated with possible commencement of Phase II activities, NOAA believes it would be premature at this stage to conduct the types of environmental reviews suggested by commenter. Lockheed Martin has not detailed the specific location(s) within the licensed exploration areas where any future at-sea activities would be conducted. The company has also not detailed the specifics of any exploration techniques, equipment or intensity. Absent this type of information, any environmental review conducted by NOAA would be speculative at best. Instead, NOAA believes that environmental reviews, including those that may be required under NEPA, are appropriate once Lockheed Martin has decided to pursue NOAA authorization for Phase II activities. Such environmental review will be subject to public review and comment, and NOAA encourages CBD to participate in that process should Lockheed Martin seek approval for Phase II activities.
Comment 2:
Response: NOAA disagrees. As described in the response to comment 1 above, no action is presently triggered or authorized pursuant to the USA-1 and USA-4 license extensions that has the potential to affect protected species under the cited statutes. As such, NOAA is unaware of, and commenter has not identified, any outstanding obligations with respect to these statutes.
Comment 3.
Response: NOAA disagrees. Contrary to the assertion of the commenter, the current license extensions do not authorize the at-sea activities described in the comments. The requested license extensions only extend the term of the licenses and do not authorize the types of at-sea exploration activities cited by commenter. Indeed, conducting such activities may be unnecessary as Lockheed Martin stands in a unique position as a pre-enactment explorer (
The CBD comments also contain an extensive discussion of the impacts of airguns used to conduct seismic surveys. No such activities have been proposed, let alone authorized.
Additionally, throughout the CBD comments the impacts of mining of the deep seabed are also discussed. Mining has not been authorized nor proposed. DSHMRA establishes a licensing requirement for exploration activities and a separate permit requirement for commercial recovery (
Federal Domestic Assistance Catalog 11.419
Defense Logistics Agency, DoD.
Notice.
In compliance with the Paperwork Reduction Act of 1995, the Defense Logistics Agency announces a proposed public information collection and seeks public comment on the provisions thereof. Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed information collection; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology.
Consideration will be given to all comments received by February 29, 2016.
You may submit comments, identified by docket number and title, by any of the following methods:
•
•
Any associated form(s) for this collection may be located within this same electronic docket and downloaded for review/testing. Follow the instructions at
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to the Defense Logistics Agency, ATTN: Joint Contingency and Expeditionary Services (JCXS) Program Management Office (PMO), 4800 Mark Center Drive, Alexandria, VA 22350; or call (571) 372-3593.
As an integral component of JCXS, JCCS was designed to register foreign vendors for work with the U.S.
Although there is no PRA requirement for the current foreign respondents, beginning January 1, 2016, a new mandate exists that will necessitate all vendors register in order to do business with the U.S. Military. This addition of U.S. vendors establishes a burden to members of the public under the PRA.
Respondents are businesses who are applying, on occasion, for authorization to be a vendor with the U.S. Military, including approval for the associated access, if appropriate, to bases worldwide. Based on changing mission requirements, the U.S. Government may also require vendors to be vetted annually for eligibility to bid on new contracts. The amount of vendors registering with JCCS is expected to increase when the new requirement for all vendors takes effect in January 2016.
Disclosure of PII and other needed information is voluntary to support the registration and vetting process. However, failure to provide the required information may result in a vendor being denied access to the JCCS business application, and subsequently prohibited from conducting business with the U.S. Military. The JCCS application is available through the Defense Logistics Agency (DLA) Web site.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for public comments regarding an extension to an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve an extension of a previously approved information collection requirement concerning Economic Purchase Quantity—Supplies.
Submit comments on or before February 29, 2016.
Submit comments identified by Information Collection 9000-0082, Economic Purchase Quantity—Supplies, by any of the following methods:
•
•
Mr. Michael O. Jackson, Procurement Analyst, Office of Governmentwide Acquisition Policy, 202-208-4949 or email
The provision at 52.207-4, Economic Purchase Quantity—Supplies, invites offerors to state an opinion on whether the quantity of supplies on which bids, proposals, or quotes are requested in solicitations is economically advantageous to the Government. Each offeror who believes that acquisitions in different quantities would be more advantageous is invited to (1) recommend an economic purchase quantity, showing a recommended unit and total price, and (2) identify the different quantity points where significant price breaks occur. This information is required by Public Law 98-577 and Public Law 98-525.
Public comments are particularly invited on: Whether this collection of information is necessary for the proper performance of functions of the Federal Acquisition Regulation (FAR), and whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Obtaining Copies of Proposals: Requesters may obtain a copy of the information collection documents from the General Services Administration, Regulatory Secretariat Division (MVCB), 1800 F Street NW., Washington, DC 20405, telephone 202-501-4755.
Please cite OMB Control No. 9000-0082, Economic Purchase Quantity—Supplies, in all correspondence.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for public comments regarding an extension of an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve an extension of a previously approved information collection requirement concerning Price Redetermination.
Submit comments on or before February 29, 2016.
Submit comments identified by Information Collection 9000-0071, Price Redetermination, by any of the following methods:
•
Submit comments via the Federal eRulemaking portal by searching the OMB control number. Select the link “Submit a Comment” that corresponds with “Information Collection 9000-0071, Price Redetermination”. Follow the instructions provided at the “Submit a Comment” screen. Please include your name, company name (if any), and “Information Collection 9000-0071, Price Redetermination” on your attached document.
•
Mr. Curtis E. Glover, Sr., Procurement Analyst, Office of Governmentwide Acquisition Policy, GSA, (202) 501-1448 or email
FAR 16.205, Fixed-price contracts with prospective price redetermination, provides for firm fixed prices for an initial period of the contract with prospective redetermination at stated times during performance. FAR 16.206, Fixed price contracts with retroactive price redetermination, provides for a fixed ceiling price and retroactive price redetermination within the ceiling after completion of the contract. In order for the amounts of price adjustments to be determined, the firms performing under these contracts must provide information to the Government regarding their expenditures and anticipated costs.
Public comments are particularly invited on: Whether this collection of information is necessary; whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Please cite OMB Control No. 9000-0071, Price Redetermination, in all correspondence.
Department of Energy.
Notice of open meeting.
This notice announces a meeting of the Environmental Management Site-Specific Advisory Board (EM SSAB), Nevada. The Federal Advisory Committee Act (Pub. L. 92-463, 86 Stat. 770) requires that public notice of this meeting be announced in the
Wednesday, January 20, 2016, 5:00 p.m.
Beatty Community Center, 100 A Avenue South, Beatty, Nevada 89003.
Barbara Ulmer, Board Administrator, 232 Energy Way, M/S 505, North Las Vegas, Nevada 89030. Phone: (702) 630-0522; Fax (702) 295-5300 or Email:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
This notice establishes the agenda and topics for discussion at the technical conference to be held on January 28, 2016, to discuss issues related to supply chain risk management. The technical conference will start at 10:00 a.m. and end at approximately 4:30 p.m. (Eastern Time) in the Commission Meeting Room at the Commission's Headquarters, 888 First Street NE., Washington, DC. The technical conference will be led by Commission staff, and FERC Commissioners may be in attendance. All interested parties are invited to attend, and registration is not required.
The topics and related questions to be discussed during this conference are provided as an attachment to this Notice. The purpose of the technical conference is to facilitate a structured dialogue on supply chain risk management issues identified by the Commission in the Revised Critical Infrastructure Protection Standards Notice of Proposed Rulemaking (NOPR) issued in this proceeding and raised in public comments to the NOPR. Prepared remarks will be presented by invited panelists.
This event will be webcast and transcribed. The free webcast allows listening only. Anyone with Internet access who desires to listen to this event can do so by navigating to the “FERC Calendar” at
FERC conferences are accessible under section 508 of the Rehabilitation Act of 1973. For accessibility accommodations, please send an email to
There is no fee for attendance. However, members of the public are encouraged to preregister online at:
For more information about the technical conference, please contact: Sarah McKinley, Office of External Affairs, 202-502-8368,
In a July 16, 2015 Notice of Proposed Rulemaking (NOPR) in the above-captioned docket, the Commission proposed to direct the North American Electric Reliability Corporation (NERC) to develop new or modified Critical Infrastructure Protection (CIP) Reliability Standards to provide security controls relating to supply chain risk management for industrial control system hardware, software, and services. The Commission sought and received comments on this proposal, including: (1) The NOPR proposal to direct that NERC develop a Reliability Standard to address supply chain risk management; (2) the anticipated features of, and requirements that should be included in, such a standard; and (3) a reasonable timeframe for development of a standard. The purpose of this conference is to clarify issues, share information, and determine the proper response to address security control and supply chain risk management concerns.
The Commission staff seeks information about the need for a new or modified Reliability Standard to manage supply chain risks for industrial control system hardware, software, and computing and networking services associated with bulk electric system operations. Panelists are encouraged to address:
• Identify challenges faced in managing supply chain risk.
• Describe how the current CIP Standards provide supply chain risk management controls.
• Describe how the current CIP Standards incentivize or inhibit the introduction of more secure technology.
• Identify possible other approaches that the Commission can take to mitigate supply chain risks.
The Commission staff seeks information about the scope and implementation of a new or modified Standard to manage supply chain risks for industrial control system hardware, software, and computing and networking services associated with bulk electric system operations. Panelists are encouraged to address:
• Identify types of assets that could be better protected with a new or modified Standard.
• Identify supply chain processes that could be better protected by a Standard.
• Identify controls or modifications that could be included in the Standard.
• Identify existing mandatory or voluntary standards or security guidelines that could form the basis of the Standard.
• Address how the verification of supply chain risk mitigation could be measured, benchmarked and/or audited.
• Present and justify a reasonable timeframe for development and implementation of a Standard.
• Discuss whether a Standard could be a catalyst for technical innovation and market competition.
The Commission staff seeks information about existing supply chain risk management efforts for information and communications technology and industrial control system hardware, software, and services in other critical infrastructure sectors and the government. Panelists are encouraged to address:
• Generally describe how registered entities and other organizations currently manage supply chain issues.
• Identify standards or guidelines that are used to establish supply chain risk management practices. Specifically, discuss experience under those standards or guidelines.
• Identify organizational roles involved in the development and implementation of supply chain risk management practices.
• Generally describe approaches for identifying, evaluating, mitigating, and monitoring supply chain risk.
• Generally discuss how supply chain risk is addressed in the contracting process with vendors and suppliers.
• Generally describe the capabilities that registered entities currently have to inspect third party information security practices.
• Generally describe the capabilities that registered entities currently have to negotiate for additional security in their hardware, software, and service contracts. Describe how this may vary based on the potential vendor or supplier and the type of service to be provided.
• Generally describe how vendors and suppliers are managing risk in their supply chain.
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j. Deadline for filing comments, motions to intervene and protests, is 30 days from the issuance date of this notice. The Commission strongly encourages electronic filing. Please file motions to intervene, protests, comments, and recommendations, using the Commission's eFiling system at
k.
l.
m.
n. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
o.
p.
Take notice that during the month of November 2015, the status of the above-captioned entities as Exempt Wholesale Generators became effective by operation of the Commission's regulations. 18 CFR 366.7(a).
On June 5, 2015, Texas Gas Transmission, LLC (Texas Gas) filed an application in Docket No. CP15-513 requesting a Certificate of Public Convenience and Necessity pursuant to section 7(c) of the Natural Gas Act to construct and operate certain natural gas pipeline facilities. The proposed project is known as the Northern Supply Access Project (Project), and would allow Texas Gas to provide an additional 384,000 million standard cubic feet per day of natural gas of north to south transportation capacity on Texas Gas's system while maintaining bi-directional flow capability on its system.
On June 17, 2015, the Federal Energy Regulatory Commission (Commission or FERC) issued its Notice of Application for the Project. Among other things, that notice alerted agencies issuing federal authorizations of the requirement to complete all necessary reviews and to reach a final decision on a request for a federal authorization within 90 days of the date of issuance of the Commission staff's Environmental Assessment (EA) for the Project. This instant notice identifies the FERC staff's planned schedule for the completion of the EA for the Project.
If a schedule change becomes necessary, additional notice will be provided so that the relevant agencies are kept informed of the Project's progress.
Texas Gas proposes to construct, install, own, operate, and maintain the proposed Northern Supply Access Project, which would involve modifications at eight existing compressor stations in Morehouse Parish, Louisiana; Coahoma County, Mississippi; Tipton County, Tennessee; Webster, Breckinridge, and Jefferson Counties, Kentucky; and Lawrence and Dearborn Counties, Indiana. Texas Gas would also add one new 23,877 horsepower compressor station in Hamilton County, Ohio.
On September 4, 2015, the Commission issued a
In order to receive notification of the issuance of the EA and to keep track of all formal issuances and submittals in specific dockets, the Commission offers a free service called eSubscription. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Additional information about the Project is available from the Commission's Office of External Affairs at (866) 208-FERC or on the FERC Web site (
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that on December 22, 2015, pursuant to Rule 202 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.202 (2014), Breitburn Operating LP (Breitburn), filed a petition for temporary waiver of Interstate Commerce Act sections 6 and 20, and the Commission's related oil pipeline tariff and reporting requirements at 18 CFR parts 341 and 357, with respect to certain oil pipeline gathering facilities in Oklahoma which transport production from producing areas known as the Postle Field Units. Breitburn states it has 100 percent ownership and title to all throughput on the facilities which connect to Jayhawk pipeline for ultimate transportation to downstream markets.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214 (2014)) on or before 5:00 p.m. Eastern time on the specified comment date. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on Tapstone.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency has submitted an information collection request (ICR), “National Water Quality Inventory Reports (Renewal)” (EPA ICR No. 1560.11, OMB Control No. 2040-0071) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before January 29, 2016.
Submit your comments, referencing Docket ID Number EPA-HQ-OW-2003-0026, to (1) EPA online using
The EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Charles Kovatch, Assessment and Watershed Protection Division, Office of Water, Mail Code: 4503T, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number: 202-566-0399; email address:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
EPA's Assessment and Watershed Protection Division (AWPD) works with its Regional counterparts to review and approve or disapprove State Section 303(d) lists and TMDLs from 56 respondents (the 50 States, the District of Columbia, and the five Territories). Section 303(d) specifically requires States to develop lists and TMDLs “from time to time,” and EPA to review and approve or disapprove the lists and the TMDLs. EPA also collects State 305(b) reports from 59 respondents (the 50 States, the District of Columbia, five Territories, and 3 River Basin Commissions).
During the period covered by this ICR renewal, respondents will: Complete their 2016 Section 305(b) reports and 2016 Section 303(d) lists; complete their 2018 Section 305(b) reports and 2018 Section 303(d) lists; transmit annual electronic updates of ambient monitoring data via the Water Quality Exchange; and continue to develop TMDLs according to their established schedules. EPA will prepare biennial updates on assessed and impaired waters for Congress and the public for the 2016 reporting cycle and for the 2018 cycle, and EPA will review 303(d) list and TMDL submissions from respondents.
Federal Accounting Standards Advisory Board.
Notice.
The Exposure Draft is available on the FASAB home page
Respondents are encouraged to comment on any part of the exposure draft. Written comments are requested by February 4, 2016, and should be sent to
Ms. Wendy M. Payne, Executive Director, 441 G St. NW., Mail Stop 6H20, Washington, DC 20548, or call (202) 512-7350.
Federal Advisory Committee Act, Pub. L. 92-463.
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees. The FCC may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number.
Written PRA comments should be submitted on or before February 29, 2016. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Cathy Williams, FCC, via email
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
47 CFR 76.1607 states that cable operators shall provide written notice by certified mail to all stations carried on its system pursuant to the must-carry rules at least 60 days prior to any change in the designation of its principal headend.
47 CFR 76.1617(a) states within 60 days of activation of a cable system, a cable operator must notify all qualified NCE stations of its designated principal headend by certified mail.
47 CFR 76.1617(b) within 60 days of activation of a cable system, a cable operator must notify all local commercial and NCE stations that may not be entitled to carriage because they either:
(1) Fail to meet the standards for delivery of a good quality signal to the cable system's principal headend, or
(2) May cause an increased copyright liability to the cable system.
47 CFR 76.1617(c) states within 60 days of activation of a cable system, a cable operator must send by certified mail a copy of a list of all broadcast television stations carried by its system and their channel positions to all local commercial and noncommercial television stations, including those not designated as must-carry stations and those not carried on the system.
47 CFR 76.1708(a) states that the operator of every cable television system shall maintain for public inspection the designation and location of its principal headend. If an operator changes the designation of its principal headend, that new designation must be included in its public file.
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written comments should be submitted on or before January 29, 2016. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contacts below as soon as possible.
Direct all PRA comments to Nicholas A. Fraser, OMB, via email
For additional information or copies of the information collection, contact Cathy Williams at (202) 418-2918. To view a copy of this information collection request (ICR) submitted to OMB: (1) Go to the Web page <
Total Annual Costs: $1,387,950.
Section 76.59(a) of the Commission's Rules authorizes the filing of market modification petitions and governs who may file such a petition. With respect to cable market modification petitions, a commercial TV broadcast station and cable system operator may file a market modification petition to modify the local television market of a particular commercial television broadcast station for purposes of cable carriage rights. With respect to satellite market modification petitions, a commercial TV broadcast stations, satellite carrier and county governmental entity (such as a county board, council, commission or other equivalent subdivision) may file a market modification petition to modify the local television market of a particular commercial television broadcast station for purposes of satellite carriage rights. Section 76.59(b) of the Commission's Rules requires that market modification petitions and responsive pleadings (
Section 338(l)(3) of the Communications Act provides that “[a] market determination . . . shall not create additional carriage obligations for a satellite carrier if it is not technically and economically feasible for such carrier to accomplish such carriage by means of its satellites in operation at the time of the determination.” If a satellite carrier opposes a market modification petition because the resulting carriage would be technically or economically infeasible pursuant to Section 338(l)(3), the carrier must provide specific evidence in its opposition or response to a pre-filing coordination request (see below) to demonstrate its claim of infeasibility. If the satellite carrier is claiming infeasibility based on insufficient spot beam coverage, then the carrier may instead provide a detailed certification submitted under penalty of perjury. Although the Commission will not require satellite carriers to provide supporting documentation as part of their certification, the Commission may decide to look behind any certification and require supporting documentation when it deems it appropriate, such as when there is evidence that the certification may be inaccurate. In the event that the Commission requires supporting documentation, it will require a satellite carrier to provide its “satellite link budget” calculations that were created for the new community. Because the Commission may determine in a given case that supporting documentation should be provided to support a detailed certification, satellite carriers are required to retain such “satellite link budget” information in the event that the Commission determines further review by the Commission is necessary. Satellite carriers must retain such information throughout the pendency of Commission or judicial proceedings involving the certification and any related market modification petition. If satellite carriers have concerns about providing proprietary and confidential information underlying their analysis, they may request confidentiality.
The Report and Order establishes a “pre-filing coordination” process that will allow a prospective petitioner for market modification (
47 CFR Section 76.66(d)(6) addresses satellite carriage after a market modification is granted by the Commission. The rule states that television broadcast stations that become eligible for mandatory carriage with respect to a satellite carrier (pursuant to § 76.66) due to a change in the market definition (by operation of a market modification pursuant to § 76.59) may, within 30 days of the effective date of the new definition, elect retransmission consent or mandatory carriage with respect to such carrier. A satellite carrier shall commence carriage within 90 days of receiving the carriage election from the television broadcast station. The election must be made in accordance with the requirements of 47 CFR Section 76.66(d)(1).
Under 47 CFR 64.1510 of the Commission's rules, telephone bills containing charges for interstate pay-per-call and other information services must include information detailing consumers' rights and responsibilities with respect to these charges. Specifically, telephone bills carrying pay-per-call charges must include a consumer notification stating that: (1) The charges are for non-communication services; (2) local and long distance telephone services may not be disconnected for failure to pay per-call charges; (3) pay-per-call (900 number) blocking is available upon request; and (4) access to pay-per-call services may be involuntarily blocked for failure to pay per-call charges. In addition, each call billed must show the type of services, the amount of the charge, and the date, time, and duration of the call. Finally, the bill must display a toll-free number which subscribers may call to obtain information about pay-per-call services. Similar billing disclosure requirements apply to charges for information services either billed to subscribers on a collect basis or accessed by subscribers through a toll-free number. The billing disclosure requirements are intended to ensure that telephone subscribers billed for pay-per-call or other information services can understand the charges levied and are informed of their rights and responsibilities with respect to payment of such charges.
Federal Communications Commission.
Notice.
This document updates and supplements information on procedures for the Broadcast Incentive Auction.
This is a summary of the
1. The Wireless Telecommunications Bureau (Bureau) updates and supplements information provided in the
2. The Bureau will make available an interactive, online tutorial focusing on the pre-auction application process for the forward auction (Auction 1002) no later than January 19, 2016. The pre-auction application process tutorial will be accessible from the Commission's Auction 1002 Web page at
3. As previously described in the
4. Each reverse auction (Auction 1001) applicant permitted to make an initial commitment must do so in the Auction System using a SecurID® token. The Bureau will therefore provide SecurID® tokens prior to the initial commitment deadline.
5. As explained in the
6. Once the initial clearing target has been determined based on initial commitments, an applicant that was permitted to make an initial commitment will receive a third confidential status letter (Final Confidential Status Letter) notifying the applicant for each complete station whether or not the station is qualified to bid in the clock rounds of the reverse auction. An applicant with one or more qualified stations will be eligible to participate in a mock auction prior to bidding in the clock rounds of the reverse auction. Additional instructions for participating in the mock auction and for placing bids in the clock rounds of the reverse auction, using the applicant's previously received SecurID® tokens, will be provided to each applicant that has at least one station qualified to bid. Any applicant with a station that is not qualified to bid in the reverse auction clock rounds will not be able to place clock round bids for that station in the Auction System.
7. As described in the
8. Each applicant listed as a qualified bidder in the
9. In the
10. The Bureau makes ministerial changes to two of the appendices released with the
11. The Bureau also notes that in Section 3.2 of APPENDIX E to the
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees. The FCC may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written PRA comments should be submitted on or before February 29, 2016. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Nicole Ongele, FCC, via email to
For additional information about the information collection, contact Nicole Ongele at (202) 418-2991.
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees. The FCC may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written PRA comments should be submitted on or before February 29, 2016. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Cathy Williams, FCC, via email
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
Federal Communications Commission.
Notice.
This document provides guidance regarding reverse auction participation by parties to pending transactions involving broadcast television licenses.
This is a summary of the
1. The Wireless Telecommunications Bureau (Bureau) recently waived the bar on the assignment of a license in, or transfer of control of an applicant for, the reverse auction, provided that (1) the assignment or transfer application has been accepted for filing as of January 12, 2016, the reverse auction application filing deadline, and (2) the assignee or transferee agrees to be bound by the original applicant's actions in the auction with respect to the license(s). Subject to these two requirements and Commission approval, assignments and transfers involving participating licensees may be consummated during the reverse auction.
2. Reverse auction participants will utilize the FCC Registration Number (FRN) and related password associated with a station to access the application and bidding systems (collectively, the Auction System) with respect to that station. The Bureau has frozen the FRN data in the Auction System as of December 8, 2015, the opening date for the reverse auction filing window. An assignee/transferee in a pending transaction that is approved and consummated until the completion of
3. With regard to the second option, the auction FRN and password will also provide access to the assignor/transferor's data in Commission licensing and other systems associated with that FRN. To prevent the assignee/transferee from accessing the information related to the stations the assignor/transferor may retain, the assignor/transferor may obtain a new FRN and password for those stations. Additionally, the auction FRN and password will provide access to the assignor/transferor's bidding information for any stations associated with the auction FRN. Thus, if a transaction involves fewer than all the licenses associated with the auction FRN, the assignee/transferee and the assignor/transferor would both have access to the same bidding information regarding all the licenses associated with that auction FRN that are in the reverse auction.
4. As a result, the parties to a pending transaction must acknowledge that the Commission is not liable for their use of any systems or information accessed as a result of a shared FRN and password under the second option. The parties may also want to contractually limit the assignee/transferee's right to access and/or use any such systems or information. Finally, the parties are subject to the rule prohibiting communication of an incentive auction applicant's bids and bidding strategies.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)).
The comment period for this application has been extended. Comments regarding this application must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than January 31, 2016.
A. Federal Reserve Bank of Cleveland (Nadine Wallman, Vice President) 1455 East Sixth Street, Cleveland, Ohio 44101-2566:
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The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than January 13, 2016.
A. Federal Reserve Bank of Atlanta (Chapelle Davis, Assistant Vice President) 1000 Peachtree Street NE., Atlanta, Georgia 30309:
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B. Federal Reserve Bank of Minneapolis (Jacquelyn K. Brunmeier, Assistant Vice President) 90 Hennepin Avenue, Minneapolis, Minnesota 55480-0291:
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The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than January 22, 2016.
A. Federal Reserve Bank of Atlanta (Chapelle Davis, Assistant Vice President) 1000 Peachtree Street NE., Atlanta, Georgia 30309:
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Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for comments regarding an extension of an information collection requirement for an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve an extension of a previously approved information collection requirement concerning Contractors Performing Private Security Functions Outside the United States.
Submit comments on or before February 29, 2016.
Submit comments identified by Information Collection 9000-0184, Contractors Performing Private Security Functions Outside the United States, by any of the following methods:
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Mr. Michael O. Jackson, Procurement Analyst, Governmentwide Acquisition Policy, at 202-208-4949 or email
Section 862 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2008, as amended by section 853 of the NDAA for FY 2009 and sections 831 and 832 of the NDAA for FY 2011, together with the required Governmentwide implementing regulations (32 CFR part 159, published at 76 FR 49650 on August 11, 2011), as amended, adds requirements and limitations for contractors performing private security functions in areas of combat operations, or other military operations as designated by the Secretary of Defense, upon agreement of the Secretaries of Defense and State.
These requirements are that contractors performing in areas such as Iraq and Afghanistan ensure that their personnel performing private security functions comply with 32 CFR part 159, including (1) accounting for Government-acquired and contractor-furnished property and (2) reporting incidents in which a weapon is discharged, personnel are attacked or killed or property is destroyed, or active, lethal countermeasures are employed.
Public comments are particularly invited upon; Whether this collection of information is necessary for the proper performance of functions of the Federal Acquisition Regulations (FAR), and whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by January 29, 2016.
When commenting on the proposed information collections, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be received by the OMB desk officer via one of the following transmissions: OMB, Office of Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax Number: (202) 395-5806 or Email:
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
Reports Clearance Office at (410) 786-1326.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
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Collecting voluntary customer feedback is the least burdensome, most effective way for the Agency to determine whether or not its public Web sites are useful to and used by its customers. Generic clearance is needed to ensure that the Agency can continuously improve its Web sites though regular surveys developed from these pre-defined questions. Surveying the Agency Web sites on a regular, ongoing basis will help ensure that users have an effective, efficient, and satisfying experience on any of the Web sites, maximizing the impact of the information and resulting in optimum benefit for the public. The surveys will ensure that this communication channel meets customer and partner priorities, builds the Agency's brands, and contributes to the Agency's health and human services impact goals. Note that the burden estimate for the collection has increased from the figure published in the 60-day notice (80 FR 66904). In the 60-day notice, we did not account for the currently approved burden that will be retained and then add it to the new burden for which we are seeking approval. The total is now 50,000 hours.
Food and Drug Administration, HHS.
Notice; withdrawal.
The Food and Drug Administration (FDA or we) is announcing the withdrawal of a draft guidance for industry, entitled “Draft Guidance for Industry: Acidified Foods.” The draft guidance was intended to complement our regulations regarding acidified foods (including regulations for specific current good manufacturing practice, establishment registration, and process filing) by helping commercial food processors
The withdrawal is effective December 30, 2015.
Michael Mignogna, Center for Food Safety and Applied Nutrition (HFS-302), Food and Drug Administration, 5100 Paint Branch Pkwy., College Park, MD 20740, 240-402-1565.
In a notice published in the
We are withdrawing the draft guidance, in part, because the procedures for voluntary submission of process filings by processors of non-acidified foods are addressed by our recently issued guidance entitled “Submitting Form FDA 2541 (Food Canning Establishment Registration) and Forms FDA 2541d, FDA 2541e, FDA 2541f, and FDA 2541g (Food Process Filing Forms) to FDA in Electronic or Paper Format” (80 FR 60909, October 8, 2015). We also are withdrawing the draft guidance, in part, because we recently issued a final rule entitled “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food” (80 FR 55908, September 17, 2015), and that rule, along with guidance documents we are developing as a companion to that rule, should help processors in ensuring safe manufacturing, processing, and packing processes and in employing appropriate quality control procedures.
Assistant Secretary for Planning and Evaluation, HHS.
Notice of meeting.
This notice announces the public meeting of the Advisory Council on Alzheimer's Research, Care, and Services (Advisory Council). The Advisory Council on Alzheimer's Research, Care, and Services provides advice on how to prevent or reduce the burden of Alzheimer's disease and related dementias on people with the disease and their caregivers. During the January meeting, the Advisory Council will review the process for developing recommendations and developing the National Plan to Address Alzheimer's Disease, discuss updates to work on Goals 2 and 3 of the National Plan, and hear updates on a future summit on care.
The meeting will be held on January 25, 2016 from 9:30 a.m. to 5:00 p.m. EDT.
The meeting will be held in Room 6, Building 31 of the National Institutes of Health, 9000 Rockville Pike, Bethesda, Maryland 20892.
Rohini Khillan (202) 690-5932,
Notice of these meetings is given under the Federal Advisory Committee Act (5 U.S.C. App. 2, section 10(a)(1) and (a)(2)). Topics of the Meeting:
During the January meeting, the Advisory Council will review the process for developing recommendations and developing the National Plan to Address Alzheimer's Disease, discuss updates to work on Goals 2 and 3 of the National Plan, and hear updates on a future summit on care.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Date: January 22, 2016.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The contract proposals and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the contract proposals, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
National Institutes of Health.
Notice.
The invention listed below is owned by an agency of the U.S. Government and is available for licensing and/or co-development in the U.S. in accordance with 35 U.S.C. 209 and 37 CFR part 404 to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing and/or co-development.
Only written comments and/or applications for a license which are received by the National Cancer Institute, Technology Transfer Center on or before January 29, 2016 will be considered.
Invention Development and Marketing Unit, Technology Transfer Center, National Cancer Institute, 9609 Medical Center Drive, Mail Stop 9702, Rockville, MD, 20850-9702, Tel. 240-276-5515 or email
Information on licensing and co-development research collaborations, and copies of the U.S. patent applications listed below may be obtained by contacting: Attn. Invention Development and Marketing Unit, Technology Transfer Center, National Cancer Institute, 9609 Medical Center Drive, Mail Stop 9702, Rockville, MD 20850-9702, Tel. 240-276-5515 or email
Technology description follows.
Fibroblast Growth Factor Receptor 4 (FGFR4) is a cell surface protein that is highly expressed in RMS, and other cancers (including liver, lung, pancreatic, ovarian, and prostate cancers). Researchers in the National Cancer Institute's Genetics-Branch found that in RMS patients, high FGFR4 expression is often associated with advanced-stage disease, rapid disease progression, and poor survival. The correlation between FGFR4 expression and highly aggressive RMS makes FGFR4 an attractive target for treatment of RMS. By targeting FGFR4 specifically, it may be possible to attack the cancer cells while leaving healthy, essential cells unaffected. This invention concerns the generation of several high-affinity monoclonal antibodies which can be used to treat FGFR4-related diseases. In particular, these antibodies have been used to generate antibody-drug conjugates (ADCs) and chimeric antigen receptors (CARs) which are capable of specifically targeting and killing diseased cells.
Javed Khan, M.D. (NCI), S. Baskar (NCI), R.J. Orientas (Lentigen Technology, Inc.)
U.S. Provisional Patent Application No. 62/221,045 filed September 20, 2015 entitled “Monoclonal Antibodies Fibroblast Growth Factor Receptor 4 (FGFR4) and Methods for Their Use” [HHS Reference E-264-2015/0-US-01]
The National Cancer Institute seeks partners to license or co-develop the development new antibody-based therapies for metastatic Rhabdomyosarcoma (RMS).
Requests for copies of the patent application or inquiries about licensing and/or research collaboration and co-development opportunities should be sent to John D. Hewes, Ph.D., email:
National Institutes of Health, Public Health Service, HHS.
Notice.
The invention listed below is owned by an agency of the U.S. Government and is available for licensing and/or co-development in the U.S. in accordance with 35 U.S.C. 209 and 37 CFR part 404 to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing and/or co-development.
Only written comments and/or applications for a license which are received by the NCI Technology Transfer Center on or before January 29, 2016 will be considered.
Technology Transfer Center, National Cancer Institute, 9609 Medical
Information on licensing and co-development research collaborations, and copies of the U.S. patent applications listed below, may be obtained by contacting: Attn. Invention Development and Marketing Unit, Technology Transfer Center, National Cancer Institute, 9609 Medical Center Drive, Mail Stop 9702, Rockville, MD 20850-9702, Tel. 240-276-5515 or email
Nigel H. Greig (NIA), Weiming Luo (NIA), David Tweedie (NIA), William Douglas Figg, Sr. (NCI), Neil Vargesson (Univ. Aberdeen, Scotland), and Shaunna Beedie (NCI & Univ. Aberdeen, Scotland)
U.S. Provisional Patent Application No. 62/235, 105, filed September 30, 2015, entitled “Thalidomide/lenolidomide/pomalidomide analogs that inhibit inflammation, angiogenesis”
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The contract proposals and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the contract proposals, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Notice is hereby given of a correction in the meeting notice of the Big Data to Knowledge Multi-Council Working Group (BD2K) that was published in the
The date of the meeting is January 11, 2016. The time and meeting access codes remain the same.
A portion of the meeting is open to the public, 11 a.m. to 12:00 p.m. and is being held by teleconference only. No physical meeting location is provided for any interested individuals to listen to committee discussions. Any individual interested in listening to the meeting discussions must call: 1-866-692-3158 and use Passcode 2956317 for access to the meeting.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
National Institutes of Health, HHS.
Notice.
The invention listed below is owned by an agency of the U.S. Government and is available for licensing and/or co-development in the U.S. in accordance with 35 U.S.C. 209 and 37 CFR part 404 to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing and/or co-development.
Only written comments and/or applications for a license which are received by the National Cancer Institute, Technology Transfer Center on or before January 29, 2016 will be considered.
Invention Development and Marketing Unit, Technology Transfer Center, National Cancer Institute, 9609 Medical Center Drive, Mail Stop 9702, Rockville, MD, 20850-9702.
Information on licensing and co-development research collaborations, and copies of the U.S. patent applications listed below may be
Technology description follows.
Researchers at the National Cancer Institute's Experimental Transplantation and Immunology Branch developed a CAR that recognizes human tumor necrosis factor receptor superfamily member 8 (TNFRSF8, also known as CD30). The expression of CD30 is deregulated in a variety of human cancers, including many lymphomas. By creating a CAR that recognizes CD30, it may be possible to treat these cancers using adoptive cell therapy.
—Treatment of human cancers associated with expression of CD30 or variants thereof
—Specific cancers include: Non-Hodgkins Lymphomas, Hodgkin's Lymphomas, several solid malignancies
—Human components are less likely to cause adverse or neutralizing immune response in patients
—Targeted therapies decrease non-specific killing of healthy cells and tissues, resulting in fewer off-target side-effects and healthier patients
Requests for copies of the patent application or inquiries about licensing and/or research collaboration and co-development opportunities should be sent to John D. Hewes. Ph.D., email:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
U.S. Citizenship and Immigration Services, Department of Homeland Security.
60-day notice.
The Department of Homeland Security (DHS), U.S. Citizenship and Immigration (USCIS) invites the general public and other Federal agencies to comment upon this proposed extension of a currently approved collection of information. In accordance with the Paperwork Reduction Act (PRA) of 1995, the information collection notice is published in the
Comments are encouraged and will be accepted for 60 days until February 29, 2016.
All submissions received must include the OMB Control Number 1615-0014 in the subject box, the agency name and Docket ID USCIS-2006-0072. To avoid duplicate submissions, please use only
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USCIS, Office of Policy and Strategy, Regulatory Coordination Division, Laura Dawkins, Chief, 20 Massachusetts Avenue NW., Washington, DC 20529-2140, telephone number 202-272-8377 (This is not a toll-free number. Comments are not accepted via telephone message). Please note contact information provided here is solely for questions regarding this notice. It is not for individual case status inquiries. Applicants seeking information about the status of their individual cases can check Case Status Online, available at the USCIS Web site at
You may access the information collection instrument with instructions, or additional information by visiting the Federal eRulemaking Portal site at:
Written comments and suggestions from the public and affected agencies should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
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Bureau of Land Management, Department of the Interior.
Public land order.
This order partially revokes the withdrawal created by Public Land Order No. 1378 insofar as it affects 21.91 acres reserved for the use of the United States Forest Service as the Sunshine Campground. This order also opens the land to appropriation and use of all kinds under the public land laws, except for the United States mining laws.
Valerie Hunt, U.S. Forest Service, Rocky Mountain Region 2, 303-275-5071; or Steve Craddock, Bureau of Land Management, Colorado State Office, 303-239-3707; or write: Land Tenure Program Lead, BLM Colorado State Office, 2850 Youngfield Street, Lakewood, Colorado 80215-7093. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 to contact the above individuals. The FIRS is available 24 hours a day, 7 days a week, to leave a message or question. You will receive a reply during normal business hours.
The United States Forest Service determined that a portion of the land withdrawn and reserved for the Sunshine Campground is not needed for picnic or recreation use, and has requested a partial revocation of the withdrawal. The land will remain segregated from the United States mining laws due to a pending land exchange proposal.
By virtue of the authority vested in the Secretary of the Interior by Section 204 of the Federal Land Policy and Management Act of 1976, 43 U.S.C. 1714, it is ordered as follows:
1. The withdrawal created by Public Land Order No. 1378 (22 FR 240 (1957)) is hereby revoked in part as to the following described land:
Sec. 20, lot 11.
The area described contains 21.91 acres in San Miguel County.
2. At 9 a.m. on December 30, 2015, subject to valid existing rights, the provisions of existing withdrawals, other segregations of record, and the requirements of applicable law, the land described in Paragraph 1 is hereby opened to such forms of disposition as may be made of National Forest System
Bureau of Land Management, Interior.
Notice of filing of plats of surveys.
The Bureau of Land Management (BLM) has officially filed the plats of survey of the lands described below in the BLM Idaho State Office, Boise, Idaho, effective 9:00 a.m., on the dates specified.
Bureau of Land Management, 1387 South Vinnell Way, Boise, Idaho 83709-1657.
These surveys were executed at the request of the Bureau of Land Management to meet their administrative needs. The lands surveyed are:
The plat representing the dependent resurvey of portions of the west boundary and subdivisional lines, and subdivision of sections 29 and 31, Township 26 North, Range 2 East, of the Boise Meridian, Idaho, Group Number 1393, was accepted October 8, 2015.
These surveys were executed at the request of the Bureau of Indian Affairs to meet certain administrative and management purposes. The lands surveyed are:
The plat representing the dependent resurvey of portions of the Boise Meridian (east boundary), subdivisional lines, subdivision of sections 12, 13, 24, and 25, and 1912 meanders of the Kootenai River in section 12, and the survey of the 2012-2014 meanders of the Kootenai River in sections 24 and 25, Township 63 North, Range 1 West, of the Boise Meridian, Idaho, Group Number 1380, was accepted October 22, 2015.
Bureau of Land Management, Interior.
Public Land Order.
This order extends the duration of the withdrawal created by Public Land Order No. 7177 for an additional 20-year period, which would otherwise expire on December 20, 2015. The extension is necessary for continued protection of the investment of Federal funds in the United States Forest Service Glacier Loop Administrative Site near Juneau, Alaska.
Renee Fencl, Bureau of Land Management Alaska State Office, 222 West 7th Avenue, No. 13, Anchorage, Alaska 99513-7504, 907-271-5067 or
The purpose for which the withdrawal was first made requires this extension to continue protection of the investment of Federal funds in the U.S. Forest Service Glacier Loop Administrative Site.
By virtue of the authority vested in the Secretary of the Interior by Section 204 of the Federal Land Policy and Management Act of 1976, 43 U.S.C. 1714, it is ordered as follows:
Public Land Order No. 7177 (60 FR 66150 (1995)), which withdrew 22.51 acres of public land near Juneau, Alaska from settlement, sale, location, or entry under the general land laws, including the United States mining laws, to protect the U.S. Forest Service Glacier Loop Administrative Site, is hereby extended for an additional 20-year period. This withdrawal will expire on December 20, 2035, unless, as a result of a review conducted prior to the expiration date pursuant to Section 204(f) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. 1714(f), the Secretary determines that the withdrawal shall be further extended.
National Park Service, Interior.
Notice.
The National Park Service is soliciting comments on the significance of properties nominated before November 28, 2015, for listing or related actions in the National Register of Historic Places.
Comments should be submitted by January 14, 2016.
Comments may be sent via U.S. Postal Service to the National Register of Historic Places, National Park Service, 1849 C St. NW., MS 2280, Washington, DC 20240; by all other carriers, National Register of Historic Places, National Park Service, 1201 Eye St. NW., 8th floor, Washington, DC 20005; or by fax, 202-371-6447.
The properties listed in this notice are being considered for listing or related actions in the National Register of Historic Places. Nominations for their consideration were received by the National Park Service before November 28, 2015. Pursuant to section 60.13 of 36 CFR part 60, written comments are being accepted concerning the significance of the nominated properties under the National Register criteria for evaluation.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
60.13 of 36 CFR part 60
On December 18, 2015, the Department of Justice lodged a proposed Consent Decree with the United States District Court for the District of Kansas in the lawsuit entitled
The United States filed this lawsuit under the Clean Air Act. The United States' complaint seeks injunctive relief and civil penalties for violations of the regulations that govern sales of substitutes for ozone-depleting substances at the defendant's facility in Wichita, Kansas.
The publication of this notice opens a period for public comment on the Consent Decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and should refer to
During the public comment period, the Consent Decree may be examined and downloaded at this Justice Department Web site:
Please enclose a check or money order for $6.25 (25 cents per page reproduction cost) payable to the United States Treasury.
Nuclear Regulatory Commission.
Notice of submission to the Office of Management and Budget; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) has recently submitted a request for renewal of an existing collection of information to the Office of Management and Budget (OMB) for review. The information collection is entitled, “NRC Form 398, Personal Qualification Statement—Licensee.”
Submit comments by January 29, 2016.
Submit comments directly to the OMB reviewer at: Vlad Dorjets, Desk Officer, Office of Information and Regulatory Affairs (3150-0018), NEOB-10202, Office of Management and Budget, Washington, DC 20503; telephone: 202-395-7315, email:
Tremaine Donnell, NRC Clearance Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-6258; email:
Please refer to Docket ID NRC-2015-0174 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
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The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. All comment submissions are posted at
If you are requesting or aggregating comments from other persons for submission to the OMB, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that comment submissions are not routinely edited to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
Under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the NRC recently submitted a request for renewal of an existing collection of information to OMB for review entitled, “NRC Form 398, Personal Qualification Statement—Licensee.” The NRC hereby informs potential respondents that an agency may not conduct or sponsor, and that a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
The NRC published a
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9. An estimate of the total number of hours needed annually to comply with the information collection requirement or request: 7,225.
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For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Notice of submission to the Office of Management and Budget; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) has recently submitted a proposed collection of information to the Office of Management and Budget (OMB) for review. The information collection is entitled, “NRC Generic Letter 2016-XX, Monitoring of Neutron-Absorbing Materials in Spent Fuel Pools.”
Submit comments by January 29, 2016.
Submit comments directly to the OMB reviewer at: Vlad Dorjets, Desk Officer, Office of Information and Regulatory Affairs (3150-XXXX), NEOB-10202, Office of Management and Budget, Washington, DC 20503; telephone: 202-395-7315, email:
Tremaine Donnell, NRC Clearance Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-6258; email:
Please refer to Docket ID NRC-2015-0136 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
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The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. All comment submissions are posted at
If you are requesting or aggregating comments from other persons for submission to the OMB, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that comment submissions are not routinely edited to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
Under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the NRC recently submitted a proposed collection of information to OMB for review entitled, “NRC Generic Letter 2016-XX, Monitoring of Neutron-Absorbing Materials in Spent Fuel Pools.” The NRC hereby informs potential respondents that an agency may not conduct or sponsor, and that a person is not required to respond to, a collection of information, unless it displays a currently valid OMB control number.
The draft generic letter was published for public comment on March 11, 2014 (79 FR 13685), but without an express request for public comment on the proposed information collection as required by the Office of Management and Budget. Therefore, the NRC published a
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9.
10.
For the Nuclear Regulatory Commission.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Valerie J. Pelton, 202-268-3049.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 22, 2015, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Maria W. Votsch, 202-268-6525.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 22, 2015, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Valerie J. Pelton, 202-268-3049.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 22, 2015, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Valerie J. Pelton, 202-268-3049.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 22, 2015, it filed with the Postal Regulatory Commission a
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes [sic] amend the Exchange's transaction fees at Chapter XV, entitled “Options Pricing,” Section 10, entitled “Participant Fee—Options.”
The Exchange purposes [sic] an increase to its Participant Fee to recoup costs incurred by the Exchange. The Exchange's Participant Fee is competitive with those of other options exchanges.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to increase the NOM Participant Fee, so the Exchange can allocate its costs to various options market participants. Today, the Exchange assesses all NOM Participants a $500 per month Participant Fee. This fee was initially assessed in 2012.
The Exchange believes this Participant Fee is competitive with fees at other options exchanges.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, for example, the Commission indicated that
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .”
The Exchange's proposal to increase the NOM Participant Fee from $500 to $1,000 per month is reasonable because the Exchange is seeking to recoup costs related to membership administration. The proposed fee is competitive with fees at other options exchanges.
The Exchange's proposal to increase the NOM Participant Fee from $500 to $1,000 per month is equitable and not unfairly discriminatory because the Participant Fee will be assessed uniformly to each NOM Participant.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In terms of intra-market competition, the Exchange's proposal to increase the NOM Participant Fee from $500 to $1,000 per month does not impose an undue burden on competition because the Exchange would uniformly assess the same Participant Fee to each NOM Participant. If the proposed amendment is unattractive to market participants, it is likely that the Exchange will lose Participants. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (“Managed Fund Shares”): The REX Gold Hedged S&P 500 ETF and the REX Gold Hedged FTSE Emerging Markets ETF. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to list and trade shares (the “Shares”) of the following under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares
The Shares will be offered by Exchange Traded Concepts Trust (the “Trust”), a Delaware statutory trust. Exchange Traded Concepts, LLC will serve as the investment adviser to the Funds (“Adviser”). Vident Investment Advisory, LLC (the “Sub-Adviser”) will serve as sub-adviser to the Funds.
SEI Investments Distribution Co. (“SIDCO”), (the “Distributor”) will be the principal underwriter and distributor of the Funds' Shares. SEI Investments Global Funds Services (the “Administrator”) will serve as the administrator, custodian, transfer agent and fund accounting agent for the Funds.
Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund's portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund's portfolio.
In the event (a) the Adviser or Sub-Adviser becomes a registered broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer, or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to a portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio.
The REX Gold Hedged S&P 500 ETF—Principal Investments
According to the Registration Statement, the Fund will seek to outperform the total return performance of the S&P 500 Dynamic Gold Hedged Index (the “S&P Benchmark”) by actively hedging the returns of the S&P 500® Index using gold futures.
The Fund will seek to achieve its investment objective of outperforming the S&P Benchmark by providing exposure to a gold-hedged U.S. large-cap portfolio using a quantitative, rules-based strategy. The Fund will invest at least 80% of its assets (plus the amount of any borrowings for investment purposes) in (i) U.S. exchange-listed large-cap U.S. stocks; (ii) gold futures, (iii) exchange-traded funds (“ETFs”)
The Fund will seek to achieve a similar level of volatility as that of the S&P Benchmark, although there is no assurance it will do so.
According to the Registration Statement, the S&P Benchmark seeks to reflect the returns of a portfolio of S&P 500® stocks, hedged with a long gold futures overlay. Specifically, the S&P Benchmark measures the total return performance of a hypothetical portfolio consisting of securities that compose the S&P 500® Index, which measures the performance of the large-capitalization sector of the U.S. equity market, and a long position in gold futures contracts, the notional value of which is comparable to the value of the S&P Benchmark's equity component.
The Sub-Adviser will continuously monitor the Fund's holdings in order to enhance performance while still providing approximately equal notional exposure to equity securities and gold futures contracts.
According to the Registration Statement, futures contracts, by their terms, have stated expirations and, at a specified point in time prior to expiration, trading in a futures contract for the current delivery month will cease. Therefore, in order to maintain exposure to gold futures contracts, the S&P Benchmark must periodically migrate out of gold futures contracts nearing expiration and into gold futures contracts that have longer remaining until expiration, a process referred to as “rolling.” The impact from this continuous process of selling expiring contracts and buying longer-dated contracts is called roll yield. The S&P Benchmark rolls these futures contracts according to a predefined schedule, regardless of the liquidity or roll yield of the futures contract selected.
The Fund will look to minimize the impact of rolling futures contracts in a number of ways. For example, the Fund may roll positions in gold futures contracts before or after the scheduled roll dates for the S&P Benchmark, to the extent of favorable market prices and available liquidity. Additionally, the Fund may attempt to minimize roll costs (and maximize yields) by rolling into the gold futures contract with the largest positive or smallest negative roll yield. This strategy for taking long positions in and unwinding exposure to gold futures contracts may cause the Fund to have more or less exposure to gold futures contracts than the S&P Benchmark. Additionally, the Fund is not obligated to rebalance its exposures at the same time that the S&P Benchmark rebalances its exposures, and the Fund may rebalance more or less frequently than the S&P Benchmark in order to ensure that the Fund's exposure to equities remains comparable to the Fund's exposure to the price of gold.
The Fund will not directly hold gold futures contracts or other commodity-linked instruments (namely, commodity-related pooled vehicles (as described below) and options on commodity futures). Rather, the Fund expects to gain exposure to these instruments by investing up to 25% of its total assets, as measured at the end of every quarter of the Fund's taxable year, in a wholly-owned and controlled Cayman Islands subsidiary (the “Subsidiary”). The Subsidiary will be advised by the Adviser and the Fund's investment in the Subsidiary will primarily be intended to provide the Fund primarily with exposure to the price of gold. The Fund's investment in the Subsidiary is expected to provide the Fund with an effective means of obtaining exposure to the commodities markets in a manner consistent with U.S. federal tax law requirements applicable to registered investment companies.
According to the Registration Statement, the REX Gold Hedged FTSE Emerging Markets ETF (the “Fund”) will seek to outperform the total return performance of the FTSE Emerging Gold Overlay Index (the “FTSE Benchmark”) by actively hedging a portfolio of emerging markets securities using gold futures.
The Fund will seek to achieve its investment objective of outperforming the FTSE Benchmark by providing exposure to a gold-hedged emerging markets portfolio using a quantitative, rules-based strategy. The Fund will invest at least 80% of its assets (plus the amount of any borrowings for investment purposes) in (i) equity securities of emerging markets companies, as such companies are classified by the FTSE Benchmark
The FTSE Benchmark seeks to reflect the returns of a portfolio of Emerging Markets Securities, hedged with a long gold futures overlay. Specifically, the FTSE Benchmark measures the total return performance of a hypothetical portfolio consisting of Emerging Markets Securities and a long position in gold futures, the notional value of which is comparable to the value of the FTSE Benchmark's equity component.
The Sub-Adviser will continuously monitor the Fund's holdings in order to enhance performance while still providing approximately equal notional exposure to equity securities and gold futures contracts.
According to the Registration Statement, futures contracts, by their terms, have stated expirations and, at a specified point in time prior to expiration, trading in a futures contract for the current delivery month will cease. Therefore, in order to maintain exposure to gold futures contracts, the FTSE Benchmark must periodically migrate out of gold futures contracts nearing expiration and into gold futures contracts that have longer remaining until expiration, a process referred to as “rolling.” The impact from this continuous process of selling expiring contracts and buying longer-dated contracts is called roll yield. The FTSE Benchmark rolls these futures contracts according to a predefined schedule, regardless of the liquidity or roll yield of the futures contract selected.
The Fund will look to minimize the impact of rolling futures contracts in a number of ways. For example, the Fund may roll positions in gold futures contracts before or after the scheduled roll dates for the FTSE Benchmark, to the extent of favorable market prices and available liquidity. Additionally, the Fund may attempt to minimize roll costs (and maximize yields) by rolling into the gold futures contract with the largest positive or smallest negative roll yield. This strategy for taking long positions in and unwinding exposure to gold futures contracts may cause the Fund to have more or less exposure to gold futures contracts than the FTSE Benchmark. Additionally, the Fund is not obligated to rebalance its exposures at the same time that the FTSE Benchmark rebalances its exposures, and the Fund may rebalance more or less frequently than the FTSE Benchmark in order to ensure that the Fund's exposure to equities remains comparable to the Fund's exposure to the price of gold.
The Fund will not directly hold gold futures contracts or other commodity-linked instruments (namely, commodity-related pooled vehicles (as described below) and options on commodity futures). Rather, the Fund expects to gain exposure to these instruments by investing up to 25% of its total assets, as measured at the end of every quarter of the Fund's taxable year, in a wholly-owned and controlled Cayman Islands subsidiary (the “Subsidiary”). The Subsidiary will be advised by the Adviser and the Fund's investment in the Subsidiary will primarily be intended to provide the Fund with exposure to the price of gold. The Fund's investment in the Subsidiary is expected to provide the Fund with an effective means of obtaining exposure to the commodities markets in a manner consistent with U.S. federal tax law requirements applicable to registered investment companies.
While each Fund will invest at least 80% of its net assets in the securities and financial instruments described above, a Fund may invest its remaining assets in the securities and financial instruments described below.
In addition to the exchange-traded equity securities described above for the Funds, the Funds may invest in the following exchange-traded equity securities: exchange-traded common stock (other than large-cap U.S. stocks or Emerging Markets Securities, respectively, for the respective Funds); exchange-traded preferred stock (other than preferred stock referred to above with respect to the REX Gold Hedged S&P 500 ETF), warrants, MLPs, rights, and convertible securities.
The Funds may invest in restricted (Rule 144A) securities.
In addition to the futures transactions described above under “Principal Investments” of a Fund, the Funds may engage in other index, commodity and currency futures transactions and may engage in exchange-traded options transactions on such futures. The Funds may use futures contracts and related options for
The Funds may purchase and write (sell) exchange-traded and OTC put and call options on securities, securities indices and currencies. A Fund may
Each Fund will also invest in money market mutual funds, cash and cash equivalents
In addition to the securities and financial instruments described under “Principal Investments” above for each Fund, each Fund may invest in the securities of pooled vehicles that are not investment companies and, thus, not required to comply with the provisions of the 1940 Act. These pooled vehicles typically hold currency or commodities, such as gold or oil, or other property that is itself not a security.
Each Fund may enter into repurchase agreements with financial institutions, which may be deemed to be loans.
Each Fund may enter into reverse repurchase agreements as part of a Fund's investment strategy.
In addition, the Funds may invest in the following fixed income instruments (“Fixed Income Instruments”): U.S. government securities, namely, U.S. Treasury obligations
The Funds will invest in the securities of other investment companies, including the Underlying Funds, to the extent that such an investment would be consistent with the requirements of Section 12(d)(1) of the 1940 Act, or any rule, regulation or order of the Commission or interpretation thereof.
According to the Registration Statement, each Fund will achieve commodities exposure through investment in a Subsidiary. Such investment may not exceed 25% of a Fund's total assets, as measured at the end of every quarter of a Fund's taxable year. Each Subsidiary will invest in derivatives, including commodity and equity futures contracts and commodity-linked instruments, and other investments (cash, cash equivalents and Fixed Income Instruments with less than one year to maturity) intended to serve as margin or collateral or otherwise support the Subsidiary's derivatives positions. Unlike a Fund, the Subsidiary may invest without limitation in commodity futures and may use leveraged investment techniques. The Subsidiaries otherwise are subject to the same general investment policies and restrictions as the Funds.
According to the Registration Statement, the Subsidiaries are not registered under the 1940 Act. As an investor in its Subsidiary, each Fund, as the Subsidiary's sole shareholder, would not have the protections offered to investors in registered investment companies. However, because a Fund would wholly own and control the Subsidiary, and a Fund and Subsidiary would be managed by the Adviser, it is unlikely that the Subsidiary would take action contrary to the interests of a Fund or a Fund's shareholders. A Fund's Board of Trustees has oversight responsibility for the investment activities of the Funds, including their investments in its respective Subsidiary, and each Fund's role as the sole shareholder of its Subsidiary. Also, in managing a Subsidiary's portfolio, the Adviser and Sub-Adviser would be subject to the same investment restrictions and operational guidelines that apply to the management of a Fund.
Each Fund will concentrate its investments (
Each Fund will be classified as a non-diversified investment company under the 1940 Act. A “non-diversified” classification means that a Fund is not limited by the 1940 Act with regard to the percentage of their assets that may be invested in the securities of a single issuer.
The Adviser will not take defensive positions in the Funds' portfolios during periods of adverse market, economic, political, or other conditions as the Adviser intends for each Fund to remain fully invested consistent with its investment strategy under all market conditions.
Each Fund may invest up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser,
According to the Registration Statement, each Fund will seek to qualify for treatment as a Regulated Investment Company (“RIC”) under the Internal Revenue Code.
With respect to the REX Gold Hedged FTSE Emerging Markets ETF, the non-U.S. equity securities in such Fund's portfolio will meet the following criteria at time of purchase
According to the Registration Statement, the Funds are subject to regulation under the Commodity Exchange Act and CFTC rules as commodity pools. The Adviser is registered as a commodity pool operator, and the Funds will be operated in accordance with CFTC rules.
Each Fund's investments will be consistent with its investment objective and will not be used to enhance leverage. While a Fund may invest in inverse ETFs and ETNs, a Fund will not invest in leveraged (
According to the Registration Statement, the Trust will issue and sell shares of each Fund only in Creation Units of at least 50,000 Shares each on a continuous basis through the Distributor, at their NAV next determined after receipt, on any business day of an order received in proper form.
The consideration for purchase of a Creation Unit of a Fund generally will consist of an in-kind deposit of a designated portfolio of securities—the “Deposit Securities”—per each Creation Unit constituting a substantial replication, or a representation, of the securities included in a Fund's portfolio and an amount of cash—the Cash Component—computed as described below. Together, the Deposit Securities and the Cash Component constitute the “Fund Deposit,” which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The Cash Component is an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities. If the Cash Component is a positive number (
The Administrator, through the National Securities Clearing Corporation (“NSCC”), will make available on each business day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time), the list of the names and the required number of shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous business day) for each Fund.
The Trust reserves the right to permit or require the substitution of an amount of cash—
In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Fund Deposit, the Administrator, through the NSCC, also will make available on each business day, the estimated Cash Component, effective through and including the previous business day, per outstanding Creation Unit of each Fund.
To be eligible to place orders with the Distributor to create a Creation Unit of a Fund, an entity must be (i) a “Participating Party,”
All orders to create or redeem Creation Units must be placed for one or more Creation Unit size aggregations of at least 50,000 Shares and must be received by the Distributor no later than 3:00 p.m., Eastern Time, an hour earlier than the close of the regular trading session on the Exchange (ordinarily 4:00 p.m., Eastern Time) (“Closing Time”), in each case on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of Shares of each Fund as next determined on such date after receipt of the order in proper form.
If permitted by the Adviser or Sub-Adviser in its sole discretion with respect to a Fund, an Authorized Participant may also agree to enter into or arrange for an exchange of a futures contract for a related position (“EFCRP”) or block trade with the relevant Fund or its Subsidiary whereby the Authorized Participant would also transfer to such Fund a number and type of exchange-traded futures contracts at or near the closing settlement price for such contracts on the purchase order date. Similarly, the Sub-Adviser in its sole discretion may agree with an Authorized Participant to use an EFCRP or block trade to effect an order to redeem Creation Units.
Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by a Fund through the Administrator and only on a business day. The Trust will not redeem Shares in amounts less than Creation Units. Beneficial owners must accumulate enough Shares in the secondary market to constitute a Creation Unit in order to have such Shares redeemed by the Trust.
With respect to the Funds, the Administrator, through the NSCC, will make available immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time) on each business day, the “Fund Securities” that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day. Fund Securities received on redemption may not be identical to Deposit Securities which are applicable to creations of Creation Units.
Unless cash redemptions are available or specified for a Fund, the redemption proceeds for a Creation Unit generally will consist of Fund Securities, as announced by the Administrator on the business day of the request for redemption received in proper form, plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after receipt of a request in proper form, and the value of the Fund Securities (the “Cash Redemption Amount”), less a redemption transaction fee. In the event that the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential will be required to be made by or through an Authorized Participant by the redeeming shareholder.
If it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such shares in cash, and the redeeming “Beneficial Owner” will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash which a Fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its Shares based on the NAV of Shares of a Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash redemptions, to offset the Trust's brokerage and other transaction costs associated with the disposition of Fund Securities). Each Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities which differs from the exact composition of the Fund Securities but does not differ in NAV.
The right of redemption may be suspended or the date of payment postponed with respect to a Fund (1) for any period during which the Exchange is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the Exchange is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the Shares of a Fund or determination of the Shares' NAV is not reasonably practicable; or (4) in such other circumstance as is permitted by the Commission.
The NAV per Share of each Fund will be computed by dividing the value of the net assets of a Fund (
In computing a Fund's NAV, a Fund's securities holdings will be valued based on their last readily available market price. Price information on exchange-listed securities, including common stocks, preferred stocks, warrants, convertible securities, MLPs, rights, commodity-linked instruments (as described above), Underlying Funds, ETNs, Depositary Receipts and pooled vehicles in which a Fund invests, will be taken from the exchange where the security is primarily traded. Other portfolio securities and assets for which market quotations are not readily available or determined to not represent the current fair value will be valued based on fair value as determined in good faith by the Sub-Adviser in accordance with procedures adopted by the Board.
Futures contracts and exchange-traded options on futures will be valued at the settlement or closing price determined by the applicable exchange. Exchange-traded options contracts will be valued at their most recent sale price. OTC options normally will be valued on the basis of quotes obtained from a third-party broker-dealer who makes markets in such securities or on the basis of quotes obtained from a third-party pricing service.
Cash and cash equivalents may be valued at market values, as furnished by recognized dealers in such securities or assets. Cash equivalents also may be valued on the basis of information furnished by an independent pricing service that uses a valuation matrix which incorporates both dealer-supplied valuations and electronic data processing techniques.
Fixed Income Instruments, Rule 144A securities, repurchase agreements and reverse repurchase agreements will generally be valued at bid prices received from independent pricing services as of the announced closing time for trading in fixed-income instruments in the respective market. Shares of money market mutual funds held by each Fund will be valued at their respective NAVs.
The Funds' Web site, which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Funds that may be downloaded. The Funds' Web site will include additional quantitative information updated on a daily basis, including, for each Fund, (1) daily trading volume, the prior business day's reported closing price, NAV and mid-point of the bid/ask spread at the time of calculation of such NAV (the “Bid/Ask Price”),
On a daily basis, the Funds will disclose on the Funds' Web site the following information regarding each portfolio holding of a Fund and its respective Subsidiary, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in a Fund's portfolio. The Web site information will be publicly available at no charge.
In addition, a basket composition file (
Investors will also be able to obtain the Trust's Statement of Additional Information (“SAI”), a Fund's Shareholder Reports, and its Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder Reports will be available free upon request from the Trust, and those documents and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded from the Commission's Web site at
In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated at least every 15 seconds during the Core Trading Session by one or more major market data vendors.
With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Funds.
The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, the minimum price variation (“MPV”) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00, for which the MPV for order entry is $0.0001.
The Shares of each Fund will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Adviser, as the “Reporting Authority”, will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of a Fund's portfolio. The Exchange represents that, for initial and/or continued listing, each Fund will be in compliance with Rule 10A-3
The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by regulatory staff of the Exchange or the Financial Industry Regulatory Authority (“FINRA”) on
The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.
The regulatory staff of the Exchange or FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, certain exchange-listed equity securities, certain futures, certain options on futures, and certain exchange-traded options with other markets and other entities that are members of the Intermarket Surveillance Group (“ISG”), and FINRA, on behalf of the Exchange, may obtain trading information regarding trading such securities and financial instruments from such markets and other entities. In addition, the regulatory staff of the Exchange may obtain information regarding trading in such securities and financial instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.
Not more than 10% of the net assets of a Fund in the aggregate invested in futures contracts or options contracts shall consist of futures contracts or options contracts whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement.
In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees.
Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin (“Bulletin”) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its Equity Trading Permit Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value and the Disclosed Portfolio is disseminated; (5) the requirement that Equity Trading Permit Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information.
In addition, the Bulletin will reference that the Funds will be subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. Eastern Time each trading day.
The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5)
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. Trading in the Shares will be subject to the existing trading surveillances, administered by the regulatory staff of the Exchange or FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. The regulatory staff of the Exchange or FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, certain exchange-listed equity securities, certain futures, certain options on futures, and certain exchange-traded options with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading such securities and financial instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities and financial instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.
With respect to the Rex Gold Hedged FTSE Emerging Markets ETF, the non-U.S. equity securities in the Fund's portfolio will meet the following criteria at time of purchase: (1) Non-U.S. equity securities each shall have a minimum market value of at least $100 million; (2) non-U.S. equity securities each shall have a minimum global monthly trading volume of 250,000 shares, or minimum global notional volume traded per month of $25,000,000, averaged over the last six months; (3) the most heavily weighted non-U.S. equity security shall not exceed 25% of the weight of the Fund's entire portfolio, and, to the extent applicable, the five most heavily weighted non-U.S. equity securities shall not exceed 60% of the weight of the Fund's entire portfolio; and (4) each non-U.S. equity security shall be listed and traded on an exchange that has last-sale reporting.
Not more than 10% of the net assets of a Fund in the aggregate invested in futures contracts or options contracts shall consist of futures contracts or options contracts whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. Each Fund's investments will be consistent with its investment objective and will not be used to enhance leverage. While a Fund may invest in inverse ETFs and ETNs, a Fund will not invest in leveraged (
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the
Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services. Information regarding the previous day's closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares, Underlying Funds and other U.S. exchange-traded equities, will be available via the CTA high-speed line, and, for equity securities that are U.S. exchange-listed, will be available from the national securities exchange on which they are listed. Price information for money market funds will be available from the investment company's Web site and from market data vendors. Price information relating to money market mutual funds, cash, cash equivalents, futures, options, options on futures, Depositary Receipts, Rule 144A securities, repurchase agreements, reverse repurchase agreements, the S&P Benchmark and the FTSE Benchmark will be available from major market data vendors. Information relating to futures and exchange-traded options on futures also will be available from the exchange on which such instruments are traded. Information relating to U.S. exchange-traded options will be available via the Options Price Reporting Authority. Pricing information regarding each asset class in which a Fund will invest will generally be available through nationally recognized data service providers through subscription agreements.
In addition, the Portfolio Indicative Value will be widely disseminated by the Exchange at least every 15 seconds during the Core Trading Session. The Funds' Web site will include a form of the prospectus for the Funds that may be downloaded, as well as additional quantitative information updated on a daily basis. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Funds' Web site will disclose the Disclosed Portfolio that will form the basis for each Fund's calculation of NAV at the end of the business day.
On a daily basis, the Funds will disclose on the Funds' Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in a Fund's portfolio. Moreover, prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Funds will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of a Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Funds' holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. In addition, as noted above, investors will have ready access to information regarding the Funds' holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of additional types of actively-managed exchange-traded products based on the price of gold and other financial instruments that will enhance competition among market participants, to the benefit of investors and the marketplace.
No written comments were solicited or received with respect to the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
NASDAQ proposes to amend Rule 5810(c) to provide NASDAQ staff with limited discretion to grant a listed company additional time to solicit proxies and hold an annual meeting of shareholders. The text of the proposed rule change is available from NASDAQ's Web site at
In its filing with the Commission, NASDAQ included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NASDAQ has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Each company listing common stock or voting preferred stock, and their equivalents, must hold an annual meeting of shareholders no later than one year after the end of the company's fiscal year and solicit proxies for that meeting.
NASDAQ notes that the only other rule where a company is subject to immediate suspension and delisting, besides when it fails to solicit proxies and hold an annual meeting, is when Staff makes a determination pursuant to the Rule 5100 Series that the company's continued listing raises a public interest concern. This determination generally is made only following discussion and review of the facts and circumstances with the company. For all other deficiencies under the Rule 5000 Series, a listed company is provided with either a fixed compliance period within which to regain compliance,
There are a variety of reasons a company may fail to timely hold an annual meeting. In many of these cases, the circumstances that precipitated the delay may arise just before a planned meeting. For example, NASDAQ has
For these reasons, NASDAQ is proposing to amend Rules 5810(c), 5815(c) and 5820(d) to afford those companies and limited partnerships that fail to hold an annual meeting in accordance with the listing rules an opportunity to submit a plan of compliance for Staff's review.
In determining whether to grant the Company an extension to comply with the annual meeting requirement, Staff will consider the likelihood that the Company would be able to hold an annual meeting within the exception period, the Company's past compliance history, the reasons for the failure to timely hold an annual meeting, corporate events that may occur within the exception period, the Company's general financial status, and the Company's disclosures to the market. This review will be based on information provided by a variety of sources, which may include the Company, its audit committee, its outside auditors, the staff of the SEC and any other regulatory body. The proposed rule change will limit the length of an extension granted by Staff, upon review of the plan, to no more than 180 calendar days from the deadline to hold the annual meeting (
Lastly, in accordance with Rule 5810(c)(2) a company or limited partnership not subject to the all-inclusive annual fee program that submits such a plan is subject to the $5,000 compliance plan review fee. Effective January 2018, all companies will be subject to the all-inclusive annual fee program and this fee will no longer be applicable to any company. Further, all companies, regardless of whether they participate in the all-inclusive annual fee program or not, are subject to the $10,000 fee for each of a Panel hearing and appeal to the Listing and Hearing Review Council set forth in Listing Rules 5815(a)(3) and 5820(a), respectively. Accordingly, under the proposed rule as compared to the current rule, companies and limited partnerships may be subject to these fees at different times, if at all, depending on whether and when they regain compliance. Notwithstanding, a company that elects not to participate in the all-inclusive annual fee program prior to January 2018 will incur the $5,000 compliance plan review fee whereas a company that has opted-in to the all-inclusive fee will not. This fee would be in addition to any fees incurred in the appellate process.
NASDAQ believes that the proposed rule changes are consistent with the provisions of Section 6 of the Act,
Specifically, the proposed changes are consistent with these requirements because they permit Staff to grant additional time to a company to comply with the annual meeting requirement in limited situations after Staff review of a compliance plan. The proposed changes, however, do not change the total length of an extension a company may be granted—as is the case under the current rule, such maximum time period would remain 360 calendar days. Furthermore, as is the case under the current rule, a company notified that it is deficient in the annual meeting requirement is required to publicly disclose such notice and the rules basis for it. NASDAQ also separately publicly discloses a list of noncompliant companies and the listing standards with which they do not comply. For these reasons, the proposed rule protects investors and the public interest.
As noted above, there are various reasons why a company may not be able to hold an annual meeting and for which immediate delisting is an inappropriate outcome under the circumstances. In lieu of the current requirement that Staff send an immediate Delisting Determination, the proposal vests Staff with discretion to determine whether the reason for the deficiency and the plan to regain compliance merit an extension. The Rules allow Staff such discretion for other deficiencies, and the only case where Staff sends an immediate Delisting Determination is where Staff has concluded, after review of the facts and circumstances, that continued listing is contrary to the public interest. NASDAQ believes that it is consistent with the Act to provide Staff with discretion to grant an extension for an annual meeting deficiency based on a plan of compliance, consistent with the process currently used for the majority of deficiencies under NASDAQ's rules. The Exchange is not extending the total time that a company may remain listed on NASDAQ while deficient; rather, the proposed rule change will allow Staff limited discretion to grant an extension to regain compliance with the listing standard for a prescribed portion of this time, which, to the extent exercised, will limit the length of time a Hearings Panel and Listing and Hearing Review Council may subsequently grant. Accordingly, the Exchange believes that the proposal promotes the requirements of the Act by providing Staff with limited discretion to allow additional time where the circumstances do not support immediate delisting, while maintaining Staff's authority to delist a company when warranted.
The Exchange also believes that assessing the $5,000 compliance plan review fee on companies that have not opted-in to the all-inclusive annual fee program prior to January 2018 is reasonable because NASDAQ is changing the process in an effort to make it more consistent with how other deficiencies are handled. The Exchange notes that companies that do not resolve their annual meeting deficiencies during an extension period provided by Staff under the proposed changes may subsequently be subject to the $10,000 fee for each of a Panel Hearing and an appeal to the Listing and Hearing Review Council. However, because most companies resolve annual meeting deficiencies within six months, under the proposed rules, they would likely not incur these fees. Further, the Exchange believes that the proposed rule change is equitably allocated because the fees assessed to companies as a result of the changes will be allocated uniformly among similarly-situated companies. Moreover, the Exchange believes that assessing different fees between companies that opt-in to the all-inclusive annual fee program and those that do not is an equitable allocation because participation in the program is elective and available to all listed companies. As a consequence, companies are able to weigh the benefits of the program against the relative risk of incurring additional fees and choose whether opting-in to the program at this juncture is appropriate.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The proposed rule change will not burden competition as it provides discretion to Staff to provide a limited time to regain compliance when immediate delisting is not warranted, thereby potentially reducing the time and costs associated with appealing a delisting determination. Moreover, the proposed rule change is intended to promote consistent and fair regulation, and is not being adopted for competitive purposes. To the extent a competitor marketplace believes that the proposed rule change places them at a competitive disadvantage, it may file with the Commission a proposed rule change to adopt the same or similar rule.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Securities and Exchange Commission.
Notice of Meeting of Securities and Exchange Commission Dodd-Frank Investor Advisory Committee.
The Securities and Exchange Commission Investor Advisory Committee, established pursuant to Section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is providing notice that it will hold a public meeting. The public is invited to submit written statements to the Committee.
The meeting will be held on Thursday, January 21, 2016 from 10:00 a.m. until 4:00 p.m. (ET). Written statements should be received on or before January 21, 2016.
The meeting will be held in Multi-Purpose Room LL-006 at the Commission's headquarters, 100 F Street NE., Washington, DC 20549. The meeting will be webcast on the Commission's Web site at
Use the Commission's Internet submission form (
Send an email message to
Send paper statements to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Statements also will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Room 1580, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All statements received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
Marc Oorloff Sharma, Senior Special Counsel, Office of the Investor Advocate, at (202) 551-3302, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
The meeting will be open to the public, except during that portion of the meeting reserved for an administrative work session during lunch. Persons needing special accommodations to take part because of a disability should notify the contact person listed in
The agenda for the meeting includes: Remarks from Commissioners; a discussion of fixed income market structure and pre-trade price transparency; a discussion of a draft letter from the Investor as Owner subcommittee regarding Financial Accounting Standards Board proposed amendments to the Statement of Financial Accounting Concepts and Notes to Financial Statements concerning disclosure materiality; an update on crowdfunding rules; a discussion of NASDAQ listing standards—shareholder approval rules; subcommittee reports; and a nonpublic administrative work session during lunch.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Chapter VIII of NASDAQ OMX PSX Fees (“PSX Chapter VIII”), in the section entitled PSX Last Sale Data Feeds and NASDAQ Last Sale Plus Data Feeds (“Last Sale”), with language regarding NASDAQ Last Sale (“NLS”) Plus (“NLS Plus”), a comprehensive data feed offered by NASDAQ OMX Information LLC
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of this proposal is to amend PSX Chapter VIII, Last Sale (b). Specifically, this proposal would allow NLS Plus to reflect consolidated volume of real-time trading activity for Tape A securities and Tape B securities. Now, consolidated volume on NLS Plus is real-time only for Tape C securities. The Exchange also proposes to remove two duplicative terms in the rule.
NLS Plus, which is reflected in PSX Chapter VIII, Last Sale (b),
Other exchanges have data feeds that are similar to NLS Plus.
NLS Plus offers data for all U.S. equities via two separate data channels: The first data channel reflects NASDAQ, BX, and PSX trades with real-time consolidated volume for NASDAQ-listed securities; and the second data channel reflects NASDAQ, BX, and PSX trades with delayed consolidated volume for NYSE, NYSE MKT, NYSE Arca and BATS-listed securities. The Exchange believes that market data distributors may use the NLS Plus data feed to feed stock tickers, portfolio trackers, trade alert programs, time and sale graphs, and other display systems. The provision of multiple options for investors to receive market data was a primary goal of the market data amendments adopted by Regulation NMS. Finally, NLS Plus provides investors with options for receiving market data that parallel products currently offered by BATS and BATS Y, EDGA, and EDGX and NYSE equity exchanges.
Consolidated volume reflects the consolidated volume at the time that the NLS Plus trade message is generated, and includes the volume for the issue symbol as reported on the consolidated market data feed. The consolidated volume is based on the real-time trades reported via the UTP Trade Data Feed (“UTDF”) and delayed trades reported via CTA. NASDAQ calculates the real-time trading volume for its trading venues, and then adds the real-time trading volume for the other (non-NASDAQ) trading venues as reported via the UTDF data feed. For non-NASDAQ-listed issues, the consolidated volume is based on trades reported via SIAC's Consolidated Tape System (“CTS”) for the issue symbol. The Exchange calculates the real-time trading volume for its trading venues, and then adds the 15-minute delayed trading volume for the other (non-NASDAQ) trading venues as reported via the CTS data feed.
NLS Plus is currently codified in PSX Chapter VIII, Last Sale (b) as follows:
(b) NASDAQ Last Sale Plus (“NLS Plus”). NLS Plus is a comprehensive data feed produced by NASDAQ OMX Information LLC. It provides last sale data as well as consolidated volume of NASDAQ U.S. equity markets (PSX, The NASDAQ Stock Market (“NASDAQ”), and NASDAQ OMX BX (“BX”)) and the NASDAQ/FINRA Trade Reporting Facility (“TRF”). NLS Plus also reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape C securities and 15-minute delayed information for Tape A and B securities. NLS Plus also contains: Trade Price, Trade Size, Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of Day Trade Summary, Adjusted Closing Price, IPO Information, and Bloomberg ID. Additionally, pertinent regulatory information such as Market Wide Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator, Trading Action, Symbol Directory, Adjusted Closing Price, and End of Day Trade Summary are
This proposal essentially reflects one change to NLS Plus as it currently exists. Whereas now consolidated volume on NLS Plus is real-time only for Tape C securities and is 15 minute delayed for Tape A and Tape B securities, this proposal would allow NLS Plus to reflect consolidated volume of real-time trading activity as reported to all of the Tapes. As proposed to be amended, PSX Chapter VIII, Last Sale (b) would state:
(b) NASDAQ Last Sale Plus (“NLS Plus”). NLS Plus is a comprehensive data feed produced by NASDAQ OMX Information LLC. It provides last sale data as well as consolidated volume of NASDAQ U.S. equity markets (PSX, The NASDAQ Stock Market (“NASDAQ”), and NASDAQ OMX BX (“BX”)) and the NASDAQ/FINRA Trade Reporting Facility (“TRF”). NLS Plus also reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape C securities. NLS Plus also contains: Trade Price, Trade Size, Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of Day Trade Summary, Adjusted Closing Price, IPO Information, and Bloomberg ID. Additionally, pertinent regulatory information such as Market Wide Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator, Trading Action, and Symbol Directory are included. NLS Plus may be received by itself or in combination with NASDAQ Basic. Additionally, NLS Plus reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape A securities and Tape B securities.
Thus, with this proposal consolidated volume would reflect real-time trading for all Tape A, Tape B, and Tape C securities. Market participants have requested that the Exchange provide NLS Plus consolidated volume that in fact reflects real-time trading for all Tape A, Tape B, and Tape C securities. The Exchange believes that this proposal would be of great benefit to market participants, who could now get similar, real-time data across all U.S. markets that are reported to Tapes A, B, and C. The Exchange believes that its proposal allowing real-time volume on the NLS Plus feed is similar to the BATS One feed, which transmits real-time data.
The Exchange proposes one housekeeping change. This is a technical change to remove two terms that are indicated twice in PSX Chapter VIII, Last Sale (b): “Adjusted Closing Price” and “End of Day Trade Summary”.
With respect to latency, as discussed in previous NLS Plus filings,
The Exchange believes that its proposal would greatly benefit the public and investors, and is consistent with the Act.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The purpose of the proposed rule change is to add language to PSX Chapter VIII, Last Sale (b) regarding real-time data across all U.S. markets that are reported to Tapes A, B, and C and are offered on NLS Plus; and to remove two duplicative terms from the rule. The Exchange believes that the proposal facilitates transactions in securities, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest by making available additional means by which investors may access real-time volume information about securities transactions, thereby providing investors with additional options for accessing information that may help to inform their trading decisions.
The Exchange notes that the Commission has recently approved a data product on several exchanges that is similar to NLS Plus and is real-time, and specifically determined that the approved data product was consistent with the Act.
In adopting Regulation NMS, the Commission granted SROs and broker-dealers (“BDs”) increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that its NLS Plus market data product is precisely the sort of market data product that the Commission envisioned when it adopted Regulation NMS. The Commission concluded that Regulation NMS—by deregulating the market in proprietary data—would itself further the Act's goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.
Moreover, data products such as NLS Plus are a means by which exchanges compete to attract order flow. To the extent that exchanges are successful in such competition, they earn trading revenues and also enhance the value of their data products by increasing the amount of data they are able to provide. Conversely, to the extent that exchanges are unsuccessful, the inputs needed to add value to data products are diminished. Accordingly, the need to compete for order flow places substantial pressure upon exchanges to keep their fees for both executions and data reasonable.
The Exchange believes that, for the reasons given, the proposal is consistent with the Act.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. As is true of all NASDAQ's non-core data products, NASDAQ's ability to offer NLS Plus through NASDAQ OMX Information LLC and price NLS Plus is constrained by: (1) Competition between exchanges and other trading platforms that compete with each other in a variety of dimensions; (2) the existence of inexpensive real-time consolidated data and market-specific data and free delayed consolidated data; and (3) the inherent contestability of the market for proprietary last sale data. The Exchange believes that its proposal is pro-competitive in that it will allow the Exchange to distribute consolidated volume for Tapes A, B, and C on a real-time basis, similarly to a data product on several exchanges that is similar to NLS Plus. The Exchange believes that this would be of great benefit to market participants, who could now get similar, real-time data across all U.S. markets that are reported to Tapes A, B, and C.
In addition, as discussed, NLS Plus competes directly with a myriad of similar products and potential products of market data vendors. This proposal allows offering on NLS Plus, on a real-time basis, U.S. market data that is reported to Tapes A, B, and C. NLS Plus joins the existing market for proprietary last sale data products that is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually limitless opportunities for entrepreneurs who wish to produce and distribute their own market data. This proprietary data is produced by each individual exchange, as well as other entities, in a vigorously competitive market. Similarly, with respect to the FINRA/NASDAQ TRF data that is a component of NLS and NLS Plus, allowing exchanges to operate TRFs has permitted them to earn revenues by providing technology and data in support of the non-exchange segment of the market. This revenue opportunity has also resulted in fierce competition between the two current TRF operators, with both TRFs charging extremely low trade reporting fees and rebating the majority of the revenues they receive from core market data to the parties reporting trades.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, the operation of the exchange is characterized by high fixed costs and low marginal costs. This cost structure is common in content and content distribution industries such as software, where developing new software typically requires a large initial investment (and continuing large investments to upgrade the software), but once the software is developed, the incremental cost of providing that software to an additional user is typically small, or even zero (
Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. The Exchange pays rebates to attract orders, charges relatively low prices for market information and charges relatively high
In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. Such regulation is unnecessary because an “excessive” price for one of the joint products will ultimately have to be reflected in lower prices for other products sold by the firm, or otherwise the firm will experience a loss in the volume of its sales that will be adverse to its overall profitability. In other words, an increase in the price of data will ultimately have to be accompanied by a decrease in the cost of executions, or the volume of both data and executions will fall.
The competitive nature of the market for products such as NLS Plus is borne out by the performance of the market. In May 2008, the internet portal Yahoo! began offering its Web site viewers real-time last sale data (as well as best quote data) provided by BATS. In response, in June 2008, NASDAQ launched NLS, which was initially subject to an “enterprise cap” of $100,000 for customers receiving only one of the NLS products, and $150,000 for customers receiving both products. The majority of NASDAQ's sales were at the capped level. In early 2009, BATS expanded its offering of free data to include depth-of-book data. Also in early 2009, NYSE Arca announced the launch of a competitive last sale product with an enterprise price of $30,000 per month. In response, NASDAQ combined the enterprise cap for the NLS products and reduced the cap to $50,000 (
In this environment, a super-competitive increase in the fees charged for either transactions or data has the potential to impair revenues from both products. “No one disputes that competition for order flow is `fierce'.”
No written comments were either solicited or received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2015-110 and should be submitted on or before January 20, 2016.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to amend the Market Data section of its fee schedule to: (i) Adopt definitions for the terms “Non-Display Usage” and “Trading Platforms”; and (ii) amend the fees for TCP Depth and Multicast Depth data products,
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend the Market Data section of its fee schedule to: (i) Adopt definitions for the terms “Non-Display Usage” and “Trading Platforms”; and (ii) amend the fees for BYX Depth to increase the Internal Distributor fee and adopt a new fee for Non-Display Usage.
The Exchange proposes to adopt definitions for the terms “Non-Display Usage” and “Trading Platforms”. The proposed definitions are designed to provide greater transparency with regard to how the Exchange assesses fees for market data. Non-Display Usage would be defined as “any method of accessing a Market Data product that involves access or use by a machine or automated device without access or use of a display by a natural person or persons.”
BYX Depth is an uncompressed market data feed that provides depth-of-book quotations and execution information based on equity orders entered into the System.
The Exchange proposes to implement the proposed changes to its fee schedule on January 4, 2016.
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,
The Exchange also believes that the proposed rule change is consistent with Section 11(A) of the Act
In addition, the proposed fees would not permit unfair discrimination because all of the Exchange's subscribers will be subject to the proposed fees on an equivalent basis. BYX Depth is distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make this data available. Accordingly, Distributors and Users can discontinue use at any time and for any reason, including due to an assessment of the reasonableness of fees charged. Firms have a wide variety of alternative market data products from which to choose, such as similar proprietary data products offered by other exchanges and consolidated data. Moreover, the Exchange is not required to make any proprietary data products available or to offer any specific pricing alternatives to any customers.
In addition, the fees that are the subject of this rule filing are constrained by competition. As explained below in the Exchange's Statement on Burden on Competition, the existence of alternatives to BYX Depth further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when subscribers can elect such alternatives. That is, the Exchange competes with other exchanges (and their affiliates) that provide similar market data products. If another exchange (or its affiliate) were to charge less to consolidate and distribute its similar product than the Exchange charges to consolidate and distribute BYX Depth, prospective Users likely would not subscribe to, or would cease subscribing to, BYX Depth.
The Exchange notes that the Commission is not required to undertake a cost-of-service or rate-making approach. The Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for non-core market data would be so complicated that it could not be done practically.
The proposed amendment to the Internal Distributor fee for BYX Depth is also equitable and reasonable as, despite the increase, the fee proposed continues to be less than similar fees currently charged by Nasdaq and NYSE for their depth-of-book data products.
The Trading Platform fee is also equitable and reasonable in that it ensures that heavy users of the BYX Depth pay an equitable share of the total fees. Currently, External Distributors pay higher fees than Internal Distributors based upon their assumed higher usage levels. The Exchange believes that Trading Platforms are generally high users of the data, using it to power a matching engine for millions or even billions of trading messages per day.
Lastly, the Exchange believes that the proposed definitions are reasonable because they are designed to provide greater transparency to Members with regard to how the Exchange would assess the proposed fee for Non-Display Usage of BYX Depth by Trading Platforms. The Exchange believes that Members would benefit from clear guidance in its fee schedule describing the manner in which is assess fees. These definitions are intended to make the fee schedule clearer and less confusing for investors and eliminate potential investor confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest. Lastly, the proposed definitions are based on existing rules of Nasdaq.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The Exchange's ability to price BYX Depth is constrained by: (i) Competition among exchanges, other trading platforms, and Trade Reporting Facilities (“TRF”) that compete with each other in a variety of dimensions; (ii) the existence of inexpensive real-time consolidated data and market-specific data and free delayed data; and (iii) the inherent contestability of the market for proprietary data.
The Exchange and its market data products are subject to significant competitive forces and the proposed fees represent responses to that competition. To start, the Exchange competes intensely for order flow. It competes with the other national securities exchanges that currently trade equities, with electronic communication networks, with quotes posted in FINRA's Alternative Display Facility, with alternative trading systems, and with securities firms that primarily trade as principal with their customer order flow.
In addition, BYX Depth competes with a number of alternative products. For instance, BYX Depth does not provide a complete picture of all trading activity in a security. Rather, the other national securities exchanges, the several TRFs of FINRA, and ECNs that produce proprietary data all produce trades and trade reports. Each is currently permitted to produce depth-of-book information products, and many currently do, including Nasdaq and NYSE.
In sum, the availability of a variety of alternative sources of information imposes significant competitive pressures on Exchange data products and the Exchange's compelling need to attract order flow imposes significant competitive pressure on the Exchange to act equitably, fairly, and reasonably in setting the proposed data product fees. The proposed data product fees are, in part, responses to that pressure. The Exchange believes that the proposed fees would reflect an equitable allocation of its overall costs to users of its facilities.
In addition, when establishing the proposed fees, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all Users. The existence of alternatives to BYX Depth, including existing similar feeds by other exchanges, consolidated data, and proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase.
The Exchange believes the proposed increase to the Internal Distributor fee and adoption of the fee for Non-Display Usage by Trading Platforms for BYX Depth would increase competition amongst the exchanges that offer depth-of-book products. The Exchange notes that, despite the proposed increase, the Internal Distribution fee for BYX Depth continues to be less than similar fees currently charged by Nasdaq and NYSE for its depth-of-book data.
Lastly, the proposed definitions will not result in any burden on competition. The Exchange believes that Members would benefit from clear guidance in its fee schedule describing the manner in which is assess fees. These definitions are intended to make the fee schedule clearer and less confusing for investors and are not designed to have a competitive impact.
The Exchange has neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 7039 (NASDAQ Last Sale and Last Sale Plus Data Feed) with language regarding NASDAQ Last Sale (“NLS”) Plus (“NLS Plus”), a comprehensive data feed offered by NASDAQ OMX Information LLC
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of this proposal is to amend Rule 7039(d). Specifically, this proposal would allow NLS Plus to reflect consolidated volume of real-time trading activity for Tape A securities and Tape B securities. Now, consolidated volume on NLS Plus is real-time only for Tape C securities. The Exchange also proposes to remove two duplicative terms in the rule.
NLS Plus, which is reflected in Rule 7039(d),
Other exchanges have data feeds that are similar to NLS Plus.
NLS Plus offers data for all U.S. equities via two separate data channels: The first data channel reflects NASDAQ, BX, and PSX trades with real-time consolidated volume for NASDAQ-listed securities; and the second data channel reflects NASDAQ, BX, and PSX trades with delayed consolidated volume for NYSE, NYSE MKT, NYSE Arca and BATS-listed securities. The Exchange believes that market data distributors may use the NLS Plus data feed to feed stock tickers, portfolio trackers, trade alert programs, time and sale graphs, and other display systems. The provision of multiple options for investors to receive market data was a primary goal of the market data amendments adopted by Regulation NMS. Finally, NLS Plus provides investors with options for receiving market data that parallel products currently offered by BATS and BATS Y, EDGA, and EDGX and NYSE equity exchanges.
Consolidated volume reflects the consolidated volume at the time that the NLS Plus trade message is generated, and includes the volume for the issue symbol as reported on the consolidated market data feed. The consolidated volume is based on the real-time trades reported via the UTP Trade Data Feed (“UTDF”) and delayed trades reported via CTA. NASDAQ calculates the real-time trading volume for its trading venues, and then adds the real-time trading volume for the other (non-NASDAQ) trading venues as reported via the UTDF data feed. For non-NASDAQ-listed issues, the consolidated volume is based on trades reported via SIAC's Consolidated Tape System (“CTS”) for the issue symbol. The Exchange calculates the real-time trading volume for its trading venues, and then adds the 15-minute delayed trading volume for the other (non-NASDAQ) trading venues as reported via the CTS data feed.
NLS Plus is currently codified in NASDAQ Rule 7039(d) as follows:
(d) NASDAQ Last Sale Plus. NASDAQ Last Sale Plus is a comprehensive data feed produced by NASDAQ OMX Information LLC. It provides last sale data as well as consolidated volume of NASDAQ U.S. equity markets (The NASDAQ Stock Market (“NASDAQ”), NASDAQ OMX BX (“BX”), and NASDAQ OMX PSX (“PSX”)) and the NASDAQ/FINRA Trade Reporting Facility (“TRF”). NASDAQ Last Sale Plus also reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape C securities and 15-minute delayed information for Tape A and Tape B securities. NASDAQ Last Sale Plus also contains: Trade Price, Trade Size, Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of Day Trade Summary, Adjusted Closing Price, IPO Information, and Bloomberg ID. Additionally, pertinent regulatory information such as Market Wide Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator, Trading Action, Symbol Directory, Adjusted Closing Price, and End of Day Trade Summary are included. NLS Plus may be received by itself or in combination with NASDAQ Basic.
This proposal essentially reflects one change to NLS Plus as it currently exists. Whereas now consolidated volume on NLS Plus is real-time only for Tape C securities and is 15 minute delayed for Tape A and Tape B securities, this proposal would allow NLS Plus to reflect consolidated volume of real-time trading activity as reported to all of the Tapes. As proposed to be amended, NASDAQ Rule 7039(d)(1) [sic] would state:
(d) NASDAQ Last Sale Plus. NASDAQ Last Sale Plus is a comprehensive data feed produced by NASDAQ OMX Information LLC. It provides last sale data as well as consolidated volume of NASDAQ U.S. equity markets (The NASDAQ Stock Market (“NASDAQ”), NASDAQ OMX BX (“BX”), and NASDAQ OMX PSX “PSX”)) and the NASDAQ/FINRA Trade Reporting Facility (“TRF”). NASDAQ Last Sale Plus also reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape C securities. NASDAQ Last Sale Plus also contains: Trade Price, Trade Size, Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of Day Trade Summary, Adjusted Closing Price, IPO Information, and Bloomberg ID. Additionally, pertinent regulatory information such as Market Wide Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator, Trading Action, and Symbol Directory are included. NLS Plus may be received by itself or in combination with NASDAQ Basic. Additionally, NASDAQ Last Sale Plus reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape A securities and Tape B securities.
The Exchange proposes one housekeeping change. This is a technical change to remove two terms that are indicated twice in Rule 7039(d): “Adjusted Closing Price” and “End of Day Trade Summary”.
With respect to latency, as discussed in previous NLS Plus filings,
The Exchange believes that its proposal would greatly benefit the public and investors, and is consistent with the Act.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The purpose of the proposed rule change is to add language to section (d) of Rule 7039 regarding real-time data across all U.S. markets that are reported to Tapes A, B, and C and are offered on NLS Plus; and to remove two duplicative terms from the rule. The Exchange believes that the proposal facilitates transactions in securities, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest by making available additional means by which investors may access real-time volume information about securities transactions, thereby providing investors with additional options for accessing information that may help to inform their trading decisions.
The Exchange notes that the Commission has recently approved a data product on several exchanges that is similar to NLS Plus and is real-time, and specifically determined that the approved data product was consistent with the Act.
In adopting Regulation NMS, the Commission granted SROs and broker-dealers (“BDs”) increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that its NLS Plus market data product is precisely the sort of market data product that the Commission envisioned when it adopted Regulation NMS. The Commission concluded that Regulation NMS—by deregulating the market in proprietary data—would itself further the Act's goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.
By removing unnecessary regulatory restrictions on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to BDs at all, it follows that the price at which such data is sold should be set by the market as well. Moreover, data products such as NLS Plus are a means by which exchanges compete to attract order flow. To the extent that exchanges are successful in such competition, they earn trading revenues and also enhance the value of their data products by increasing the amount of data they are able to provide. Conversely, to the extent that exchanges are unsuccessful, the inputs needed to add value to data products are diminished. Accordingly, the need to compete for order flow places substantial pressure upon exchanges to keep their fees for both executions and data reasonable.
The Exchange believes that, for the reasons given, the proposal is consistent with the Act.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. As is true of all NASDAQ's non-core data products, NASDAQ's ability to offer NLS Plus through NASDAQ OMX Information LLC and price NLS Plus is constrained by: (1) Competition between exchanges and other trading platforms that compete with each other in a variety of dimensions; (2) the existence of inexpensive real-time consolidated data and market-specific data and free delayed consolidated data; and (3) the inherent contestability of the market for proprietary last sale data. The Exchange believes that its proposal is pro-competitive in that it will allow the Exchange to distribute consolidated volume for Tapes A, B, and C on a real-time basis, similarly to a data product on several exchanges that is similar to NLS Plus. The Exchange believes that this would be of great benefit to market participants, who could now get similar, real-time data across all U.S. markets that are reported to Tapes A, B, and C.
In addition, as discussed, NLS Plus competes directly with a myriad of similar products and potential products of market data vendors. This proposal allows offering on NLS Plus, on a real-time basis, U.S. market data that is reported to Tapes A, B, and C. NLS Plus joins the existing market for proprietary last sale data products that is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually limitless opportunities for entrepreneurs who wish to produce and distribute their own market data. This proprietary data is produced by each individual exchange, as well as other entities, in a vigorously competitive market. Similarly, with respect to the FINRA/NASDAQ TRF data that is a component of NLS and NLS Plus, allowing exchanges to operate TRFs has permitted them to earn revenues by providing technology and data in support of the non-exchange segment of the market. This revenue opportunity has also resulted in fierce competition between the two current TRF operators, with both TRFs charging extremely low trade reporting fees and rebating the majority of the revenues they receive from core market data to the parties reporting trades.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, the operation of the exchange is characterized by high fixed costs and low marginal costs. This cost structure is common in content and content distribution industries such as software, where developing new software typically requires a large initial investment (and continuing large investments to upgrade the software), but once the software is developed, the incremental cost of providing that software to an additional user is typically small, or even zero (
Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. NASDAQ pays rebates to attract orders, charges relatively low prices for market information and charges relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower liquidity rebates to attract orders, setting relatively low prices for accessing posted liquidity, and setting relatively high prices for market information. Still others may provide most data free of charge and rely exclusively on transaction fees to recover their costs. Finally, some platforms may incentivize use by providing opportunities for equity ownership, which may allow them to charge lower direct fees for executions and data.
In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. Such regulation is unnecessary because an “excessive” price for one of the joint products will ultimately have to be reflected in lower prices for other products sold by the firm, or otherwise the firm will experience a loss in the volume of its sales that will be adverse to its overall profitability. In other words, an increase in the price of data will ultimately have to be accompanied by a decrease in the cost of executions, or the volume of both data and executions will fall.
The competitive nature of the market for products such as NLS Plus is borne out by the performance of the market. In May 2008, the Internet portal Yahoo! began offering its Web site viewers real-time last sale data (as well as best quote data) provided by BATS. In response, in June 2008, NASDAQ launched NLS, which was initially subject to an “enterprise cap” of $100,000 for customers receiving only one of the NLS products, and $150,000 for customers receiving both products. The majority of NASDAQ's sales were at the capped level. In early 2009, BATS expanded its offering of free data to include depth-of-book data. Also in early 2009, NYSE Arca announced the launch of a competitive last sale product with an enterprise price of $30,000 per month. In response, NASDAQ combined the enterprise cap for the NLS products and reduced the cap to $50,000 (
In this environment, a super-competitive increase in the fees charged for either transactions or data has the potential to impair revenues from both products. “No one disputes that competition for order flow is `fierce'.”
No written comments were either solicited or received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Exchange's transaction fees to adopt a new Participant Fee at Chapter XV, entitled, “Options Pricing,” Section 10 entitled “Participant Fee—Options.”
The Exchange purposes [sic] to adopt a Participant Fee, applicable to BX Options Participants, to recoup costs incurred by the Exchange. The Exchange's Participant Fee is competitive with those of other options exchanges.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to adopt a Participant Fee, applicable to BX Options Participants, so the Exchange can allocate its costs to various options market participants. Today, the Exchange does not assess BX Options Participants a fee to access the options market. The Exchange proposes to assess all BX Options Participants a $500 per month Participant Fee. The NASDAQ Options Market LLC (“NOM”) initially assessed a Participant Fee in 2012 to its Options Participants.
The Exchange believes this Participant Fee is competitive with fees at other options exchanges.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, for example, the Commission indicated that market forces should generally determine the price of non-core market data because national market system regulation “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .”
The Exchange's proposal to adopt a BX Options Participant Fee of $500 per month is reasonable because the Exchange is seeking to recoup costs related to membership administration. The proposed fee is lower than similar fees at other options exchanges.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In terms of intra-market competition, the Exchange's proposal to adopt a BX Options Participant Fee of $500 per month does not impose an undue burden on competition because the Exchange would uniformly assess the same Participant Fee to each BX Options Participant. If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose Participants. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
FINRA is proposing to adopt FINRA Rule 2273, which would establish an obligation for a member to deliver an educational communication in connection with member recruitment practices and account transfers. The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Representatives who leave their member firm often contact former customers and emphasize the benefits the former customers would experience by transferring their assets to the firm that recruited the registered representative (“recruiting firm”) and maintaining their relationship with the representative. In this situation, the former customer's confidence in and prior experience with the representative may be one of the customer's most important considerations in determining whether to transfer assets to the recruiting firm. However, FINRA is concerned that former customers may not be aware of other important factors to consider in making a decision whether to transfer assets to the recruiting firm, including directs costs that may be incurred. Therefore, to provide former customers with a more complete picture of the potential implications of a decision to transfer assets, the proposed rule change would require delivery of an educational communication by the recruiting firm that highlights key considerations in transferring assets to the recruiting firm, and the direct and indirect impacts of such a transfer on those assets.
FINRA believes that former customers would benefit from receiving a concise, plain-English document that highlights the potential implications of transferring assets. The proposed educational communication is intended to encourage former customers to make further inquiries of the transferring representative (and, if necessary, the customer's current firm), to the extent that the customer considers the information important to his or her decision making.
The details of proposed FINRA Rule 2273 (Educational Communication Related to Recruitment Practices and Account Transfers) are set forth below.
The proposed rule change would require a member that hires or associates with a registered representative to provide to a former customer of the representative, individually, in paper or electronic form, an educational communication prepared by FINRA. The proposed rule change would require delivery of the educational communication when: (1) The member, directly or through a representative, individually contacts a former customer of that representative to transfer assets; or (2) a former customer of the representative, absent individual contact, transfers assets to an account assigned, or to be assigned, to the representative at the member.
The proposed rule change would define a “former customer” as any customer that had a securities account assigned to a registered person at the representative's previous firm. The term “former customer” would not include a customer account that meets the definition of an “institutional account” pursuant to FINRA Rule 4512(c); provided, however, accounts held by a natural person would not qualify for the institutional account exception.
The proposed educational communication focuses on important considerations for a former customer who is contemplating transferring assets to an account assigned to his or her former representative at the recruiting firm. The educational communication would highlight the following potential implications of transferring assets to the recruiting firm: (1) Whether financial incentives received by the representative may create a conflict of interest; (2) that some assets may not be directly transferrable to the recruiting firm and as a result the customer may incur costs to liquidate and move those assets or account maintenance fees to leave them with his or her current firm; (3) potential costs related to transferring assets to the recruiting firm, including differences in the pricing structure and fees imposed by the customer's current firm and the recruiting firm; and (4) differences in products and services between the customer's current firm and the recruiting firm.
The educational communication is intended to prompt a former customer to make further inquiries of the transferring representative (and, if necessary, the customer's current firm), to the extent that the customer considers the information important to his or her decision making.
FINRA believes that a broad range of communications by a recruiting firm or its registered representative would constitute individualized contact that would trigger the delivery requirement under the proposal. These communications may include, but are not limited to, oral or written communications by the transferring representative: (1) Informing the former customer that he or she is now associated with the recruiting firm, which would include customer communications permitted under the Protocol for Broker Recruiting (“Protocol”);
Furthermore, FINRA would consider oral or written communications to a group of former customers to similarly trigger the requirement to deliver the educational communication under the proposed rule change. These types of oral or written communications by a member, directly or through the representative, to a group of former customers may include, but are not limited to: (1) Mass mailing of information; (2) sending copies of information via email; or (3) automated phone calls or voicemails.
The proposed rule change would require a member to deliver the educational communication at the time of first individualized contact with a former customer by the member, directly or through the representative, regarding the former customer transferring assets to the member.
If the first individualized contact with the former customer is oral, the proposed rule change would require the member or representative to notify the former customer orally that an educational communication that includes important considerations in deciding whether to transfer assets to the member will be provided not later than three business days after the contact. The proposed rule change would require the educational communication be sent within three business days from such oral contact or with any other documentation sent to the former customer related to transferring assets to the member, whichever is earlier.
If the former customer seeks to transfer assets to an account assigned, or to be assigned, to the representative at the member, but no individualized contact with the former customer by the representative or member occurs before the former customer seeks to transfer assets, the proposed rule change would mandate that the member deliver the educational communication to the former customer with the account transfer approval documentation.
Pursuant to the proposed rule change, the educational communication requirement would not apply when the former customer expressly states that he or she is not interested in transferring assets to the member. If the former customer subsequently decides to transfer assets to the member without further individualized contact within the period of three months following the date that the representative begins employment or associates with the member, then the educational communication would be required to be provided with the account transfer approval documentation.
To facilitate uniform communication under the proposed rule change and to assist members in providing the proposed communication to former customers of a representative, the proposed rule change would require a member to deliver the proposed educational communication prepared by FINRA to the former customer, individually, in paper or electronic form.
If the Commission approves the proposed rule change, FINRA will announce the effective date of the proposed rule change in a
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. All members would be subject to the proposed rule change, so they would be affected in the same manner, and FINRA has narrowly tailored the rule requirements to minimize the impacts on firms.
FINRA believes that the proposed rule change would protect investors by highlighting the potential implications of transferring assets to the recruiting firm. The proposed educational communication is intended to prompt a former customer to make further inquiries of the transferring representative (and, if necessary, the customer's current firm), to the extent that the customer considers the information important to his or her decision making.
FINRA recognizes that a member that hires or associates with a registered person would incur costs to comply with the proposed rule change on an initial and ongoing basis. Members would need to establish and maintain written policies and procedures reasonably designed to ensure compliance with the proposed rule change, including monitoring communications by the transferring representative and other associated persons of the recruiting firm with former retail customers of the representative. The compliance costs would likely vary across members based on a number of factors such as the size of a firm, the extent to which a member hires registered representatives from other firms, and the effectiveness and application of existing procedures to the types of communications that must be monitored under the proposed rule change.
FINRA does not believe that the proposed rule change will impose undue operational costs on members to comply with the educational communication. While FINRA recognizes that there will be some small operational costs to members in complying with the proposed
In developing the proposed rule change, FINRA considered several alternatives to the proposed rule change, to ensure that it is narrowly tailored to achieve its purposes described previously without imposing unnecessary costs and burdens on members or resulting in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
First, the
Second, the Rule 2243 Proposal would have required members to report to FINRA information related to significant increases in total compensation over the representative's prior year compensation that would be paid to the representative during the first year at the recruiting firm so that FINRA could assess the impact of these arrangements on a member's and representative's obligations to customers and detect potential sales practices abuses. Consistent with the removal of the requirement to disclose ranges of recruitment compensation paid to a transferring representative, the proposed rule change does not include a reporting obligation. However, FINRA will include potential customer harm resulting from recruitment compensation as part of its broader conflicts management review.
Third, the disclosure requirements in the
Fourth, in response to concerns from commenters to the Rule 2243 Proposal about the proposal's competitive implications, operational aspects and the effectiveness of the proposed compensation disclosures, FINRA has instead proposed requiring delivery of an educational communication that highlights key considerations in transferring assets to the recruiting firm, and the direct and indirect impacts of such a transfer on those assets. Moreover, to ensure that former customers receive uniform information and to ease implementation of the proposed rule change, FINRA has created an educational communication for members to use in satisfying the proposed requirements. FINRA believes this approach is more effective than a general disclosure requirement of the fact of additional compensation paid to the representative because the educational communication allows for more context and explanation and is more likely to prompt a discussion with the transferring representative and the customer's current firm.
For these reasons, FINRA believes that the proposed rule change would not burden competition, but, instead, would strengthen FINRA's regulatory structure and provide additional protection to investors.
In March 2014, FINRA filed a proposal to adopt Rule 2243 to establish disclosure and reporting obligations related to member recruitment practices.
FINRA developed a one-page disclosure template for the Rule 2243 Proposal, but allowed members to use an alternative form if it contained substantially similar content. The Rule 2243 Proposal would have required delivery of the disclosures at the time of first individualized contact with a former customer by the transferring representative or recruiting firm. The Rule 2243 Proposal would have required disclosure for one year following the date the representative began employment or associated with the recruiting firm.
With respect to the reporting obligation, the Rule 2243 Proposal would have required a member to report to FINRA if the member reasonably expected the total compensation paid to the transferring representative during the representative's first year of association with the member to result in an increase over the representative's prior year compensation by the greater of 25% or $100,000. FINRA intended to use the information received as a data point in its risk-based examination program.
The SEC received 184 comments on the Rule 2243 Proposal, including 33 unique comments. Commenters to the Rule 2243 Proposal conveyed concerns about the proposal's competitive implications and operational aspects, as well as the effectiveness of the proposed compensation disclosures. On June 20, 2014, FINRA withdrew SR-FINRA-2014-010 to further consider the comments to the Rule 2243 Proposal.
A revised proposal was published for public comment in
Eight commenters stated that the
FINRA believes that the proposed rule change (reflected, in part, in the
As proposed in the
As discussed in greater detail in Item II.A., FINRA believes that a broad range of communications by a recruiting firm, directly or through a representative, with former customers may reasonably be seen as individually contacting the former customer to transfer assets to the recruiting firm and, as such, would trigger the delivery of the educational communication under the proposed rule change. To lessen any potential confusion regarding whether a communication by a member, directly or through the representative, with a former customer was an inducement to transfer assets, FINRA has revised the proposal to remove the reference to “inducement” of former customers. FINRA instead proposes to trigger delivery of the educational communication when: (1) The member, directly or through a representative, individually contacts a former customer of that representative to transfer assets; or (2) a former customer of the representative, absent individual contact, transfers assets to an account assigned, or to be assigned, to the representative at the member.
Some commenters stated that the requirement to provide the communication following the first individualized contact with a former customer would be unworkable as members would need to rely on representatives to report the contacts with former customers.
The proposed rule change retains the delivery triggers in the
Furthermore, FINRA does not believe that setting up policies and procedures to supervise a registered person's communications with former customers presents an unreasonable burden to members. Members already are obligated to supervise representatives' communications with customers and have flexibility to design their supervisory systems. FINRA notes that the commenters did not provide specific data or other support for their contention that the delivery requirements would be unworkable for recruiting firms.
One commenter suggested that FINRA include additional language in the proposed rule that a former customer may transfer absent individualized contact and provided examples of transfers absent individualized contact.
FINRA also received comments regarding the timing of delivery of the educational communication. Some commenters supported requiring the delivery of the educational communication prior to the time that a former customer decides to transfer assets to the recruiting firm to ensure that the former customer has sufficient time to consider and respond to the information in the communication.
However, several commenters suggested that the requirement to deliver the educational communication should be integrated into an existing process, such as including the communication with the account transfer approval documentation, so as to make implementation of the requirement more cost effective and efficient for members.
The proposed rule change retains the requirement that a member deliver the educational communication at the time of first individualized contact with a former customer by the member, directly or through the representative, regarding the former customer transferring assets to the member. FINRA believes requiring delivery of the communication at the time of first individualized contact is more effective than requiring delivery of the communication at or prior to account opening because customers typically have already made the decision to transfer assets by that point in the process. FINRA believes the same problem exists with respect to a verification letter sent in compliance with Rule 17a-3 under the Exchange Act. FINRA does not believe that it is particularly burdensome to require members to include as part of a written communication to former customers a non-customized, FINRA-created educational communication that includes key information for the customer to consider in making a decision to transfer assets to a new firm. In addition, FINRA believes that to be effective, the proposed educational communication should be accessible to the former customer at or shortly after the time the first individualized contact is made by the recruiting firm or the representative.
Finally, for the reasons discussed in more detail above, the proposed rule change no longer mandates specific disclosure of financial incentives received by the representative. As such, the suggestion to require that representatives disclose any recruitment-related compensation received by the representative in writing at the time of the first individualized contact with the former customer is inconsistent with the approach in the proposed rule change to identify important considerations for former customers and prompt further inquiry to the extent any of those considerations are of concern or interest to the customer. Moreover, the suggestion would reintroduce the privacy and operational challenges raised by many commenters to the Rule 2243 Proposal. Accordingly, FINRA declines to include the suggested requirement.
Under the proposed rule change (as reflected in the
Some commenters to the
The proposed rule change retains the three business day period proposed in the
One commenter stated that FINRA should clarify that the three business day period is for transmission of the educational communication by the member and not for receipt of the communication by the customer.
The
Some commenters supported shortening the length of the applicable period as communications between a representative and former customers typically occur quickly following the representative's transfer to the recruiting firm. For example, one commenter indicated that six months was too long of a period but did not offer an alternative period.
Based on feedback from the industry, FINRA believes that the representatives who individually contact former customers to transfer assets typically do so soon after being hired or associating with the recruiting firm. In addition, FINRA recognizes that tracking contacts with former customers may be more difficult as time passes from the date of the representative's hire or association. In recognition of these factors, the proposed rule change provides that the delivery of the educational communication shall apply for three months following the date the representative begins employment or associates with the member. FINRA believes a three-month period will effectively achieve the regulatory objective while lessening the operational and supervisory burdens on firms.
Commenters requested that FINRA clarify the application of the
FINRA recognizes that a representative may transfer to a new firm in circumstances where the decision may not be completely volitional (
Similarly, a change of broker-dealer of record for a customer's account in the application-way business context typically does not present the same considerations for customers related to costs, portability, and differences in products, services and fees between the firms as in circumstances where a representative individually contacts a former customer to transfer assets to a new firm.
In short, these circumstances do not present the investor protection dimensions that the
One commenter suggested that FINRA state in the proposed rule or supplementary material to the proposed rule that appropriate supervisory procedures to implement the educational delivery requirement would be deemed to exist if a member were to mandate training, spot checks, and certifications.
One commenter supported revising the
Some commenters stated that, even if effective supervisory procedures existed for the educational communication requirement, the training, implementation, and maintenance of supervisory controls related to the
FINRA does not believe that the training, implementation, and maintenance of supervisory controls related to the proposed rule change (as reflected in the
FINRA believes that the investor protection benefits of providing the important information contained in the educational communication to former customers to inform their decision whether to transfer assets to their representative's new firm are reasonably aligned with any costs that may arise under the proposed rule change.
The
While some firms may elect to include a customer affirmation requirement as part of their supervisory controls in implementing the proposed rule change, the proposed rule change does not incorporate a customer affirmation requirement. FINRA believes that the requirements to provide the educational communication at the time of first individualized contact with a former customer, to follow up in writing if such contact is oral, and to deliver the disclosures with the account transfer approval documentation when no individual contact is made, will ensure that former customers receive and have an opportunity to review the information in the proposed educational communication before they decide to transfer assets to a recruiting firm. Furthermore, FINRA wishes to avoid adding an additional requirement to the proposed rule that may impede the timely transfer of customer assets between members.
At this time, FINRA does not believe that a customer affirmation is necessary to accomplish the goals of the proposed rule change. FINRA will assess the effectiveness of the educational communication requirement without a customer affirmation requirement following implementation of the proposed rule. If FINRA finds that the proposed educational communication alone is not attracting the attention of customers to influence their decision-making process, then it will reconsider a customer affirmation requirement.
Some commenters indicated that the proposed educational communication is too focused on conflicts of interest that may be created by the financial incentives received by a representative for transferring firms.
FINRA recognizes the business rationales for offering financial incentives and transition assistance to recruit experienced representatives and seeks neither to encourage nor discourage the practice with the proposed rule change. The proposed rule change is intended to highlight a broad range of potential implications of transferring assets to the recruiting firm, and customers can engage in further conversations with the recruiting firm or their representative in areas of personal concern or interest. While the proposed educational communication notes that a former customer may wish to consider whether financial incentives received by the representative may create a conflict of interest, it is not particularly focused on that consideration. The educational communication also notes that the former customer may wish to consider whether: (1) Assets may not be directly transferrable to the recruiting firm and as a result the customer may incur costs to liquidate and move those assets or account maintenance fees to leave them with his or her current firm; (2) potential costs related to transferring assets to the recruiting firm, including differences in the pricing structure and fees imposed between the customer's current firm and the recruiting firm; and (3) differences in products and services between the customer's current firm and the recruiting firm. The educational communication is intended to prompt a former customer to make further inquiries of the transferring representative (and, if necessary, the customer's current firm). Furthermore, to the extent that the former customer is unsure about whether the information
One commenter stated that before imposing the educational communication requirement, FINRA should establish that a real or potential conflict of interest exists in every transaction and that there is evidence of systemic problems with the account transfer process or the current disclosure regime to justify the costs associated with the proposed rule change.
This commenter also stated that the discussions of investor testing of, and the economic impact assessment for, the proposed educational communication in the
As discussed above, FINRA tested the educational communication with a diverse group of retail investors, who indicated that the educational communication effectively conveyed important and useful information. Investors also indicated that the communication identified issues to consider that they had previously been unaware of and that would be meaningful in making a decision whether to transfer assets to the representative's new firm. FINRA believes that potential conflicts of interest, portability, costs, including differences in the pricing structure and fees and tax implications due to liquidation of assets, and differences in products and services are material to many former customers' decision whether to transfer assets.
FINRA also notes that the Protocol governs the employment transitions of representatives of signatory firms—such as what information is categorized as confidential and is restricted from being moved from one firm to the other—and does not address the issues that are highlighted in the proposed communication (
With respect to how existing FINRA rules protect former customers from harm, there is no current rule that requires representatives to inform former customers in a timely manner of the potential implications of transferring assets, so as to allow them to make an informed decision that may have cost and service implications, among others. FINRA believes that the proposed rule change is easily distinguishable from and serves a different purpose than other currently existing FINRA rules.
Some commenters suggested that the proposed educational communication should be streamlined to reduce its length.
Some commenters supported replacing the term “broker” in the educational communication with a different, more “modern” term (
The proposed rule change (as reflected in the
With the proposed rule change, FINRA is focused on providing customers impactful information to consider when deciding whether to transfer assets to a representative's new firm, where cost and portability issues are most likely to arise and where certain potential conflicts (
One commenter suggested adding supplementary material to the
One commenter suggested that FINRA confirm that the proposed rule does not require or create a presumption in favor of a member sharing a former customer's information with a transferring representative or the recruiting firm.
FINRA does not agree that the proposed rule change would encourage violations of federal or state privacy regulations because it does not require the disclosure of any information related to non-public customer personal information. With respect to commenters' concerns regarding non-compete agreements and the prohibitions in Regulation S-P, FINRA notes that the proposed rule change is not intended to impact any contractual agreement between a representative and his or her former firm or new firm and does not require members to disclose information in a manner inconsistent with Regulation S-P.
Some commenters indicated that, due to privacy agreements or Regulation S-P, representatives may not have information available to answer customer inquiries prompted by the educational communication.
One commenter stated that the discussions of investor testing of, and the economic impact assessment for, the proposed educational communication in the
Some commenters to the
The proposed rule change does not include a
Furthermore, a
One commenter proposed creating an exemption from the requirement to deliver the educational communication if none of the issues identified in the communication are applicable to the representative's association with the recruiting firm.
One commenter suggested creating an exemption from the requirement to deliver the educational communication for independent contractor model firms where, as stated by the commenter, the customers are not viewed as being “own[ed]” by the firm.
Two commenters stated that the
The
The proposed rule change would apply to customers that meet the definition of a “former customer” under the proposed rule. This would include any customer that had a securities account assigned to a representative at the representative's previous firm and would not include a customer account that meets the definition of an institutional account pursuant to FINRA Rule 4512(c) other than accounts held by any natural person. FINRA believes that former customers that a member or representative individually contacts to transfer assets to a new firm are most impacted in recruitment situations because they have already developed a relationship with the representative and because their assets may be both the basis for the representative's recruitment compensation and subject to potential costs and changes if the customer decides to move those assets to the recruiting firm. FINRA did not extend the application of the proposed rule to non-natural person institutional accounts because it believes that such accounts are more sophisticated in their dealings with representatives and that the proposed educational communication would not have as significant an impact on their decision whether to transfer assets to a new firm.
One commenter supported the use of a FINRA-created educational communication in lieu of a member-created communication.
To facilitate members providing the educational communication at a relatively low cost and without significant administrative burden, FINRA has developed an educational communication for members to use to satisfy the requirements of the proposed rule change. To ensure that former customers receive uniform information and to ease implementation of the proposed rule change, FINRA does not propose to permit members to revise the communication or integrate the communication into other documents.
The proposed rule change would not require a member to report to FINRA
One commenter to the
The proposed rule change would apply to any registered person that transfers to a member and individually contacts a former customer (
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Robert W. Errett, Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend BX Rule 7039 (BX Last Sale and NASDAQ Last Sale Plus Data Feeds) with language regarding NASDAQ Last Sale (“NLS”) Plus (“NLS Plus”), a comprehensive data feed offered by NASDAQ OMX Information LLC
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of this proposal is to amend Rule 7039(b). Specifically, this proposal would allow NLS Plus to reflect consolidated volume of real-time trading activity for Tape A securities and Tape B securities. Now, consolidated volume on NLS Plus is real-time only for Tape C securities. The Exchange also proposes to remove two duplicative terms in the rule.
NLS Plus, which is reflected in Rule 7039(b),
Other exchanges have data feeds that are similar to NLS Plus.
NLS Plus offers data for all U.S. equities via two separate data channels: The first data channel reflects NASDAQ, BX, and PSX trades with real-time consolidated volume for NASDAQ-listed securities; and the second data channel reflects NASDAQ, BX, and PSX trades with delayed consolidated volume for NYSE, NYSE MKT, NYSE Arca and BATS-listed securities. The Exchange believes that market data distributors may use the NLS Plus data feed to feed stock tickers, portfolio trackers, trade alert programs, time and sale graphs, and other display systems. The provision of multiple options for investors to receive market data was a primary goal of the market data amendments adopted by Regulation NMS. Finally, NLS Plus provides investors with options for receiving market data that parallel products currently offered by BATS and BATS Y, EDGA, and EDGX and NYSE equity exchanges.
Consolidated volume reflects the consolidated volume at the time that the NLS Plus trade message is generated, and includes the volume for the issue symbol as reported on the consolidated market data feed. The consolidated volume is based on the real-time trades reported via the UTP Trade Data Feed (“UTDF”) and delayed trades reported via CTA. NASDAQ calculates the real-time trading volume for its trading venues, and then adds the real-time trading volume for the other (non-NASDAQ) trading venues as reported via the UTDF data feed. For non-NASDAQ-listed issues, the consolidated volume is based on trades reported via SIAC's Consolidated Tape System (“CTS”) for the issue symbol. The Exchange calculates the real-time trading volume for its trading venues, and then adds the 15-minute delayed trading volume for the other (non-NASDAQ) trading venues as reported via the CTS data feed.
NLS Plus is currently codified in BX Rule 7039(b) as follows:
(b) NASDAQ Last Sale Plus (“NLS Plus”). NLS Plus is a comprehensive data feed produced by NASDAQ OMX Information LLC. It provides last sale data as well as consolidated volume of NASDAQ U.S. equity markets (BX, The NASDAQ Stock Market (“NASDAQ”), and NASDAQ OMX PSX (“PSX”)) and the NASDAQ/FINRA Trade Reporting Facility (“TRF”). NLS Plus also reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape C securities and 15-minute delayed information for Tape A and B securities. NLS Plus also contains: Trade Price, Trade Size, Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of Day Trade Summary, Adjusted Closing Price, IPO Information, and Bloomberg ID. Additionally, pertinent regulatory information such as Market Wide Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator, Trading Action, Symbol Directory, Adjusted Closing Price, and End of Day Trade Summary are
This proposal essentially reflects one change to NLS Plus as it currently exists. Whereas now consolidated volume on NLS Plus is real-time only for Tape C securities and is 15 minute delayed for Tape A and Tape B securities, this proposal would allow NLS Plus to reflect consolidated volume of real-time trading activity as reported to all of the Tapes. As proposed to be amended, BX Rule 7039(b) would state:
(b) NASDAQ Last Sale Plus (“NLS Plus”). NLS Plus is a comprehensive data feed produced by NASDAQ OMX Information LLC. It provides last sale data as well as consolidated volume of NASDAQ U.S. equity markets (BX, The NASDAQ Stock Market (“NASDAQ”), and NASDAQ OMX PSX (“PSX”)) and the NASDAQ/FINRA Trade Reporting Facility (“TRF”). NLS Plus also reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape C securities. NLS Plus also contains: Trade Price, Trade Size, Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of Day Trade Summary, Adjusted Closing Price, IPO Information, and Bloomberg ID. Additionally, pertinent regulatory information such as Market Wide Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator, Trading Action, and Symbol Directory are included. NLS Plus may be received by itself or in combination with NASDAQ Basic. Additionally, NLS Plus reflects cumulative volume real-time trading activity across all U.S. exchanges for Tape A securities and Tape B securities.
The Exchange proposes one housekeeping change. This is a technical change to remove two terms that are indicated twice in Rule 7039(b): “Adjusted Closing Price” and “End of Day Trade Summary”.
With respect to latency, as discussed in previous NLS Plus filings,
The Exchange believes that its proposal would greatly benefit the public and investors, and is consistent with the Act.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The purpose of the proposed rule change is to add language to section (b) of Rule 7039 regarding real-time data across all U.S. markets that are reported to Tapes A, B, and C and are offered on NLS Plus; and to remove two duplicative terms from the rule. The Exchange believes that the proposal facilitates transactions in securities, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest by making available additional means by which investors may access real-time volume information about securities transactions, thereby providing investors with additional options for accessing information that may help to inform their trading decisions.
The Exchange notes that the Commission has recently approved a data product on several exchanges that is similar to NLS Plus and is real-time, and specifically determined that the approved data product was consistent with the Act.
In adopting Regulation NMS, the Commission granted SROs and broker-
[E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.
By removing unnecessary regulatory restrictions on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to BDs at all, it follows that the price at which such data is sold should be set by the market as well.
Moreover, data products such as NLS Plus are a means by which exchanges compete to attract order flow. To the extent that exchanges are successful in such competition, they earn trading revenues and also enhance the value of their data products by increasing the amount of data they are able to provide. Conversely, to the extent that exchanges are unsuccessful, the inputs needed to add value to data products are diminished. Accordingly, the need to compete for order flow places substantial pressure upon exchanges to keep their fees for both executions and data reasonable.
The Exchange believes that, for the reasons given, the proposal is consistent with the Act. The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The purpose of the proposed rule change is to add language to section (b) of Rule 7039 regarding real-time data across all U.S. markets that are reported to Tapes A, B, and C and are offered on NLS Plus; and to remove two duplicative terms from the rule. The Exchange believes that the proposal facilitates transactions in securities, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest by making available additional means by which investors may access real-time information about securities transactions, thereby providing investors with additional options for accessing information that may help to inform their trading decisions.
The Exchange notes that the Commission has recently approved a data product on several exchanges that is similar to NLS Plus and is real-time, and specifically determined that the approved data product was consistent with the Act.
In adopting Regulation NMS, the Commission granted SROs and broker-dealers (“BDs”) increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that its NLS Plus market data product is precisely the sort of market data product that the Commission envisioned when it adopted Regulation NMS. The Commission concluded that Regulation NMS—by deregulating the market in proprietary data—would itself further the Act's goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.
By removing unnecessary regulatory restrictions on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to BDs at all, it follows that the price at which such data is sold should be set by the market as well. Moreover, data products such as NLS Plus are a means by which exchanges compete to attract order flow. To the extent that exchanges are successful in such competition, they earn trading revenues and also enhance the value of their data products by increasing the amount of data they are able to provide. Conversely, to the extent that exchanges are unsuccessful, the inputs needed to add value to data products are diminished. Accordingly, the need to compete for order flow places substantial pressure upon exchanges to keep their fees for both executions and data reasonable.
The Exchange believes that, for the reasons given, the proposal is consistent with the Act.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. As is true of all NASDAQ's non-core data products, NASDAQ's ability to offer NLS Plus through NASDAQ OMX Information LLC and price NLS Plus is constrained by: (1) Competition between exchanges and other trading platforms that compete with each other in a variety of dimensions; (2) the existence of inexpensive real-time consolidated data and market-specific data and free delayed consolidated data; and (3) the inherent contestability of the market for proprietary last sale data. The Exchange believes that its proposal is pro-
In addition, as discussed, NLS Plus competes directly with a myriad of similar products and potential products of market data vendors. This proposal allows offering on NLS Plus, on a real-time basis, U.S. market data that is reported to Tapes A, B, and C. NLS Plus joins the existing market for proprietary last sale data products that is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually limitless opportunities for entrepreneurs who wish to produce and distribute their own market data. This proprietary data is produced by each individual exchange, as well as other entities, in a vigorously competitive market. Similarly, with respect to the FINRA/NASDAQ TRF data that is a component of NLS and NLS Plus, allowing exchanges to operate TRFs has permitted them to earn revenues by providing technology and data in support of the non-exchange segment of the market. This revenue opportunity has also resulted in fierce competition between the two current TRF operators, with both TRFs charging extremely low trade reporting fees and rebating the majority of the revenues they receive from core market data to the parties reporting trades.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, the operation of the exchange is characterized by high fixed costs and low marginal costs. This cost structure is common in content and content distribution industries such as software, where developing new software typically requires a large initial investment (and continuing large investments to upgrade the software), but once the software is developed, the incremental cost of providing that software to an additional user is typically small, or even zero (
Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. The Exchange pays rebates to attract orders [sic], charges relatively low prices for market information and charges relatively high prices for accessing posted liquidity [sic]. Other platforms may choose a strategy of paying lower liquidity rebates to attract orders, setting relatively low prices for accessing posted liquidity, and setting relatively high prices for market information. Still others may provide most data free of charge and rely exclusively on transaction fees to recover their costs. Finally, some platforms may incentivize use by providing opportunities for equity ownership, which may allow them to charge lower direct fees for executions and data.
In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. Such regulation is unnecessary because an “excessive” price for one of the joint products will ultimately have to be reflected in lower prices for other products sold by the firm, or otherwise the firm will experience a loss in the volume of its sales that will be adverse to its overall profitability. In other words, an increase in the price of data will ultimately have to be accompanied by a decrease in the cost of executions, or the volume of both data and executions will fall.
The competitive nature of the market for products such as NLS Plus is borne out by the performance of the market. In May 2008, the internet portal Yahoo! began offering its Web site viewers real-time last sale data (as well as best quote data) provided by BATS. In response, in June 2008, NASDAQ launched NLS, which was initially subject to an “enterprise cap” of $100,000 for customers receiving only one of the NLS products, and $150,000 for customers receiving both products. The majority of NASDAQ's sales were at the capped level. In early 2009, BATS expanded its offering of free data to include depth-of-book data. Also in early 2009, NYSE Arca announced the launch of a competitive last sale product with an enterprise price of $30,000 per month. In response, NASDAQ combined the enterprise cap for the NLS products and reduced the cap to $50,000 (
In this environment, a super-competitive increase in the fees charged for either transactions or data has the potential to impair revenues from both products. “No one disputes that competition for order flow is `fierce'.”
No written comments were either solicited or received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to retire the Proprietary Trader and Proprietary Trader Principal registration categories and to establish the Securities Trader and Securities Trader Principal registration categories. The Exchange is also amending its rules to establish the Series 57 examination as the appropriate qualification examination for Securities Traders and deleting the rule referring to the S501 continuing education program currently applicable to Proprietary Traders. The Exchange will announce the effective date of the proposed rule change in a circular distributed to Members.
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange is proposing herein to replace the Series 56 with the Series 57 examination and to make various related changes to its registration rules. Specifically, in response to the FINRA Amendments (defined below), the Exchange is proposing to retire the Proprietary Trader
Currently, under Exchange Rule 11.4(e), each person associated with a member who is included within the definition of an “Authorized Trader” in Rule 1.5(d) is required to register with the Exchange and to pass an appropriate qualification examination before such registration may become effective. The Exchange recognizes the following qualification examinations as acceptable for purposes of registration as an Authorized Trader: Series 7, Series 56, or one of several foreign securities examination modules.
Interpretation and Policy .01(f) of Exchange Rule 2.5 currently provides that a person may register with the Exchange as a Proprietary Trader if such person engages solely in proprietary trading, passes the Series 56 examination and is an associated person of a proprietary trading firm as defined in Interpretation and Policy .01(g) of Exchange Rule 2.5. Therefore, pursuant to Interpretation and Policy .01 to Exchange Rule 2.5, an individual meeting these criteria may register in the Proprietary Trader category after passing the Series 56 examination rather than as a General Securities Representative after passing the Series 7 examination or equivalent foreign securities examination module.
In consultation with FINRA and other exchanges, and in order to harmonize the requirements for individuals engaged in trading activities, the Exchange is now proposing to retire the Proprietary Trader registration category. Similarly, the Exchange is proposing to adopt a new Securities Trader registration category.
Under Exchange Rules, as revised, each person associated with a member who is included within the definition of Authorized Trader will be required to register as a Securities Trader unless they instead qualify based on the Series 7 examination or an equivalent foreign securities examination module. Therefore, representatives who previously qualified for Proprietary Trader registration will be required to register as Securities Traders. Accordingly, the Exchange is proposing to modify paragraph (f) of Interpretation and Policy .01 to reflect the new Securities Trader qualification as a permissible registration for Authorized Traders of Members that engage solely in trading on the Exchange on either an agency or principal basis. In order to register as a Securities Trader, an applicant would be required to have passed the new Securities Trader qualification examination (Series 57) or a predecessor examination (
A person registered as a Proprietary Trader in the Central Registration Depository (CRD®) system on the effective date of the proposed rule change will be grandfathered as a Securities Trader without having to take any additional examinations and without having to take any other actions. In addition, individuals who were registered as Proprietary Traders in the CRD system prior to the effective date of the proposed rule change will be eligible to register as Securities Traders without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a representative and the date they register as a Securities Trader.
Persons registered in the new category would be subject to the continuing education requirements of Interpretation and Policy .02(e) to Rule 2.5. The Exchange proposes to amend Interpretation and Policy .02(e) by removing the option for Series 56 registered persons to participate in the S501 Series 56 Proprietary Trader continuing education program in order to satisfy the Regulatory Element. The S501 Series 56 Proprietary Trader continuing education program is being phased out along with the Series 56 Proprietary Trader qualification examination. As a result, effective January 4, 2016, the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons will cease to exist. In place of the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons, the Exchange proposes that Series 57 registered persons be required to take the S101 General Program for Series 7 and all other registered persons.
Currently, under Interpretation and Policy .01(d), the Exchange requires each Member to register “Principals”
The Exchange has been working with other exchanges and FINRA to develop this new principal registration category and believes that it is an appropriate corollary to the new Securities Trader representative registration category. To qualify for registration as a Securities Trader Principal, an applicant must become qualified and registered as a Securities Trader under proposed Interpretation and Policy .01(c) and pass either the Series 24 or Series 14 examination. A person who is qualified and registered as a Securities Trader Principal would only be permitted to have supervisory responsibility over the activities of Securities Traders, unless such person were separately qualified and registered in another appropriate principal registration category, such as the General Securities Principal registration category. Conversely, the proposed rule change clarifies that each principal who will have supervisory responsibility over registered Securities Traders is required to become qualified and registered as a Securities Trader Principal.
A person registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system on the effective date of the proposed rule change will be eligible to register as a Securities Trader Principal without having to take any additional examinations. An individual who was registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system prior to the effective date of the proposed rule change will also be eligible to register as a Securities Trader Principal without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a principal and the date they register as a Securities Trader Principal. Members, however, will be required to affirmatively register persons transitioning to the proposed registration category as Securities Trader Principals on or after the effective date of the proposed rule change.
In order to accomplish the changes proposed above, the Exchange has proposed modifications throughout Interpretation and Policy .01 and .02 to Rule 2.5 as well as Rule 11.4(e) to eliminate references to Proprietary Trader, Proprietary Trader Principal, and Series 56 examination and to replace such references with Securities Trader, Securities Trader Principal and Series 57 examination. The Exchange also proposes to modify Rule 11.6, which sets forth the registration requirements applicable to Market Maker Authorized Traders, or MMATs, to cross-reference Interpretation and Policy .01 and .02. Although Rule 11.6 currently requires an MMAT to qualify by taking the Series 7 examination, the Exchange does not intend to impose different registration or continuing education requirements on MMATs than are required of Authorized Traders generally. In addition to these changes, the Exchange proposes to delete paragraph (h) to Interpretation .01, which currently states that: “Principals responsible for supervising the activities of General Securities Representatives must successfully complete the Series 7 or an equivalent foreign examination module in addition to the Series 24.” The Exchange proposes to eliminate this provision as duplicative with existing language in Interpretation and Policy .01, including paragraph (d), which states that “[i]ndividuals that supervise the activities of General Securities Representatives must successfully complete the Series 7 or an equivalent foreign examination module as a prerequisite to the Series 24 or Series 14 and shall be referred to as General Securities Principals.” The Exchange also proposes to modify a reference in Interpretation and Policy .01(e) from “General Securities Representative Principal” to “General Securities Principal.” In addition, the Exchange proposes to eliminate the fees applicable to the Series 56 examination as well as the fees associated with the continuing education necessary to maintain registration after passing the Series 56 examination. Consistent with all other examinations recognized by the Exchange, FINRA will administer the Series 57 examination and the continuing education requirements related thereto, and the Exchange will not be separately charging and collecting any fees in order to take such examination or participate in applicable continuing education. Finally, in order to continue to align the Exchange's rules with the rules of its affiliated exchanges, the Exchange proposes to adopt descriptive headings in Interpretation and Policy .02 to Rule 2.5 based on Interpretation and Policy .02 to Rule 2.5 of the rules of EDGA Exchange, Inc. and EDGX Exchange, Inc. and to modify the language, but not the substance, of Rule 11.4(e).
The Exchange believes that proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Implementation of the proposed changes to the Exchange's registration rules in coordination with the FINRA Amendments does not present any competitive issues, but rather is designed to provide less burdensome and more efficient regulatory compliance for members and enhance the ability of the Exchange to fairly and efficiently regulate members, which will further enhance competition. Additionally, the proposed rule change should not affect intramarket competition because all similarly situated representatives and principals will be required to complete the same qualification examinations and maintain the same registrations.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission waive the thirty-day operative delay so that the proposal may become operative as of January 4, 2016. The Exchange states that waiving the thirty-day delay would allow the Exchange to eliminate the Proprietary Trader and Proprietary Trader Principal registration categories and adopt the Securities Trader and Securities Trader Principal registration categories at the same time as FINRA and the other national securities exchanges. The Commission believes that waiving the thirty day delay is consistent with the protection of investors and the public interest, as it will enable BYX to have the new requirements in effect at the same time as the other SROs . Therefore, the Commission hereby waives the thirty-day operative delay and designates the proposal operative as of January 4, 2016.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On October 23, 2015, New York Stock Exchange LLC (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (the “Commission”) pursuant to Section 19(b)(1)
The Exchange proposes to change the co-location services offered by the Exchange to include a means for Users to receive market data feeds from third party markets (the “Third Party Data”) through a wireless connection.
The Exchange proposes to offer the wireless connection to provide Users with an alternative means of connectivity for Third Party Data. As the Exchange notes, wireless connections involve beaming signals through the air between antennas that are within sight of one another.
Under the proposed rule change, the Exchange would utilize a network vendor to provide a wireless connection to the Third Party Data through wireless connections from the Exchange access centers in Secaucus and Carteret, New Jersey, to its data center in Mahwah, New Jersey, through a series of towers equipped with wireless equipment.
A User would be charged a $5,000 non-recurring initial charge for each wireless connection and a monthly recurring charge (“MRC”) that would vary depending upon the feed that the User opts to receive. If a User purchased two wireless connections, it would pay two non-recurring initial charges. The MRC for a wireless connection to each of BATS Pitch BZX Gig shaped data, DirectEdge EDGX Gig shaped data, and NASDAQ BX Totalview-ITCH data will be $6,000; the MRC for a wireless connection of NASDAQ Totalview-ITCH data will be $8,500; and the MRC for a wireless connection of NASDAQ Totalview-ITCH and BX Totalview-ITCH data will be $12,000. The Exchange proposes to waive the first month's MRC, to allow Users to test the receipt of the feed(s) for a month before incurring any MRCs.
The wireless connections would include the use of one port for connectivity to the Third Party Data. A User will only require one port to connect to the Third Party Data, irrespective of how many of the five wireless connections it orders. If a User that has more than one wireless connection wishes to use more than one port to connect to the Third Party Data,
The Exchange represents that there is limited bandwidth available on the wireless connection for data feeds from third parties. As a result, the Exchange has decided to offer as Third Party Data only the data feeds that are in high demand from Users. Although constrained by bandwidth with respect to the number of feeds it can carry, the Exchange represents that the wireless network offered by the Exchange can be made available to an unlimited number of Users.
The wireless connection would provide Users with an alternative means of connectivity for Third Party Data. Currently, Users can receive Third Party Data through other methods, including, for example, from another User, through a telecommunications provider, or over the internet protocol (“IP”) network.
The wireless connection to the Third Party Data is expected to be available no later than March 1, 2016. The Exchange will announce the date that the wireless connection to the Third Party Data will be available through a customer notice.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission believes that the Exchange's proposal to provide this additional connectivity option is consistent with the requirement of Section 6(b)(5) of the Act. The Commission believes that the proposal is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the Exchange makes wireless connectivity available to all Users on an equal basis. All Users that voluntarily select this service option will be charged the same amount for the same services, and there would be no differentiation among Users with regard to the fees charged for the service. Further, the Exchange represents that Users of the new wireless connection would not receive Third Party Data that is not available to all Users. In addition, the Exchange represents that Users that do not opt to utilize the Exchange's wireless connections would still be able to obtain Third Party Data through other methods, such as from wireless networks offered by third party vendors, other Users, through telecommunications providers, or over the IP network.
The Commission also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act.
The Commission also finds that consistent with Section 6(b)(8) of the Act the proposed rule change does not impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange states that Users currently can receive Third Party Data from competing wireless networks offered by third party vendors, including at least four third party vendors that offer Users wireless network connections using wireless equipment installed on towers and buildings near the data center. The Exchange represents, based on the information available to it, that the proposed wireless connection would provide data at the same or similar speed, and at the same or similar cost, as existing wireless networks, thereby enhancing competition.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
The following is a notice of applications for deregistration under section 8(f) of the Investment Company Act of 1940 for the month of December 2015. A copy of each application may be obtained via the Commission's Web site by searching for the file number, or for an applicant using the Company name box, at
The Commission: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Hae-Sung Lee, Attorney-Adviser, at (202) 551-7345 or Chief Counsel's Office at (202) 551-6821; SEC, Division of Investment Management, Chief Counsel's Office, 100 F Street NE., Washington, DC 20549-8010.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Chapter XV, entitled “Options Pricing,” at Section 2, which governs pricing for Exchange members using the NASDAQ Options Market (“NOM”), the Exchange's facility for executing and routing standardized equity and index options.
The Exchange purposes to lower the Non-NOM Market Maker
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to lower the Non-NOM Market Maker Penny Pilot Options Fee for Removing Liquidity for options overlying EEM, GLD, IWM, QQQ, and SPY from $0.55 to $0.50 per contract. The details of this proposal are below.
The Exchange proposes, beginning January 4, 2016, to decrease the Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot Options from $0.55 to $0.50 per contract for options overlying EEM, GLD, IWM, QQQ, and SPY. The Exchange notes that the Fees for Removing Liquidity for other Participants in Penny Pilot Options will remain the same, at $0.050 [sic] per contract. The Exchange believes that lowering this fee may encourage additional order flow to be directed to NOM for options overlying EEM, GLD, IWM, QQQ, and SPY.
The Exchange believes that the proposed rule change is consistent with Section 6 of the Act,
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, for example, the Commission indicated that market forces should generally determine the price of non-core market data because national market system regulation “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .”
The Exchange's proposal to decrease the Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot Options from $0.55 to $0.50 per contract for options overlying EEM, GLD, IWM, QQQ, and SPY is reasonable because the Exchange seeks to assess all Participants the same rate of $0.50 per contract to remove Penny Pilot Options on NOM. Also, the Exchange believes that lowering this fee may encourage additional order flow to be directed to NOM for options overlying EEM, GLD, IWM, QQQ, and SPY.
The Exchange's proposal to decrease the Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot Options from $0.55 to $0.50 per contract for options overlying EEM, GLD, IWM, QQQ, and SPY is equitable and not unfairly discriminatory because all Participants will be assessed a $0.50 per contract Fee for Removing Liquidity in Penny Pilot Options for all options transacted on NOM.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In this instance, the proposed change to fees assessed to Participants for execution of securities does not impose a burden on competition because the Exchange's execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues.
The Exchange's proposal to decrease the Non-NOM Market Maker Fee for Removing Liquidity in Penny Pilot Options from $0.55 to $0.50 per contract for options overlying EEM, GLD, IWM, QQQ, and SPY does not impose an undue burden on intra-market competition because the Exchange will assess all Participants the same Fee for Removing Liquidity in Penny Pilot Options.
In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Participants or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2015-155 and should be submitted on or before January 20,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On April 24, 2015, the Municipal Securities Rulemaking Board (“MSRB”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act” or “Act”)
As described more fully in the Proposing Release, as modified by Amendment No. 1 and Amendment No. 2, the MSRB is proposing to adopt new Rule G-42, on duties of non-solicitor municipal advisors and proposed amendments to Rule G-8, on books and records to be made by brokers, dealers, municipal securities dealers, and municipal advisors (the “proposed rule change”).
Proposed Rule G-42 would establish the core standards of conduct and duties of municipal advisors when engaging in municipal advisory activities, other than municipal advisory solicitation activities (“municipal advisors”). In summary, the core provisions of Proposed Rule G-42 would:
• Establish certain standards of conduct consistent with the fiduciary duty owed by a municipal advisor to its municipal entity clients, which includes a duty of care and of loyalty;
• Establish the standard of care owed by a municipal advisor to its obligated person clients;
• Require the full and fair disclosure, in writing, of all material conflicts of interest and legal or disciplinary events that are material to a client's evaluation of a municipal advisor;
• Require the documentation of the municipal advisory relationship, specifying certain aspects of the relationship that must be included in the documentation;
• Require that recommendations made by a municipal advisor are suitable for its clients, or that it determine the suitability of recommendations made by third parties when appropriate; and
• Specifically prohibit a municipal advisor from engaging in certain activities, including, in summary:
○ Receiving excessive compensation;
○ delivering inaccurate invoices for fees or expenses;
○ making false or misleading representations about the municipal advisor's resources, capacity or knowledge;
○ participating in certain fee-splitting arrangements with underwriters;
○ participating in any undisclosed fee-splitting arrangements with providers of investments or services to a municipal entity or obligated person client of the municipal advisor;
○ making payments for the purpose of obtaining or retaining an engagement to perform municipal advisory activities, with limited exceptions; and
○ entering into certain principal transactions with the municipal advisor's municipal entity clients, within limited exceptions.
In addition, the proposed rule change would define key terms used in
Section (a) of Proposed Rule G-42 would establish the core standards of conduct and duties applicable to municipal advisors. Subsection (a)(i) of Proposed Rule G-42 would provide that each municipal advisor in the conduct of its municipal advisory activities for an obligated person client is subject to a duty of care. Subsection (a)(ii) would provide that each municipal advisor in the conduct of its municipal advisory activities for a municipal entity client is subject to a fiduciary duty, which includes a duty of loyalty and a duty of care.
Proposed supplementary material would provide guidance on the duty of care and the duty of loyalty. Paragraph .01 of the Supplementary Material would describe the duty of care to require, without limitation, a municipal advisor to: (1) Exercise due care in performing its municipal advisory activities; (2) possess the degree of knowledge and expertise needed to provide the municipal entity or obligated person client with informed advice; (3) make a reasonable inquiry as to the facts that are relevant to a client's determination as to whether to proceed with a course of action or that form the basis for any advice provided to the client; and (4) undertake a reasonable investigation to determine that the municipal advisor is not basing any recommendation on materially inaccurate or incomplete information. The duty of care that would be established in section (a) of Proposed Rule G-42 would also require the municipal advisor to have a reasonable basis for: any advice provided to or on behalf of a client; any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the client, any other party involved in the municipal securities transaction or municipal financial product, or investors in the municipal entity client's securities or securities secured by payments from an obligated person client; and, any information provided to the client or other parties involved in the municipal securities transaction in connection with the preparation of an official statement for any issue of municipal securities as to which the advisor is advising.
Paragraph .02 of the Supplementary Material would describe the duty of loyalty to require, without limitation, a municipal advisor, when engaging in municipal advisory activities for a municipal entity, to deal honestly and with the utmost good faith with the client and act in the client's best interests without regard to the financial or other interests of the municipal advisor. Paragraph .02 would also provide that the duty of loyalty would preclude a municipal advisor from engaging in municipal advisory activities with a municipal entity client if it cannot manage or mitigate its conflicts of interest in a manner that will permit it to act in the municipal entity's best interests.
Paragraph .03 of the Supplementary Material would specify that a municipal advisor is not required to disengage from a municipal advisory relationship if a municipal entity client or an obligated person client elects a course of action that is independent of or contrary to advice provided by the municipal advisor.
Paragraph .04 of the Supplementary Material would specify that a municipal advisor could limit the scope of the municipal advisory activities to be performed to certain specified activities or services if requested or expressly consented to by the client, but could not alter the standards of conduct or impose limitations on any of the duties prescribed by Proposed Rule G-42. Paragraph .04 would provide that, if a municipal advisor engages in a course of conduct that is inconsistent with the mutually agreed limitations to the scope of the engagement, it may result in negating the effectiveness of the limitations.
Paragraph .08 of the Supplementary Material would state, as a general matter, that, municipal advisors may be subject to fiduciary or other duties under state or other laws and nothing in Proposed Rule G-42 would supersede any more restrictive provision of state or other laws applicable to municipal advisory activities.
Section (b) of Proposed Rule G-42 would require a municipal advisor to fully and fairly disclose to its client in writing all material conflicts of interest, and to do so prior to or upon engaging in municipal advisory activities. The provision would set forth a non-exhaustive list of scenarios under which a material conflict of interest would arise or be deemed to exist and that would require a municipal advisor to provide written disclosures to its client. Subsections (b)(i)(A) through (E) would provide specific scenarios that give rise to conflicts of interest that would be deemed to be material and require proper disclosure to a municipal advisor's client. Under the proposed rule change, a material conflict of interest would always include: Any affiliate of the municipal advisor that provides any advice, service or product to or on behalf of the client that is directly related to the municipal advisory activities to be performed by the disclosing municipal advisor; any payments made by the municipal advisor, directly or indirectly, to obtain or retain an engagement to perform municipal advisory activities for the client; any payments received by the municipal advisor from a third party to enlist the municipal advisor's recommendations to the client of its services, any municipal securities transaction or any municipal financial product; any fee-splitting arrangements involving the municipal advisor and any provider of investments or services to the client; and any conflicts of interest arising from compensation for municipal advisory activities to be performed that is contingent on the size or closing of any transaction as to which the municipal advisor is providing advice. Subsection (b)(i)(F) would require municipal advisors to disclose any other actual or potential conflicts of interest, of which the municipal advisor is aware after reasonable inquiry, that could reasonably be anticipated to impair its ability to provide advice to or on behalf of its client in accordance with the applicable standards of
Under subsection (b)(i), if a municipal advisor were to conclude, based on the exercise of reasonable diligence, that it had no known material conflicts of interest, the municipal advisor would be required to provide a written statement to the client to that effect.
Subsection (b)(ii) would require disclosure of any legal or disciplinary event that would be material to the client's evaluation of the municipal advisor or the integrity of its management or advisory personnel. A municipal advisor would be permitted to fulfill this disclosure obligation by identifying the specific type of event and specifically referring the client to the relevant portions of the municipal advisor's most recent SEC Forms MA or MA-I
Paragraph .05 of the Supplementary Material would provide that the required conflicts of interest disclosures must be sufficiently detailed to inform the client of the nature, implications and potential consequences of each conflict and must include an explanation of how the municipal advisor addresses or intends to manage or mitigate each conflict.
Paragraph .07 of the Supplementary Material would provide that a municipal advisor that inadvertently engages in municipal advisory activities but does not intend to continue the municipal advisory activities or enter into a municipal advisory relationship
Section (c) of Proposed Rule G-42 would require each municipal advisor to evidence each of its municipal advisory relationships by a writing, or writings created and delivered to the municipal entity or obligated person client prior to, upon or promptly after the establishment of the municipal advisory relationship. The documentation would be required to be dated and include, at a minimum:
• The form and basis of direct or indirect compensation, if any, for the municipal advisory activities to be performed, as provided in proposed subsection (c)(i);
• the information required to be disclosed in proposed section (b), including the disclosures of conflicts of interest, as provided in proposed subsection (c)(ii);
• a description of the specific type of information regarding legal and disciplinary events requested by the Commission on SEC Form MA and SEC Form MA-I, as provided in proposed subsection (c)(iii), and detailed information specifying where the client may electronically access the municipal advisor's most recent Form MA and each most recent Form MA-I filed with the Commission;
• the date of the last material change to the legal or disciplinary event disclosures on any SEC Forms MA or MA-I filed with the Commission by the municipal advisor and a brief explanation of the basis for the materiality of the change or addition, as provided in proposed subsection (c)(iv);
• the scope of the municipal advisory activities to be performed and any limitations on the scope of the engagement, as provided in proposed subsection (c)(v);
• the date, triggering event, or means for the termination of the municipal advisory relationship, or, if none, a statement that there is none, as provided in proposed subsection (c)(vi); and
• any terms relating to withdrawal from the municipal advisory relationship, as provided in proposed subsection (c)(vii).
Paragraph .06 of the Supplementary Material would require municipal advisors to promptly amend or supplement the writing(s) required by section (c) during the term of the municipal advisory relationship as necessary to reflect any material changes or additions in the required information. Paragraph .06 would also provide that a municipal advisor would not be required to provide the disclosure of conflicts of interest and other information required under proposed section (c)(ii) if the municipal advisor previously fully complied with the requirements of proposed section (b) to disclose such information and proposed subsection (c)(ii) would not require the disclosure of any materially different information than that previously disclosed to the client.
Section (d) of Proposed Rule G-42 would provide that a municipal advisor must not recommend that its client enter into any municipal securities transaction or municipal financial product unless the municipal advisor has a reasonable basis to believe, based on the information obtained through the reasonable diligence of the municipal advisor, that the recommended transaction or product is suitable for the client. Proposed section (d) also contemplates that a municipal advisor may be requested by the client to review and determine the suitability of a recommendation made by a third party to the client. If a client were to request this type of review, and such review were within the scope of the engagement, the municipal advisor's determination regarding the suitability of the third-party's recommendation regarding a municipal securities transaction or municipal financial product would be subject to the same reasonable diligence standard—requiring the municipal advisor to obtain relevant information through the exercise of reasonable diligence.
As to both types of review, the municipal advisor would be required under proposed section (d) to inform its municipal entity or obligated person client of its evaluation of the material risks, potential benefits, structure and other characteristics of the recommended municipal securities transaction or municipal financial product; the basis upon which the advisor reasonably believes the recommended transaction or product is, or (as may be applicable in the case of a review of a recommendation) is not, suitable for the client; and whether the municipal advisor has investigated or considered other reasonably feasible alternatives to the recommended municipal securities transaction or municipal financial product that might also or alternatively serve the client's objectives.
Paragraph .09 of the Supplementary Material would provide guidance related to a municipal advisor's suitability obligations. Under this provision, a municipal advisor's determination of whether a municipal securities transaction or municipal financial product is suitable for its client must be based on numerous factors, as applicable to the particular type of client, including, but not limited to: The client's financial situation and needs, objectives, tax status, risk tolerance, liquidity needs, experience with municipal securities transactions or municipal financial products generally or of the type and complexity being recommended, financial capacity to withstand changes in market conditions during the term of the municipal financial product or the period that municipal securities to be issued are reasonably expected to be outstanding, and any other material information known by the municipal advisor about the client and the municipal securities transaction or municipal financial product, after the municipal advisor has conducted a reasonable inquiry.
In connection with a municipal advisor's obligation to determine the suitability of a municipal securities transaction or a municipal financial product for a client, which should take into account its knowledge of the client, paragraph .10 of the Supplementary Material would require a municipal advisor to know its client. The obligation to know the client would require a municipal advisor to use reasonable diligence to know and retain essential facts concerning the client and the authority of each person acting on behalf of the client, and is similar to requirements in other regulatory regimes.
Subsection (e)(i)(A) would prohibit a municipal advisor from receiving compensation from its client that is excessive in relation to the municipal advisory activities actually performed for the client. Paragraph .11 of the Supplementary Material would provide additional guidance on how compensation would be determined to be excessive. Included in paragraph .11 are several factors that would be considered when evaluating the reasonableness of a municipal advisor's compensation relative to the nature of the municipal advisory activities performed, including, but not limited to: The municipal advisor's expertise, the complexity of the municipal securities transaction or municipal financial product, whether the fee is contingent upon the closing of the municipal securities transaction or municipal financial product, the length of time spent on the engagement and whether the municipal advisor is paying any other relevant costs related to the municipal securities transaction or municipal financial product.
Subsection (e)(i)(B) would prohibit municipal advisors from delivering an invoice for fees or expenses for municipal advisory activities that is materially inaccurate in its reflection of the activities actually performed or the personnel that actually performed those activities.
Subsection (e)(i)(C) would prohibit a municipal advisor from making any representation or submitting any information that the municipal advisor knows or should know is either materially false or materially misleading due to the omission of a material fact, about its capacity, resources or knowledge in response to requests for proposals or in oral presentations to a client or prospective client for the purpose of obtaining or retaining an engagement to perform municipal advisory activities.
Subsection (e)(i)(D) would prohibit municipal advisors from making or participating in two types of fee-splitting arrangements: (1) Any fee-splitting arrangement with an underwriter on any municipal securities transaction as to which the municipal advisor has provided or is providing advice; and (2) any undisclosed fee-splitting arrangement with providers of investments or services to a municipal entity or obligated person client of the municipal advisor.
Subsection (e)(i)(E) would, generally, prohibit a municipal advisor from making payments for the purpose of obtaining or retaining an engagement to perform municipal advisory activities. However, the provision contains three exceptions. The prohibition would not apply to: (1) Payments to an affiliate of the municipal advisor for a direct or indirect communication with a municipal entity or obligated person on behalf of the municipal advisor where such communication is made for the purpose of obtaining or retaining an engagement to perform municipal advisory activities; (2) reasonable fees
Subsection (e)(ii) of Proposed Rule G-42 would, subject to the exception provided in paragraph .14 of the Supplementary Material, prohibit a municipal advisor to a municipal entity, and any affiliate of such municipal advisor, from engaging with the municipal entity client in a principal transaction that is the same, or directly related to the, issue of municipal securities or municipal financial product as to which the municipal advisor is providing or has provided advice to the municipal entity client. The ban on principal transactions would apply only with respect to clients that are municipal entities. The ban would not apply to principal transactions between a municipal advisor (or an affiliate of the municipal advisor) and the municipal advisor's obligated person clients. Although such transactions would not be prohibited, the MSRB notes that all municipal advisors, including those engaging in municipal advisory activities for obligated person clients, are currently subject to the MSRB's fundamental fair-practice rule, Rule G-17.
Paragraph .08 of the Supplementary Material would provide an exception to the ban on principal transactions in subsection (e)(ii) in order to avoid a possible conflict with existing MSRB Rule G-23, on activities of financial advisors. Specifically, the ban in subsection (e)(ii) would not apply to an acquisition as principal, either alone or as a participant in a syndicate or other similar account formed for the purpose of purchasing, directly or indirectly, from an issuer all or any portion of an issuance of municipal securities on the basis that the municipal advisor provided advice as to the issuance, because such a transaction is the type of transaction that is addressed, and, in certain circumstances, prohibited by Rule G-23.
For purposes of the prohibition in proposed subsection (e)(ii), subsection (f)(ix) would define the term “principal transaction” to mean “when acting as principal for one's own account, a sale to or a purchase from the municipal entity client of any security or entrance into any derivative, guaranteed investment contract, or other similar financial product with the municipal entity client.” Further, paragraph .13 of the Supplementary Material would clarify that the term “other similar financial product,” as used in subsection (f)(ix), would include a bank loan, but only if it is in an aggregate principal amount of $1,000,000 or more and is economically equivalent to the purchase of one or more municipal securities.
Paragraph .14 of the Supplementary Material would provide an exception (the “Exception”) to the ban on principal transactions for transactions in specified fixed income securities. As provided in proposed section (a) of paragraph .14 of the Supplementary Material, a principal transaction could be excepted from the specified prohibition only if the municipal advisor also is a broker-dealer registered under Section 15 of the Exchange Act,
Under proposed section (b) of paragraph .14 of the Supplementary Material, neither the municipal advisor nor any affiliate of the municipal advisor may be providing, or have provided, advice to the municipal entity client as to an issue of municipal securities or a municipal financial product that is directly related to the principal transaction, except advice as to another principal transaction that also meets all the other requirements of proposed paragraph .14.
Proposed section (c) of paragraph .14 of the Supplementary Material would limit a municipal advisor's principal transactions under the Exception to sales to or purchases from a municipal entity client of any U.S. Treasury security, agency debt security or corporate debt security. In addition, the proposed Exception would not be available for transactions involving municipal escrow investments as defined in Exchange Act Rule 15Ba1-1(h)
To comply with proposed section (d) of paragraph .14 of the Supplementary Material, a municipal advisor would have two options. Under the first option, which is set forth in proposed subsection (d)(1) of paragraph .14, a municipal advisor would be required, on a transaction-by-transaction basis, to disclose to the municipal entity client in writing before the completion of the principal transaction the capacity in which the municipal advisor is acting and obtain the consent of the client to such transaction. Consent would mean informed consent, and in order to make informed consent, the municipal advisor, consistent with its fiduciary duty, would be required to disclose specified information, including the price and other terms of the transaction, as well as the capacity in which the municipal advisor would be acting.
Alternatively, a municipal advisor could comply with proposed subsection (d)(2) of paragraph .14 by meeting six requirements, as set forth in proposed paragraphs (d)(2)(A) through (F) of paragraph .14 and summarized below. First, under proposed paragraph (d)(2)(A), neither the municipal advisor nor any of its affiliates could be the issuer, or the underwriter (as defined in Exchange Act Rule 15c2-12(f)(8)),
Third, under proposed paragraph (d)(2)(C), the municipal advisor, prior to the execution of each principal transaction, would be required to: (i) Inform the municipal entity client, orally or in writing, of the capacity in which it may act with respect to such transaction and (ii) obtain consent from the municipal entity client, orally or in writing, to act as principal for its own account with respect to such transaction.
Fourth, under proposed paragraph (d)(2)(D), a municipal advisor would be required to send a written confirmation at or before completion of each principal transaction that includes the information required by 17 CFR 240.10b-10 or MSRB Rule G-15, and a conspicuous, plain English statement informing the municipal entity client that the municipal advisor: (i) Disclosed to the client prior to the execution of the transaction that the municipal advisor may be acting in a principal capacity in connection with the transaction and the client authorized the transaction and (ii) sold the security to, or bought the security from, the client for its own account.
Fifth, under proposed paragraph (d)(2)(E), a municipal advisor would be required to send its municipal entity client, no less frequently than annually, written disclosure containing a list of all transactions that were executed in the client's account in reliance upon the Exception, and the date and price of the transactions.
Sixth, under proposed paragraph (d)(2)(F), each written disclosure would be required to include a conspicuous, plain English statement regarding the ability of the municipal entity client to revoke the prospective written consent to principal transactions without penalty at any time by written notice.
A municipal advisor's use and compliance with the requirements of the Exception would not be construed as relieving it in any way from acting in the best interests of its municipal entity client nor from any obligation that may be imposed by other applicable provisions of the federal securities laws and state law.
Section (f) of Proposed Rule G-42 would provide definitions of the terms “affiliate of the municipal advisor,” “municipal advisory relationship,” “official statement,” and “principal transaction.” Further, for several terms in Proposed Rule G-42 that have been previously defined by federal statute or SEC rules, proposed section (f) would, for purposes of Proposed Rule G-42, adopt the same meanings. These terms would include “advice;” “municipal advisor;” “municipal advisory activities;” “municipal entity;” and “obligated person.”
Paragraph .12 of the Supplementary Material emphasizes the proposed rule's application to municipal advisors whose municipal advisory clients are sponsors or trustees of municipal fund securities.
The proposed amendments to Rule G-8 would require each municipal advisor to make and keep a copy of any document created by the municipal advisor that was material to its review of a recommendation by another party or that memorializes its basis for any determination as to suitability.
As noted previously, the Commission received 15 comment letters in response to the Proposing Release, 13 comment letters in response to the OIP or Amendment No. 1 and seven comment letters in response to Amendment No. 2.
In response to the Proposing Release, SIFMA stated that the addition of “without limitation” in Proposed Rule G-42(a)(ii) raises significant and unnecessary ambiguities, as a fiduciary duty is generally understood to encompass a duty of care and duty of loyalty.
In response to the Proposing Release, four commenters expressed concern regarding the duty of care standard, as expressed in paragraph .01 of the Supplementary Material, which requires municipal advisors to undertake “a reasonable investigation” to avoid basing recommendations on “materially inaccurate or incomplete information.”
In its response to comments, the MSRB noted that it had previously responded to similar comments in the Proposing Release and that it had determined that the requirement would not result in an unreasonable and unnecessary burden for municipal advisors or their clients.
WM Financial supported the requirement that a municipal advisor should conduct reasonable investigations of publicly available documentation and engage in discussions with the client such that the municipal advisor's recommendations reflect what the advisor reasonably believes is in the customer's best interest.
In response to Amendment No. 2, ICI reiterated the concerns regarding the Proposed Rule's requirement that municipal advisors undertake a reasonable investigation of the accuracy and completeness of information on which a municipal advisor bases its recommendation.
In response to these comments, the MSRB stated that the duty of care is a core principle underlying many of the obligations of the proposed rule change, and the proposed requirement to conduct a reasonable investigation is vital because the veracity of the information on which a municipal advisor bases its recommendation can have a significant impact on the ability of a municipal advisor to make informed and suitable recommendations.
In response to Amendment No. 1 or the OIP, SIFMA commented that proposed paragraph .01 of the Supplementary Material should more explicitly state that municipal advisors assisting in the preparation of any portion of an official statement in connection with a competitive transaction must exercise “reasonable diligence with respect to the accuracy and completeness of any portion of the official statement as to which the municipal advisor assisted in the preparation.”
Three commenters expressed concerns regarding the differing timing of documentation required by sections
The MSRB previously considered and addressed the same or similar comments regarding the timing requirements of proposed sections (b) and (c),
Columbia Capital commented that it supports the requirement in proposed section (b) that a municipal advisor disclose material conflicts of interest prior to or upon engaging in municipal advisory activities.
NAMA suggested merging the two “catch-all provisions” in subsections (b)(i)(A) and (b)(i)(G) of Proposed Rule G-42 because it is not clear what the difference is between the two paragraphs.
In response to the Proposing Release, WM Financial stated that contingent fees that are based on the completion of a transaction, but not on the size of a transaction, are not a conflict of interest.
Columbia Capital commented that every type of fee structure “creates a set of incentives and disincentives that can be detrimental to the municipal entity or obligated person,” and specifying contingent compensation arrangements in the proposed rule implies that contingent compensation arrangements are more problematic or imbued with greater conflicts of interest than other compensation arrangements.
In response to these comments, the MSRB stated that requiring municipal advisors to disclose conflicts of interest that could arise from, or are inherent in, contingent compensation is an appropriate and necessary measure to protect municipal entity and obligated person clients.
GFOA and NAMA expressed concerns with disclosing information regarding legal or disciplinary events through reference to the municipal advisor's most recent Form MA and Form MA-I.
In response to the comments, the MSRB noted that the provision in proposed section (b) allowing the municipal advisor to provide legal or disciplinary event disclosures by identifying the specific type of event and referencing the relevant portions of the municipal advisor's most recent Forms MA or MA-I is permissive, not mandatory.
In response to Amendment No. 1 or the OIP, SIFMA objected to the revisions to subsection (c)(iv), requiring municipal advisors to provide a brief explanation of the basis for the materiality of each change or addition, on the grounds that it would be “unnecessary and overly burdensome, outweighing any potential benefit.”
NAMA requested the MSRB provide more clarity about the term “detailed information” in the requirement in subsection (c)(iii) that the municipal advisor provide “detailed information specifying where the client may electronically access the municipal advisor's most recent Form MA and each most recent Form MA-I filed with the Commission.”
BDA and First Southwest expressed concern that documentation requirements for recommendations are too burdensome.
In response, the MSRB stated that the documentation required by Proposed Rule G-8(h)(iv) is an appropriately tailored recordkeeping requirement that will assist regulatory examiners in assessing the compliance of municipal advisors with Proposed Rule G-42.
In response to Amendment No. 1 or the OIP, BDA, Columbia Capital, NAMA and SIFMA expressed concern over the documentation requirement under Proposed Rule G-8(h)(iv), which would require a municipal advisor to keep a copy of any document created by a municipal advisor “that was material to its review of a recommendation by another party or that memorializes the basis for any determination as to suitability.”
Columbia Capital commented that it would be very difficult for a municipal advisor to “document the rationale for every point of advice in a municipal advisory relationship, including documenting the rationale for every conceivable path not taken.”
In addition, Columbia Capital stated its belief that the recordkeeping requirements “might actually conflict with [a firm's] fiduciary duty where [the] client desires to maintain such internal dialogue in confidence” but where the client (in particular public clients) is subject to open records laws that may frustrate that desire. NAMA stated that the proposed rule is unclear as to whether the document requirements apply to the financing “as a whole” or whether they apply to “every facet of a transaction” which could span several months.
In response to comments, the MSRB reiterated its belief that Proposed Rule G-8(h)(iv) is an appropriately tailored recordkeeping requirement that will assist regulatory examiners in assessing the compliance of municipal advisors with Proposed Rule G-42.
With regard to Columbia Capital's concerns about a municipal advisor maintaining a level of confidentiality as may be requested by a client, the MSRB stated that the proposed rule would not create the conflict discussed because Proposed Rule G-8(h)(iv) would not require a municipal advisor to deliver documents that must be maintained by the municipal advisor to the client or into the possession of a party not privy to, or contemplated under, the municipal advisory relationship.
NAMA supported section (d)'s requirements to inform clients about reasons for a recommendation, however, it stated that greater clarity through a non-exclusive list of examples of how regulated entities could comply with the
PFM requested the MSRB provide a more concise definition of the term “suitable” to enable municipal advisors to comply with the requirements and stated that the “perfunctory list of generic factors” for consideration in paragraph .08 of the Supplementary Material failed to provide municipal advisors with a clear definition of such an important term.
The MSRB responded to the comments by stating that it chose not to take a more prescriptive or descriptive approach to determining suitability in the proposed rule change because it would risk creating inflexible requirements that would fail to adequately account for the diversity of municipal advisors, the activities in which they engage and the varying needs of clients.
In response to Amendment No. 1 or the OIP, SIFMA commented that it is unclear when a communication constitutes a “recommendation” (thus triggering a suitability analysis under the proposed rule change), as opposed to “advice” or, as SIFMA referenced, “ancillary advice.”
In response to SIFMA's comments, the MSRB stated that the proposed rule would adopt, and apply to municipal advisors, the existing MSRB interpretive guidance regarding the general principles currently applicable to dealers for determining whether a particular communication constitutes a recommendation of a securities transaction.
In response to the Proposing Release, GFOA expressed concern that the language in subsection (d)(ii) implies that municipal advisors would be permitted to make a recommendation to a client that is unsuitable, which seemed contrary to the proposed rule's duty of care and loyalty requirements.
First Southwest requested an exemption to the suitability standard in proposed section (d) and paragraph .08 of the Supplementary Material for “sophisticated municipal issuers.”
SIFMA suggested that the safe harbor in paragraph .06
In response to these comments, the MSRB stated that section (d) of Proposed Rule G-42 applies only in the case where a municipal advisor makes a recommendation of a municipal securities transaction or municipal
In response to Amendment No. 1 or the OIP, Columbia Capital expressed concern regarding the inadvertent advice exemption, stating it is “rife for abuse” and that the MSRB should define “inadvertent” very narrowly.
In response to the comments, the MSRB noted that the inadvertent advice exemption would only apply when a municipal advisor inadvertently engages in municipal advisory activities but does not intend to continue the municipal advisory activities or enter into a municipal advisory relationship.
SIFMA expressed support for the prohibition on delivering inaccurate invoices, but requested the addition of materiality and knowledge qualifiers (
In response to the Proposing Release, ten commenters expressed a variety of concerns with the prohibition on certain principal transactions in Proposed Rule G-42(e)(ii).
BDA, FSI, Millar Jiles, SIFMA and Zions commented that, if no exception to the proposed principal transaction ban were added, the Proposed Rule would be inconsistent with one or more of the following provisions of the Exchange Act:
The MSRB responded to the foregoing comments by incorporating the Exception to the principal transaction ban, as discussed below under “Exception to Principal Transaction Ban.”
In response to the Proposing Release, SIFMA and Zions expressed concerns that the prohibition on principal transactions is overbroad and inconsistent with existing regulatory regimes regarding financial professionals.
In response to Amendment No. 1 or the OIP, BDA, Coastal Securities, FSI, Millar Jiles, SIFMA and Zions commented that the principal transaction ban should be revised to
The MSRB responded to the foregoing comments by incorporating the Exception to the principal transaction ban, as discussed below under “Exception to Principal Transaction Ban.”
FSI, GFOA and SIFMA requested an exemption to the principal transaction prohibition when advice is provided to a municipal entity client that is incidental to or ancillary to a broker-dealer's execution of securities transactions, including transactions involving municipal bond proceeds or municipal escrow funds.
In response to Amendment No. 1 or the OIP, BDA, FSI, GFOA, and SIFMA also suggested that the MSRB consider an exception to the ban for limited advice that is incidental to securities execution services.
The MSRB responded to the foregoing comments by incorporating the Exception to the principal transaction ban, as discussed below under “Exception to Principal Transaction Ban.”
BDA, GKB and SIFMA expressed concern that the language in subsection (e)(ii) limiting the principal transaction prohibition to transactions “directly related to the same municipal securities transaction or municipal financial product” is vague or overly broad.
SIFMA argued that any prohibition should be more narrowly tailored to prevent principal transactions directly related to the advice provided by the municipal advisor.
In response to Amendment No. 1 or the OIP, SIFMA commented that the MSRB failed to consider a suggestion to amend the ban to limit its scope to principal transactions that are directly related to the advice provided by the municipal advisor.
In response to the comments, the MSRB determined not to narrow, broaden or otherwise modify the standard in this regard.
The MSRB modified the proposed ban to incorporate the Exception, discussed below under “Exception to Prohibited Principal Transactions.” In light of the MSRB's incorporation of the Exception, the MSRB stated its belief that it is not appropriate to further modify the ban at this time.
In response to the Proposing Release, SIFMA and Wells Fargo addressed concerns regarding the impact of the principal transaction prohibition on affiliates of municipal advisors.
In response to Amendment No. 1 or the OIP, SIFMA commented that the MSRB failed to consider limiting the application of the ban to affiliates of a municipal advisor that have no knowledge of the municipal advisory engagement, or more broadly to affiliates and business units of the municipal advisor that have no such knowledge.
In response to the comments, the MSRB stated its belief that the proposed ban, as to affiliates, is appropriately targeted given the acute nature of the conflicts of interest presented and the risk of self-dealing by affiliates in transactions that are “directly related” to the municipal securities transaction or municipal financial product as to which the affiliated municipal advisor has provided advice.
Several commenters expressed concerns with proposed paragraph .11 of the Supplementary Material under which a bank loan would be subject to the prohibition on principal transactions if the loan was “in an aggregate principal amount of $1,000,000 or more and economically equivalent to the purchase of one or more municipal securities.”
ABA expressed a general concern that banking organizations that are required to operate through a variety of affiliates and subsidiaries would fall within the scope of the “common control” definition in the statute and the prohibition would prevent a banking organization from providing ordinary bank services to a municipal entity.
Similarly, Millar Jiles suggested that a municipal advisor should be able to satisfy its fiduciary obligation to a municipal entity by procuring bids for the proposed financing (and thus make a principal bank loan through an affiliated entity permissible), stating that if the affiliate of the municipal advisor were the lowest bidder, the municipality would be penalized by being forced to borrow at a higher rate under the proposed rule change.
The MSRB responded that even if both elements (
Zions argued that bank loans “should be excluded in their entirety” from Proposed Rule G-42.
In response to Zions's comments, the MSRB noted that proposed paragraph .12, on principal transactions—other similar financial products, is limited substantially and would target only those loans that would be the same as, or directly related to, the municipal securities transaction or municipal financial product as to which the municipal advisor is providing or has provided advice and which would be considered “economically equivalent to the purchase of one or more municipal securities.”
In response to Amendment No. 1 or the OIP, Zions commented that the principal transaction ban is overly broad and inconsistent with federal banking laws, and, as an alternative to generally permitting principal transactions (subject to disclosure and consent requirements), bank loans should be excluded in their entirety from the ban.
In response to Zions's comments, the MSRB stated that the concerns are addressed to some extent by the bank exemption from the definition of “municipal advisor.”
In response to Zions's comments that the principal transaction ban should be eliminated because of its possible impact on the CRA, the MSRB noted that the proposed prohibition on principal transactions is narrowly targeted and would have a limited impact on a municipal advisor or its affiliate providing loans and financial services, generally. The MSRB also stated that Zions's comments do not demonstrate—and the MSRB is not aware of any indication—that Congress intended the requirements of the CRA to take precedence over other statutory and regulatory requirements.
BDA commented on the language of paragraph .11 of the Supplementary Material, arguing that the phrase “economically equivalent” is “too ambiguous and does not provide clarity.”
The MSRB responded that not all loans of $1 million or more would be considered an “other similar financial product,” and that determination would depend on the facts and circumstances regarding a particular loan, including structure and marketing.
Millar Jiles also expressed confusion regarding the “economically equivalent” language.
In response to Millar Jiles's comments, the MSRB stated that whether one or more loans would be aggregated to reach the $1 million threshold would depend on the facts and circumstances surrounding the transactions, including but not limited to factors such as how close in time to the other the loans occurred, the purpose of each loan and the similarity of purpose among the loans, and whether such loans are components of a more comprehensive plan of financing. The MSRB clarified that no single factor would be determinative in such an analysis.
SIFMA suggested the proposed subsection (e)(ii) be revised to permit an otherwise prohibited principal transaction where the municipal entity is represented by more than one municipal advisor, including a separate registered municipal advisor with respect to the principal transaction.
The MSRB concluded that the incorporation at this stage of an exception to the ban like that suggested by SIFMA would be premature, add additional and unnecessary complexity, and be potentially burdensome to administer.
In response to Amendment No. 1 or the OIP, BDA suggested that the principal transaction ban be amended not only for municipal advisors providing advice in connection with the trading as principal of securities, but also to allow most principal transactions if the transaction is approved by the governing body of the municipal entity client after the governing body has been fully informed about any actual or potential conflicts of interest associated with the principal transaction.
In response to BDA's comment, the MSRB stated that BDA's proposed exception was quite broadly drawn and may, in many instances, not address the type of self-dealing transactions and the resulting abuses from self-dealing that the statutory requirements and the developing regulatory framework for municipal advisors were intended to address.
In response to Amendment No. 2, the SEC received six comment letters on the principal transaction ban and the proposed Exception.
SIFMA commented that the Exception shows movement toward a more workable construct than the complete principal transaction ban, but that “importing into the Exception all of the procedural accoutrements of Section 206(3) and Rule 206(3)-3T, adopted in another context,” has resulted in the Exception being unreasonably limited and unworkable in practice.
BDA acknowledged that the Exception has addressed what it termed “marginal considerations surrounding
In response to these comments, the MSRB first explained that the issues raised by the Exception arise with respect to a limited universe of municipal advisory activities—namely, advising with respect to the investment of proceeds of municipal securities or municipal escrow investments.
If the firm is an investment adviser registered under the Advisers Act, the giving of investment advice on the investment of proceeds of municipal securities and municipal escrow investments can be excluded. If the municipal entity makes a qualifying request for proposals (“RFP”) or request for qualifications (“RFQ”) on the investment of proceeds of municipal securities or on municipal escrow investments, or a qualifying mini-RFP or mini-RFQ, the giving of advice in response can be exempt. If the municipal entity relies on the advice of an independent registered municipal advisor (“IRMA”) with respect to the same aspects of the investment of proceeds of municipal securities or municipal escrow investments, the firm's giving of advice can be exempt, subject to certain procedural requirements. Additionally, if a firm selling investments provides general information but no SEC-defined “advice,” then the firm need not rely on any exclusion or exemption at all.
The MSRB explained that it is generally only beyond all of these scenarios that a firm could be subject to Proposed Rule G-42 and the principal transaction ban based on the providing of advice on the investment of bond proceeds or municipal escrow investments.
The MSRB further responded to commenters' concerns by stating that it crafted the Exception to the principal transaction ban drawing on Section 206(3) of the Advisers Act
GFOA expressed a concern that the procedural requirements of the Exception would be too complex or burdensome and render the relief intended to be granted “illusory.”
In response to GFOA's comments, the MSRB stated that it is clear from repeated commentary by representatives of broker-dealers and supporting data, that similar provisions for investment advisers have been manageable and relied upon extensively, providing an ample basis to believe that the similar approach in proposed paragraph .14(d)(2) of the Supplementary Material will be useful and workable for a significant portion of those firms that wish to use an option under the Exception.
GFOA asked whether the consent required to be obtained under proposed paragraph .14(d)(1) of the Supplementary Material may be oral as opposed to written. The MSRB responded that oral consent would be sufficient under proposed paragraph .14(d)(1).
GFOA also asked whether certain communications that would be required to be made in writing under the Exception may be made through email. In response, the MSRB stated that such communications may be made by email, provided the municipal advisor satisfies the same procedural conditions that the SEC applies to an investment adviser when communicating with customers via email as set forth in SEC guidance regarding the use of electronic media.
GFOA asked whether a broker-dealer that has provided advice to a municipal entity based on one of the exclusions or exemptions to the definition of “municipal advisor” (
GFOA asked why a broker-dealer that is a municipal advisor must, under MSRB Rule G-3,
In response to Amendment No. 2, SIFMA expressed a concern that the Exception would be available, according to proposed paragraph .14(a) of the Supplementary Material, only to a firm that is a registered broker-dealer and only for accounts subject to the Exchange Act, and the rules thereunder, and the rules of self-regulatory organization(s) of which it is a member.
The MSRB stated that it similarly considers it necessary that transactions in reliance on the Exception be executed under this comprehensive set of investor protections. In response to SIFMA's concern regarding banks, the MSRB notes that the SEC has provided an exemption from the municipal advisor definition for banks providing advice on multiple subjects, which could mean that a bank engaging in particular principal transactions would not be subject to Proposed Rule G-42 at all.
FSI and SIFMA expressed concerns regarding the requirement, as part of the option under proposed paragraph .14(d)(2), that the municipal advisor provide its client with an annual summary statement.
The MSRB first noted that a municipal advisor that considers the alternative provided under proposed paragraph .14(d)(1) comparatively more cost-effective, may make transaction-by-transaction written disclosure and obtain written or oral consent under that provision and not be subject to the additional procedural requirements under proposed paragraph.14(d)(2) to make use of the Exception.
The MSRB also responded that the confirmation disclosure requirement, like the similar requirement under the IA Rule, is designed to ensure that clients are given a written notice and reminder of each transaction that the municipal advisor effects on a principal basis and that conflicts of interest are inherent in such transactions. The MSRB explained that, like under the IA Rule, a firm relying on proposed paragraph .14(d)(2) need not send a duplicate confirmation and may include additional required disclosures on a confirmation otherwise sent to a customer with respect to a particular principal transaction.
BDA commented that the option under proposed paragraph .14(d)(2) would not be meaningful or useful in part because, under proposed paragraph.14(d)(2)(A), neither the firm nor any affiliate would be permitted to be, at the time of a sale, an underwriter of the security.
SIFMA and FSI objected to the exclusion from the Exception of transactions in connection with municipal escrow investments, and suggested that the Exception be extended.
SIFMA commented that the Exception should extend to the purchase and sale of money market instruments, commercial paper, certificates of deposit and other deposit instruments.
The MSRB responded that the designated class of securities for purposes of the Exception is intended to address comments previously submitted that an absolute ban on principal transactions in fixed income securities, which are frequently sold by broker-dealers as principal or riskless principal, would be particularly problematic and such a ban would impose a substantial burden on municipal entities.
SIFMA commented that it was unclear whether the Exception would extend to the affiliates of a municipal advisor, and that there does not appear to be any reason to permit a municipal advisor (if also a broker-dealer) to benefit from the Exception, and not similarly allow an affiliate (if also a broker-dealer, or if exempt from registration as a broker-dealer) to benefit from the Exception.
SIFMA, in response to Amendment No. 2, commented that it would be impractical for a firm relying on the Exception to comply with the conflicts disclosure and relationship documentation requirements of proposed sections (b) and (c), particularly on a transaction-by-transaction basis.
In response to Amendment No. 1 or the OIP, several commenters expressed the view that the proposed rule change was inconsistent with certain provisions of the Exchange Act.
In response to Amendment No. 2, NAMA subsequently commented that it “supports the current proposed Rule and urges the SEC to approve it in its current form without further erosion of the important principal transaction ban that is in place to protect investors.”
In response to Amendment No. 1 or the OIP, SIFMA stated that Proposed Rule G-42 was inconsistent with Section 15B(b)(2)(C) of the Exchange Act
In response to Amendment No. 1 or the OIP, Cooperman, GFOA, ICI and SIFMA questioned the adequacy of the MSRB's economic analysis of the proposed rule change.
In response to the comments regarding the MSRB's economic analysis, the MSRB noted in its December Response Letter that throughout the development of the proposed rule change the MSRB rigorously followed its Policy on the Use of Economic Analysis in MSRB Rulemaking (“MSRB Policy”).
The MSRB believes that commenters' observations that, as a result of the proposed rule change, some municipal advisors may have exited the market and some issuers may be experiencing less competition do not provide a basis for revising the MSRB's prior assessments of the potential impacts of the proposed rule change for several reasons.
With regard to the impact of the proposed rule change on small municipal advisors, the MSRB discussed the potential burdens on smaller advisory firms at length and concluded that the likely costs represented only those necessary to achieve the purposes of the Exchange Act.
Also in response to Amendment No. 1 or the OIP, several commenters indicated their view that the proposed rule change was inconsistent with the Exchange Act in connection with the principal transaction ban if such ban remained as proposed, without any exceptions or modifications. The MSRB, in Amendment No. 2, addressed the primary concerns by adding the Exception. The MSRB believes that the Exception is responsive to the commenters' concerns that, in connection with the proposed ban, Proposed Rule G-42 is inconsistent with the Exchange Act.
In response to the Proposing Release, BDA and NAMA stated that the reference to MSRB Rule G-23 in paragraph .08 of the Supplementary Material was unnecessary or enhances the possible conflict between Proposed Rule G-42 and Rule G-23.
In response to comments, the MSRB stated that the effect of the final sentence in proposed paragraph .08 is intentionally quite limited.
In response to Amendment No. 1 or the OIP, NAMA reiterated its comments that the reference to Rule G-23 should be deleted from proposed paragraph .08 because the MSRB's statements regarding that provision in its August Response Letter were unnecessarily complicated.
In response to NAMA's comments, the MSRB reiterated its earlier response regarding the limited effect of the reference to G-23 in paragraph .08 of the Supplementary Material.
ICI and SIFMA requested the proposed rule change only apply prospectively to municipal advisory relationships entered into, or recommendations of municipal securities transactions or municipal financial products to an existing municipal entity or obligated person client made, after the effective date of the proposed rule change.
The MSRB responded that the proposed rule would not require the creation of new contractual relationships or the modification of existing contracts or agreements between municipal advisors and their clients when the rule takes effect.
In response to Amendment No. 1 or the OIP, ICI reiterated its comment that the proposed rule should only apply prospectively when a municipal advisor either enters into a new advisory relationship with a municipal client or when it recommends a new municipal securities transaction or new municipal financial product to an existing municipal client.
The MSRB responded stating that all provisions of the proposed rule would, if approved, apply only prospectively.
PFM suggested that all supplementary material be removed and moved to separate written interpretative guidance to afford the subjects more “fittingly robust regulatory guidance.”
The Commission has carefully considered the proposed rule change, as modified by Amendment No. 1 and Amendment No. 2, as well as the
In particular, the proposed rule change, as amended, is consistent with Sections 15B(b)(2), 15B(b)(2)(C), and 15B(b)(2)(L)(i) of the Act. Section 15B(b)(2) of the Act provides that the MSRB shall propose and adopt rules to effect the purposes of that title with respect to transactions in municipal securities effected by brokers, dealers, and municipal securities dealers and advice provided to or on behalf of municipal entities or obligated persons by brokers, dealers, municipal securities dealers, and municipal advisors with respect to municipal financial products, the issuance of municipal securities, and solicitations of municipal entities or obligated persons undertaken by brokers, dealers, municipal securities dealers and municipal advisors.
The proposed rule change, as amended, is consistent with Sections 15B(b)(2), 15B(b)(2)(C), and 15B(b)(2)(L)(i) of the Act because it establishes standards of conduct and duties for municipal advisors when engaging in municipal advisory activities. Specifically, the proposed rule change provides that each municipal advisor in the conduct of its municipal advisory activities for an obligated person client is subject to a duty of care. The proposed rule change also provides that each municipal advisor to a municipal entity client is subject to a fiduciary duty that includes a duty of loyalty and a duty of care. Paragraphs .01 and .02 of the Supplementary Material provide guidance on the duty of care and the duty of loyalty, respectively, to assist municipal advisors in complying with such duties. In addition, the proposed rule change includes means to help prevent breaches of these duties by municipal advisors, including the requirements for the information that must be included in the documentation of the municipal advisory relationship; specified activities (such as certain principal transactions and excessive compensation) that would be explicitly prohibited; and disclosure requirements that must accompany a municipal advisor's recommendation regarding a municipal security or a municipal financial product. The Commission believes these requirements are reasonably designed to prevent acts, practices and courses of business as are not consistent with a municipal advisor's fiduciary duty.
The proposed rule change, as amended, would help protect municipal entities and obligated persons by promoting higher ethical and professional standards of the municipal advisors they employ to assist with issuances of municipal securities and transactions in municipal financial products. By requiring municipal advisors to provide detailed disclosures of material conflicts of interest and certain other information prior to or upon the establishment of the municipal advisory relationship, the proposed rule change will help ensure municipal entity and obligated person clients have access to sufficient information to make meaningful choices, based on the merits of the municipal advisor. The Commission believes the disclosure requirements also could incentivize municipal advisors not to engage in misconduct.
The Commission also finds that the proposed rule change, as amended, is consistent with Section 15B(b)(2)(L)(iv) of the Act, in that it does not impose a regulatory burden on small municipal advisors that is not necessary or appropriate in the public interest and for the protection of investors, municipal entities, and obligated persons, provided that there is robust protection of investors against fraud.
In addition, the Commission finds that the proposed rule change, as amended, is consistent with Section 15B(b)(2)(G) of the Act which provides that the MSRB's rules shall prescribe records to be made and kept by municipal advisors and the periods for which such records shall be preserved.
In approving the proposed rule change, as amended, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation.
As noted above, the Commission received 35 comment letters on the filing. The Commission believes that the MSRB, through its responses and through proposed changes in Amendment No. 1 and Amendment No. 2, has addressed commenters' concerns.
For the reasons noted above, including those discussed in the MSRB Response Letters, the
Commission believes that the proposed rule change, as amended by Amendment No. 1 and Amendment No. 2, is consistent with the Act.
For the Commission, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to retire the Proprietary Trader and Proprietary Trader Principal registration categories and to establish the Securities Trader and Securities Trader Principal registration categories. The Exchange is also amending its rules to establish the Series 57 examination as the appropriate qualification examination for Securities Traders and deleting the rule referring to the S501 continuing education program currently applicable to Proprietary Traders. The Exchange will announce the effective date of the proposed rule change in a circular distributed to Members.
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange is proposing herein to replace the Series 56 with the Series 57 examination and to make various related changes to its registration rules. Specifically, in response to the FINRA Amendments (defined below), the Exchange is proposing to retire the Proprietary Trader
Currently, under Exchange Rule 11.4(e), each person associated with a member who is included within the definition of an “Authorized Trader” in Rule 1.5(d) is required to register with
Interpretation and Policy .01(f) of Exchange Rule 2.5 currently provides that a person may register with the Exchange as a Proprietary Trader if such person engages solely in proprietary trading, passes the Series 56 examination and is an associated person of a proprietary trading firm as defined in Interpretation and Policy .01(g) of Exchange Rule 2.5. Therefore, pursuant to Interpretation and Policy .01 to Exchange Rule 2.5, an individual meeting these criteria may register in the Proprietary Trader category after passing the Series 56 examination rather than as a General Securities Representative after passing the Series 7 examination or equivalent foreign securities examination module.
In consultation with FINRA and other exchanges, and in order to harmonize the requirements for individuals engaged in trading activities, the Exchange is now proposing to retire the Proprietary Trader registration category. Similarly, the Exchange is proposing to adopt a new Securities Trader registration category.
Under Exchange Rules, as revised, each person associated with a member who is included within the definition of Authorized Trader will be required to register as a Securities Trader unless they instead qualify based on the Series 7 examination or an equivalent foreign securities examination module. Therefore, representatives who previously qualified for Proprietary Trader registration will be required to register as Securities Traders. Accordingly, the Exchange is proposing to modify paragraph (f) of Interpretation and Policy .01 to reflect the new Securities Trader qualification as a permissible registration for Authorized Traders of Members that engage solely in trading on the Exchange on either an agency or principal basis. In order to register as a Securities Trader, an applicant would be required to have passed the new Securities Trader qualification examination (Series 57) or a predecessor examination (
A person registered as a Proprietary Trader in the Central Registration Depository (CRD®) system on the effective date of the proposed rule change will be grandfathered as a Securities Trader without having to take any additional examinations and without having to take any other actions. In addition, individuals who were registered as Proprietary Traders in the CRD system prior to the effective date of the proposed rule change will be eligible to register as Securities Traders without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a representative and the date they register as a Securities Trader.
Persons registered in the new category would be subject to the continuing education requirements of Interpretation and Policy .02(e) to Rule 2.5. The Exchange proposes to amend Interpretation and Policy .02(e) by removing the option for Series 56 registered persons to participate in the S501 Series 56 Proprietary Trader continuing education program in order to satisfy the Regulatory Element. The S501 Series 56 Proprietary Trader continuing education program is being phased out along with the Series 56 Proprietary Trader qualification examination. As a result, effective January 4, 2016, the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons will cease to exist. In place of the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons, the Exchange proposes that Series 57 registered persons be required to take the S101 General Program for Series 7 and all other registered persons.
Currently, under Interpretation and Policy .01(d), the Exchange requires each Member to register “Principals”
The Exchange has been working with other exchanges and FINRA to develop this new principal registration category and believes that it is an appropriate corollary to the new Securities Trader representative registration category. To qualify for registration as a Securities Trader Principal, an applicant must become qualified and registered as a Securities Trader under proposed Interpretation and Policy .01(c) and pass either the Series 24 or Series 14 examination. A person who is qualified and registered as a Securities Trader Principal would only be permitted to have supervisory responsibility over the activities of Securities Traders, unless such person were separately qualified and registered in another appropriate principal registration category, such as the General Securities Principal registration category. Conversely, the proposed rule change clarifies that each principal who will have supervisory responsibility over registered Securities Traders is required to become qualified and registered as a Securities Trader Principal.
A person registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system on the effective date of the proposed rule change will be eligible to register as a Securities Trader Principal without having to take any additional examinations. An individual who was registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system prior to the effective date of the proposed rule change will also be eligible to register as a Securities Trader Principal without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a principal and the date they register as a Securities Trader Principal. Members, however, will be required to affirmatively register persons transitioning to the proposed
In order to accomplish the changes proposed above, the Exchange has proposed modifications throughout Interpretation and Policy .01 and .02 to Rule 2.5 as well as Rule 11.4(e) to eliminate references to Proprietary Trader, Proprietary Trader Principal, and Series 56 examination and to replace such references with Securities Trader, Securities Trader Principal and Series 57 examination. The Exchange also proposes to modify Rule 11.18, which sets forth the registration requirements applicable to Market Maker Authorized Traders, or MMATs, to cross-reference Interpretation and Policy .01 and .02. Although Rule 11.18 currently requires an MMAT to qualify by taking the Series 7 examination, the Exchange does not intend to impose different registration or continuing education requirements on MMATs than are required of Authorized Traders generally. In addition to these changes, the Exchange proposes to delete paragraph (h) to Interpretation .01, which currently states that: “Principals responsible for supervising the activities of General Securities Representatives must successfully complete the Series 7 or an equivalent foreign examination module in addition to the Series 24.” The Exchange proposes to eliminate this provision as duplicative with existing language in Interpretation and Policy .01, including paragraph (d), which states that “[i]ndividuals that supervise the activities of General Securities Representatives must successfully complete the Series 7 or an equivalent foreign examination module as a prerequisite to the Series 24 or Series 14 and shall be referred to as General Securities Principals.” The Exchange also proposes to modify a reference in Interpretation and Policy .01(e) from “General Securities Representative Principal” to “General Securities Principal.” In addition, the Exchange proposes to eliminate the fees applicable to the Series 56 examination as well as the fees associated with the continuing education necessary to maintain registration after passing the Series 56 examination. Consistent with all other examinations recognized by the Exchange, FINRA will administer the Series 57 examination and the continuing education requirements related thereto, and the Exchange will not be separately charging and collecting any fees in order to take such examination or participate in applicable continuing education. Finally, in order to continue to align the Exchange's rules with the rules of its affiliated exchanges, BATS Exchange, Inc. and BATS Y-Exchange, Inc., the Exchange proposes to modify the language, but not the substance, of Rule 11.4(e).
The Exchange believes that proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Implementation of the proposed changes to the Exchange's registration rules in coordination with the FINRA Amendments does not present any competitive issues, but rather is designed to provide less burdensome and more efficient regulatory compliance for members and enhance the ability of the Exchange to fairly and efficiently regulate members, which will further enhance competition. Additionally, the proposed rule change should not affect intramarket competition because all similarly situated representatives and principals will be required to complete the same qualification examinations and maintain the same registrations.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission waive the thirty-day operative delay so that the proposal may become operative as of January 4, 2016. The Exchange states that waiving the thirty-day delay would allow the Exchange to eliminate the Proprietary Trader and Proprietary Trader Principal registration categories and adopt the Securities Trader and Securities Trader Principal registration categories at the same time as FINRA and the other national securities exchanges. The Commission believes that waiving the thirty day delay is consistent with the protection of investors and the public interest, as it will enable EDGX to have the new requirements in effect at the same time as the other SROs. Therefore, the Commission hereby waives the thirty-day operative delay and designates the proposal operative as of January 4, 2016.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On October 23, 2015, NYSE Arca, Inc. (the “Exchange” or “NYSE Arca”) filed with the Securities and Exchange Commission (the “Commission”) pursuant to Section 19(b)(1)
The Exchange proposes to change the co-location services offered by the Exchange to include a means for Users to receive market data feeds from third party markets (the “Third Party Data”) through a wireless connection.
The Exchange proposes to offer the wireless connection to provide Users with an alternative means of connectivity for Third Party Data. As the Exchange notes, wireless connections involve beaming signals through the air between antennas that are within sight of one another.
Under the proposed rule change, the Exchange would utilize a network vendor to provide a wireless connection to the Third Party Data through wireless connections from the Exchange access centers in Secaucus and Carteret, New Jersey, to its data center in Mahwah, New Jersey, through a series of towers equipped with wireless equipment.
A User would be charged a $5,000 non-recurring initial charge for each wireless connection and a monthly recurring charge (“MRC”) that would vary depending upon the feed that the User opts to receive. If a User purchased two wireless connections, it would pay two non-recurring initial charges. The MRC for a wireless connection to each
The wireless connections would include the use of one port for connectivity to the Third Party Data. A User will only require one port to connect to the Third Party Data, irrespective of how many of the five wireless connections it orders. If a User that has more than one wireless connection wishes to use more than one port to connect to the Third Party Data,
The Exchange represents that there is limited bandwidth available on the wireless connection for data feeds from third parties. As a result, the Exchange has decided to offer as Third Party Data only the data feeds that are in high demand from Users. Although constrained by bandwidth with respect to the number of feeds it can carry, the Exchange represents that the wireless network offered by the Exchange can be made available to an unlimited number of Users.
The wireless connection would provide Users with an alternative means of connectivity for Third Party Data. Currently, Users can receive Third Party Data through other methods, including, for example, from another User, through a telecommunications provider, or over the internet protocol (“IP”) network.
The wireless connection to the Third Party Data is expected to be available no later than March 1, 2016. The Exchange will announce the date that the wireless connection to the Third Party Data will be available through a customer notice.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission believes that the Exchange's proposal to provide this additional connectivity option is consistent with the requirement of Section 6(b)(5) of the Act. The Commission believes that the proposal is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the Exchange makes wireless connectivity available to all Users on an equal basis. All Users that voluntarily select this service option will be charged the same amount for the same services, and there would be no differentiation among Users with regard to the fees charged for the service. Further, the Exchange represents that Users of the new wireless connection would not receive Third Party Data that is not available to all Users. In addition, the Exchange represents that Users that do not opt to utilize the Exchange's wireless connections would still be able to obtain Third Party Data through other methods, such as from wireless networks offered by third party vendors, other Users, through telecommunications providers, or over the IP network.
The Commission also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act.
The Commission also finds that consistent with Section 6(b)(8) of the
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to retire the Proprietary Trader and Proprietary Trader Principal registration categories and to establish the Securities Trader and Securities Trader Principal registration categories. The Exchange is also amending its rules to establish the Series 57 examination as the appropriate qualification examination for Securities Traders and deleting the rule referring to the S501 continuing education program currently applicable to Proprietary Traders. The Exchange will announce the effective date of the proposed rule change in a circular distributed to Members.
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange is proposing herein to replace the Series 56 with the Series 57 examination and to make various related changes to its registration rules. Specifically, in response to the FINRA Amendments (defined below), the Exchange is proposing to retire the Proprietary Trader
Currently, under Exchange Rule 11.4(e), each person associated with a member who is included within the definition of an “Authorized Trader” in Rule 1.5(d) is required to register with the Exchange and to pass an appropriate qualification examination before such registration may become effective. The Exchange recognizes the following qualification examinations as acceptable for purposes of registration as an Authorized Trader: Series 7, Series 56, or one of several foreign securities examination modules.
Interpretation and Policy .01(f) of Exchange Rule 2.5 currently provides that a person may register with the Exchange as a Proprietary Trader if such person engages solely in proprietary trading, passes the Series 56 examination and is an associated person of a proprietary trading firm as defined in Interpretation and Policy .01(g) of Exchange Rule 2.5. Therefore, pursuant to Interpretation and Policy .01 to Exchange Rule 2.5, an individual meeting these criteria may register in the Proprietary Trader category after passing the Series 56 examination rather than as a General Securities Representative after passing the Series 7
In consultation with FINRA and other exchanges, and in order to harmonize the requirements for individuals engaged in trading activities, the Exchange is now proposing to retire the Proprietary Trader registration category. Similarly, the Exchange is proposing to adopt a new Securities Trader registration category.
Under Exchange Rules, as revised, each person associated with a member who is included within the definition of Authorized Trader will be required to register as a Securities Trader unless they instead qualify based on the Series 7 examination or an equivalent foreign securities examination module. Therefore, representatives who previously qualified for Proprietary Trader registration will be required to register as Securities Traders. Accordingly, the Exchange is proposing to modify paragraph (f) of Interpretation and Policy .01 to reflect the new Securities Trader qualification as a permissible registration for Authorized Traders of Members that engage solely in trading on the Exchange on either an agency or principal basis. In order to register as a Securities Trader, an applicant would be required to have passed the new Securities Trader qualification examination (Series 57) or a predecessor examination (
A person registered as a Proprietary Trader in the Central Registration Depository (CRD®) system on the effective date of the proposed rule change will be grandfathered as a Securities Trader without having to take any additional examinations and without having to take any other actions. In addition, individuals who were registered as Proprietary Traders in the CRD system prior to the effective date of the proposed rule change will be eligible to register as Securities Traders without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a representative and the date they register as a Securities Trader.
Persons registered in the new category would be subject to the continuing education requirements of Interpretation and Policy .02(e) to Rule 2.5. The Exchange proposes to amend Interpretation and Policy .02(e) by removing the option for Series 56 registered persons to participate in the S501 Series 56 Proprietary Trader continuing education program in order to satisfy the Regulatory Element. The S501 Series 56 Proprietary Trader continuing education program is being phased out along with the Series 56 Proprietary Trader qualification examination. As a result, effective January 4, 2016, the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons will cease to exist. In place of the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons, the Exchange proposes that Series 57 registered persons be required to take the S101 General Program for Series 7 and all other registered persons.
Currently, under Interpretation and Policy .01(d), the Exchange requires each Member to register “Principals”
The Exchange has been working with other exchanges and FINRA to develop this new principal registration category and believes that it is an appropriate corollary to the new Securities Trader representative registration category. To qualify for registration as a Securities Trader Principal, an applicant must become qualified and registered as a Securities Trader under proposed Interpretation and Policy .01(c) and pass either the Series 24 or Series 14 examination. A person who is qualified and registered as a Securities Trader Principal would only be permitted to have supervisory responsibility over the activities of Securities Traders, unless such person were separately qualified and registered in another appropriate principal registration category, such as the General Securities Principal registration category. Conversely, the proposed rule change clarifies that each principal who will have supervisory responsibility over registered Securities Traders is required to become qualified and registered as a Securities Trader Principal.
A person registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system on the effective date of the proposed rule change will be eligible to register as a Securities Trader Principal without having to take any additional examinations. An individual who was registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system prior to the effective date of the proposed rule change will also be eligible to register as a Securities Trader Principal without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a principal and the date they register as a Securities Trader Principal. Members, however, will be required to affirmatively register persons transitioning to the proposed registration category as Securities Trader Principals on or after the effective date of the proposed rule change.
In order to accomplish the changes proposed above, the Exchange has proposed modifications throughout Interpretation and Policy .01 and .02 to Rule 2.5 as well as Rule 11.4(e) to eliminate references to Proprietary Trader, Proprietary Trader Principal, and Series 56 examination and to replace such references with Securities Trader, Securities Trader Principal and Series 57 examination. The Exchange also proposes to modify Rule 11.18, which sets forth the registration requirements applicable to Market Maker Authorized Traders, or MMATs, to cross-reference Interpretation and Policy .01 and .02. Although Rule 11.18 currently requires an MMAT to qualify by taking the Series 7 examination, the Exchange does not intend to impose
The Exchange believes that proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Implementation of the proposed changes to the Exchange's registration rules in coordination with the FINRA Amendments does not present any competitive issues, but rather is designed to provide less burdensome and more efficient regulatory compliance for members and enhance the ability of the Exchange to fairly and efficiently regulate members, which will further enhance competition. Additionally, the proposed rule change should not affect intramarket competition because all similarly situated representatives and principals will be required to complete the same qualification examinations and maintain the same registrations.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission waive the thirty-day operative delay so that the proposal may become operative as of January 4, 2016. The Exchange states that waiving the thirty-day delay would allow the Exchange to eliminate the Proprietary Trader and Proprietary Trader Principal registration categories and adopt the Securities Trader and Securities Trader Principal registration categories at the same time as FINRA and the other national securities exchanges. The Commission believes that waiving the thirty day delay is consistent with the protection of investors and the public interest, as it will enable EDGA to have the new requirements in effect at the same time as the other SROs. Therefore, the Commission hereby waives the thirty-day operative delay and designates the proposal operative as of January 4, 2016.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to retire the Proprietary Trader and Proprietary Trader Principal registration categories and to establish the Securities Trader and Securities Trader Principal registration categories. The Exchange is also amending its rules to establish the Series 57 examination as the appropriate qualification examination for Securities Traders and deleting the rule referring to the S501 continuing education program currently applicable to Proprietary Traders. The Exchange will announce the effective date of the proposed rule change in a circular distributed to Members.
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange is proposing herein to replace the Series 56 with the Series 57 examination and to make various related changes to its registration rules. Specifically, in response to the FINRA Amendments (defined below), the Exchange is proposing to retire the Proprietary Trader
Currently, under Exchange Rule 11.4(e), each person associated with a member who is included within the definition of an “Authorized Trader” in Rule 1.5(d) is required to register with the Exchange and to pass an appropriate qualification examination before such registration may become effective. The Exchange recognizes the following qualification examinations as acceptable for purposes of registration as an Authorized Trader: Series 7, Series 56, or one of several foreign securities examination modules.
Interpretation and Policy .01(f) of Exchange Rule 2.5 currently provides that a person may register with the Exchange as a Proprietary Trader if such person engages solely in proprietary trading, passes the Series 56 examination and is an associated person of a proprietary trading firm as defined in Interpretation and Policy .01(g) of Exchange Rule 2.5. Therefore, pursuant to Interpretation and Policy .01 to Exchange Rule 2.5, an individual meeting these criteria may register in the Proprietary Trader category after passing the Series 56 examination rather than as a General Securities Representative after passing the Series 7
In consultation with FINRA and other exchanges, and in order to harmonize the requirements for individuals engaged in trading activities, the Exchange is now proposing to retire the Proprietary Trader registration category. Similarly, the Exchange is proposing to adopt a new Securities Trader registration category.
Under Exchange Rules, as revised, each person associated with a member who is included within the definition of Authorized Trader will be required to register as a Securities Trader unless they instead qualify based on the Series 7 examination or an equivalent foreign securities examination module. Therefore, representatives who previously qualified for Proprietary Trader registration will be required to register as Securities Traders. Accordingly, the Exchange is proposing to modify paragraph (f) of Interpretation and Policy .01 to reflect the new Securities Trader qualification as a permissible registration for Authorized Traders of Members that engage solely in trading on the Exchange on either an agency or principal basis. In order to register as a Securities Trader, an applicant would be required to have passed the new Securities Trader qualification examination (Series 57) or a predecessor examination (
A person registered as a Proprietary Trader in the Central Registration Depository (CRD®) system on the effective date of the proposed rule change will be grandfathered as a Securities Trader without having to take any additional examinations and without having to take any other actions. In addition, individuals who were registered as Proprietary Traders in the CRD system prior to the effective date of the proposed rule change will be eligible to register as Securities Traders without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a representative and the date they register as a Securities Trader.
Persons registered in the new category would be subject to the continuing education requirements of Interpretation and Policy .02(e) to Rule 2.5. The Exchange proposes to amend Interpretation and Policy .02(e) by removing the option for Series 56 registered persons to participate in the S501 Series 56 Proprietary Trader continuing education program in order to satisfy the Regulatory Element. The S501 Series 56 Proprietary Trader continuing education program is being phased out along with the Series 56 Proprietary Trader qualification examination. As a result, effective January 4, 2016, the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons will cease to exist. In place of the S501 Series 56 Proprietary Trader continuing education program for Series 56 registered persons, the Exchange proposes that Series 57 registered persons be required to take the S101 General Program for Series 7 and all other registered persons.
Currently, under Interpretation and Policy .01(d), the Exchange requires each Member to register “Principals”
The Exchange has been working with other exchanges and FINRA to develop this new principal registration category and believes that it is an appropriate corollary to the new Securities Trader representative registration category. To qualify for registration as a Securities Trader Principal, an applicant must become qualified and registered as a Securities Trader under proposed Interpretation and Policy .01(c) and pass either the Series 24 or Series 14 examination. A person who is qualified and registered as a Securities Trader Principal would only be permitted to have supervisory responsibility over the activities of Securities Traders, unless such person were separately qualified and registered in another appropriate principal registration category, such as the General Securities Principal registration category. Conversely, the proposed rule change clarifies that each principal who will have supervisory responsibility over registered Securities Traders is required to become qualified and registered as a Securities Trader Principal.
A person registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system on the effective date of the proposed rule change will be eligible to register as a Securities Trader Principal without having to take any additional examinations. An individual who was registered as a General Securities Principal and as a Proprietary Trader Principal in the CRD system prior to the effective date of the proposed rule change will also be eligible to register as a Securities Trader Principal without having to take any additional examinations, provided that no more than two years have passed between the date they were last registered as a principal and the date they register as a Securities Trader Principal. Members, however, will be required to affirmatively register persons transitioning to the proposed registration category as Securities Trader Principals on or after the effective date of the proposed rule change.
In order to accomplish the changes proposed above, the Exchange has proposed modifications throughout Interpretation and Policy .01 and .02 to Rule 2.5 as well as Rule 11.4(e) to eliminate references to Proprietary Trader, Proprietary Trader Principal, and Series 56 examination and to replace such references with Securities Trader, Securities Trader Principal and Series 57 examination. The Exchange also proposes to modify Rule 11.6, which sets forth the registration requirements applicable to Market Maker Authorized Traders, or MMATs, to cross-reference Interpretation and Policy .01 and .02. Although Rule 11.6 currently requires an MMAT to qualify by taking the Series 7 examination, the Exchange does not intend to impose
The Exchange believes that proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Implementation of the proposed changes to the Exchange's registration rules in coordination with the FINRA Amendments does not present any competitive issues, but rather is designed to provide less burdensome and more efficient regulatory compliance for members and enhance the ability of the Exchange to fairly and efficiently regulate members, which will further enhance competition. Additionally, the proposed rule change should not affect intramarket competition because all similarly situated representatives and principals will be required to complete the same qualification examinations and maintain the same registrations.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission waive the thirty-day operative delay so that the proposal may become operative as of January 4, 2016. The Exchange states that waiving the thirty-day delay would allow the Exchange to eliminate the Proprietary Trader and Proprietary Trader Principal registration categories and adopt the Securities Trader and Securities Trader Principal registration categories at the same time as FINRA and the other national securities exchanges. The Commission believes that waiving the thirty day delay is consistent with the protection of investors and the public interest, as it will enable BATS to have the new requirements in effect at the same time as the other SROs. Therefore, the Commission hereby waives the thirty-day operative delay and designates the proposal operative as of January 4, 2016.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On October 23, 2015, NYSE MKT LLC (the “Exchange” or “NYSE MKT”) filed with the Securities and Exchange Commission (the “Commission”) pursuant to Section 19(b)(1)
The Exchange proposes to change the co-location services offered by the Exchange to include a means for Users to receive market data feeds from third party markets (the “Third Party Data”) through a wireless connection.
The Exchange proposes to offer the wireless connection to provide Users with an alternative means of connectivity for Third Party Data. As the Exchange notes, wireless connections involve beaming signals through the air between antennas that are within sight of one another.
Under the proposed rule change, the Exchange would utilize a network vendor to provide a wireless connection to the Third Party Data through wireless connections from the Exchange access centers in Secaucus and Carteret, New Jersey, to its data center in Mahwah, New Jersey, through a series of towers equipped with wireless equipment.
A User would be charged a $5,000 non-recurring initial charge for each wireless connection and a monthly recurring charge (“MRC”) that would vary depending upon the feed that the User opts to receive. If a User purchased two wireless connections, it would pay two non-recurring initial charges. The MRC for a wireless connection to each of BATS Pitch BZX Gig shaped data, DirectEdge EDGX Gig shaped data, and NASDAQ BX Totalview-ITCH data will be $6,000; the MRC for a wireless connection of NASDAQ Totalview-ITCH data will be $8,500; and the MRC for a wireless connection of NASDAQ Totalview-ITCH and BX Totalview-ITCH data will be $12,000. The
The wireless connections would include the use of one port for connectivity to the Third Party Data. A User will only require one port to connect to the Third Party Data, irrespective of how many of the five wireless connections it orders. If a User that has more than one wireless connection wishes to use more than one port to connect to the Third Party Data,
The Exchange represents that there is limited bandwidth available on the wireless connection for data feeds from third parties. As a result, the Exchange has decided to offer as Third Party Data only the data feeds that are in high demand from Users. Although constrained by bandwidth with respect to the number of feeds it can carry, the Exchange represents that the wireless network offered by the Exchange can be made available to an unlimited number of Users.
The wireless connection would provide Users with an alternative means of connectivity for Third Party Data. Currently, Users can receive Third Party Data through other methods, including, for example, from another User, through a telecommunications provider, or over the internet protocol (“IP”) network.
The wireless connection to the Third Party Data is expected to be available no later than March 1, 2016. The Exchange will announce the date that the wireless connection to the Third Party Data will be available through a customer notice.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission believes that the Exchange's proposal to provide this additional connectivity option is consistent with the requirement of Section 6(b)(5) of the Act. The Commission believes that the proposal is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the Exchange makes wireless connectivity available to all Users on an equal basis. All Users that voluntarily select this service option will be charged the same amount for the same services, and there would be no differentiation among Users with regard to the fees charged for the service. Further, the Exchange represents that Users of the new wireless connection would not receive Third Party Data that is not available to all Users. In addition, the Exchange represents that Users that do not opt to utilize the Exchange's wireless connections would still be able to obtain Third Party Data through other methods, such as from wireless networks offered by third party vendors, other Users, through telecommunications providers, or over the IP network.
The Commission also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act.
The Commission also finds that consistent with Section 6(b)(8) of the Act the proposed rule change does not impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange states that Users currently can receive Third Party Data from competing wireless networks offered by third party vendors, including at least four third party vendors that offer Users wireless network connections using
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act,” “Exchange Act” or “SEA”)
FINRA is proposing to adopt FINRA Rules 2030 (Engaging in Distribution and Solicitation Activities with Government Entities)
The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
In July 2010, the SEC adopted Rule 206(4)-5 under the Investment Advisers Act of 1940 (“Advisers Act”) addressing pay-to-play practices by investment advisers (the “SEC Pay-to-Play Rule”).
The SEC Pay-to-Play Rule also prohibits an investment adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any person to solicit a government entity for investment advisory services on behalf of the investment adviser unless the person is a “regulated person.” A “regulated person” includes a member firm, provided that: (a) FINRA rules prohibit member firms from engaging in distribution or solicitation activities if political contributions have been made; and (b) the SEC finds, by order, that such rules impose substantially equivalent or more stringent restrictions on member firms than the SEC Pay-to-Play Rule imposes on investment advisers and that such rules are consistent with the objectives of the SEC Pay-to-Play Rule.
Based on this regulatory framework, FINRA is proposing a pay-to-play rule, Rule 2030, modeled on the SEC Pay-to-Play Rule that would impose substantially equivalent restrictions on member firms engaging in distribution or solicitation activities to those the SEC Pay-to-Play Rule imposes on investment advisers. FINRA is also proposing rules that would impose recordkeeping requirements on member firms in connection with political contributions.
The proposed rules would establish a comprehensive regime to regulate the activities of member firms that engage in distribution or solicitation activities with government entities on behalf of investment advisers. FINRA believes that establishing requirements for member firms that are modeled on the SEC's Pay-to-Play-Rule is a more effective regulatory response to the concerns the SEC identified in the SEC Pay-to-Play Rule Adopting Release regarding third-party solicitations than an outright ban on such activity. For example, in the SEC Pay-to-Play Rule Adopting Release, the SEC stated that solicitors
FINRA sought comment on the proposed rule change in
The proposed rule change, as revised in response to comments on
Proposed Rule 2030(a) would prohibit a covered member from engaging in distribution
The proposed rule would not ban or limit the amount of political contributions a covered member or its covered associates could make. Instead, it would impose a two-year time out on engaging in distribution or solicitation activities for compensation with a government entity on behalf of an investment adviser after the covered member or its covered associates make a contribution to an official of the government entity. Consistent with the two-year time out in the SEC Pay-to-Play Rule, the two-year time out in the proposed rule is intended to discourage covered members from participating in pay-to-play practices by requiring a cooling-off period during which the effects of a political contribution on the selection process can be expected to dissipate.
Proposed Rule 2030(g)(4) defines a “covered member” to mean “any member except when that member is engaging in activities that would cause the member to be a municipal advisor as defined in Exchange Act Section 15B(e)(4), SEA Rule 15Ba1-1(d)(1) through (4) and other rules and regulations thereunder.” As noted above, the SEC Pay-to-Play Rule includes within its definition of “regulated person” SEC-registered municipal advisors, subject to specified conditions.
A member firm that solicits a government entity for investment advisory services on behalf of an unaffiliated investment adviser may be required to register with the SEC as a municipal advisor as a result of such activity.
The proposed rule would apply to covered members acting on behalf of any investment adviser registered (or required to be registered) with the SEC, or unregistered in reliance on the exemption available under Section 203(b)(3) of the Advisers Act for foreign private advisers, or that is an exempt reporting adviser under Advisers Act Rule 204-4(a).
An official of a government entity would include an incumbent, candidate or successful candidate for elective office of a government entity if the office is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser or has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser.
Thus, the two-year time out would be triggered by contributions, not only to elected officials who have legal authority to hire the adviser, but also to elected officials (such as persons with appointment authority) who can influence the hiring of the adviser. As noted in the SEC Pay-to-Play Rule Adopting Release, a person appointed by an elected official is likely to be subject to that official's influences and recommendations. It is the scope of authority of the particular office of an official, not the influence actually exercised by the individual that would determine whether the individual has influence over the awarding of an investment advisory contract under the definition.
The proposed rule's time out provisions would be triggered by contributions made by a covered member or any of its covered associates. A contribution would include a gift, subscription, loan, advance, deposit of money, or anything of value made for the purpose of influencing the election for a federal, state or local office, including any payments for debts incurred in such an election. It would also include transition or inaugural expenses incurred by a successful candidate for state or local office.
As stated in the SEC Pay-to-Play Rule Adopting Release, contributions made to influence the selection process are typically made not by the firm itself, but by officers and employees of the firm who have a direct economic stake in the business relationship with the government client.
Contributions by an executive officer of a covered member would trigger the two-year time out. As discussed in Item II.C below, commenters requested that FINRA define the term “executive officer” for purposes of the proposed pay-to-play rule. Accordingly, consistent with the SEC Pay-to-Play Rule, proposed Rule 2030(g)(5) defines an “executive officer of a covered member” to mean: “(A) The president; (B) Any vice president in charge of a principal business unit, division or function (such as sales, administration or finance); (C) Any other officer of the covered member who performs a policy-making function; or (D) Any other person who performs similar policy-making functions for the covered member.” Whether a person is an executive officer would depend on his or her function or activities and not his or her title. For example, an officer who is a chief executive of a covered member but whose title does not include “president” would nonetheless be an executive officer for purposes of the proposed rule.
In addition, a covered associate would include a political action committee, or PAC, controlled by the covered member or any of its covered associates as a PAC is often used to make political contributions.
Consistent with the SEC Pay-to-Play Rule, the proposed rule would attribute to a covered member contributions made by a person within two years (or, in some cases, six months) of becoming a covered associate. This “look back” would apply to any person who becomes a covered associate, including a current employee who has been transferred or promoted to a position covered by the proposed rule. A person would become a “covered associate” for purposes of the proposed rule's “look back” provision at the time he or she is hired or promoted to a position that meets the definition of a “covered associate.”
Thus, when an employee becomes a covered associate, the covered member must “look back” in time to that employee's contributions to determine whether the time out applies to the covered member. If, for example, the contributions were made more than two years (or, pursuant to the exception described below for new covered associates, six months) prior to the employee becoming a covered associate, the time out has run. If the contribution was made less than two years (or six months, as applicable) from the time the person becomes a covered associate, the proposed rule would prohibit the covered member that hires or promotes the contributing covered associate from receiving compensation for engaging in distribution or solicitation activities on behalf of an investment adviser from the hiring or promotion date until the two-year period has run.
In no case would the prohibition imposed be longer than two years from the date the covered associate made the contribution. Thus, if, for example, the covered associate becomes employed (and engages in solicitation activities) one year and six months after the contribution was made, the covered member would be subject to the proposed rule's prohibition for the remaining six months of the two-year period. This “look back” provision, which is consistent with the SEC Pay-to-Play Rule, is designed to prevent covered members from circumventing the rule by influencing the selection process by hiring persons who have made political contributions.
Proposed Rule 2030(b) would prohibit a covered member or covered associate from coordinating or soliciting
In addition, as discussed in Item II.C below, in response to a request for clarification from a commenter regarding the application of this provision of the proposed rule, FINRA notes that, consistent with guidance provided by the SEC in connection with SEC Pay-to-Play Rule 206(4)-5(a)(2), a direct contribution to a political party by a covered member or its covered associates would not violate the proposed rule unless the contribution was a means for the covered member to do indirectly what the rule would prohibit if done directly (for example, if the contribution was earmarked or known to be provided for the benefit of a particular government official).
Proposed Rule 2030(e) further provides that it shall be a violation of Rule 2030 for any covered member or any of its covered associates to do anything indirectly that, if done directly, would result in a violation of the rule. This provision is consistent with a similar provision in the SEC Pay-to-Play Rule
Proposed Rule 2030(d)(1) provides that a covered member that engages in distribution or solicitation activities with a government entity on behalf of a covered investment pool
Proposed Rule 2030(d) is modeled on a similar prohibition in the SEC Pay-to-Play Rule
As discussed in more detail below, the proposed rule contains exceptions that are modeled on similar exceptions in the SEC Pay-to-Play Rule for
In addition, proposed Rule 2030(f) includes an exemptive provision for covered members that is modeled on the
Proposed Rule 2030(c)(1) would except from the rule's restrictions contributions made by a covered associate who is a natural person to government entity officials for whom the covered associate was entitled to vote
Proposed Rule 2030(c)(2) would provide an exception from the proposed rule's restrictions for covered members if a natural person made a contribution more than six months prior to becoming a covered associate of the covered member unless the covered associate engages in, or seeks to engage in, distribution or solicitation activities with a government entity on behalf of the covered member. This provision is consistent with a similar provision in the SEC Pay-to-Play Rule.
Proposed Rule 2030(c)(3) would provide an exception from the proposed rule's restrictions for covered members if the restriction is due to a contribution made by a covered associate and: (1) The covered member discovered the contribution within four months of it being made; (2) the contribution was less than $350; and (3) the contribution is returned within 60 days of the discovery of the contribution by the covered member.
Consistent with the SEC Pay-to-Play Rule, this exception would allow a covered member to cure the consequences of an inadvertent political contribution to an official for whom the covered associate is not entitled to vote. As the SEC stated in the SEC Pay-to-Play Rule Adopting Release, the exception is limited to the types of contributions that are less likely to raise pay-to-play concerns.
Proposed Rule 4580 would require covered members that engage in distribution or solicitation activities with a government entity on behalf of any investment adviser that provides or is seeking to provide investment advisory services to such government entity to maintain books and records that would allow FINRA to examine for compliance with its pay-to-play rule. This provision is consistent with similar recordkeeping requirements imposed on investment advisers in connection with the SEC Pay-to-Play Rule.
• The names, titles and business and residence addresses of all covered associates;
• the name and business address of each investment adviser on behalf of which the covered member has engaged in distribution or solicitation activities with a government entity within the past five years (but not prior to the rule's effective date);
• the name and business address of all government entities with which the covered member has engaged in distribution or solicitation activities for
• all direct or indirect contributions made by the covered member or any of its covered associates to an official of a government entity, or direct or indirect payments to a political party of a state or political subdivision thereof, or to a PAC.
The proposed rule would require that the direct and indirect contributions or payments made by the covered member or any of its covered associates be listed in chronological order and indicate the name and title of each contributor and each recipient of the contribution or payment, as well as the amount and date of each contribution or payment, and whether the contribution was the subject of the exception for returned contributions in proposed Rule 2030.
If the Commission approves the proposed rule change, FINRA will announce the effective date of the proposed rule change in a
Proposed Rule 2030(a)'s prohibition on engaging in distribution or solicitation activities for compensation with a government entity on behalf of an investment adviser that provides or is seeking to provide investment advisory services to such government entity within two years after a contribution is made to the government entity, will not be triggered by contributions made prior to the effective date. Similarly, the prohibition will not apply to contributions made prior to the effective date by new covered associates to which the two years or, as applicable, six months “look back” applies.
As of the effective date, member firms must begin to maintain books and records in compliance with proposed Rule 4580. Member firms will not be required, however, to look back for the five years prior to the effective date of the proposed rule to identify investment advisers and government entity clients in accordance with proposed Rule 4580(a)(2) and (a)(3).
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,
FINRA believes that the proposed rule change establishes a comprehensive regime to allow member firms to continue to engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisers following the compliance date for the SEC's ban on third-party solicitations while deterring member firms from engaging in pay-to-play practices. In the absence of a FINRA pay-to-play rule, covered members will be prohibited from receiving compensation for engaging in distribution and solicitation activities with government entities on behalf of investment advisers. FINRA believes that establishing a pay-to-play rule modeled on the SEC Pay-to-Play Rule is a more effective regulatory response to the concerns identified by the SEC regarding third-party solicitations than an outright ban on such activity. At the same time, FINRA believes that the proposed two-year time out will deter member firms from engaging in pay-to-play practices and, thereby, protect investors and the public interest.
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
As discussed above, FINRA published
As discussed above, the SEC Pay-to-Play Rule prohibits an investment adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any person to solicit a government entity for investment advisory services on behalf of the investment adviser unless the person is a “regulated person.” A “regulated person” includes a member firm, provided that: (a) FINRA rules prohibit member firms from engaging in distribution or solicitation activities if political contributions have been made; and (b) the SEC finds, by order, that such rules impose substantially equivalent or more stringent restrictions on member firms than the SEC Pay-to-Play Rule imposes on investment advisers and that such rules are consistent with the objectives of the SEC Pay-to-Play Rule. Thus, FINRA must propose its own pay-to-play rule to enable member firms to continue to engage in distribution and solicitation activities for compensation with government entities on behalf of investment advisers.
The proposed rule change would establish a comprehensive regime to regulate the activities of member firms that engage in distribution or solicitation activities with government entities on behalf of investment advisers. FINRA aims to enable member firms to continue to engage in such activities for compensation while at the same time deterring member firms from engaging in pay-to-play practices.
The baseline used to evaluate the impact of the proposed rule change is the regulatory framework under the SEC Pay-to-Play Rule and the MSRB pay-to-play rules.
The member firms that would have to cease their distribution or solicitation activities for compensation with government entities on behalf of investment advisers may bear direct losses as a result of the loss of this business. In addition, the absence of a FINRA pay-to-play rule that the SEC finds by order is substantially equivalent to or more stringent than the SEC Pay-to-Play Rule may impact investment advisers and public pension plans.
Specifically, without such a rule, there could be a decrease in the number of third-party solicitors which may reduce the competition in the market for solicitation services. Some investment advisers may need to search for and hire new solicitors as a result of the absence of a FINRA pay-to-play rule to continue their solicitation activities. Due to the potentially limited capacity of third-party solicitors, investment advisers may encounter difficulties in retaining solicitors or delays in solicitation services. These changes would likely increase the costs to investment advisers that rely on third-party solicitors to obtain government clients.
To the extent that higher costs may reduce the number of investment advisers competing for government business, public pension plans may face more limited investment opportunities. In such an instance, there may be an opportunity cost to a government entity either as it may not invest its assets optimally, or when seeking capital due to limitations on its access to funding.
The proposed rule change would enable member firms to continue to engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisers within the regulatory boundaries of the proposed rule change. The proposed rule change would prevent a potentially harmful disruption in the member firms' solicitation business, and accordingly may help member firms avoid some of the likely losses associated with the absence of such a rule change. The proposed rule change may also help promote competition by allowing more third-party solicitors to participate in the market for solicitation services, which may in turn reduce costs to investment advisers and improve competition for advisory services.
The proposed rule change is intended to establish a comprehensive regime to allow member firms to continue to engage in distribution or solicitation activities with government entities on behalf of investment advisers while deterring member firms from engaging in pay-to-play practices. FINRA believes the proposed rules would curb fraudulent conduct resulting from pay-to-play practices and, therefore, help promote fair competition in the market and protect public pension funds and investors. FINRA also believes the proposed rules would likely reduce the search costs of government entities and increase their ability to efficiently allocate capital, and thereby would promote capital formation.
FINRA recognizes that covered members that engage in distribution or solicitation activities with government entities on behalf of investment advisers would incur costs to comply with the proposed rules on an initial and ongoing basis. Member firms would need to establish and maintain policies and procedures to monitor contributions the firm and its covered associates make and to ensure compliance with the proposed requirements. In addition, member firms that wish to engage in distribution or solicitation activities with government entities may face hiring constraints as a result of the two-year (or, in some cases, six months) “look back” provision.
The compliance costs would likely vary across member firms based on a number of factors such as the number of covered associates, business models of member firms and the extent to which their compliance procedures are automated, whether the covered member is (or is affiliated with) an investment adviser subject to the SEC Pay-to-Play Rule, and whether the covered member is a registered municipal securities dealer and thus subject to MSRB pay-to-play rules.
The potential burden arising from compliance costs associated with the proposed rules can be initially gauged from the SEC's cost estimates for the SEC Pay-to-Play Rule. The SEC has estimated that investment advisers would spend between 8 and 250 hours to establish policies and procedures to comply with the SEC Pay-to-Play Rule.
In addition, the SEC estimated the costs for investment advisers to engage outside legal services to assist in drafting policies and procedures. It estimated that 75 percent of larger advisory firms, 50 percent of medium firms, and 25 percent of smaller firms subject to the SEC Pay-to-Play Rule
The SEC estimated that the recordkeeping requirements of the SEC Pay-to-Play Rule would increase an investment adviser's burden by approximately 2 hours per year,
FINRA requested comment on the economic impacts of the proposed rule change as set forth in
Monument Group stated that the vast majority of independent placement agents that would be subject to the proposed rules are small businesses, many of which are minority- or women-owned. Monument Group stated that these firms operate with focused staff and no revenues from other lines of business. Accordingly, Monument Group stated that incremental regulatory requirements that have little impact on larger firms can create significant resource and cost issues for these smaller firms. Specifically, Monument Group stated that the disclosure requirements would place significant and unique burdens on independent third-party private fund placement agents. Another commenter, 3PM, stated that the proposed rule change would add a new and significant burden on small firms in terms of the disclosure and recordkeeping requirements. 3PM also stated that not only would small firms be impacted by cost, but also by their limited personnel resources who would have to take on additional responsibilities to comply with the proposed rule change.
Monument Group requested that FINRA consider the already existing state, municipal and local lobbying registration, disclosure and reporting requirements and pay-to-play regimes in calculating the cost and competitive impact of the proposed rule change. Monument Group stated that the proposed rule change disproportionately affects FINRA-registered placement agents (as compared with other broker-dealers) and has the largest economic and anti-competitive effect on small independent firms.
As discussed above and in more detail in Item II.C below, after considering the comments, FINRA has determined not to propose a disclosure requirement for government distribution and solicitation activities at this time. FINRA believes that this determination will reduce substantially the cost and compliance burden concerns raised by commenters regarding the proposed rule change. FINRA however may consider a disclosure requirement for government distribution and solicitation activities as part of a future rulemaking and would consider the economic impact of any such revised proposed disclosure requirement as part of that rulemaking.
Although FINRA has determined to retain a recordkeeping requirement, FINRA notes that, in response to commenter concerns to
Since the scope of the proposed rule after the modifications is substantially equivalent to the SEC Pay-to-Play Rule, FINRA believes that the SEC's cost estimates serve as a reasonable reference for the potential compliance costs on member firms. In response to the question on the costs of engaging outside legal services to assist in drafting policies and procedures to comply with the proposed rule, 3PM estimated that the majority of member firms would spend between $1,500 and $2,500 or approximately five to 10 hours of a professional consultant's time. In addition, 3PM estimated that a member firm would exert approximately 10 to 20 additional hours of compliance oversight in connection with the proposed rule each year. These estimates are slightly lower than the SEC's estimates discussed above.
The proposed rule is not expected to have competitive effects among member firms engaging in distribution or solicitation activities, since all member firms will be subject to the same prohibitions. Moreover, because the restrictions imposed by the proposed rule are substantially equivalent to the restrictions imposed by the SEC Pay-to-Play Rule, the proposed rule is not expected to create an uneven playing field between member firms and investment advisers. There may be a potential impact on the competition between member firms and municipal advisors depending on the differences between the proposed rule and the finalized MSRB rules regulating similar activities of municipal advisors.
Since the SEC requires that FINRA impose “substantially equivalent or more stringent restrictions” on member firms that wish to act as “regulated persons” than the SEC Pay-to-Play Rule imposes on investment advisers, FINRA believes it is appropriate (and achieves the right balance between the costs and benefits) to model the proposed rule change on the SEC Pay-to-Play Rule rather than impose a regulatory alternative, including a more stringent regulatory alternative, on such member firms.
In November 2014, FINRA published the proposed rule change for comment in
Most commenters expressed appreciation or support for FINRA's decision to propose a pay-to-play rule, noting the potential disruption of an SEC ban on third party solicitations if FINRA were not to propose and adopt a pay-to-play rule. The commenters raised, however, a number of concerns with the proposed pay-to-play rule, as well as the related proposed disclosure and recordkeeping requirements. A summary of the comments and FINRA's responses are discussed below.
CCP expressed First Amendment concerns with the proposed rule change. Among other things, CCP raised vagueness and over-breadth concerns with a number of the provisions in the proposed rule change,
In light of CCP raising these constitutional concerns, FINRA notes that the proposed pay-to-play rule does not impose any restrictions on making independent expenditures, ban political contributions, or attempt to regulate State and local elections. FINRA acknowledges that the two-year time out provision may affect the propensity of covered members and their covered associates to make political contributions.
Moreover, for an investment adviser and its covered associates to provide or agree to provide, directly or indirectly, payment to a member firm to solicit a government entity for investment advisory services on behalf of the investment adviser, the SEC must find that FINRA's pay-to-play rule imposes substantially equivalent or more stringent restrictions on member firms than the SEC Pay-to-Play Rule imposes on investment advisers and that FINRA's rule is consistent with the objectives of the SEC Pay-to-Play Rule. CCP suggested alternative approaches to the proposed pay-to-play rule that it argued would be “less restrictive,” but FINRA does not believe that CCP's suggested less restrictive alternatives would meet the SEC's requirements. Accordingly, FINRA has crafted its proposal such that it is substantially similar to the SEC's Pay-to-Play Rule.
FINRA notes that the SEC modeled the SEC Pay-to-Play Rule on similarly designed MSRB Rule G-37, which the United States Court of Appeals for the District of Columbia Circuit upheld against a First Amendment challenge in
Consistent with
Government entities would include all state and local governments, their agencies and instrumentalities, and all public pension plans and other collective government funds, including participant-directed plans such as 403(b),
Consistent with
As stated in
The proposed pay-to-play rule would apply to covered members acting on behalf of any investment adviser registered (or required to be registered) with the SEC, or unregistered in reliance on the exemption available under Section 203(b)(3) of the Advisers Act for foreign private advisers, or that is an exempt reporting adviser under Advisers Act Rule 204-4(a).
A “covered associate” includes any general partner, managing member or executive officer of a covered member, or other individual with a similar status or function.
A covered associate also would include a PAC controlled by the covered member or any of its covered associates. FSI asserted that the restrictions on PAC contributions, and the definition of “control” with respect to covered associates are vague and potentially over-broad. For example, FSI stated that “[i]t is unclear whether an employee or executive of a member firm that holds a position on a PAC board of directors or other advisory committee would have `control' of the PAC under the Proposed Rules. It would also cover PACs that are not connected to the employee or executive's member firm.” As stated in
Consistent with
The SEC Pay-to-Play Rule prohibits an investment adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any person to solicit a government entity for investment advisory services on behalf of the investment adviser unless the person is a “regulated person.”
Language in the SEC Pay-to-Play Rule Adopting Release further supports the inclusion of distribution activities by broker-dealers in a FINRA pay-to-play rule. For example, when discussing comments related to its proposed ban on using third parties to solicit government business, the SEC addressed
Based on the SEC's definition of “regulated person” as well as its discussion regarding the treatment of distribution fees paid pursuant to a 12b-1 plan, FINRA believes its proposed rule must apply to member firms engaging in distribution activities. Accordingly, FINRA has not revised the proposed rule to remove references to the term “distribution.”
ICI requested confirmation that, with respect to mutual funds, the proposed rule would be triggered only when a member firm solicits a government entity to include a mutual fund in a government entity's plan or program and not when the member is selling mutual fund shares to a government entity. FSI asked for clarification with respect to the treatment of traditional brokerage activities by a financial advisor as “distribution or solicitation activities” in the context of government entity plans.
As discussed above, the proposed pay-to-play rule would apply to distribution activities by covered members. FINRA notes, however, that based on the definition of a “covered investment pool,” the proposed rule would not apply to distribution activities related to registered investment companies that are not investment options of a government entity's plan or program.
CAI requested clarification that “compensation” in the context of covered investment pools does not include conventional compensation arrangements for the distribution of mutual funds, variable annuity contracts and other securities included within the definition of “covered investment pool.” Consistent with the SEC Pay-to-Play Rule, to the extent the mutual fund distribution fees are paid by the fund pursuant to a 12b-1 plan, such payments would not be prohibited under the proposed rule as they would not constitute payments by the fund's investment adviser. If, however, the adviser pays for the fund's distribution out of its “legitimate profits,” the proposed rule would generally be implicated.
In
In the
After considering CAI's concerns, FINRA has modified the language of the proposed rule to recognize the relationship between the selling member and the covered investment
As stated in
Accordingly, FINRA has modified the proposed rule to include proposed Rule 2030(d)(2) that provides that for purposes of the proposed rule “an investment adviser to a covered investment pool in which a government entity invests or is solicited to invest shall be treated as though that investment adviser were providing or seeking to provide investment advisory services directly to the government entity.”
CAI sought confirmation from FINRA that the proposed pay-to-play rule would not apply in the context of two-tiered investment products, such as variable annuities. CAI asserted, among other things, that “[o]rdinarily, there is no investment adviser providing investment advisory services to the separate account supporting the variable annuity contract, although there are investment advisers providing investment advisory services to the underlying mutual funds or unregistered investment pools.” CAI requested clarification that a covered member selling two-tiered investment products is not engaging in solicitation activities on behalf of the investment adviser and sub-advisers managing the underlying funds. FINRA notes that the SEC did not exclude specific products from the SEC Pay-to-Play Rule and, therefore, FINRA has determined not to exclude specific products from its proposed rule.
In
NASAA expressed support for FINRA's inclusion of a disgorgement provision for violations of the proposed rule. Most commenters, however, opposed the requirement.
After considering the comments and, in particular, that FINRA has authority to require disgorgement of fees in enforcement actions, FINRA has determined not to include a disgorgement requirement in the proposed rule.
Consistent with
CAI sought confirmation that the proposed prohibition on soliciting and coordinating contributions would not apply when a contribution is made to a political action committee, political party or other third party, where there is no knowledge or indication of how such contribution will be used. Similar to guidance provided in the context of SEC Pay-to-Play Rule 206(4)-5(a)(2), FINRA notes that a direct contribution to a political party by a covered member or its covered associates would not violate the proposed rule unless the contribution was a means for the covered member to do indirectly what the rule would prohibit if done directly (for example, if the contribution was earmarked or known to be provided for the benefit of a particular government official).
Consistent with
In
FINRA has determined not to modify the proposed exceptions. As stated in
Proposed Rule 4580 would require covered members that engage in distribution or solicitation activities with a government entity on behalf of any investment adviser that provides or is seeking to provide investment advisory services to such government entity to maintain books and records that would allow FINRA to examine for compliance with its proposed pay-to-play rule. SIFMA requested that FINRA not extend the recordkeeping requirements to unsuccessful solicitations where the covered member does not receive compensation because maintaining such records would impose significant costs on covered members with little corresponding benefit.
FINRA intends that the recordkeeping requirements of proposed Rule 4580 be consistent with similar recordkeeping requirements imposed on investment advisers in connection with the SEC Pay-to-Play Rule.
Consistent with
As stated in the
In
After considering the comments, FINRA has determined not to propose a disclosure rule at this time. FINRA will continue to consider whether such a rule would be appropriate. If FINRA determines to propose a disclosure rule at a later date, it would do so pursuant to FINRA's notice and comment rulemaking process.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104-13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes revisions and an extension of OMB-approved information collections.
SSA is soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Mail, email, or fax your comments and recommendations on the information collection(s) to the OMB Desk Officer and SSA Reports Clearance Officer at the following addresses or fax numbers.
Or you may submit your comments online through
I. The information collections below are pending at SSA. SSA will submit them to OMB within 60 days from the date of this notice. To be sure we consider your comments, we must receive them no later than February 29, 2016. Individuals can obtain copies of the collection instruments by writing to the above email address.
1. Internet Direct Deposit Application—31 CFR 210—0960-0634. SSA requires all applicants and recipients of Social Security Old Age, Survivors, and Disability Insurance (OASDI) benefits, or Supplemental Security Income payments to receive these benefits and payments via direct deposit at a financial institution. SSA receives Direct Deposit/Electronic Funds Transfer (DD/EFT) enrollment information from OASDI beneficiaries and SSI recipients to facilitate DD/EFT of their funds with their chosen financial institution. We also use this information when an enrolled individual wishes to change their DD/EFT information. For the convenience of the respondents, we collect this information through several modalities, including an Internet application, in-office or telephone interviews, and our automated telephone system. In addition to using the direct deposit information to enable DD/EFT of funds to the recipient's chosen financial institution, we also use the information through our Direct Deposit Fraud Indicator to ensure the correct recipient receives the funds. Respondents are OASDI beneficiaries and SSI recipients requesting that we enroll them in the Direct Deposit program or change their direct deposit banking information.
2. Centenarian and Medicare Non-Utilization Project Development Worksheets: Face-to-Face Interview and Telephone Interview—20 CFR 416.204(b) and 422.135—0960-0780. SSA conducts interviews with centenary Title II beneficiaries and Title XVI recipients, and Medicare Non-Utilization Project (MNUP) beneficiaries age 90 and older to: (1) Assess if the beneficiaries are still living; (2) prevent fraud through identity misrepresentation; and (3) evaluate the well-being of the recipients. SSA field office personnel obtain the information through one-time, in-person interviews with the centenarians and MNUP beneficiaries. If the centenarians and MNUP beneficiaries have representatives or caregivers, SSA personnel invite them to the interviews. During these interviews, SSA employees make overall observations of the centenarians, MNUP beneficiaries, and their representative payees (if applicable). The interviewer uses the appropriate Development Worksheet as a guide for the interview, in addition to documenting findings during the interview. Non-completion of the Worksheets, or refusal of the interviews, will result in the suspension of the centenarians' or MNUP beneficiaries' payments. SSA conducts the interviews either over the telephone or through a face-to-face discussion with the respondents. Respondents are SSI recipients or Social Security beneficiaries 100 years old or older; MNUP beneficiaries; their representative payees; or their caregivers.
II. SSA submitted the information collection below to OMB for clearance. Your comments regarding the information collection would be most useful if OMB and SSA receive them 30 days from the date of this publication. To be sure we consider your comments, we must receive them no later than January 29, 2016. Individuals can obtain copies of the OMB clearance package by writing to
On September 2, 2011, the agency published interim final regulations and notifications processes for the restrictive access and alternative service process at 76 FR 54700. These regulations explain the process we follow when we restrict individuals from receiving in-person services in our field offices and provide them, instead, with alternative services. We published these rules to create a safer environment for our personnel and members of the public who use our facilities, while ensuring we continue to serve the American people with as little disruption to our operations as possible. Under our regulations at 20 CFR 422.905, an individual whom we restrict access to our facilities has the opportunity to appeal our decision within 60 days of the date of the restrictive access and alternative service notice. Under 20 CFR 422.906, if the individual does not appeal the decision within the 60 days; if we restrict the individual prior to the effective date of this regulation; or if the appeal results in a denial, the individual has another opportunity to request review of the restriction after a three-year period. We make this periodic review available to all restricted individuals once every three years.
The interim final restrictive access and alternative services rules contain two public reporting burdens:
• 20 CFR 422.905—after SSA issues a restrictive access and alternative service decision against an individual, the individual has 60 days to appeal the determination. Restricted individuals must submit a written appeal stating why they believe SSA should rescind the restriction and allow them to conduct business with us on a face-to-face basis in one of our offices. There is no printed form for this request; restricted individuals create their own written statement of appeal, and submit it to a sole decision-maker in the regional office of the region where the restriction originated. The individuals may also provide additional documentation to support their appeal.
• 20 CFR 422.906—three years after the original restrictive access and alternative service decision, restricted individuals may re-submit a written
Respondents for this collection are individuals appealing their restrictions from in-person services at SSA field offices.
Federal Aviation Administration (FAA), DOT.
Notice.
This notice contains a summary of a petition seeking relief from specified requirements of Title 14 of the Code of Federal Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before January 19, 2016.
Send comments identified by docket number FAA-2015-1022 using any of the following methods:
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Dan Ngo (202) 267-4264, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591.
This notice is published pursuant to 14 CFR 11.85.
Federal Aviation Administration (FAA), DOT.
Notice.
This notice contains a summary of a petition seeking relief from specified requirements of Title 14 of the Code of Federal Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before January 19, 2016.
Send comments identified by docket number FAA-2014-0352 using any of the following methods:
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Dan Ngo (202) 267-4264, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591.
This notice is published pursuant to 14 CFR 11.85.
Federal Aviation Administration (FAA), DOT.
Notice.
This notice contains a summary of a petition seeking relief from specified requirements of Title 14 of the Code of Federal Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before January 19, 2016.
Send comments identified by docket number FAA-2015-0036 using any of the following methods:
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•
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Michael Cameron, (202) 267-4549. 800 Independence Avenue SW., Washington, DC 20591.
This notice is published pursuant to 14 CFR 11.85.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice of renewal of exemptions; request for comments.
FMCSA announces its decision to renew the exemptions of 107 individuals from its rule prohibiting persons with insulin-treated diabetes mellitus (ITDM) from operating commercial motor vehicles (CMVs) in interstate commerce. FMCSA has statutory authority to exempt individuals from this rule if the exemptions granted will not compromise safety. The Agency has concluded that granting these exemption renewals will provide a level of safety that is equivalent to or greater than the level of safety maintained without the exemptions for these CMV drivers.
Each group of renewed exemptions are effective from the dates stated in the discussions below. Comments must be received on or before January 29, 2016.
You may submit comments bearing the Federal Docket Management System (FDMS) numbers: Docket No.
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Christine A. Hydock, Chief, Medical Programs Division, 202-366-4001,
Under 49 U.S.C. 31136(e) and 31315, FMCSA may renew an exemption from the Federal Motor Carrier Safety Regulations 2-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to or greater than the level that would be achieved absent such exemption.” The statute also allows the Agency to renew exemptions at the end of the 2-year period. The 107 individuals listed in this notice have recently become eligible for a renewed exemption from the diabetes prohibition in 49 CFR 391.41(b)(3), which applies to drivers of CMVs in interstate commerce. The drivers remain in good standing with the Agency, have maintained their required medical monitoring and have not exhibited any medical issues that would compromise their ability to safely operate a CMV during the previous 2-year exemption period.
This notice addresses 107 individuals who have requested renewal of their exemptions in accordance with FMCSA procedures. These 107 drivers remain in good standing with the Agency, have maintained their required medical monitoring and have not exhibited any medical issues that would compromise their ability to safely operate a CMV during the previous 2-year exemption period. Therefore, FMCSA has decided to extend each exemption for a renewable two-year period. Each individual is identified according to the renewal date.
The exemptions are renewed subject to the following conditions: (1) That each individual submit a quarterly monitoring checklist completed by the treating endocrinologist as well as an annual checklist with a comprehensive medical evaluation; (2) that each individual reports within 2 business days of occurrence, all episodes of severe hypoglycemia, significant complications, or inability to manage diabetes; also, any involvement in an accident or any other adverse event in a CMV or personal vehicle, whether or not it is related to an episode of hypoglycemia; (3) that each individual submit an annual ophthalmologist's or optometrist's report; and (4) that each individual provide a copy of the annual medical certification to the employer for retention in the driver's qualification file, or keep a copy in his/her driver's qualification file if he/she is self-employed. The driver must also have a copy of the certification when driving, for presentation to a duly authorized Federal, State, or local enforcement official.
Under 49 U.S.C. 31315(b)(1), an exemption may be granted for no longer than two years from its approval date and may be renewed upon application for additional two year periods. The following groups of drivers received renewed exemptions in the month of January and are discussed below.
As of January 5, 2016, and in accordance with 49 U.S.C. 31136(e) and 31315, the following 20 individuals have satisfied the renewal conditions for obtaining an exemption from the rule prohibiting drivers with ITDM from driving CMVs in interstate commerce. (76 FR 71112; 77 FR 532):
The drivers were included in Docket No. FMCSA-2011-0300. Their exemptions are effective as of January 5, 2016 and will expire on January 5, 2018.
As of January 11, 2016, and in accordance with 49 U.S.C. 31136(e) and 31315, the following 24 individuals, have satisfied the renewal conditions for obtaining an exemption from the rule prohibiting drivers with ITDM from driving CMVs in interstate commerce (74 FR 55890; 75 FR 1449):
The drivers were included in Docket No. FMCSA-2009-0289. Their exemptions are effective as of January 11, 2016 and will expire on January 11, 2018.
As of January 23, 2016, and in accordance with 49 U.S.C. 31136(e) and 31315, the following 13 individuals have satisfied the renewal conditions for obtaining an exemption from the rule prohibiting drivers with ITDM from driving CMVs in interstate commerce. (78 FR 65034; 79 FR 3917):
The drivers were included in Docket No. FMCSA-2013-0190. Their exemptions are effective as of January 23, 2016 and will expire on January 23, 2018.
As of January 28, 2016, and in accordance with 49 U.S.C. 31136(e) and 31315, the following 25 individuals have satisfied the renewal conditions for obtaining an exemption from the rule prohibiting drivers with ITDM from driving CMVs in interstate commerce. (74 FR 65836; 75 FR 4622):
The drivers were included in Docket No. FMCSA-2009-0290. Their exemptions are effective as of January 28, 2016 and will expire on January 28, 2018.
As of January 29, 2016, and in accordance with 49 U.S.C. 31136(e) and 31315, the following 25 individuals have satisfied the renewal conditions for obtaining an exemption from the rule prohibiting drivers with ITDM from driving CMVs in interstate commerce. (78 FR 68139; 79 FR 4807):
The drivers were included in Docket No. FMCSA-2013-0191. Their exemptions are effective as of January 29, 2016 and will expire on January 29, 2018.
Each of the 107 drivers in the aforementioned groups qualifies for a renewal of the exemption. They have maintained their required medical monitoring and have not exhibited any medical issues that would compromise their ability to safely operate a CMV during the previous 2-year exemption period.
These factors provide an adequate basis for predicting each driver's ability to continue to drive safely in interstate commerce. Therefore, FMCSA concludes that extending the exemption for each of the 107 drivers for a period of two years is likely to achieve a level of safety equal to that existing without the exemption. The drivers were included in docket numbers FMCSA-2009-0289; FMCSA-2009-0290; FMCSA-2011-0300; FMCSA-2013-0190; FMCSA-2013-0191.
FMCSA will review comments received at any time concerning a particular driver's safety record and determine if the continuation of the exemption is consistent with the requirements at 49 U.S.C. 31136(e) and 31315. However, FMCSA requests that interested parties with specific data concerning the safety records of these drivers submit comments by January 29, 2016.
FMCSA believes that the requirements for a renewal of an exemption under 49 U.S.C. 31136(e) and 31315 can be satisfied by initially granting the renewal and then requesting and evaluating, if needed, subsequent comments submitted by interested parties. As indicated above, the Agency previously published notices of final disposition announcing its decision to exempt these 107 individuals from rule prohibiting persons with ITDM from operating CMVs in interstate commerce in 49 CFR 391.41(b)(3). The final decision to grant an exemption to each of these individuals was made on the merits of each case and made only after careful consideration of the comments received to its notices of applications. The notices of applications stated in detail the medical condition of each applicant for an exemption from rule prohibiting persons with ITDM from operating CMVs in interstate commerce. That information is available by consulting the above cited
Interested parties or organizations possessing information that would otherwise show that any, or all, of these drivers are not currently achieving the statutory level of safety should immediately notify FMCSA. The Agency will evaluate any adverse evidence submitted and, if safety is being compromised or if continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315, FMCSA will take immediate steps to revoke the exemption of a driver.
You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FMCSA can contact you if there are questions regarding your submission.
To submit your comment online, go to
We will consider all comments and material received during the comment period and may change this proposed rule based on your comments. FMCSA may issue a final rule at any time after the close of the comment period.
To view comments, as well as any documents mentioned in this preamble, and to submit your comment online, go to
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FMCSA announces its plan to submit the Information Collection Request (ICR) described below to the Office of Management and Budget (OMB) for its review and approval. The FMCSA seeks emergency approval to revise an ICR titled, “Licensing Applications for Motor Carrier Operating Authority,” that is used by for-hire motor carriers of regulated commodities, motor passenger carriers, freight forwarders, property brokers, and certain Mexico-domiciled motor carriers to register their operations with the FMCSA.
Please send your comments to this notice by January 29, 2016. OMB must receive your comments by this date to act quickly on the ICR.
All comments should reference Federal Docket Management System (FDMS) Docket Number FMCSA-2015-0461. Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the attention of the Desk Officer, Department of Transportation/Federal Motor Carrier Safety Administration, and sent via electronic mail to
Mr. Jeff Secrist, Office of Registration and Safety Information, Department of Transportation, Federal Motor Carrier Safety Administration, West Building, 6th Floor, 1200 New Jersey Avenue SE., Washington, DC 20590-0001. Telephone: 202-385-2367; email
FMCSA published a Final Rule titled, “Unified Registration System,” (78 FR 52608), dated August 23, 2013, that would incorporate all registration form requirements included in this ICR, except the Form OP-1(MX), into the Form MCSA-1 in the OMB Control Number 2126-0051, “FMCSA Registration/Updates,” ICR effective October 23, 2015. The Form OP-1(MX) was excluded from the Form MCSA-1 because its information collection requirements are beyond the scope of the Unified Registration System Final Rule. On October 5, 2015, FMCSA obtained OMB approval to eliminate all of the registration forms except the Form OP-1(MX) from this ICR.
This emergency ICR revision request is due to a Final Rule titled “Unified Registration System,” (80 FR 63695) dated October 21, 2015, which changed the effective and compliance dates of the 2013 Final Rule from October 23, 2015, to September 30, 2016. This change in the effective and compliance dates from the 2013 Final Rule is required to allow FMCSA additional time to complete the information technology (IT) systems work required to fully implement that rule. As a result, FMCSA seeks emergency approval to continue using the Licensing Applications for Motor Carrier Operating Authority Forms (OP-1(NNA), OP-1(FF), OP-1, and OP-1(P)) through September 30, 2016, as these forms will be needed to support registration requirements.
Office of the Secretary, U.S. Department of Transportation.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. 3501
Comments on this notice must be received by February 29, 2016.
You may submit comments [identified by Docket No. DOT-OST-2015-XXXX] through one of the following methods:
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Marc D. Pentino, Departmental Office of Civil Rights, Office of the Secretary, U.S. Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC, 20590; 202-366-4648;
Centers for Medicare & Medicaid Services (CMS), HHS.
Final rule.
This final rule establishes a prior authorization program for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) items that are frequently subject to unnecessary utilization. This rule defines unnecessary utilization and creates a new requirement that claims for certain DMEPOS items must have an associated provisional affirmed prior authorization decision as a condition of payment. This rule also adds the review contractor's decision regarding prior authorization of coverage of DMEPOS items to the list of actions that are not initial determinations and therefore not appealable.
These regulations are effective February 29, 2016.
Maria Ciccanti, (410) 786-3107.
Jennifer McCormick, (410) 786-2852.
Lynne Zaccaria, (410) 786-2485.
The purpose of this final rule is to implement a new prior authorization program aimed at reducing unnecessary utilization and aberrant billing of certain DMEPOS items. Section 1834(a)(15) of the Social Security Act (the Act) authorizes the Secretary to develop and periodically update a list of DMEPOS that the Secretary determines, on the basis of prior payment experience, are frequently subject to unnecessary utilization and to develop a prior authorization process for these items. This final rule implements that authority by interpreting “frequently subject to unnecessary utilization,” by specifying a list of items that meet our criteria, and by establishing a prior authorization process.
The following provisions are addressed in this final rule:
• Establishment of a prior authorization process for DMEPOS items that are frequently subject to unnecessary utilization. We define “unnecessary utilization” as the furnishing of items that do not comply with one or more of Medicare's coverage, coding, and payment rules. We believe a prior authorization process will ensure beneficiaries receive medically necessary care while minimizing the risk of improper payments, and will therefore protect both beneficiaries and the Medicare program.
• Creation of a Master List of certain DMEPOS items potentially subject to prior authorization. The final rule will create an initial Master List that includes items that meet the following criteria:
++ Appear on the DMEPOS Fee Schedule list.
++ Meet either of the following criteria:
—Identified in a General Accountability Office (GAO) or Department of Health and Human Services Office of Inspector General (OIG) report that is national in scope and published in 2007 or later as having a high rate of fraud or unnecessary utilization.
—Listed in the 2011 or later Comprehensive Error Rate Testing (CERT) program's Annual Medicare Fee-For-Service (FFS) Improper Payment Rate Report Durable Medical Equipment (DME) Report's Service Specific Overpayment Rate Appendix.
We note that, in the proposed rule, this report was titled as stated in the previous sentence. However, for the purposes of this final rule, we are changing the name to the CERT Annual Medicare Fee-For-Service (FFS) Improper Payment Rate Report DME and/or DMEPOS Service Specific Report(s). The Annual Medicare Fee-For-Service (FFS) Improper Payment Rate Report DME and/or DMEPOS Service Specific Report(s) will hereafter be referred to as the CERT DME and/or DMEPOS Service Specific Report(s). We believe that changing the term to Report(s) (rather than Appendix) and removing the Overpayment Rate wording could limit possible future confusion if the CERT DME and/or DMEPOS Service Specific report(s) are reported in the narrative rather than the appendices or if the name of the report changes in future annual publications.
++ Have an average purchase fee of $1,000 or greater (adjusted annually for inflation) or an average monthly rental fee schedule of $100 or greater (adjusted annually for inflation). (These dollar amounts are referred to as the payment threshold).
• Maintenance of the Master List of certain DMEPOS items potentially subject to prior authorization is conducted based on the following:
++ The Master List is self-updating annually. That is, items on the DMEPOS Fee Schedule that meet the payment threshold are added to the list when the item is listed in a future OIG or GAO report of a national scope or listed in a future CERT DME and/or DMEPOS Service Specific Report(s).
++ Items remain on the Master List for 10 years from the date the item was added to the Master List.
++ Items are updated on the Master List when the Healthcare Common Procedure Coding System (HCPCS) codes representing an item have been discontinued and cross-walked to an equivalent item.
++ Items are removed from the list sooner than 10 years if the purchase amount drops below the payment threshold (currently an average purchase fee of $1,000 or greater or an average monthly rental fee schedule of $100 or greater).
++ Items that age off the Master List because they have been on the list for 10 years can remain on or be added back to the Master List if a subsequent GAO/OIG, or CERT DME and/or DMEPOS Service Specific Report(s) identifies the item to be frequently subject to unnecessary utilization.
++ Items already on the Master List that are identified by a GAO/OIG, or CERT DME and/or DMEPOS Service Specific Report(s) will remain on the list for 10 years from the publication date of the new report(s).
++ We will notify the public annually of any additions and deletions from the Master List by posting the notification in the
• The Required Prior Authorization List—Presence on the Master List will not automatically require prior authorization. In order to balance minimizing provider and supplier burden with our need to protect the Medicare program, we are initially implementing prior authorization for a subset of items on the Master List (hereafter referred to as “Required Prior Authorization List”).
• The Prior Authorization Process—This provision requires that prior to furnishing the item and prior to submitting the claim for processing, a prior authorization requester must submit evidence that the item complies
• A provisional affirmation prior authorization decision is a condition of payment. We are finalizing the provision to automatically deny payment for a claim for an item on the Required Prior Authorization List that is submitted without a provisional affirmation prior authorization decision.
• A prior authorization decision is not a payment decision, and thus a prior authorization decision is not appealable. We have added new section 405.926(t) to our regulations to specify that a review contractor's prior determination of coverage is not an initial determination.
The overall economic cost of this final rule is approximately $1.3 million in the first year. The 5 year cost is approximately $57 million and the 10 year cost is approximately $212 million, mostly driven by the increased number of items subjected to prior authorization after the first year. Additional administrative paperwork costs to private sector providers and suppliers and an increase in Medicare spending to conduct reviews combine to create the financial impact. However, this impact is offset by some savings. We believe there are likely to be other benefits and cost savings that result from the DMEPOS prior authorization requirement. However, many of those benefits are difficult to quantify. For instance, we expect to see savings in the form of reduced unnecessary utilization, fraud, waste, and abuse, including a reduction in improper Medicare FFS payments (note that not all improper payments are fraudulent).
The overall benefits of this final rule include a change in billing practices that also enhances the coordination and collaboration of care between the primary care provider and the supplier to provide the most appropriate DMEPOS item to meet the needs of the beneficiary. The provider and supplier community will benefit from the increased education and outreach that is planned during year 1 of the prior authorization program.
Savings, net of premium offsets, to the Medicare program due to reductions in payments to DMEPOS suppliers are estimated to be $10 million in 2016, potentially rising over time to between $10 million and $110 million in 2025, yielding a 10-year annualized amount of $10 to $68.1 million with a 7 percent discount rate or $10 to $71.4 million with a 3 percent discount rate.
The term “durable medical equipment (DME)” is defined in section 1861(n) of the Social Security Act (the Act). It is also referenced in the definition of “medical and other health services” in section 1861(s)(6) of the Act. Furthermore, the term is defined in 42 CFR 414.202 as equipment furnished by a supplier or a home health agency (HHA) that—
• Can withstand repeated use;
• Effective with respect to items classified as DME after January 1, 2012, has an expected life of at least 3 years;
• Is primarily and customarily used to serve a medical purpose;
• Generally is not useful to an individual in the absence of an illness or injury; and
• Is appropriate for use in the home.
Section 1861(s)(9) of the Act provides for the coverage of leg, arm, back, and neck braces; and artificial legs, arms, and eyes, including replacement if required because of a change in the patient's physical condition. As indicated by section 1834(h)(4)(C) of the Act, together with certain shoes described in section 1861(s)(12) of the Act, these items are often referred to as “orthotics and prosthetics.” Under section 1834(h)(4)(B) of the Act, the term ”prosthetic devices” does not include parenteral and enteral nutrition, supplies and equipment, and implantable items payable under section 1833(t) of the Act.
Examples of durable medical equipment include hospital beds, oxygen tents, and wheelchairs. Prosthetic devices are included in the definition of “medical and other health services” in section 1861(s)(8) of the Act. Prosthetic devices are defined as devices (other than dental) which replace all or part of an internal body organ, including replacement of such devices. Examples of prosthetic devices include cochlear implants, electrical continence aids, electrical nerve stimulators, and tracheostomy speaking valves.
Medicare pays for DMEPOS items only if the beneficiary's medical record contains sufficient documentation of the beneficiary's medical condition to support the need for the type and quantity of items ordered. In addition, other conditions of payment must be satisfied for the claim to be paid. These conditions of payment vary by item, but are specified in statute and in CMS regulations. They are further detailed in our manuals and in local and national coverage determinations. Among other things, there must be a valid order for the item obtained from a physician or, when permitted, an eligible professional.
Once Medicare coverage, coding, and payment rules are satisfied, the supplier dispenses the item to the beneficiary. In general, items are delivered directly to the beneficiary or to an authorized representative, delivered to the beneficiary by shipping or delivery service, or delivered to a nursing facility on behalf of the beneficiary. The supplier is required to maintain proof of delivery in its files in keeping with the supplier standards contained in 42 CFR 424.57(c). The claim is then submitted to the Medicare Administrative Contactor (MAC) for payment. If a claim is denied, the beneficiary or supplier may appeal the MAC's decision. Claims may also be selected for pre- or post-payment review. As discussed in the following section, the prior authorization process will require applicable documentation to be submitted for review before an item is delivered to the beneficiary.
Section 1834(a)(15) of the Act authorizes the Secretary to develop and periodically update a list of DMEPOS items that the Secretary determines, on the basis of prior payment experience, are frequently subject to unnecessary utilization and to develop a prior authorization process for these items.
This final rule implements that authority by interpreting “frequently subject to unnecessary utilization,” specifying a list of items that meet our criteria, and establishing a prior authorization process.
Medicare pays for DMEPOS items only if the beneficiary's medical record contains sufficient documentation of the beneficiary's medical condition to support the need for the type and quantity of items ordered. In addition, all required documentation elements outlined in Medicare policies must be present for the claim to be paid.
Payment made for the furnishing of an item that does not meet one or more of Medicare's coverage, coding, and
For the 2014 CERT reporting period, approximately 5.1 billion dollars was improperly paid for DMEPOS items. This represents a 53.1 percent improper payment rate for DMEPOS and represents 10.4 percent of the overall improper payment rate.
Given that for the 2014 reporting period, 92 percent of the DMEPOS improper payment rate is attributed to insufficient documentation, we believe we must develop a mechanism for DMEPOS to have sufficient associated documentation before the item is furnished and before the claim is submitted for payment. We believe a prior authorization program can accomplish this by reviewing many of the required documentation elements outlined in applicable Medicare policies before the item is furnished and before the claim is submitted for payment.
Prior authorization has the added benefit of providing a supplier some assurance of payment for items receiving a provisional affirmation decision. (However, as described later in this section, certain requirements—such as proof of delivery—can only be evaluated after the claim has been submitted). In addition, beneficiaries will have information regarding coverage prior to receiving the item, and will benefit by knowing in advance of receiving an item, if they will incur financial liability for non-covered items. If a supplier does not submit all of the required documentation with its first prior authorization request, it will be notified of the missing documentation and may resubmit its request. We proposed that requesters be permitted to submit a prior authorization request an unlimited number of times.
We note claims for which there is a provisional affirmation prior authorization decision will be afforded some protection from future audits, both pre- and post-payment. However, review contractors may audit claims if potential fraud, inappropriate utilization or changes in billing patterns are identified. In addition, IPERA requires all federal agencies to evaluate their programs for improper payments. The CMS CERT program reviews a stratified, random sample of claims annually to identify and measure improper payments. It is possible for a DMEPOS claim subject to prior authorization to fall within the sample. In this situation, the subject claim would not be protected from the CERT audit. While implementing a new prior authorization program will require suppliers to modify their processes, we believe suppliers can minimize disruption to their business processes by learning in advance what information or documentation is required for coverage of specific items. We will partner with the supplier, provider, and beneficiary community to make sure they have all the information about the new program needed to submit a prior authorization request. We believe that some assurance of payment and some protection from future audits may ultimately reduce burdens associated with denied claims and appeals.
Of the approximately 37 million beneficiaries enrolled in the Medicare FFS program in 2013, 11 million had a DMEPOS claim.
We have experience in implementing a prior authorization program that enables beneficiaries to receive a needed DME item, without access issues or barriers to care. We have monitored the beneficiary experience in The Medicare Prior Authorization of Power Mobility Devices (PMDs) Demonstration, which began in 2012. Prior to implementation, we spoke to numerous Medicare beneficiary groups that expressed support for the demonstration. Feedback from beneficiaries has been largely positive. We are not aware of any access issue or barriers to care created by the prior authorization process for PMDs.
The Medicare Prior Authorization of PMDs Demonstration was initially implemented in California, Illinois, Michigan, New York, North Carolina, Florida, and Texas. Since implementation, we have observed a decrease in expenditures for PMDs in the demonstration states and non-demonstration states. Based on claims processed from September 1, 2012 through November 14, 2014, monthly expenditures for the PMD codes included in the demonstration decreased from $12 million to $3 million in the demonstration states and from $20 million in September 2012 to $6 million in June 2014 in the non-demonstration states. Subsequently, we expanded the demonstration to 12 additional states on October 1, 2014, and on July 15, 2015, we extended the demonstration for all 19 states until August 31, 2018.
We promote a high quality health care system by aiming for better care at lower costs and for improved health outcomes. Crucial to this is maintaining beneficiary access to quality care. We
In the May 28, 2014
In the following sections of this final rule, we include a summary of the provisions of the May 28, 2014 proposed rule, the public comments received, our responses, and our final decisions.
In § 414.234(a), we proposed that “prior authorization” be defined as a process through which a request for provisional affirmation of coverage is submitted to CMS or its contractors for review before the item is furnished to the beneficiary and before the claim is submitted for processing. We also proposed that “provisional affirmation” be defined as a preliminary finding that a future claim meets Medicare coverage, coding, and payment rules.
We also proposed in § 414.234(a) that “unnecessary utilization” be defined as the furnishing of items that do not comply with one or more of Medicare's coverage, coding, and payment rules. In accordance with section 1834(a)(15)(A) of the Act, we proposed to use “prior payment experience” to establish which items are “frequently” subject to unnecessary utilization. The Government Accountability Office (GAO), the Department of Health and Human Services' (HHS) Office of Inspector General (OIG), and CMS through CERT reports publish analyses of prior payment data and identify Medicare DMEPOS items that have high improper payment rates. We proposed that since the findings in these reports are the result of analysis of prior payment experience, we would use these reports to establish which items are frequently subject to unnecessary utilization. We discuss the use of GAO, OIG, and CERT reports to establish Master List inclusion criteria in section II.B. of this final rule.
We strive in every case to pay the right amount to a legitimate provider, for covered, correctly coded, and correctly billed services provided to an eligible beneficiary. We believe that a prior authorization process for DMEPOS items frequently subject to unnecessary utilization can help suppliers comply with Medicare's coverage, coding, and payment rules by having the required information and documentation reviewed before the item is furnished and before the claim is submitted. In addition, claims for which there is a provisional affirmation prior authorization decision will be afforded some protection from future audits. The review contractors may continue to audit claims if potential fraud, inappropriate utilization or changes in billing patterns are identified. In addition, IPERA requires all federal agencies to evaluate their programs for improper payments. The CMS CERT program reviews a stratified, random sample of claims annually to identify and measure improper payments. It is possible for a DMEPOS claim subject to prior authorization to fall within the sample. In this situation, the subject claim would not be protected from the CERT audit. In addition, OIG's authority to audit claims is not impacted by the protection from future audits provided by the provisional affirmation prior authorization decision.
When unnecessary utilization (as defined by this final rule) of a covered Medicare service, item or device is identified, we have a responsibility to evaluate the errors and develop processes to mitigate or reduce the unnecessary utilization. This is sometimes difficult since we must not only safeguard the Medicare program, but we must also safeguard beneficiaries' full access to the covered care they need. We believe using a prior authorization process would help to make sure items frequently subject to unnecessary utilization are furnished in compliance with applicable Medicare coverage, coding, and payment rules before they are delivered. This would safeguard against unnecessary utilization while also protecting beneficiaries' access to medically necessary items. We believe this is an effective way to reduce or prevent improper payments for unnecessary DMEPOS items while preserving beneficiary access to quality care and services.
The following summarizes comments on our proposed definitions of “prior authorization,” “provisional affirmation,” and “unnecessary utilization” at § 414.234(a).
We are finalizing the definitions of “prior authorization,” “provisional affirmation,” and “unnecessary utilization” at § 414.234(a) as proposed. In addition, we are finalizing the use of GAO, OIG, and CERT reports to establish prior payment history. Public comments and our responses pertaining to the use of GAO, OIG, and CERT reports are described in section II.B. of this final rule.
In the May 28, 2014 proposed rule (79 FR 30516 through 30519), we proposed a Master List of initial items that, based on proposed criteria, are frequently subject to unnecessary utilization, hereafter referred to as the “Master List.” We solicited public comments on the proposed inclusion criteria and the proposed Master List maintenance process. We proposed to include an item on the initial Master List if the item appears on the DMEPOS Fee Schedule list, meets one of the two criteria described later in this section, and has an average purchase fee of $1,000 or greater or an average rental fee schedule of $100 or greater. We refer to these dollar amounts as the payment threshold. We stated that having the payment threshold for DMEPOS items included on the Master List would allow us to focus our limited resources on items for which prior authorization will result in the largest potential savings for the Medicare program. The DMEPOS Fee Schedule is updated annually and lists Medicare allowable pricing for DMEPOS, including the full payment amount for capped rental items. For administrative simplicity, we proposed that we would not annually adjust the average purchase fee of $1,000 or greater or the average monthly rental fee schedule of $100 or greater threshold for inflation. Under our proposal, any changes to this threshold would be proposed through notice and comment rulemaking.
In addition to the payment threshold, we proposed that the item must meet one of the two following criteria:
• The item is identified in a GAO or HHS OIG report that is national in scope and published in 2007 or later as having a high rate of fraud or unnecessary utilization.
• The item is listed in the 2011 or later published CERT program's Annual Medicare Fee-For-Service (FFS) Improper Payment Rate Report Durable Medical Equipment (DME) Service Specific Overpayment Rate Appendix.
We proposed using reports dated from 2007 or later because the GAO and OIG do not always repeat analysis of specific items annually. We believed it necessary to look back a number of years to capture findings on a variety of DMEPOS items. The GAO audits agency operations to determine whether federal funds are being spent efficiently and effectively as well as identifies areas where Medicare may be vulnerable to fraud and improper payments. Section 1834(a)(15) of the Act directs the Secretary to use prior payment experience as a basis for identifying DMEPOS items frequently subject to unnecessary utilization. We believe utilizing GAO evaluations that identify DMEPOS items as having a high rate of fraud or unnecessary utilization accomplishes this directive because GAO's analysis includes an evaluation of paid claims history.
The OIG provides independent and objective oversight that promotes economy, efficiency, and effectiveness in the programs and operations of HHS. OIG's mission to protect the integrity of HHS programs is carried out through a network of audits, investigations, and inspections. The OIG audits and evaluates the performance of HHS programs and their participants. In some cases, OIG reports disclose aberrant billing utilization data or high incidences of improper payments for particular items or services.
Because the CERT program reviews a representative random sample of claims each year, we are using the most recent published report at the time of the writing of this final rule which is the 2014 CERT Report. We believe limiting this criterion to items listed in the 2011 or later CERT DME and/or DMEPOS Service Specific Report(s) (and also meeting the payment threshold) accomplishes the directive of section 1834(a)(15) of the Act. Interested parties can access the CERT reports at:
We proposed that nationwide findings by OIG or by GAO of potentially high rates of fraud, unnecessary utilization, or aberrant or improper billings, and CERT reports of the incidence and rates of improper payments are good indicators that an item is “frequently subject to unnecessary utilization” as set out in section 1834(a)(15) of the Act. The use of GAO, OIG, and CERT reports to establish which items are frequently subject to unnecessary utilization are discussed in detail in section II.B. of the proposed rule (79 FR 30513).
In the May 28, 2014 proposed rule (79 FR 30514), we described the proposed Master List maintenance process. We proposed the following:
• The Master List is self-updating annually. That is, items on the DMEPOS Fee Schedule that meet the payment threshold are added to the list when the item is listed in a future OIG or GAO report of a national scope or a future CERT DME and/or DMEPOS Service Specific Report(s).
• Items remain on the Master List for 10 years from the date the item was added to the Master List.
• Items are updated on the Master List when the Healthcare Common Procedure Coding System (HCPCS) code representing an item has been discontinued and cross-walked to an equivalent item.
• Items are removed from the list sooner than 10 years if the purchase amount drops below the payment threshold (an average purchase fee of $1,000 or greater or an average monthly rental fee schedule of $100 or greater).
• Items age off the Master List because they have been on the list for 10 years and can remain on or be added back to the Master List if a subsequent GAO/OIG or CERT DME and/or DMEPOS Service Specific Report(s) identifies the item to be frequently subject to unnecessary utilization.
• Items already on the Master List that are identified by a GAO/OIG, or CERT DME and/or DMEPOS Service Specific Report(s) will remain on the list for 10 years from the date of the new report.
• We notify the public annually of any additions and deletions from the Master List by posting the notification in the
In the proposed rule we stated that we selected a 10-year timeframe because we believe 10 years without a finding that the item has a potentially high rate of fraud, unnecessary utilization or aberrant or improper billing makes the original placement no longer current.
We received the following comments on the proposed Master List inclusion criteria and Master List maintenance process in section 414.234(b) and our responses follow:
We believed using the payment threshold as described would allow us to focus our limited resources on the more expensive DMEPOS items frequently subject to unnecessary utilization. However, we agree with the commenters who believed a fixed-payment threshold would not be appropriate in future years. While there were several price points suggested, we have decided that the best solution would be to keep the current payment threshold, but adjust it annually for inflation. The DMEPOS Fee Schedule is updated every year and announced in November with an effective date of January 1. In accordance with the statutory sections 1834(a)(14) and 1886(b)(3)(B)(xi)(II) of the Act, the DMEPOS fee schedule amounts are updated annually by the percentage increase in the consumer price index for all urban consumers (United States city average) or CPI-U for the 12-month period ending with June of the previous year, adjusted by the change in the economy-wide productivity equal to the 10-year moving average of changes in annual economy-wide private non-farm business multifactor productivity (MFP). For example, for CY 2015, the MFP adjustment is 0.6 percent and the CPI-U percentage increase is 2.1 percent. Thus, the 2.1 percentage increase in the CPI-U is reduced by the 0.6 percentage increase in the MFP resulting in a net increase of 1.5 percent for the update factor. For CY 2015, the update factor of 1.5 percent was applied to the applicable CY 2014 DMEPOS fee schedule amounts.
In response to public comment, we will make an annual inflation adjustment to the payment threshold. This adjustment will be the same percentage as the DMEPOS fee schedule annual adjustments. This adjustment will apply to the Master List maintenance process as well. Specifically, items already on the Master List with an average rental price that drops below $100 (adjusted for inflation) or average purchase price that drops below $1,000 (adjusted for inflation) will be removed from the list.
We disagree with the commenter that stated that the payment threshold may cause suppliers to deny Medicare beneficiaries their DMEPOS items. The payment threshold does not establish a new price for the DMEPOS; rather it establishes the criteria to initiate a prior authorization process. The PMD demonstration has shown that unnecessary utilization has decreased while beneficiaries have continued to receive a PMD when medically necessary.
Some commenters disagreed with the use of the CERT 2011 report or later as Master List inclusion criteria stating that some items on the 2011 do not appear on later reports, indicating that policy or other factors have already reduced the improper payment rate for those items. Others believed that the sample size for the CERT reports is too small to conclude improper payment rates. Several commenters recommended that CMS consider using more recent CERT reports as well as internal data sources. Other commenters stated that CMS should look into the reasons for the high error rates for the proposed Master list items, such as, overly complex regulations, a need for targeted education to medical professionals and suppliers, and the misapplication of policies by CERT personnel.
We disagree with the commenter that stated the CERT sample was too small. The CERT sample is stratified so that the sample and its findings are representative of the universe of Medicare FFS claims; we believe using stratification provides greater precision and that using these tools provides validity to the criteria. In addition to these criteria, we may choose to take current claims data into consideration when determining which Master List item(s) will be on the Required Prior Authorization List.
Items appearing on earlier CERT reports but not later ones will stay on the Master List for 10 years from their inclusion date. While some commenters believed an item no longer appearing in the CERT report should be dropped from the Master List, we believe the item should remain on the list to assure that the improved billing practice is sustained over time.
In response to the commenters who stated that we should look into the reasons for the high error rates for the proposed Master list items, such as: Having overly complex regulations; lacking targeted education to medical professionals and suppliers; and misapplying policies, we conduct analyses on the root causes for high improper payment rates, including CMS policies, and auditor application of the policies to their reviews. Medicare review contractors undergo frequent education and inter-rater reliability assessments to assure consistency in review approaches. Inter-rater reliability assessment is a performance measurement tool used to assess the level of consistency among medical review staff and adherence to organizational standards. It is used to promote quality and consistency in reviews. Where findings indicate that the problem may be overly complex CMS policies, we initiate policy revision. A recent example is the substantially increased improper payment rate for home health services published in the 2013 Annual CERT report. In response, we published a final rule in November 2014 that simplified the home health service face-to-face documentation requirements because most of the increased errors were related to the face-to-face documentation.
We believe using both the CERT report and the OIG/GAO reports allow us to create safeguards for a broader category of items.
We recognize commenters requested public input on Master List updates. However, we respectfully disagree. We believe by the nature of the criteria, the Master List is inherently self-updating. We note that there will be no discretion about which items are added or updated because it will be based on the inclusion criteria about which the public provided comment. However, inclusion on the Master List does not mean that the item will automatically be subject to prior authorization. (Only a subset of the Master List items will be selected and added to the “Required Prior Authorization List.” This is further discussed in section II.D. of this final rule.) We believe 10 years without a finding that the item has a potentially high rate of fraud, unnecessary utilization or aberrant or improper billing makes the original placement no longer current. We recognize some commenters believe 10 years is too long, but this timeframe will enable us to have a thorough and complete Master List. However, we may choose to take current claims data into consideration when determining which items will be on the Required Prior Authorization List.
We are finalizing the Master List inclusion criteria and Master List maintenance process as proposed in section 414.234(b). Section 1834(a)(15)(A) of the Act requires us to use “prior payment history” when identifying DMEPOS items frequently subject to unnecessary utilization. We believe using past and future GAO and OIG reports as well as CERT DME data is a way to meet this requirement.
We are finalizing the Master List inclusion criteria and Master List maintenance process as proposed in section 414.234(b). In addition, we are finalizing the proposed payment threshold, but are including an annual adjustment for inflation as stated in revised section 414.234(b)(1). The adjusted payment threshold will apply to the inclusion criteria as well as the Master List maintenance process. We are also finalizing our proposal to notify the public annually of any additions and deletions from the Master List by posting the notification in the
In the May 28, 2014 proposed rule (79 FR 30516 through 30519), we proposed a Master List of Items Frequently Subject to Unnecessary Utilization. There have been several reports that were national in scope and published by the HHS OIG since 2007 identifying DMEPOS items that meet the payment threshold and are frequently subject to unnecessary utilization. They are as follows:
• An August 2011 OIG report titled “Questionable Billing by Suppliers of Lower Limb Prostheses” found that between 2005 and 2009, Medicare spending for lower limb prostheses increased 27 percent, from $517 million to $655 million.
One finding, billing for prostheses when the beneficiary had no claims from the referring physician, raised questions about whether the physician ever evaluated the beneficiary and whether the billed devices were medically necessary. Another finding related to billing for a high percentage
• A July 2011 OIG report titled “Most Power Wheelchairs in the Medicare Program Did Not Meet Medical Necessity Guidelines” found that 61 percent of power wheelchairs provided in the first half of 2007 were medically unnecessary or lacked sufficient documentation to determine medical necessity.
There were two previous OIG reports based on the same sample of claims that found noncompliance problems with documentation requirements and coding requirements (“Medicare Power Wheelchair Claims Frequently Did Not Meet Documentation Requirements”
• An August 2009 OIG report titled “Inappropriate Medicare Payment for Pressure Reducing Support Surfaces,” found that 86 percent of claims for group 2 pressure reducing support surfaces did not meet Medicare coverage criteria for the first half of 2007.
• A June 2007 OIG report titled “Medicare Payments for Negative Pressure Wound Therapy Pumps in 2004” found that 24 percent of negative pressure wound therapy pumps did not meet Medicare coverage criteria in 2004.
In Tables 1 through 4, we provide the 2011 through 2014 Annual Medicare FFS Improper Payment Rate Report DME and/or DMEPOS Service Specific Reports. These tables illustrate the overpayment rates for specified DMEPOS items and the corresponding overpayment amounts. Items from these tables are included on the Master List if they meet the payment threshold. The listed DMEPOS items and the information in the “projected dollars overpaid” column were provided by the CERT program. CERT includes DMEPOS items on this list if the items have 30 or more claims sampled and are in the top 20 services by descending projected overpayment amount. Any services that have less than 30 claims are wrapped up into the “Less than 30 Claims” line. Numbers are projected to the universe (or population) using a weighting system that accounts for both the volume of a stratified service and expenditures. Each claim is individually weighted based upon the strata it was sampled in and the jurisdiction it was processed in. Dollar amounts are then multiplied by this weight value.
We received the following comments with regard to items that were included on the proposed Master List and our responses follow.
Some commenters noted that certain contractor local coverage determinations are based, in part, on the pricing, data analysis, and coding (PDAC) contractor assignment of functional levels for specific prosthetics and their components. Commenters went on to state that there are no studies showing that specific prosthetic components are inappropriate for any functional level. With this, some commenters expressed concern that even if the beneficiary had the appropriate functional level, he or she may still be denied prior authorization thus, they state, LLPs should not be included on the Master List.
Several commenters were concerned because prostheses can change frequently when the beneficiary changes (for example, weight changes) and many prostheses are customized. Commenters were concerned that with the advent of the prior authorization program, subsequent limbs would not receive a provisional affirmative decision.
Many commenters expressed concerns that including LLPs on the proposed Master List would cause a delay in care, increased complications, comorbidities, higher out-of-pocket costs, and poor clinical outcomes. Some commenters recommended a private insurance company handle the prior authorization of all LLPs on the proposed Master List.
Some commenters noted that success of the prior authorization of PMD demonstration should not be applied to the prior authorization developed by this final rule since PMDs are “commodities” while many other DMEPOS items (such as LLPs) are not.
We disagree with the suggestion that any item needed for chronic or life-long conditions be exempt from the Master List. Most of the Master List items are used for chronic or life-long medical conditions and documentation requirements for these items remains unchanged. We believe we can address access issues by designing a prior authorization process that is nimble and efficient when an item is needed quickly. In section II.E. of this final rule, we discuss in more detail the proposed timelines for the prior authorization process and our final decision regarding timelines.
Regarding some commenters' concern that a beneficiary may not receive the appropriate LLP because of functional requirements criteria or because the beneficiary's functional capabilities have changed, we again reassure commenters that we support a beneficiary's access to the appropriate prosthetic. The submitted medical documentation must support the request for payment of the subject LLP. As noted previously, we will issue specific guidance regarding the prior authorization timelines in subregulatory guidance. One reason for this is to create timelines/processes that are logical for each DMEPOS item selected for prior authorization. For example, timelines and contractor processes for prior authorization of LLPs may be uniquely different than for other DMEPOS items. We disagree with the commenter who suggested that we use a private insurance company to process prior authorizations for LLPs. Any entity doing work on behalf of the government is an agent of the government and must abide by all applicable Medicare coverage, coding, and payment rules when making payment determinations. We recognize that the Pricing, Data Analysis, and Coding (PDAC) contractor developed the functional levels of LLPs. However, longstanding documentation requirements based on PDAC assignment have not changed and will also apply to documentation
Finally, we do not understand how a prior authorization program could increase beneficiary out-of-pocket expenses for LLPs. The same coverage, coding, and payment rules apply. A beneficiary will still have access to medically necessary LLPs and his or her costs should not change due to prior authorization processes.
Some commenters requested that we include all oxygen and respiratory devices, while many commenters requested that we exclude all of them. Commenters recommended that CMS exclude respiratory assistive devices from the prior authorization requirement because of the administrative burden to furnish medical documentation before the device is given to the beneficiary. Specifically, a commenter expressed concern regarding the impact of a prior authorization process on the commercial driver community. Commenters noted that those commercial drivers who have a diagnosis of obstructive sleep apnea must undergo a clearance process that requires the beneficiary to utilize a respiratory assistive device prior to obtaining commercial driver clearance. Commenters were concerned that the proposed prior authorization process would prolong the process of obtaining the clearance necessary to perform their job duties. Other commenters believe that the proposed prior authorization timeline would give beneficiaries the impression that respiratory therapy is not mandatory; which would then lead to more costly treatment(s) of obstructive sleep apnea.
Some commenters recommended that the beneficiary should be liable if a supplier did not obtain a prior authorization. Other commenters recommended that CMS use its authority to suspend or cease any prior authorization program if patient access is jeopardized. In addition, commenters requested that CMS clarify the Advance Beneficiary Notice of Non-Coverage (ABN) process and the proposed prior authorization process.
In the May 28, 2014 proposed rule, we included a discussion of Medicare's ABN and liability policies. This discussion can be found under section II.F. of this final rule. However, interested persons can find more information regarding Medicare's ABN process at this site:
Regarding the commenters who believe that all items on the Master List will be subject to the prior authorization requirements, we would like to clarify that only a subset of the Master List items will be selected and added to the “Required Prior Authorization List.”
We are finalizing the Master List as proposed with two modifications. First, we are adding oxygen concentrator (E1390) since it meets the criteria and should have been added to the proposed Master List. The addition is bolded and italicized for easy reference on the Master List (Table 5). Second, we are removing five proposed items from the list that did not meet the 2015 DMEPOS Fee Schedule list criteria of $1,000 or greater average purchase fee schedule or an average rental fee schedule of $100 or greater. These items include the following:
• Custom shaped protective cover, above knee (L5705).
• Custom shaped protective cover, knee disarticulation (L5706).
• Addition, exoskeletal knee-shin system, polycentric, friction swing and stance phase control (L5718).
• Addition, exoskeletal knee-shin system, single axis, pneumatic swing, friction stance phase control (L5722).
• Addition, endoskeletal knee-shin system, polycentric, mechanical stance phase lock (L5816).
DMEPOS items meeting the proposed criteria are listed in the Final Master List, which is found in Table 5.
In addition, we are finalizing our proposal to notify the public annually of any additions and deletions from the Master List by posting the notification in the
In the May 28, 2014 proposed rule (79 FR 30519), we stated that an item's presence on the Master List would not automatically require prior authorization. We proposed implementing the prior authorization program by limiting the number of items from the Master List that would be subject to prior authorization. We stated that by implementing prior authorization for a subset of Master List items, we would minimize provider and supplier burden while safeguarding the Medicare program. This subset of Master List items is hereafter referred to as the “Required Prior Authorization List” as described in § 414.234 (c). We proposed that we would inform the public of the Required Prior Authorization List in the
Additionally, we proposed a prior authorization program for eligible items that may be implemented nationally or locally. For example, we noted that OIG and GAO reports and the CERT DME and/or DMEPOS Service Specific Report(s) often include regional data, and we proposed that we could elect to limit the prior authorization requirement to a particular region of the country if claims data show that unnecessary utilization of the selected item(s) is concentrated in a particular region. Alternately, we proposed that we may elect to implement prior authorization nationally if claims data show that unnecessary utilization of the selected item(s) is widespread and
We also proposed to have the authority to suspend or cease the prior authorization program generally, or for a particular item or items at any time, without undertaking a separate rulemaking. An example of when we may elect to exercise this authority, described in the proposed rule, is suspending or ceasing the prior authorization program due to new payment policies, which may render the prior authorization requirement obsolete or remove the item from Medicare coverage. If we suspend or cease the prior authorization requirement, we proposed we would post notification of the suspension on the CMS Prior Authorization Web site, contractor Web sites, publications, and bulletins and include the date of suspension.
The proposed rule did not announce the first items on the Required Prior Authorization List. In the proposed rule, we requested public comment on the: (1) Number of items selected for initial implementation; (2) number of future items selected for implementation; and (3) frequency in which we would select the items.
We noted in the May 28, 2014 proposed rule (79 FR 30520) that the proposed Master List contains DMEPOS items currently included in the CMS Prior Authorization of PMD Demonstration, and that we would not require prior authorization for PMDs under this rule, at least until the demonstration was complete. We proposed that the finalized rule would not affect the current Prior Authorization of PMD Demonstration.
In the following discussion, we summarize the comments and our responses for section II.D. of this final rule along with our final decision applicable to this section.
We point out that the public commented on the Master List items, which we published as part of the proposed rule. Thus we disagree with the commenters that believed the Required Prior Authorization List (a subset of the Master List) process should include another public comment. We are finalizing our proposal to implement the prior authorization program locally or nationally or to suspend or cease the prior authorization requirement program generally or for a particular item or items at any time without undertaking a separate rulemaking. Providing subregulatory guidance will allow us to implement the prior authorization program in such a way that if we encounter problems, we can quickly halt the program as a whole, or for a particular item.
We are aware that some suppliers believe they need more than 60-day notice to prepare for prior authorization of a selected item on the Required Prior Authorization List. However, while the notice in the
We agree with commenters who believed initially implementing prior authorization for all items on the Master List creates undue burden for suppliers and physicians. In response to commenters that expressed their objections to CMS's decision to not identify in the proposed rule which Master List item(s) would initially be subject to prior authorization, we believe a number of factors will guide our selection. For example, CMS may consider factors such as geographic location, item utilization or cost, system capabilities, administrative burden, emerging trends, vulnerabilities identified in official agency reports, or other data analysis. Therefore, we may initially elect to require prior authorization on only one item in a small region and quickly suspend the requirement if we find there are unintended effects.
In response to a commenter who believed having two lists was too confusing, we believe having two lists is necessary. The Required Prior Authorization List is selected from the Master List of Items Frequently Subject to Unnecessary Utilization. The Required Prior Authorization List is defined as a subset of Master List items subject to prior authorization.
We believe having the two lists minimizes burdens associated with implementation of prior authorization. For example, CMS may elect to
We are finalizing our proposal to select an item(s) from the Master List and include it on the Required Prior Authorization List, to implement the prior authorization program locally or nationally, and to suspend or cease the prior authorization requirement program generally, or for a particular item without undertaking a separate rulemaking. We are also finalizing our authority to determine the number of item(s) selected upon initial implementation, determine the number of items selected for future implementation, and determine the frequency with which we would select the item(s).
Lastly, we are finalizing the proposal that we inform the public of the Required Prior Authorization List in the
We note that all provisions finalized in this rule apply in competitive bidding areas because CMS conditions of payment apply under the Medicare DMEPOS Competitive bidding Program.
As described in the May 28, 2014 proposed rule (79 FR 30520), the proposed prior authorization process would not create new or change existing clinical documentation requirements. As proposed, it would require the same information necessary to support Medicare payment, just earlier in the process. This process allows the review contractor to confirm, to the extent possible, that all relevant coverage, coding, and clinical documentation requirements are met before the item is furnished to the beneficiary and before the claim is submitted for payment.
We proposed that prior to furnishing the item and prior to submitting the claim for processing, a prior authorization requester would submit evidence that the item complies with all applicable Medicare coverage, coding, and payment rules. Information regarding Medicare coverage, coding, and payment rules for DMEPOS items is found in the Act, our regulations, National Coverage Determinations (NCDs), Local Coverage Determinations (LCD), CMS manuals and transmittals, as well as Durable Medical Equipment Medicare Administrative Contractors' (DME MAC) Web sites. All Medicare coverage, coding, and payment rules would apply. Medicare coverage, coding, and payment rules applicable to items on the Required Prior Authorization List would also be posted on the CMS Prior Authorization Web site. Furthermore, we proposed we would not change existing requirements regarding the entity responsible for creating required clinical documentation. For example, clinical documentation that is required to be created by a practitioner would still be required to be created by the practitioner. Similarly, documentation requiring supplier origination (for
We stated in the proposed rule that CMS or its review contractors would review the prior authorization request to determine whether the item ordered for the beneficiary complies with applicable Medicare coverage, coding, and payment rules. After receipt of all applicable required Medicare documentation, CMS or its review contractors would conduct a medical review and communicate a decision that provisionally affirms or non-affirms the request. We proposed that a provisional affirmation is a preliminary finding that a future claim meets Medicare's coverage, coding, and payment rules. Claims receiving a provisional affirmation may still be denied based on technical requirements that can only be evaluated after the claim has been submitted for formal processing. For example, a finding that a claim is a duplicate claim can only be made after the claim has been submitted for formal processing. Claims receiving a provisional affirmation may also be denied based on information not available at the time of a prior authorization request (that is, proof of delivery). A prior authorization request that is non-affirmed under section 1834(a)(15) of the Act is not an initial determination on a claim for payment for items furnished, and therefore, would not be appealable. We proposed making this distinction clear by adding a new paragraph (t) to § 405.926 stating that a review contractor's prior determination of coverage is not an initial determination.
In the May 28, 2014 proposed rule (79 FR 30520), we stated that claims associated with a non-affirmation decision, as well as claims for items subject to prior authorization but for which no prior authorization was requested, would be denied if submitted for processing. A requester who submits a claim for which there was a non-affirmation decision or for which no prior authorization request was obtained would be afforded full appeal rights on the claim.
We proposed that CMS or its review contractors would make reasonable efforts to communicate the decision within 10 days of receipt of all applicable information. However, we stated that final timelines for communicating a provisionally affirmed or non-affirmed decision to the requester would be described in CMS guidance and posted on the CMS Prior Authorization Web site. We proposed allowing unlimited resubmissions of prior authorization requests.
To address circumstances where applying the standard timeframe for making a prior authorization decision could seriously jeopardize the life or health of the beneficiary, we proposed a mechanism for an expedited review. We proposed that if CMS or its review contractors agree that using the standard timeframes for review places the beneficiary at risk as previously described, then we would allow an expedited review of the prior authorization request and communicate an expedited decision. In these situations, we stated that CMS or its review contractors would make reasonable efforts to communicate the decision within 2 business days of receipt of all applicable Medicare required documentation. We stated this process would be further defined in CMS guidance and posted on the CMS Prior Authorization Web site. We proposed that a prior authorization request for an expedited review would include documentation that shows that applying the standard timeframe for making a decision could seriously jeopardize the life or health of the beneficiary. For example, documentation could include medical records, supplier documentation, home health documentation or any other documentation deemed to support the necessity of an expedited review. We solicited public comment on whether the proposed process would meet our objective of maintaining beneficiary access to care and protecting the Medicare program without placing undue burden on practitioners and suppliers.
We proposed to permit a requester to resubmit a prior authorization request if the initial request was non-affirmed. Prior authorization requests would be reviewed, and a decision of a provisional affirmation or a non-affirmation would be communicated to the affected parties in the same manner as an initial request. We stated we would consider a request for the same beneficiary for the same HCPCS code in a 6-month period of time to be a resubmission. We proposed that a request outside of those parameters would be treated as a new initial request. We sought public comment on the number of resubmitted prior authorization requests allowed.
In the May 28, 2014 proposed rule, we suggested that Medicare or its review contractors make a reasonable effort to render a provisional affirmation or a non-affirmation decision within 10 days of receiving the initial request, 2 days for an expedited request or 20 days for a resubmission. We also sought public comment on suggested timeframes for provisional affirmation or non-affirmation decisions on resubmitted prior authorization requests. Furthermore, in the proposed rule, we stated additional information about timeframes for all decisions would be described in CMS guidance to its contractors. In the May 28, 2014 proposed rule, we included the following illustrations of possible prior authorization scenarios:
Scenario 1: A requester submits to CMS (or its review contractors) a prior authorization request along with all required documentation. CMS (or its review contractors) finds that the request meets all applicable Medicare requirements. CMS (or its review contractors) would communicate a provisional affirmation decision to the affected parties. The supplier would submit the claim following receipt of a provisional affirmation decision, and the claim would be paid, as long as all other requirements were met.
In the preceding example, the granted affirmation decision is provisional because payment decisions can only be made after all requirements are evaluated. For example, a claim could have received a provisional affirmation prior authorization decision. However, after submission, the claim could be denied due to technical payment reasons, such as the claim was a duplicate claim or the claim was for a deceased beneficiary. In addition, certain documentation needed in support of the claim, such as proof of delivery, are unavailable for review on a prior authorization request.
Scenario 2: A requester submits to CMS (or its review contractors) a prior authorization request. CMS (or its review contractors) conducts a medical review of submitted documentation and determines that the request and submitted documentation does not comply with one or more applicable Medicare coverage, coding, and payment rules. CMS (or its review contractors) communicates a decision that non-affirms the request. A non-affirmation is a preliminary finding that a future claim associated with the submitted documentation and prior authorization request would be denied if submitted because the associated request and submitted documentation did not meet one or more of Medicare's coverage, coding, and payment rules. The communication to the affected parties would identify which Medicare coverage, coding or payment rule(s) was not supported in the request and submitted documentation and thus served as the basis for the non-affirmation decision. The requester could resubmit the prior authorization
Scenario 3: A claim is submitted without a prior authorization decision. The claim would be denied because there was no prior authorization request, which is a condition of payment. The supplier is liable unless the conditions for assigning liability to the beneficiary or Medicare are met. (For more information, see section 1879(h)(2) of the Act for assigned claims, section 1834(j)(4) of the Act for non-assigned claims, and our discussion in section II.F. of this final rule).
We proposed to automatically deny payment for a claim for an item on the Required Prior Authorization List that is submitted without a provisional affirmation prior authorization decision. We believe that section 1834(a)(15) of the Act established an advanced determination process (that is, a prior authorization process) as a condition of payment for items on the list developed by the Secretary. We stated in the May 28, 2014 proposed rule that absent this potential penalty for noncompliance with the prior authorization process, section 1834(a)(15) of the Act would be rendered moot, as suppliers would not be required to seek an advance decision of coverage for these items. A mandatory prior authorization process for these items best ensures that CMS effectuates its goal of reducing unnecessary utilization for the items identified by the Secretary in accordance with section 1834(a)(15)(A) of the Act.
We proposed in § 414.234(c) that we would require, as a condition of payment for certain DMEPOS items frequently subject to unnecessary utilization, that a prior authorization request be submitted prior to the submission of a claim. We stated that the new requirement would reduce the unnecessary utilization and the resulting overpayment for certain DMEPOS items.
In addition, we proposed adding a new paragraph (t) to § 405.926 stating that a review contractor's prior determination of coverage is not an initial determination and is thus not appealable because the prior authorization decision is not an initial determination with respect to a claim for benefits under Part A or Part B. Section 405.926 contains the list of actions that are not initial determinations and thus not appealable. However, we noted that a requester who submits a claim for which there was a non-affirmation decision or for which no prior authorization request was obtained would be afforded appeal rights.
We believe that a prior authorization process is an effective way to address unnecessary utilization, particularly since most items frequently subject to unnecessary utilization are identified as such because of insufficient supporting documentation. Inherent in a prior authorization process is a review of supportive evidence for the medical necessity of the item. Traditionally, this review has involved the beneficiary's medical record.
In summary, we proposed the following prior authorization process:
• Prior to furnishing the item and prior to submitting the claim for processing, a prior authorization requester would submit evidence that the item complies with all coverage, coding, and payment rules.
• CMS or its review contractors would review the prior authorization request and accompanying documentation to determine whether the item ordered for the beneficiary complies with applicable Medicare coverage, coding, and payment rules.
• After receipt of all applicable required Medicare documentation, CMS or its review contractors would conduct a medical review and communicate a decision that provisionally affirms or non-affirms the request.
• For the initial prior authorization request, CMS or its review contractors would make reasonable efforts to communicate a provisionally affirmed or a non-affirmed decision within 10 business days of receipt of all applicable information.
• A requester may resubmit a prior authorization request if the initial request was non-affirmed. Unlimited resubmissions are permitted.
• For each resubmitted prior authorization request, CMS or its review contractors would make reasonable efforts to communicate a provisionally affirmed or a non-affirmed decision within 20 business days of receipt of all applicable information.
• For circumstances where applying the standard timeframe for making a prior authorization decision could seriously jeopardize the life or health of the beneficiary, an expedited review could be requested. For expedited reviews, CMS or its review contractors would expect the submitted documentation to include evidence that applying the standard timeframe for making a decision could seriously jeopardize the life or health of the beneficiary. If CMS or its review contractors agreed that applying the standard timeframe would jeopardize the life or health of the beneficiary, then CMS or its review contractors would make reasonable efforts to communicate a provisionally affirmed or a non-affirmed decision within 2 business days of receipt of all applicable information.
In the proposed rule, we specifically solicited public comment on the following:
• The number of resubmitted prior authorization requests allowed.
• The suggested timeframes for provisional affirmation or non-affirmation decisions on resubmitted prior authorization requests.
• Whether the proposed process would meet our objective of maintaining beneficiary access to care and protecting the Medicare program without placing undue burden on practitioners and suppliers.
We will take the comments regarding alternate processes that afford more expedient responses to the requestor (for example, the 24-hour 7-day a week model) into consideration when developing the prior authorization timeframes.
We believe that permitting resubmissions of non-affirmation prior authorization decisions allows the requester to be educated about what is missing in the initial prior authorization request before the claim is submitted. The review contractor will list the specific information that is missing for any prior authorization request receiving a non-affirmation prior authorization decision. For example, a requester who received a non-affirmation prior authorization decision because medical necessity documentation was missing can resubmit the request and include the required documentation previously missing. If all applicable Medicare coverage, coding, and payment rules are satisfied with the resubmitted prior authorization request, the formerly non-affirmation prior authorization decision would be changed to a provisional affirmation decision. If the requester disagreed with the review contractor's non-affirmation decision and believed that the prior authorization request met all requirements, the requester could submit the claim for payment. The supplier would receive a payment denial. After receiving the payment denial, the supplier may appeal the claim. The beneficiary may also appeal the denied claim.
We remind readers that an affirmation prior authorization decision is provisional because other information that is only available after the claim is submitted may result in a denial. For example, there may be technical issues, such as a duplicate claim, or an absent or improperly listed proof of delivery date that can be known only after the claim is submitted. However, we believe that reviewing the documentation and information in advance of submitting the claims does provide some assurance that the claim is likely to be paid. We believe that suppliers and beneficiaries prefer to have some assurance that their claim is likely to be paid because all the required information was provided in advance of submitting the claim and furnishing the item to the beneficiary.
• Coverage and other requirements of NCDs/LCDs;
• Technical requirements (for example, date stamps);
• Statutory requirements (for example, face-to-face encounter documentation); and
• All other requirements.
We will provide education specific to each item subject to prior authorization so that suppliers are informed of specific documentation requirements.
In response to commenters that requested that the prosthetists' notes and records stand alone in fulfilling medical necessity documentation requirements for a beneficiary's prostheses, we note that the expertise of prosthetists is very important and contributes to beneficiaries' recovery. However, a prosthetist's records alone do not illustrate the comprehensive clinical picture of the beneficiary. For example, a physician order alone does not satisfy Medicare's medical necessity criteria. Rather, it is the documentation of multiple healthcare team members working on behalf of the beneficiary that conveys the complete picture of the beneficiary's medical need and appropriate delivery of care. As a principle, when reviewing any claim for medical necessity, we look for corroboration between all entries (including physician's orders) in a beneficiary's medical record.
We expect that the review contractor will provide a prior authorization decision within the timeframes established in subregulatory guidance. We conduct day-to-day oversight, as well as formal annual performance evaluations of Medicare contractors, to make sure that they are meeting the requirements of their contract. We may require action plans for standards that are not met and also consider documented past performance for future contract awards.
Beneficiaries and suppliers may file a complaint in cases where they believe access to a DMEPOS item or a supplier was improperly denied or if they believe a prior authorization request was not handled properly. More information on ways to file a complaint is available at
Federal procurement regulations effectively prohibit issuing fines or similar financial penalties to Medicare Administrative Contractors for not meeting performance standards. We provide incentives to contractors for exceeding the requirements in their contracts. This is done through a formal award fee process. Contractors are awarded extra fees for exemplary accuracy in their medical review determinations. We conduct quality checks of the prior authorization decisions through a sample of random claims. Findings from this quality check are communicated to CMS' Medicare Contractor Management Group (MCMG) and are used to determine if a contractor is eligible for an award fee. We also perform annual performance evaluations of MACs to ensure that they are meeting all requirements of their contract. We may require action plans for standards that are not met and also consider documented past performance for future MAC contract awards. In situations where two suppliers in the same contractor jurisdiction submit identical documentation to support medical necessity and receive two different determinations, we would refer the incident to MCMG for review.
In addition, we conduct day-to-day contractor oversight by, among other things, frequent communication with the contractor medical review components. In these communications, we receive status updates about the different types of medical review decisions. For example, we monitor contractors' pre- and post-pay medical review strategies. Upon implementation, we will also monitor contractors' prior authorization processes, including the decisions they render and the timeframes in which the decisions are rendered.
As noted earlier, prior authorization timeframe requirements will be made available to stakeholders and the public in subregulatory guidance, which allows for greater flexibility in the event timeline modifications are warranted. We remind commenters that both the final rule and the Act gives us the authority to implement the prior authorization requirement for a DMEPOS item locally or nationally, and suspend or cease the prior authorization process generally or for a particular item. We note the prior authorization timeframe(s) detailed in subregulatory guidance will not exceed the timeframes described in the May 28, 2014 proposed rule (79 FR 30521). We believe that this authority allows us to be quickly responsive to any general implementation issue(s) that may surface, including any unforeseen beneficiary access issues.
We are finalizing prior authorization as a condition of payment. As such, if a claim subject to prior authorization is received without an associated affirmed prior authorization request, it will be denied. Once the claim is denied, standard appeal rights apply.
Additionally we believe that permitting unlimited resubmissions gives the requester multiple opportunities to make a prior authorization request with all of the required documentation and receive a provisional affirmation decision. As such, we expect fewer denials because a significant percentage of denials have been due to insufficient documentation. With fewer denials, we expect fewer appeals.
We are finalizing the following proposed provisions summarized in section II.E. of this final rule:
• Create prior authorization as a condition of payment for items on the Required Prior Authorization List, as proposed in § 414.234(c)(1). Claims receiving a non-affirmation decision, as well as claims for items subject to prior authorization but for which no prior authorization was requested, will be denied if submitted for processing.
• Add a new paragraph (t) to § 405.926 stating that a contractor's prior determination of coverage is not an initial determination. Section 405.926 contains the list of actions that are not initial determinations and thus not appealable.
• Define a “provisional affirmation” prior authorization request decision, as proposed in § 414.234(a).
• Require all relevant documentation necessary to show that the item meets applicable Medicare coverage, coding, and payment rules be submitted before the item is furnished to the beneficiary and before the claims is submitted for processing, as proposed in § 414.234(d)(1).
• Permit unlimited resubmissions of the prior authorization request, as proposed in § 414.234(e)(3)(ii).
• Include an expedited review option and process, as proposed in § 414.234(e)(4).
We received several comments that were outside the scope of the proposed rule. Other comments were related to the proposed prior authorization rule, but did not address any of the topics discussed in this final rule. In the following discussion, we summarize and respond to these comments.
In the May 28, 2014 proposed rule (79 FR 30520), we discussed how CMS' liability policies apply to the prior authorization process. A request for prior authorization must be submitted prior to furnishing the item to the beneficiary and prior to submitting the claim for processing. When a claim for an item on the Required Prior Authorization List is submitted and denied, the contractor determines liability for the denied item based on sections 1834(j)(4) of the Act for non-assigned claims and 1879(h)(2)of the Act for assigned claims. Under these sections, any expenses incurred for the denied item or service are the responsibility of the supplier unless liability is transferred to the beneficiary in instances where beneficiaries are given an ABN, Form CMS-R-131, because the beneficiary knows or could be expected to know that payment would not be made. Sections 1834(j)(4) and 1879(h)(2) of the Act, both of which reference the refund procedures in section 1834(a)(18)(A) of the Act, address liability decisions made after assessing actual or expected knowledge, based on all the relevant facts pertaining to each particular denial.
The limitation on liability provision in section 1879 of the Act establishes a process for determining financial liability for certain denials of items or services. In the case of assigned DME that is subject to the prior authorization requirement established in this final rule, under section 1879(h) of the Act, a supplier is presumed to be financially liable for a claim denied if there is no prior authorization affirmation. The same holds true for non-assigned DME under section 1834(j)(4) of the Act. If the supplier collected any monies from the beneficiary for such denied items, the supplier is required to refund such monies. Under section 1879(a) of the Act, the determination of financial liability for certain categories of denied claims is based on actual or constructive knowledge that Medicare is not expected to cover or make payment for such denied items or services. In general, the supplier is held financially liable under section 1879 of the Act because it is expected to be familiar with Medicare coverage and payment requirements. However, as explained later in this section, under sections 1879(h) and 1834(a)(18) of the Act, liability may be shifted from the supplier to the beneficiary if the supplier delivers a valid ABN, Form CMS-R-131, to the beneficiary. Similarly, under section 1879(a) of the Act, if the supplier believes, for example, that an item may not be considered medically reasonable and necessary under section 1862(a)(1)(A) of the Act, the supplier may shift financial liability to the beneficiary by delivering a valid ABN to the beneficiary.
After promulgation of the prior authorization requirement through this final rule, CMS or its review contractors would presume that the supplier knew that Medicare would automatically deny the claim for which the supplier failed to request a prior authorization, per section 1834(a)(15) of the Act. However, CMS or its review contractors would generally presume that the Medicare beneficiary does not know, and cannot reasonably be expected to know, that Medicare will deny, or has denied, payment in advance under section 1834(a)(15) of the Act.
Under sections 1834(j)(4) and 1879(h)(2) of the Act, when a beneficiary receives an item or service and does not know that CMS or its review contractors may deny the claim based on an unmet prior authorization requirement, the supplier is financially liable for the denied claim and is obligated to refund any payments received from the beneficiary. In cases where the beneficiary insists on getting the item without the prior authorization decision or while the decision is pending, or in cases where the prior authorization decision is non-affirmed, the supplier must issue a valid ABN to the beneficiary, in order to shift liability to the beneficiary. If the beneficiary agrees to pay for the item when signing the ABN, liability rests with the beneficiary if Medicare does, in fact, deny the claim. The ABN notifies the beneficiary that an item usually covered by Medicare may not be paid for in this instance. When completing the ABN, the supplier must provide a clear reason why Medicare may deny payment. The ABN must not be used to bypass the prior authorization process, and existing policy prohibits routine ABN issuance. In order for the ABN to be considered valid, the ABN must be issued to the
Detailed requirements for valid ABN issuance can be found in Chapter 30 of the Medicare Claims Processing Manual (Internet Only Manual (IOM) Pub 100-04):
This section will be updated to provide standard language that suppliers must include on ABNs issued for items requiring prior authorization. If an ABN is not given to the beneficiary in the manner described in CMS' claims processing manual, financial liability for the denied claim will not be shifted to the beneficiary.
We did not receive any comments on this discussion of how CMS's liability policies apply to the prior authorization process and we are not making any changes.
Under the Paperwork Reduction Act of 1995, we are required to provide 30-day notice in the
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
In compliance with the PRA we solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). We note to readers that CMS is in compliance with the requirements of the PRA with respect to information collection requirements associated with the day-to-day medical review activities. The information collection requirements associated with day-to-day medical review activities are currently approved under OMB control number 0938-0969 and have an expiration date of July 31, 2018.
The base medical review information collection requirements assess the burden associated with the time and effort necessary for the provider and/or supplier of services to locate and obtain the supporting documentation for the Medicare claim and to forward the materials to the Medicare contractor for the medical review process. We note that the burden analysis for the prior authorization process proposed by this rule only addresses additional burdens created in excess of the standard medical review process utilized by CMS contractors and addressed in the base medical review information collection requirements. We will create a new information collection requirement package that is in addition to the current base medical review information collection requirement.
We are finalizing our proposal in § 414.234(c), that as a condition of payment for certain DMEPOS items frequently subject to unnecessary utilization, a prior authorization request must be submitted prior to the submission of a claim. As a condition of payment, program policies specify that certain documentation requirements be met prior to payment. Section 1833(e) of the Act states that no payment shall be made to any provider of services or other person unless there has been furnished such information as may be necessary in order to determine the amounts due such provider or other person for the period with respect to which the amounts are being paid or for any prior period. Section 1815(a) of the Act states that no such payments shall be made to any provider unless it has furnished such information as the Secretary may request in order to determine the amounts due such provider for the period with respect to which the amounts are being paid or any prior period. We are not changing the documentation requirements. Prior authorization would require information to support a Medicare provisional payment decision earlier in the process, before the item is delivered. A prior authorization request would include evidence that the request for payment complies with applicable Medicare clinical documentation, coverage, coding, and payments rules. All documentation requirements specified in applicable policy would still apply. We note that it is a long standing expectation that supportive documentation be kept on file by affected providers/suppliers prior to furnishing a DMEPOS item.
This final rule does not add or change any current documentation requirements. However, we believe it will initially increase the time burden associated with collecting and submitting said documentation. The increase of time burden will vary depending on the volume of claims requiring prior authorization. Based on our previously described experience with the PMD demonstration, we similarly expect the time burden to ultimately decrease due to a decrease in utilization of the item(s) subject to prior authorization. Before or on the date in which this final rule is published, we will submit a new information collection request for OMB review and approval that will illustrate the new time burden associated with collecting and submitting prior authorization documentation.
We further note that the anticipated increase in cost associated with the collection and submission of the requested data is offset somewhat by the limited protection from future audits that is afforded to suppliers under this final rule. While the prior authorization program created by this final rule may share some select features with the PMD demonstration, they are disparate enough that we cannot quantify the cost reductions. We would need sufficient item-by-item historical prior authorization program data created by this final rule to perform the necessary calculations. Until the program is operational, we can only make this assertion based on our limited experience with the PMD demonstration.
We are finalizing the definition of unnecessary utilization as the furnishing of items or services that do not comply with one or more of Medicare's clinical documentation, coverage, coding, and payment rules. Specifically, and for the purpose of this final rule, an item frequently subject to unnecessary utilization is identified as having a high incidence of fraud, improper payments or unnecessary utilization in GAO or OIG reports or the CERT DME and/or DMEPOS Service Specific Report(s), has an average purchase fee of $1,000 or greater or an average rental fee schedule of $100 or greater, and is listed on the DMEPOS fee schedule.
This final rule implements prior authorization, a tool utilized by private sector health care payers to prevent unnecessary utilization of certain DMEPOS items. In 2014, the total utilization for all items listed in the Master List was over $1.6 billion. The Master List includes DMEPOS items frequently subject to unnecessary utilization meeting criteria described earlier in this final rule. Presence of an item(s) on the Master List would not automatically result in that item being subject to prior authorization. In order to balance provider and supplier burden
In 2014, there were over 2.3 million beneficiaries receiving an item from the Master List. Cost, utilization, and improper payment rates of items on the Master List vary greatly. It is important to note that not all items on the Master List have a known improper payment rate since their Master List inclusion may have been based on a 2007 or later OIG/GAO report and not the CERT DME and/or DMEPOS Service Specific Report(s). The CERT program develops improper payment rates for those items for which at least 30 claims are included in their sample. Consequently, DMEPOS items have an associated improper payment rate if at least 30 claims for that code were included in the CERT sample.
To best estimate the impact of this final rule within a range of programmatic activity, we isolated those items on the Master List that had an associated improper payment rate. Historically, the agency has focused its finite resources towards reducing the improper payment rate. We believe that we can best estimate the impact of this final rule using that approach.
We remind readers that items on the Master List are identified as those frequently subject to unnecessary utilization, have a high incidence of fraud, improper payments or unnecessary utilization in GAO or OIG reports and/or appear on the CERT DME and/or DMEPOS Service Specific Report(s), have an average purchase fee of $1,000 or greater or an average rental fee schedule of $100 or greater, and are listed on the DMEPOS fee schedule. The total number of items on the Master List is 135.
In order to determine what might be on the Required Prior Authorization List to estimate the burden of this final rule, we excluded PMDs from the Master List since they are currently subject to prior authorization under a CMS demonstration and thus not eligible to be selected from the Master List to the Required Prior Authorization List until the demonstration is completed. The remaining items were cross referenced against CERT DME and/or DMEPOS Service Specific Report(s) for an associated improper payment rate. We ranked the cross-referenced 20 items by average improper payment dollars per line. Using 2014 CERT data, we developed low, primary, and high estimates of potentially affected claims for each year for the first 10 years of the program.
To calculate our low estimate of affected claims, we focused on Master List items with the highest average improper payment dollars per line. For example, during the 2014 CERT reporting period, Medicare paid for the top three DMEPOS items on the Master List associated with the highest improper payment dollars per line nearly 7,500 times. We believe limiting prior authorization to the top three items results in a low programmatic activity compared to implementing prior authorization for all items in the Master List. Consequently we use 7,500 as our low estimate of potentially affected claims for our 10-year projection (see Table 6). We did not account for Medicare growth or ramp up activities of this program for our low estimate since we selected 7,500 to represent the minimum level of program activity regardless of other factors. Based on the 2014 CERT data, if we avoided 100 percent of payment errors for the top three items, we would realize the largest gain on investment. Again, it is important to note that the ranking could change every year since it is based on the acquired CERT sample and the highest average improper payment dollars.
To calculate the highest estimate of affected claims, we looked for the top 15 DMEPOS items on the Master List with the highest average improper payments dollars per line. These items were provided nearly 400,000 times. If we avoid 100 percent of improper payments for the top 15 Master List DMEPOS items with the highest average improper payment dollars per line, we realize a significantly lower gain on investment. Subjecting 15 items to prior authorization results in high programmatic activity, thus we used 500,000 as our highest estimate of affected claims for years 8 through 10 in our projections (Calendar Years (CY)s 2023 through 2025 Table 6). We believe 500,000 accounts for Medicare growth as well as the potential variability in ranking the highest average improper payment dollars per line of Master List DMEPOS items which may result in higher than 400,000 claim counts.
We derive our primary estimate (see Table 6) by averaging the low and high estimate of potential claims affected. Based on the 2014 CERT data, there were over 200,000 Medicare payments made for the top 14 Master List DMEPOS items with the highest average improper payment dollars per line. If we avoid 100 percent of improper payments for the top 14 Master List DMEPOS items with the highest improper payment dollars per line, we realize a moderate gain on investment. Subjecting 14 items to prior authorization results in moderate programmatic activity, thus we used 253,750 as our primary estimate of affected claims for years 8 through 10 in our projections (CYs 2023 through 2025 (see Table 6)). We believe the primary estimates accounts for Medicare growth as well as the potential variability in ranking the highest improper payment rates of Master List DMEPOS items which may result in higher than 200,000 claim counts.
We provide the preceding discussion to explain how we arrived at the estimated number of potential claims affected. However, we note that other factors may contribute to the number of claims ultimately affected. For example, future policies, regulations or response to stakeholder needs may be factored into the Master List item selection(s) and consequently impact the number of claims ultimately affected.
As noted earlier in this section, Table 6 lists our estimated range of potentially affected claims.
To account for the possibility of unlimited resubmissions, we multiplied the low, primary, and high estimates of potentially affected claims in Table 6 by 2.25. We selected 2.25 as the multiplier based on preliminary analysis of
We note that it is a long standing expectation that supportive documentation be kept on file by affected providers/suppliers prior to furnishing a DMEPOS item. While it cannot be considered a usual and customary business practice as defined in the implementing regulations of the PRA at 5 CFR 1320.3(b)(2), we believe that the burden associated with maintaining the documentation represents a negligible increase above what is currently required for compliance with the base medical review information collection requirements approved under OMB control number 0938-0969. We also recognize that there will be an associated cost to the affected providers/suppliers when requiring full compliance with this expectation. This associated cost is incurred with the unlimited resubmission of prior authorization requests that this rule provides and the costs associated with documentation collection and submission during the prior authorization resubmission process. We believe this cost is justified in the case of unlimited resubmissions as the process affords the supplier more than one opportunity to receive a provisional affirmative prior authorization determination that ultimately could result in claim payment. In addition, the resubmission process allows for supplier education about the documentation requirements. We anticipate that as the supplier becomes more familiar with those requirements, the amount of resubmissions would decrease over time for that particular item or service as would the associated costs of documentation collection and submission. We further note, that by allowing an unlimited number of resubmissions, we ultimately reduce supplier burden as we expect that a fewer number of appeals will be pursued. We believe that the resubmission process would provide the supplier with an increased opportunity for claims to be paid; however, no data exists to validate this assertion so it is not assumed in the associated burden calculations.
Table 7 provides low, primary, and high estimates of potentially affected cases (claims and resubmissions of associated prior authorization requests). The average of the high estimate of potentially affected cases in years 1 through 3 is 157,500 ((22,500 + 225,000 + 225,000)/3) cases per year for the first 3 years.
We estimate that the private sector's per-case time burden attributed to submitting documentation and associated clerical activities in support of a prior authorization request is equivalent to that of submitting documentation and clerical activities associated for prepayment review, which is 0.5 hours per submission. We apply this time burden estimate to initial submissions, resubmissions, and expedited requests (that is, affected cases). The total high estimated burden for the first year is 11,250 hours (22,500 × 0.5 hours) and the total high estimated burden per year for years 2 and 3 is 112,500 hours (225,000 × 0.5 hours). Table 8 lists the low, primary, and high estimated time burden associated with potentially affected cases.
Then, we multiply the time burden estimate to an average loaded hourly rate of $35.36 (mean hourly rate of $18.13 + fringe benefits) for the Medical Record and Health Information Technician classification
We also estimate the cost of mailing medical records to be $5 per request for prior authorization. Some commenters questioned how we arrived at the $5 estimate cost for mailing medical records. Our estimation is based on the mailing costs of medical records for prepay review. However, many of the records are received via fax machines which have lower associated costs than traditional mail. Additionally, we offer methods of electronic submission of medical documentation to providers and suppliers who wish to use a less expensive alternative for sending in medical documents. Additional information is available on Medicare review contractor Web sites.
In instances when the supplier must first obtain the medical records from a health care provider, we estimate that the mailing costs are doubled ($10), as records are transferred from provider to supplier, and then to CMS or its contractors. We estimate that there are 22,500 cases (high estimate cases, see Table 7) for which the mailing costs could be doubled in the first year. Based on CMS' experience within the agency and Medicare medical review contractor feedback, it is reasonable to believe that less than half (11,250) of the medical records are mailed in. Therefore, we estimate the costs are $112,500 (11,250 x $10) for the first year. The total high estimated mailing cost for years 2 and 3 is $4,500,000, or $2,250,000 per year. Mailing costs for the CYs 2016 through 2018 average $3,037,500.
To summarize, based on the average of the high estimate of potentially affected claims for CYs 2016 through 2018 (Table 6), the information collection requirements discussed earlier in this section will affect an average of 70,000 claims in CYs 2016 through 2018. Please note that while we have provided data for 10 calendar years, our estimates are based off of the 3-year average of CYs 2016 through 2018. Three years is the maximum term of an OMB approval period for an information collection request. We estimate that the average 70,000 claims will have an associated prior authorization request submission 2.25 times resulting in an average of 157,500 cases. The total estimated average annual time burden for CYs 2016 through 18 is 78,750 hours per year at a cost of $2.8 million per year. After adding CYs 2016-2018 average mailing costs, the burden rises to $5.8 million per year.
We solicited public comment on our proposed review and cost time estimates. A summary of the comments and our responses follows.
In response to public comments, we have re-evaluated the provided information, collection data, and explanation. We believe that the requirements expressed in this final rule meet the utility and clarity standards. We are finalizing the provisions in the Collection of Information Requirement section, as proposed.
This final rule codifies section 1834(a)(15)(A) and (C) of the Act to monitor payments for certain DMEPOS items by creating a requirement for advance decision as a condition of payment. This new requirement aims to reduce the unnecessary utilization and the resulting overpayment for certain DMEPOS items.
We have examined the impact of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2012), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is
Per Executive Order 12866, we have prepared a regulatory impact analysis that, to the best of our ability, presents the costs and benefits of this final rule. The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year. For details see the Small Business Administration's (SBA) Web site at:
The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a regulatory flexibility analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities. The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities that the rule affects, and an explanation of any meaningful options that achieve the objectives with less significant adverse economic impact on the small entities.
For purposes of the RFA, physicians, non-physician practitioners (NPPs), and suppliers, including independent diagnostic treatment facilities (IDTFs), are considered small businesses if they generate revenues of $11 million or less based on the SBA size standards. Approximately 95 percent of physicians are considered to be small entities. There are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the physician fee schedule (PFS). Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this final rule constitutes our regulatory flexibility analysis for the remaining provisions and addresses comments received on these issues.
In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this final rule would not have a significant impact on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits on state, local, or tribal governments or on the private sector before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2015, that threshold is approximately $144 million. This final rule would not impose a mandate that will result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of more than $144 million in any one year.
Executive Order 13132 establishes certain requirements that an agency must meet when it announces a final rule that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has federalism implications. Since this final rule does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.
We have prepared the following analysis, which together with the information provided in the rest of this preamble, meets all assessment requirements. The analysis explains the rationale for and purposes of this final rule, details the costs and benefits of the rule, and presents the measures we would use to minimize the burden on small entities. We are unaware of any relevant federal rules that duplicate, overlap, or conflict with this final rule. The relevant sections of this final rule contain a description of significant alternatives if applicable.
Methodology: A number of factors affect this analysis. For instance, the number of Master List items selected to be subject to the prior authorization requirement is dependent on multiple factors. Consequently, we are proposing a range of estimates to illustrate various implementation scenarios, as described in section III. of this final rule.
In addition, as the DMEPOS community acclimates to using prior authorization as part of their billing practice, there may be greater systemic or other processing efficiencies to allow more extensive implementation.
Lastly, the overall economic impact of this provision on the health care sector is dependent on the number of claims affected. For the purpose of this narrative analysis, we use the “primary” estimate to project costs. However, Table 7 lists both the low and high estimated cost projections, as well as the primary cost estimate.
The values populating Table 10 were obtained from Table 9, Range Estimate of PRA Burden in Dollars (see section III. of this final rule) and Table 11, Medicare Cost, which can be found in following pages. Together, Tables 9 and 11 combine to convey the overall economic impact to the health sector, which is illustrated in Table 10 titled, Overall Economic Impact to the Health Sector.
Based on the estimate, the overall economic cost of this final rule is approximately $1.3 million in the first year. The 5 year cost is approximately $57 million and the 10 year cost is approximately $212 million, mostly driven by the assumed increased number of items subjected to prior authorization after the first year. Paperwork costs to private sector providers and an increase in Medicare spending to conduct reviews combine to create the financial impact. However, this impact is offset by some savings as described in Table 12. We believe there are likely to be other benefits and cost savings that result from the DMEPOS prior authorization requirement. However, many of those benefits are difficult to quantify. For instance, we expect to see savings in the form of reduced unnecessary utilization, fraud, waste, and abuse, including a reduction in improper Medicare FFS payments (note that not all improper payments are fraudulent).
We have provided the following budgetary cash impact possibilities based on the President's 2016 Budget baseline with an assumed January 1, 2016 effective date.
The definition of small entity in the RFA includes non-profit organizations. Per the RFA's use of the term, most suppliers and providers are small entities. Likewise, the vast majority of physician and nurse practitioner (NP) practices are considered small businesses according to the SBA's size standards, which define a small business as having total revenues of $11 million or less in any 1 year. While the economic costs and benefits of this final rule are substantial in the aggregate, the economic impact on individual entities would be relatively small. We estimate that 90 to 95 percent of DMEPOS suppliers and practitioners who order DMEPOS are small entities under the RFA definition. The rationale behind requiring prior authorization of covered DMEPOS items is to make sure the beneficiary's medical condition warrants the item of DMEPOS before the item is delivered.
The impact on DMEPOS suppliers could be significant, as the final rule changes their billing practices. We believe that the purpose of the statute and this final rule is to avoid unnecessary utilization of DMEPOS items, thus we do not view decreased revenues from items frequently subject to unnecessary utilization by DMEPOS suppliers to be a condition that we must mitigate. We believe that the effect on legitimate suppliers and practitioners would be minimal. Additionally, this final rule offers an additional protection to a supplier's cash flow as the supplier would know in advance if the Medicare requirements are met.
We do not believe that this final rule would significantly affect the number of legitimate claims submitted for items on the required prior authorization list. However, we do expect a decrease in the overall amount paid for DMEPOS items resulting from a reduction in unnecessary utilization of DMEPOS items requiring prior authorization.
In accordance with our explanation, we would select certain items from the Master List to require prior authorization by placing them on the Required List. As discussed previously, we have chosen a flexible approach that makes it difficult to specify the number of items on the Required List in advance. Similarly, it is not possible to specify the resulting numbers of affected claims and medical reviews in advance. Consequently, we are proposing a range of estimates to capture various possible scenarios.
If funded for the high estimation of potentially affected claims, we could grow the program and affect as many as 500,000 claims by years 8 through 10. This estimate accounts for initial prior authorization requests only.
Resubmissions after a non-affirmation decision is rendered on an initial request are not included in the high estimation of potential claims affected. If the program grew to impact as many as 500,000 claims, the potentially impacted cases (claims and resubmissions) total would be 1,125,000. This potential growth accounts for the large fiscal increase shown in the program impact analysis.
We estimate that the private sector's costs are associated with the per-case time burden attributed to submitting documentation and associated clerical activities in support of a prior authorization request. These costs are discussed in detail in section III. of this final rule (see Table 9). As noted in Table 9, we estimate that the private sector's average costs for years 1 through 3 would total $2.8 million.
Medicare would incur additional costs associated with processing the prior authorization requests. Applying the same logic previously described, we develop a range of potential costs that are dependent on the extent of implementation. We use the range of potentially affected cases (claims and resubmissions) in Table 7 and multiply it by $50, the estimated cost to review each request. The Medicare Administrative Contractors (MACs) have experience conducting reviews and we based our time and cost estimates on their previous experience. We understand some reviews take longer than others; consequently, our estimates are averages. Table 11 lists the cost range estimates.
As discussed in the next section, we expect a reduction in the utilization of Medicare DMEPOS items when such utilization does not comply with one or more of Medicare's coverage, coding, and payment rules. Although these rules are designed to permit utilization that is medically necessary, DMEPOS items
We can anticipate benefits because we expect a reduction in the unnecessary utilization of those Medicare DMEPOS items subject to prior authorization. We will be closely monitoring utilization and billing practices. The benefits include a changed billing practice that also enhances the coordination of care for the beneficiary. For example, requiring prior authorization for certain items requires that the primary care provider and the supplier collaborate more frequently to order and deliver the most appropriate DMEPOS item meeting the needs of the beneficiary. Improper payments made because the practitioner did not order the DMEPOS, or because the practitioner did not evaluate the patient, would likely be reduced by the requirement that a supplier submit clinical documentation created by the practitioner as part of its prior authorization request.
We believe it is more reasonable to require practitioners and suppliers to adopt new practices for fewer items at a time, rather than institute large scale change all at once. In addition, during the ramp up of the program in year 1, we will be doing education and outreach. Consequently, we estimate a smaller volume of items in year 1.
Our Office of the Actuary has provided the following budgetary cash impact possibilities based on the President's 2016 Budget baseline with an assumed January 1, 2016 effective date. The impacts are specific to the three scenarios in our potentially affected claim range: The low, primary, and high estimation of potentially affected claims (see Table 6).
As previously discussed, each item on the Master List is high cost and frequently subject to unnecessary utilization. In addition, each item has been either the subject of a previous OIG or GAO report or has appeared on a CERT DME and/or DMEPOS Service Specific Report(s) (2011 or later) of DMEPOS items with high improper payment rates. Together, utilization of items on the Master List accounted for $1.6 billion. The status quo is not a desirable alternative to this final rule because current payment practices have not affected unnecessary utilization appreciably. Accordingly, the economic impact of no regulatory action would result in the lack of recoupment of some or all associated projected improper payments. Evidence of this is found in the CERT improper payment rates and the associated projected improper payment amount for all DMEPOS, which despite trending downward, have remained high for the last several years (53.1 percent in 2014). By exercising our statutory authority to establish a prior authorization process that creates a Master List of DMEPOS high cost items known to be the subject of GAO/OIG reports and/or high improper payment rates, we hope to positively affect unnecessary utilization and improper payments for DMEPOS in general.
Another alternative we considered was to allow MACs processing Medicare claims to design safeguards that positively affect improper payment rates and unnecessary utilization. However, in recent years we have required MACs to create strategies aimed at reducing improper payment and over utilization. While MACs have complied with this requirement, we have not seen sufficient effect on the improper payment rate and over utilization. The reason is that MACs are limited in their resources and authority. Often unforeseen issues or statutory requirements cause the MACs to reprioritize their work and respond to CMS direction to focus on an issue not previously on their strategy. In addition, their current practices of pre-payment or post-payment manual medical reviews are costly, and thus are used on a very small percentage of claims. Both create burdens for the claim submitter. For example, in a pre-payment medical review, the claim submitter has already furnished the item or service. Payment is held until the claim submitter supplies the MAC with requested documentation supporting their request for payment. Submitters may be confused about the type of documents being requested and, as a result, submit incomplete documentation. The submitter has only one opportunity to submit the appropriate documentation, which if insufficient, will result in the submitter not receiving his or her payment. In post-payment reviews, the submitter has furnished the item or service and has received payment. Similar to pre-payment reviews, the submitter may be confused about the documents needed to support the payment. If the payment is denied, the MAC is obligated to recover the payment. Claim submitters have told us that returning payment, or requesting an appeal to defend the payment, is burdensome and costly.
By requiring documentation before the claim is submitted and before the item or service is furnished, the submitter and contractor are afforded unlimited opportunities to clarify requirements to receive a provisional affirmation decision. By addressing this process in advance of furnishing the item or service or submitting the claim, we believe there will be less items and/or services paid improperly and unnecessarily utilized, as well as less burden on providers.
Another alternative we considered in response to public comments was to subject 100 percent of the 135 items on the Master List to prior authorization at the same time rather than establishing a prior authorization program for a certain Master List item for a particular state or MAC jurisdiction.
Using 2013 data, as cited in footnote 4, this approach would impact 11 million beneficiaries and potentially 91,000 DME suppliers. If we looked at 2014 data per footnote 5, the impact of implementing prior authorization for 135 items on the Master List would affect 10 million beneficiaries and potentially 90,000 suppliers. We recognize that an impact of this magnitude would allow the DMEPOS community little time to alter current business practices and adjust to the collection and submission requirements of the prior authorization process. Furthermore, we believe that subjecting all of the 135 items on the Master List to prior authorization would maximize both administrative and provider burden alike due to the sheer volume of items and suppliers affected.
In addition to maximizing supplier and administrative burden, we believe this approach could potentially create beneficiary access to care issues. By utilizing prior authorization for all 135 items on the Master List at the same time, we believe that our ability to suspend, cease or make adjustments to the prior authorization process would be hampered by the volume of items and affected suppliers. This could lead to a delay in processing prior authorization requests and result in beneficiaries waiting for reasonable and medically necessary DMEPOS items they would otherwise receive. In addition, we believe that establishing prior authorization for select items on the Master List rather than all 135 items on the Master List allows us to monitor and balance programmatic activity with return on investment while safeguarding program integrity and beneficiary access to care.
We recognize that DMEPOS suppliers may have some difficulty tracking what items are on the Required Prior authorization List versus what items are on the Master List, given that changes could happen frequently. However, we believe two separate lists will maximize flexibility and allow us to be as responsive as possible to suppliers' and beneficiaries' concerns.
As required by OMB Circular A4 (available at
The analysis in the previous sections, together with the remainder of this preamble, provides our Regulatory Flexibility Analysis. In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget.
Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medical devices, Medicare, Reporting and recordkeeping requirements, Rural areas, X-rays.
Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR chapter IV as set forth below:
Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 263a).
(t) A contractor's prior authorization determination related to coverage of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).
Secs. 1102, 1871, and 1881(b)(1) of the Social Security Act (42 U.S.C.1302, 1395hh, and 1395rr(b)(1)).
(a)
(b)
(i) The item has been identified as having a high rate of fraud or unnecessary utilization in a report that is national in scope from 2007 or later published by any of the following:
(A) The Office of Inspector General (OIG).
(B) The General Accountability Office (GAO).
(ii) The item is listed in the 2011 or later Comprehensive Error Rate Testing (CERT) program's Annual Medicare Fee-For-Service (FFS) Improper Payment Rate Report DME and/or DMEPOS Service Specific Report(s).
(2) The Master List of DMEPOS Items Frequently Subject to Unnecessary Utilization is self-updating annually and is published in the
(3) DMEPOS items identified as having a high rate of fraud or unnecessary utilization in any of the following reports that are national in scope and meeting the payment threshold criteria set forth in paragraph (b)(1) of this section are added to the Master List:
(i) OIG reports published after 2015.
(ii) GAO reports published after 2015.
(iii) CERT program's Annual Medicare FFS Improper Payment Rate Report DME and/or DMEPOS Service Specific Report(s) published after 2015, also referred to as the Comprehensive Error Rate Testing (CERT) program's Annual Medicare FFS Improper Payment Rate Report DME Service Specific Report(s).
(4) Items remain on the Master List for 10 years from the date the item was added to the Master List.
(5) Items that are discontinued or are no longer covered by Medicare are removed from the Master List.
(6) An item is removed from the list if the purchase amount drops below the payment threshold (an average purchase fee of $1,000 or greater or an average monthly rental fee schedule of $100 or greater).
(7) An item is removed from the Master List and replaced by its equivalent when the Healthcare Common Procedure Coding System (HCPCS) code representing the item has been discontinued and cross-walked to an equivalent item.
(c)
(i) The Required Prior Authorization List specified in paragraph (c)(1) of this section is selected from the Master List of Items Frequently Subject to Unnecessary Utilization (as described in paragraph (b) of this section). CMS may consider factors such as geographic location, item utilization or cost, system capabilities, administrative burden, emerging trends, vulnerabilities identified in official agency reports, or other data analysis.
(ii) CMS may elect to limit the prior authorization requirement to a particular region of the country if claims data analysis shows that unnecessary utilization of the selected item(s) is concentrated in a particular region.
(iii) The Required Prior Authorization List is effective no less than 60 days after publication and posting.
(2)
(ii) Claims receiving a provisional affirmation may be denied based on either of the following:
(A) Technical requirements that can only be evaluated after the claim has been submitted for formal processing.
(B) Information not available at the time of a prior authorization request.
(d)
(1) Include all relevant documentation necessary to show that the item meets
(i) Order.
(ii) Relevant information from the beneficiary's medical record.
(iii) Relevant supplier produced documentation.
(2) Be submitted before the item is furnished to the beneficiary and before the claim is submitted for processing.
(e)
(2) If applicable Medicare coverage, coding, and payment rules are met, CMS or its contractor issues a provisional affirmation to the requester.
(3)(i) If applicable Medicare coverage, coding, and payment rules are not met, CMS or its contractor issues a non-affirmation decision to the requester.
(ii) If the requester receives a non-affirmation decision, the requester may resubmit a prior authorization request before the item is furnished to the beneficiary and before the claim is submitted for processing.
(4)
(ii) If CMS or its contractor agrees that processing a prior authorization request using a standard timeline for review could seriously jeopardize the life or health of the beneficiary or the beneficiary's ability to regain maximum function, then CMS or its contractor expedites the review of the prior authorization request and communicates the decision following the receipt of all applicable Medicare required documentation.
(f)
(2) CMS provides notification of the suspension of the prior authorization requirements via—
(i)
(ii) Posting on the CMS prior authorization Web site.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
The MSRB filed with the Commission a proposed rule change consisting of proposed amendments to Rule G-37, on political contributions and prohibitions on municipal securities business, Rule G-8, on books and records to be made by brokers, dealers, municipal securities dealers, and municipal advisors, Rule G-9, on preservation of records, and Forms G-37 and G-37x (the “proposed rule change”). The MSRB requested that the proposed rule change be approved with an effective date to be announced by the MSRB in a regulatory notice published no later than two months following the Commission approval date, which effective date shall be no sooner than six months following publication of the regulatory notice and no later than one year following the Commission approval date; provided, however, that any prohibition under Rule G-37 already in effect before the effective date of the proposed rule change shall be of the scope, and continue for the length of time, provided under Rule G-37 as in effect at the time of the contribution that resulted in such prohibition.
The text of the proposed rule change is available on the MSRB's Web site at
In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) amended Section 15B of the Exchange Act
As charged by Congress, the MSRB is in the process of developing a comprehensive regulatory framework for municipal advisors and their associated persons, including the proposed amendments to Rule G-37.
Such practices among municipal advisors create conflicts of interest and give rise to circumstances suggesting
“Pay to play” practices are rarely explicit: Participants typically do not let it be known that contributions or payments are made or accepted for the purpose of influencing the selection of a municipal advisor (or dealer, municipal advisor or investment adviser on behalf of which a municipal advisor acts as a solicitor).
In the Board's view, continued “pay to play” practices by professionals seeking or engaging in municipal advisory business (including municipal advisors soliciting municipal entities on behalf of dealers, municipal advisors and investment advisers) and the awarding of business by conflicted officials erodes public trust and confidence in the fairness of the municipal securities market, impedes a free and open market in municipal securities, may damage the integrity of the market, and may increase costs borne by municipal entities, issuers, obligated persons and investors. The MSRB believes that extending the policies embodied in Rule G-37 to municipal advisors through targeted amendments to Rule G-37 will help ensure common standards for dealers and municipal advisors, who operate in the same market, and frequently with the same clients.
In the years preceding the MSRB's adoption of Rule G-37, widespread reports regarding the existence of “pay to play” practices had fueled industry, regulatory and public concerns, calling into question the integrity, fairness, and sound operation of the municipal securities market.
The problems associated with “pay to play” practices undermined investor confidence in the municipal securities market, which was essential to the liquidity and capital-raising ability of the market.
Current Rule G-37 is a comprehensive regulatory regime composed of several separate and mutually reinforcing requirements for dealers. Chief among them are: Limitations on business activities that are triggered by the making of certain political contributions; limitations on solicitation and coordination of political contributions; and disclosure and recordkeeping regarding political contributions and municipal securities business.
This regime is widely recognized as having significantly curbed “pay to play” practices and the appearance of such practices in the municipal securities market.
Rule G-37 currently applies to dealers in the following respects. Rule G-37(b) prohibits dealers from engaging in municipal securities business with an issuer within two years after a triggering contribution to an official of such issuer is made by: (i) The dealer; (ii) any person who is a municipal finance professional (“MFP”) of the dealer; or (iii) any political action committee (“PAC”) controlled by either the dealer or any MFP of the dealer (the “ban on municipal securities business”).
Current Rule G-37(c)(i) prohibits dealers and their MFPs from soliciting or coordinating contributions to an official of an issuer with which the dealer is engaging or seeking to engage in municipal securities business. Rule G-37(c)(ii) prohibits dealers and certain of their MFPs
Currently, Rule G-37 also applies to certain activities of dealers that are now defined as municipal advisory activities under the Exchange Act and Exchange Act Rule 15Ba1-1(e).
In summary, the proposed amendments to Rule G-37 would extend the core standards under Rule G-37 to municipal advisors by:
• Subject to exceptions, prohibiting a municipal advisor from engaging in “municipal advisory business”
• prohibiting municipal advisors and MAPs from soliciting contributions, or coordinating contributions, to certain officials of a municipal entity with which the municipal advisor is engaging or seeking to engage in municipal advisory business;
• requiring a “nexus” between a contribution and the ability of the official to influence the awarding of business to the municipal advisor (or the dealer, municipal advisor or investment adviser clients of a defined “municipal advisor third-party solicitor”);
• prohibiting municipal advisors and certain MAPs from soliciting payments, or coordinating payments, to political parties of states and localities with which the municipal advisor is engaging in, or seeking to engage in, municipal advisory business;
• prohibiting municipal advisors and MAPs from committing indirect violations of proposed amended Rule G-37;
• requiring quarterly disclosures to the MSRB of certain contributions and related information;
• providing for certain exemptions from a ban on municipal advisory business; and
• extending applicable interpretive guidance under Rule G-37 to municipal advisors.
In addition, subject to exceptions, the proposed amendments would prohibit a dealer or municipal advisor from engaging in municipal securities business or municipal advisory business, as applicable, with a municipal entity for two years following the making of a contribution to certain officials of the municipal entity by a municipal advisor third-party solicitor engaged by the dealer or municipal advisor, an MAP of such municipal advisor third-party solicitor, or a PAC controlled by the municipal advisor third-party solicitor or an MAP of the municipal advisor third-party solicitor. The proposed amendments would also subject a dealer-municipal advisor to a “cross-ban” on municipal securities business, municipal advisory business,
The discussion of the proposed rule change begins with the proposed amendments to expand the purpose and scope of Rule G-37 as set forth in proposed section (a). This is followed by a discussion of the defined terms “municipal advisor third-party solicitor,” “municipal financial professional” and “municipal advisor professional”
Currently, Rule G-37(a) describes the purpose and intent of Rule G-37, which includes the protection of investors and the public interest. It further describes the key mechanisms through which the rule aims to achieve its purposes: (i) A ban on municipal securities business following the making of a triggering contribution to an official of an issuer; and (ii) the public disclosure of information regarding dealers' political contributions and municipal securities business.
The proposed amendments would modify section (a) to include reference to municipal advisory business and reflect that a ban on business and the public disclosure requirements would apply to both dealers and municipal advisors. The proposed amendments also would expand the scope of the purpose to ensure that the high standards and integrity of the “municipal securities market” (instead of the “municipal securities industry”) are maintained. In addition, in section (a) and throughout the rule, the proposed defined term “municipal entity”
“Municipal entity” includes college savings plans (“529 plans”) that comply with Section 529 of the Internal Revenue Code (26 U.S.C. 529), and certain entities that do not issue municipal securities, including various types of state or local government-sponsored or established plans or pools of assets, such as local government investment pools (“LGIPs”), public employee retirement systems, public employee benefit plans and public pension plans (including participant directed plans and 403(b) and 457 plans).
The proposed amendments to section (a) also would add “municipal entities” and “obligated persons”
Municipal advisors that undertake a solicitation of a municipal entity on behalf of a third-party dealer, municipal advisor or investment adviser engage in a distinct type of municipal advisory business. To extend the policies contained in Rule G-37 to these municipal advisors, the proposed amendments to Rule G-37 would add a new defined term, “municipal advisor third-party solicitor” in proposed Rule G-37(g)(x). A municipal advisor third-party solicitor would be defined in proposed Rule G-37(g)(x) as a municipal advisor that:
The terms “municipal advisor third-party solicitor,” “solicit” and “soliciting” would be consistent with the terms “municipal advisor”
Thus, a municipal advisor that provides advice to or on behalf of a municipal entity or obligated person within the meaning of Section 15B(e)(4) of the Exchange Act
Under current Rule G-37, a contribution by a person who is a municipal finance professional, or MFP, of a dealer may trigger a ban on municipal securities business as to the dealer in certain cases. The proposed amendments would incorporate minor non-substantive amendments to the term MFP, and define as a “municipal advisor professional,” or MAP, certain persons who are employed or otherwise affiliated with a municipal advisor. Similarly to an MFP, if an MAP makes a contribution, under the proposed amendments the action may trigger a ban on municipal advisory business as to the municipal advisor in certain cases.
The MSRB proposes to more specifically identify the persons engaged in the functions described in current paragraphs (A) through (E) of Rule G-37(g)(iv), and to relocate the defined term, municipal finance professional, from subsection (g)(iv) to proposed subsection (g)(ii) of the rule. A person described in current Rule G-37(g)(iv)(A) would be a “municipal finance representative” in proposed Rule G-37(g)(ii)(A); a person described in current Rule G-37(g)(iv)(B) would be a “dealer solicitor” in proposed Rule G-37(g)(ii)(B); a person described in current Rule G-37(g)(iv)(C) would be a “municipal finance principal” in proposed Rule G-37(g)(ii)(C); a person described in current Rule G-37(g)(iv)(D) would be a “dealer supervisory chain person” in proposed Rule G-37(g)(ii)(D); and a person described in current Rule G-37(g)(iv)(E) would be a “dealer executive officer” in proposed Rule G-37(g)(ii)(E). Additionally, proposed Rule G-37(g)(ii)(B), describing “dealer solicitors” (
The MSRB also proposes additional minor technical amendments to the definition of MFP to improve its readability. In paragraph (A), defining the term, “municipal finance representative,” the MSRB proposes to substitute the words “other than” in place of the more lengthy proviso in the current definition. In paragraph (E), defining the term “dealer executive officer,” the MSRB proposes to: (i) Relocate the parenthetical pertaining to bank dealers within the definition; and (ii) reorganize the clause that provides that a dealer shall be deemed to have no MFPs if the only associated persons meeting the MFP definition are those described in paragraph (E) (of current Rule G-37(g)(iv) or proposed Rule G-37(g)(ii)). Also, the MSRB proposes minor, non-substantive amendments to shorten the final paragraph of the definition of municipal finance professional, which provides that a person designated by the dealer as an MFP in the dealer's records under Rule G-8(a)(xvi) would be deemed to be an MFP and would retain the designation for one year after the last activity or position which gave rise to the designation. The amendments to the defined term are not intended to, and would not be interpreted to, substantively modify the scope of the current definition of municipal finance professional, except to the extent the defined term “municipal solicitor” used within the “dealer solicitor” definition applies to the solicitation of a
Under proposed Rule G-37(g)(iii), an MAP would be any associated person of a municipal advisor engaged in the following activities:
(A) Any “municipal advisor representative”—any associated person engaged in municipal advisor representative activities, as defined in Rule G-3(d)(i)(A);
(B) any “municipal advisor solicitor”—any associated person who is a municipal solicitor (as defined in paragraph (g)(xiii)(B) of this rule) (or in the case of an associated person of a municipal advisor third-party solicitor, paragraph (g)(xiii)(C) of this rule);
(C) any “municipal advisor principal”—any associated person who is both: (1) A municipal advisor principal (as defined in Rule G-3(e)(i));
(D) any “municipal advisor supervisory chain person”—any associated person who is a supervisor of any municipal advisor principal up through and including, in the case of a municipal advisor other than a bank municipal advisor, the Chief Executive Officer or similarly situated official, and, in the case of a bank municipal advisor, the officer or officers designated by the board of directors of the bank as responsible for the day-to-day conduct of the bank's municipal advisory activities, as required by 17 CFR 240.15Ba1-1(d)(4)(i); or
(E) any “municipal advisor executive officer”—any associated person who is a member of the executive or management committee (or similarly situated official) of a municipal advisor (or, in the case of a bank municipal advisor, the separately identifiable department or division of the bank as defined in Section 15B(e)(4) of the Act and 17 CFR 240.15Ba1-1(d)(4)(i) thereunder); provided, however, that if the persons described in this paragraph are the only associated persons of the municipal advisor meeting the definition of municipal advisor professional, the municipal advisor shall be deemed to have no municipal advisor professionals.
As in the definition of MFP, proposed Rule G-37(g)(iii) defining MAP would provide that a person designated by a municipal advisor as an MAP in the municipal advisor's records would be deemed an MAP and would retain the designation for one year after the last activity or position which gave rise to the designation.
The chart below illustrates the similarities between the defined term, “municipal finance professional,” as revised by the proposed amendments, and the new proposed defined term, “municipal advisor professional.”
Currently, Rule G-37(b) sets forth a ban on municipal securities business that might have otherwise been awarded as a
Under the proposed amendments, as discussed
The determination of whether a municipal advisor was engaged as a municipal advisor third-party solicitor by a regulated entity client would be determined based on the facts and circumstances.
Under current Rule G-37, for any contribution to trigger a ban on applicable business, an additional element—selection influence—must be present. A contribution by a dealer, MFP or PAC controlled by either the dealer or an MFP of the dealer can only trigger a ban on municipal securities business for the dealer if the official to whom the contribution was made is an “official of an issuer.” As discussed
The term “official of a municipal entity” would be substituted for the current term “official of an issuer” in Rule G-37. The definition of “official of an issuer” (or “official of such issuer”) in current Rule G-37(g)(vi) includes any person who, at the time of the contribution, was an incumbent, candidate or successful candidate: (A) For elective office of the issuer which office is directly or indirectly responsible for, or can influence the outcome of, the hiring of a dealer for municipal securities business by the issuer; or (B) for any elective office of a state or of any political subdivision, which office has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring of a dealer for municipal securities business by an issuer.
The proposed amendments would delete the term “official of an issuer” from Rule G-37(g)(vi) and substitute the term “official of a municipal entity” as set forth in proposed Rule G-37(g)(xvi). To take into account the possibility that an ME official may have the ability to influence the hiring of a dealer, municipal advisor or investment adviser, or the hiring of two or more of such professionals, three categories of ME officials would be identified in proposed Rule G-37(g)(xvi): An official of a municipal entity with dealer selection influence, as described in proposed paragraph (A), an official of a municipal entity with municipal advisor selection influence, as described in proposed paragraph (B), and an official of a municipal entity with investment adviser selection influence, as described in proposed paragraph (C).
The term “official of a municipal entity with dealer selection influence” would be substantively similar to the “official of an issuer” definition in current Rule G-37(g)(vi), with the exception of the substitution of the term “municipal entity” in place of the term “issuer.”
Currently, under Rule G-37, a dealer subject to a ban is generally prohibited from engaging in “municipal securities business” with the relevant issuer. “Municipal securities business” is currently defined in Rule G-37(g)(vii) as the purchase of a primary offering on other than a competitive bid basis, the offer or sale of a primary offering of municipal securities, providing financial advisory or consultant services to or on behalf of an issuer with respect to a primary offering on other than a competitive bid basis, and providing remarketing agent services with respect to a primary offering on other than a competitive bid basis. Under interpretive guidance issued in 1997 (the “1997 Guidance”), the municipal securities business from which a dealer subject to a ban is prohibited from engaging in is “new” municipal securities business. The MSRB has interpreted “new” municipal securities business as contractual obligations with an issuer entered into after the date of the triggering contribution to an official of the issuer and contractual obligations that were entered into prior to the date of the triggering contribution but which
Under the proposed rule change, the definition of municipal securities business would not be amended, except to renumber the definition as proposed subsection (g)(xii) and incorporate conforming changes. Additionally, the 1997 Guidance and the 2002 Guidance would remain unchanged for dealers.
Under proposed Rule G-37(b)(i)(B) and proposed Rule G-37(b)(i)(C)(1), a municipal advisor (including a municipal advisor third-party solicitor) subject to a ban would generally be prohibited from engaging in “municipal advisory business” with the relevant municipal entity. Proposed Rule G-37(g)(ix) would define “municipal advisory business” to mean those activities that would cause a person to be a municipal advisor as defined in Section 15B(e)(4) of the Act, 17 CFR 240.15Ba1-1(d)(1)-(4) and other rules and regulations thereunder.
Notably, if a municipal advisor third-party solicitor is subject to a ban under proposed Rule G-37(b)(i)(C), it would be prohibited from engaging in all types of municipal advisory business with the relevant municipal entity, including providing certain advice to the municipal entity and soliciting the municipal entity on behalf of
For municipal advisors, the MSRB intends that all existing interpretive guidance regarding the municipal securities business of dealers under Rule G-37 would apply to the analogous interpretive issues regarding the municipal advisory business of municipal advisors. However, because the “new” versus non-“new” business distinction in the 1997 Guidance only applies to pre-existing issue-specific contractual obligations
Under the proposed rule change, a dealer or municipal advisor that is not a municipal advisor third-party solicitor could be subject to a ban on applicable business only when a triggering contribution is made to an ME official who can influence the awarding of the type of business in which that regulated entity engages.
A dealer that engages in municipal securities business, but not municipal advisory business, would be subject to a ban on municipal securities business only when a triggering contribution is made by any of the persons described in proposed Rule G-37(b)(i)(A) or proposed Rule G-37(b)(i)(C)(2) to an official of a municipal entity with dealer selection influence, as described in proposed Rule G-37(g)(xvi)(A). (Although the ME official may also have influence as described in proposed Rule G-37(g)(xvi)(B) and (C), regarding the selection of municipal advisors and investment advisers, the broader scope of influence would be irrelevant in determining whether a dealer would be subject to a ban on municipal securities business.)
Best Dealer is a dealer located in a Midwestern state. On-Site MA is a municipal advisor third-party solicitor located in a western coastal state, State A. Best Dealer engages On-Site MA to solicit three major municipal entities in State A to hire Best Dealer to underwrite municipal bonds, including North City and South City of State A. Dan is an employee and an MAP of On-Site MA. Dan resides in North City. Dan makes a contribution of $240 to an ME official of South City, for whom Dan is not entitled to vote. The ME official exercises influence in the selection of dealers, municipal advisors and investment advisers for South City matters. As a result of Dan's $240 contribution to the ME official, Best Dealer, the dealer client of On-Site MA, becomes subject to a ban on engaging in municipal securities business with South City, because Dan's contribution is a triggering contribution and Best Dealer engaged On-Site MA to solicit South City on behalf of Best Dealer. In addition, as discussed
Although the ME official exercises influence in the selection of municipal advisors and investment advisers, because Best Dealer does not engage in municipal advisory business, a ban on applicable business would subject Best Dealer only to a ban on municipal securities business.
Similarly, a non-dealer municipal advisor that is not a municipal advisor
Best MA is a municipal advisor located in a Midwestern state, and is not a municipal advisor third-party solicitor. On-Site MA is a municipal advisor third-party solicitor located in a western coastal state, State A. Best MA engages On-Site MA to solicit the city school districts of three major municipalities in State A to hire Best MA to provide municipal advisory services for such school districts, including North City School District and South City School District. Dan is an employee and an MAP of On-Site MA. Dan resides in North City. Dan makes a contribution of $240 to an official running for re-election to the school board of South City School District. Dan is not entitled to vote for the candidate. The ME official exercises influence in the selection of dealers, municipal advisors and investment advisers for South City School District matters. As a result of Dan's $240 contribution to the ME official, Best MA, the client of On-Site MA, becomes subject to a ban on engaging in municipal advisory business with South City School District, because Dan's contribution is a triggering contribution and Best MA engaged On-Site MA to solicit South City School District on behalf of Best MA. Because Best MA does not engage in municipal securities business, a ban on applicable business would subject Best MA only to a ban on municipal advisory business.
In addition, as discussed
A non-dealer municipal advisor third-party solicitor would be subject to a ban on municipal advisory business, including advising and soliciting, when a triggering contribution is made by any of the persons described in proposed Rule G-37(b)(i)(C)(1) to any ME official,
Best Dealer is a dealer located in a Midwestern state. Best MA is a municipal advisor located in a Midwestern state, and is not a municipal advisor third-party solicitor. Best IA third-party solicitor located in a western coastal state, State A. Best Dealer engages On-Site MA to solicit three major municipal entities in State A, including North City and South City, to hire Best Dealer to underwrite municipal bonds. Best MA engages On-Site MA to solicit the five largest municipal entities in State A, including North City and South City, to hire Best MA to provide municipal advisory services for such entities. Best IA engages On-Site MA to solicit, in State A, all municipalities with populations over 150,000 people, to retain Best IA for investment advice. Dan is an employee and an MAP of On-Site MA, and resides in North City. Dan makes a contribution of $240 to an ME official of South City, for whom Dan is not entitled to vote. The ME official exercises influence in the selection of dealers, municipal advisors and investment advisers, for South City matters.
The consequences for On-Site MA would be as follows: On-Site MA would be banned from the following business with South City: engaging in any form of municipal advisory business with South City (because municipal advisory business is defined to include solicitation on behalf of dealers, municipal advisors and investment advisers AND other municipal advisory functions), including soliciting South City on behalf of any dealer, including Best Dealer, any third-party municipal advisor, including Best MA, and any investment adviser.
The additional consequences of such contribution would be as follows: The dealer client, Best Dealer, would become subject to a ban on engaging in municipal securities business with South City, because Best Dealer engaged On-Site MA to solicit South City on behalf of Best Dealer (and the ME official receiving the contribution had dealer selection influence); and the municipal advisor client, Best MA, would become subject to a ban on engaging in municipal advisory business (of any type) with South City, because Best MA engaged On-Site MA to solicit South City on behalf of Best MA (and the ME official receiving the contribution had municipal advisor selection influence). However, Best IA, who also engaged On-Site MA to solicit South City (a municipality with a population of over 150,000 people), would not be subject to a ban under proposed amended Rule G-37, because although the ME official receiving the contribution had investment adviser selection influence, the proposed rule change does not extend to investment advisers that are not also dealers or municipal advisors. However, as noted
If a municipal advisor does not also engage in municipal securities business, a ban on applicable business under the proposed rule change would subject the municipal advisor only to a ban on municipal advisory business.
The proposed rule change would treat dealer-municipal advisors as a single economic unit and would subject such firms to an appropriately scoped ban on business. The scope of the ban on business would not be dependent on the particular line of business within the dealer-municipal advisor with which the person or PAC that is the contributor may be associated. Instead, the scope of the ban on business would depend on the type of influence that can be exercised by the ME official to whom the triggering contribution is made. As a result, a dealer-municipal advisor could be subject, based on a single contribution, to a ban on municipal securities business, a ban on municipal advisory business, or both. Further, any of the following entities or persons might trigger a ban on business for a dealer-municipal advisor if the entity or person makes a contribution that is a triggering contribution in the particular facts and circumstances: The dealer-municipal advisor; an MFP or MAP of the dealer-municipal advisor; a PAC controlled by the dealer-municipal advisor or an MFP or an MAP of the dealer-municipal advisor; a municipal advisor third-party solicitor engaged on behalf of the dealer-municipal advisor; an MAP of such municipal advisor third-party solicitor; or a PAC controlled by either such municipal advisor third-party solicitor or an MAP of such municipal advisor third-party solicitor.
In the first scenario, a contribution is made to an ME official with
In the second scenario, a contribution is made to an ME official with
The table below shows the most common persons from whom a contribution could trigger a ban on municipal securities business, a ban on municipal advisory business, or both under proposed amended Rule G-37.
As discussed above, under the 1997 Guidance, a dealer that is subject to a ban on municipal securities business with an issuer is prohibited from engaging in new municipal securities business with that issuer, which includes pre-existing but non-issue-specific contractual undertakings. In such cases, to give the issuer the opportunity to receive the benefit of the work already provided and to find a replacement to complete the work performed by the dealer, as needed, the dealer may—notwithstanding the ban on business—continue to perform its pre-existing but non-issue-specific contractual undertakings subject to an orderly transition to another entity to perform such business.
Proposed Rule G-37(b)(i)(E) would essentially codify this guidance for dealers and extend it to municipal advisors that are not soliciting the municipal entity with which they become subject to a ban on applicable business. Under this provision, a dealer or municipal advisor that is engaging in municipal securities business or municipal advisory business with a municipal entity and, during the period of the engagement, becomes subject to a ban on applicable business, may continue to engage in the otherwise prohibited municipal securities business and/or municipal advisory business solely to allow for an orderly transition to another entity and, where
For municipal advisors, consistent with the existing interpretive guidance applicable to dealers, the orderly transition period would apply only with respect to pre-existing but non-issue-specific contractual undertakings owed to municipal entities, which, as discussed above, are included in “new” municipal advisory business and are subject to a ban. For example, if a municipal advisor enters into a long-term contract with a municipal entity for municipal advisory business (
After carefully considering whether to extend the orderly transition period under the interpretive guidance to municipal advisors, the MSRB determined that it is a necessary and appropriate aspect of the regulatory framework governing the municipal market. Significantly, the MSRB believes that certain aspects of proposed amended Rule G-37 would serve as important bulwarks against potential abuse of the orderly transition period. Public disclosure is a critical aspect of Rule G-37 and under the proposed rule change, municipal advisors would be required to disclose (comparable to the current requirements for dealers) to the MSRB information about their political contributions and the municipal advisory business in which they have engaged.
Proposed amendments to Rule G-37(b)(ii) would consolidate in one provision the types of contributions that do not currently subject a dealer to a ban on applicable business, and would extend the same exclusions to municipal advisors. The first exclusion is for
Currently, the two-year look-back is modified under Rule G-37 in two situations. Under Rule G-37(b)(ii), contributions to an issuer official by an individual that is an MFP solely based on his or her solicitation activities for the dealer are excluded and do not trigger a ban on municipal securities business for the dealer,
Currently, under Rule G-37(b)(iii), contributions by MFPs who have that status solely by virtue of their supervisory or management-level activities, including persons serving on an executive or management committee (
Currently, Rule G-37(c)(i) prohibits a dealer and an MFP of the dealer from soliciting any person or PAC to make any contribution or coordinating any contributions to an issuer official with which the dealer is engaging or is seeking to engage in municipal securities business. The proposed amendments to this subsection would retain this prohibition with respect to dealers and their MFPs and would extend the prohibition to municipal advisors and their MAPs. Further, to ensure a relevant nexus exists between the type of business in which a regulated entity engages or seeks to engage and its solicitation or coordination of any contributions to an ME official with the influence to award such business, proposed subsection (c)(i) would be amended to distinguish contributions based on the type of influence held by the ME official.
Thus, under proposed subsection (c)(i), a dealer and an MFP of the dealer would be prohibited from soliciting any person or PAC to make any contribution, or from coordinating any contributions, to an official of a municipal entity with dealer selection influence with which municipal entity the dealer is engaging, or is seeking to engage, in municipal securities business. Similarly, a municipal advisor and an MAP of the municipal advisor would be prohibited from soliciting any person or PAC to make any contribution, or from coordinating any contributions, to an official of a municipal entity with municipal advisor selection influence with which municipal entity the municipal advisor is engaging, or is seeking to engage, in municipal advisory business. In addition, in light of the nexus that exists between a municipal advisor third-party solicitor's business (to solicit business on behalf of dealers, municipal advisors and investment advisers) and ME officials of every type, the prohibition on soliciting and coordinating contributions would apply, for municipal advisor third-party solicitors, to the solicitation or coordination of contributions to any ME official, if the ME official has municipal advisor selection influence, dealer selection influence or investment adviser selection influence.
Because dealer-municipal advisors engage in both municipal securities business and municipal advisory business, and consistent with the principle that dealer-municipal advisors should be treated as a single economic unit, proposed subsection (c)(i) would not, for dealer-municipal advisors, distinguish a contribution given to an official of a municipal entity with dealer selection influence from one given to an official of a municipal entity with municipal advisor selection influence. Thus, a dealer-municipal advisor, its MFPs, and its MAPs would be prohibited from soliciting any person or PAC to make any contribution or coordinating any contributions to an official of a municipal entity with dealer selection influence or municipal advisor selection influence with which municipal entity the dealer-municipal advisor is engaging or is seeking to engage in municipal securities business or municipal advisory business. If the dealer-municipal advisor is a municipal advisor third-party solicitor, the dealer-municipal advisor and its MAPs would also be prohibited from soliciting or coordinating contributions to an official with investment adviser selection influence.
Currently, Rule G-37(c)(ii) prohibits a dealer and three of the five categories of MFPs as defined, respectively, in current Rule G-37(g)(iv)(A), (B) and (C), from soliciting any person or PAC to make any payment or coordinate any payments to a political party of a state or locality where the dealer is engaging or seeking to engage in municipal securities business. Proposed amendments to this subsection would retain this prohibition with respect to dealers and these categories of MFPs and would extend the prohibitions to municipal advisors and the three analogous categories of MAPs (“municipal advisor representatives,” “municipal advisor solicitors,” and “municipal advisor principals,” as defined, respectively, in proposed Rule G-37(g)(iii)(A), (B) and (C)). To improve the readability of this provision, Rule G-37(c)(ii), as proposed to be amended, would refer to the relevant MFPs and MAPs by their proposed descriptive terms, rather than by cross-references to the relevant definitions.
Rule G-37(d) currently prohibits a dealer and any MFP of the dealer from doing, directly or indirectly, through or by any other person or means, any act which would result in a violation of the ban on municipal securities business or the prohibition on soliciting or coordinating contributions. Proposed amendments to this section would retain this prohibition with respect to dealers and their MFPs and would extend it to municipal advisors and their MAPs.
Currently, Rule G-37(e) contains broad public disclosure requirements to facilitate enforcement of Rule G-37 and to promote public scrutiny of dealers' political contributions and municipal securities business. Under the provision, dealers are required to
The proposed amendments to Rule G-37(e) would retain these disclosure requirements for dealers, except such requirements would apply to contributions to “officials of municipal entities,” which is a potentially broader group of recipients than “officials of an issuer.”
For municipal advisors, the disclosure requirements of proposed amended Rule G-37(e), would be substantially similar to those for dealers, with one exception for municipal advisor third-party solicitors. The proposed amendments to Rule G-37(e)(i)(C) would require municipal advisor third-party solicitors to list on Form G-37 the names of the third parties on behalf of which they solicited business as well as the nature of the business solicited. The proposed amendments to Rule G-37(e)(iv) would require municipal advisors, like dealers, to submit the required disclosures to the Board in electronic form. The MSRB also proposes to incorporate minor, non-substantive changes to section (e) to improve the readability of the section.
Currently, Rule G-37(f) permits dealers to submit additional voluntary disclosures to the Board. The proposed amendments to Rule G-37(f) would make no change in this respect for dealers and would permit municipal advisors also to make voluntary disclosures.
Current Rule G-37(g) sets forth definitions for several terms used in Rule G-37. Proposed amendments to this section (which are not addressed in detail elsewhere in this filing) would add to Rule G-37 new defined terms and would modify existing defined terms in large part to make the appropriate provisions of Rule G-37 applicable to municipal advisors and their associated persons. The first new defined term, “regulated entity,” in proposed Rule G-37(g)(i), would mean “a dealer or municipal advisor,” and the terms “regulated entity,” “dealer” and “municipal advisor” would exclude the entity's associated persons. With the addition of the defined term “regulated entity” current Rule G-37(g)(iii), which distinguishes dealers from their associated persons, would be deleted as unnecessary. The definition of “reportable date of selection” would be amended to apply it to municipal advisors, to slightly reorganize the definition and to relocate it from Rule G-37(g)(xi) to proposed Rule G-37(g)(xviii).
Several of the proposed new defined terms for municipal advisors would be analogous to the defined terms applicable to dealers in current Rule G-37. Proposed Rule G-37(g)(xiv) would define the new term “non-MAP executive officer” regarding the executive officers of a municipal advisor in a manner analogous to the term “non-MFP executive officer” applicable to executive officers of dealers under proposed Rule G-37(g)(xv).
Rule D-8 defines the term “bank dealer” to mean “a municipal securities dealer which is a bank or a separately identifiable department or division of a bank as defined in rule G-1 of the Board.”
The proposed amendments would renumber and relocate a number of definitions in Rule G-37(g) as follows: “bond ballot campaign” would be relocated from subsection (g)(x) to proposed subsection (g)(v); “issuer” would be relocated from subsection (g)(ii) to proposed subsection (g)(vii); “payment” would be relocated from subsection (g)(viii) to proposed subsection (g)(xvii); “municipal securities business” would be relocated from subsection (g)(vii) to proposed subsection (g)(xii); and “contribution” would be relocated from subsection (g)(i) to proposed subsection (g)(vi). With the exception of substituting the term “municipal entity” in place of “issuer” in the definition of the terms “contribution” and “municipal securities business,” the proposed amendments to Rule G-37(g) would not substantively amend the definitions of these terms.
Current Rule G-37(h) provides that a ban on business under the rule arises only from contributions made on or after April 25, 1994 (the original effective date of Rule G-37). Proposed amendments to section (h) would provide that a ban on applicable business under the rule would arise only from contributions made on or after an effective date to be announced by the MSRB in a regulatory notice published no later than two months following SEC approval, which effective date shall be no sooner than six months following publication of the regulatory notice and no later than one year following SEC approval. However, with respect to dealers and dealer-municipal advisors that are currently subject to the requirements of Rule G-37, any ban on municipal securities business that was already triggered before the effective date of the proposed rule change would remain in effect and end according to the provisions of Rule G-37 as in effect at the time of the contribution that triggered the ban.
Rule G-37 currently provides two mechanisms through which a dealer may be exempted from a ban on municipal securities business. First, under current Rule G-37(i), a registered securities association of which a dealer is a member, or another appropriate regulatory agency
• Whether the exemption is consistent with the public interest, the protection of investors and the purposes of the rule;
• whether, prior to the time a triggering contribution was made, the dealer had developed and instituted procedures reasonably designed to ensure compliance with the rule, and had no actual knowledge of the triggering contribution;
• whether the dealer has taken all available steps to cause the contributor to obtain a return of the triggering contribution(s), and has taken other remedial or preventive measures as appropriate under the circumstances, and the nature of such other remedial or preventive measures directed specifically toward the contributor who made the triggering contribution and all employees of the dealer;
• whether, at the time of the triggering contribution, the contributor was an MFP or otherwise an employee of the dealer, or was seeking such employment;
• the timing and amount of the triggering contribution;
• the nature of the election (
• the contributor's apparent intent or motive in making the triggering contribution, as evidenced by the facts and circumstances surrounding the triggering contribution.
The proposed amendments to section (i) would extend its provisions to municipal advisors, including municipal advisor third-party solicitors, and bans on municipal advisory business, on generally analogous terms. The proposed amendments would provide a process for municipal advisors subject to a ban on municipal advisory business to request exemptive relief from such ban on business from a registered securities association of which is it a member or the Commission, or its designee, for all other municipal advisors. Dealer-municipal advisors seeking exemptive relief from a ban on municipal securities business and a ban on municipal advisory business must, for each type of ban, seek relief from the applicable agency or agencies. With respect to dealers, the proposed amendments to section (i) would also make minor, non-substantive changes to improve its readability.
Under the proposed amendments, in determining whether to grant the requested exemptive relief from a ban on municipal advisory business, the relevant agency would be required to consider the factors, with limited modifications, that currently apply when a request for exemptive relief is made by a dealer. The proposed modifications to the factors are limited to those necessary to reflect their application to both dealers and municipal advisors
As previously discussed, under the proposed amendments to Rule G-37(b), a contribution made by an MAP of a municipal advisor third-party solicitor soliciting business for a dealer client or a municipal advisor client would subject both the municipal advisor third-party solicitor and the regulated entity client to a ban on applicable business. Under the proposed amendments to section (i), if either the municipal advisor third-party solicitor or the regulated entity client desired exemptive relief from the applicable ban on business, the entity that desired relief would be required to separately apply for the exemptive relief and independently satisfy the relevant agency that the application should be granted.
Second, under Rule G-37(j)(i), a dealer currently may avail itself of an automatic exemption (
The proposed amendments to section (j) would extend its provisions to all municipal advisors and bans on municipal advisory business. A municipal advisor could avail itself of an automatic exemption from a ban triggered by an MAP of the municipal advisor upon satisfaction of conditions that are the same or analogous
The proposed amendments to Rule G-8 (books and records) and Rule G-9 (preservation of records) would make related changes to those rules based on the proposed amendments to Rule G-37. The proposed amendments to Rule G-8 would add a new paragraph (h)(iii) to impose the same recordkeeping requirements related to political contributions by municipal advisors and their associated persons as currently exist for dealers and their associated persons. With respect to dealers, minor conforming proposed amendments to Rule G-8(a)(xvi) would be incorporated to conform the recordkeeping requirements of the rule to the proposed
The proposed amendments to Rule G-9(h) would generally require municipal advisors to preserve for six years the records required to be made in proposed amended Rule G-8(h)(iii), consistent with the analogous retention requirement in Rule G-9(a) for dealers.
The proposed amendments to Forms G-37 and G-37x would permit the forms to be used by both dealers and municipal advisors to make the disclosures that would be required by proposed amended Rule G-37(e). Dealer-municipal advisors could make all required disclosures on a single Form G-37.
Section 15B(b)(2) of the Exchange Act
Section 15B(b)(2)(C) of the Exchange Act
The MSRB believes that the proposed rule change is consistent with the Act. It would address potential “pay to play” practices by municipal advisors involving corruption or the appearance of corruption. Doing so is consistent with the intent of Congress in granting rulemaking jurisdiction over municipal advisors to the MSRB. As the Commission has recognized, the regulation of municipal advisors and their advisory activities is generally intended to address problems observed with the unregulated conduct of some municipal advisors, including “pay to play” practices.
The proposed amendments to Rule G-37 would subject all municipal advisors, including municipal advisor third-party solicitors, to “pay to play” regulation that is consistent with the MSRB's regulation of dealers.
The proposed rule change is expected to aid municipal entities that choose to engage municipal advisors in connection with their issuance of municipal securities as well as transactions in municipal financial products by promoting higher ethical and professional standards of such advisors and helping to ensure that the selection of such municipal advisors is based on merit and not tainted by
These parties play a valuable role in the municipal securities market, in the course of providing financial and related advice or in underwriting the securities. The mere perception of
Further, the disclosure requirements contained in the proposed rule change will serve to give regulators and the market, including investors, transparency regarding the political contributions of municipal advisors and thereby promote market integrity. The combined effect of the ban on business provisions and the disclosure provisions will serve to reduce the appearance of
Additionally, upon a finding by the Commission that the proposed rule change imposes at least substantially equivalent restrictions on municipal advisors as the IA Pay to Play Rule imposes on investment advisers and that the proposed rule change is consistent with the objectives of the IA Pay to Play Rule, the proposed rule change would serve as a means to permit investment advisers to continue to pay municipal advisors for the solicitation of investment advisory
Section 15B(b)(2)(L)(iv) of the Act
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(L)(iv) of the Exchange Act. While the proposed rule change would affect all municipal advisors, including small municipal advisors, the MSRB believes it is necessary and appropriate to address “pay to play” practices in the municipal market. The MSRB believes that the approach taken under the proposed rule change (which has for more than two decades applied to dealers of diverse sizes) would appropriately accommodate the diversity of the municipal advisor population, including small municipal advisors and sole proprietorships.
The MSRB recognizes that municipal advisors would incur costs to meet the requirements set forth in the proposed rule change. These costs may include additional compliance and recordkeeping costs associated with initially establishing compliance regimes and ongoing compliance, as well as separate legal and compliance fees associated with the triggering of a ban on applicable business or an application for relief from such a ban. Small municipal advisors, however, will necessarily have fewer personnel whose contributions may trigger disclosure obligations or subject the municipal advisory firm to a ban on applicable business under the proposed rule change. Small municipal advisors can also reasonably be expected to have relatively fewer municipal advisory engagements than larger firms and fewer municipal entities with whom they engage in municipal advisory business. Thus, their compliance costs are likely to be significantly lower than relatively larger municipal advisors.
The MSRB also believes that the proposed amendments to Rule G-37(i) regarding application for an exemption from a ban on applicable business and proposed amendments to Rule G-37(j) regarding the automatic exemption from a ban on applicable business provide significant relief to all municipal advisors, including small municipal advisors, from the consequences of an inadvertent triggering contribution. In particular, the automatic exemption provision would provide a regulated entity relief from a ban on applicable business without the need to resort to a formal application for an exemption, which may involve the use of outside legal counsel or compliance professionals.
Additionally, because small municipal advisors can be reasonably expected to employ fewer personnel and/or have fewer engagements, they are likely to have less information to report to the MSRB under the proposed rule change. Further, municipal advisors that meet the standards to file a Form G-37x in lieu of a Form G-37 may avail themselves of relief from all other reporting obligations as long as they continue to meet those standards. Thus, the MSRB believes that the proposed rule change is consistent with the Dodd-Frank Act's provision with respect to burdens that may be imposed on small municipal advisors.
Finally, the MSRB believes that the proposed rule change will allow small municipal advisors to compete based on merit rather than their ability or willingness to make political contributions, which may be a significant benefit relative to the status quo.
The MSRB also believes that the proposed rule change is consistent with Section 15B(b)(2)(G) of the Exchange Act,
The proposed rule change would require, under proposed amendments to Rule G-8, that a municipal advisor make and keep certain records concerning political contributions and the municipal advisory business in which the municipal advisor engages. Proposed amendments to Rule G-9 would require that these records be preserved for a period of at least six years. The MSRB believes that the proposed amendments to Rules G-8 and G-9 related to recordkeeping and records preservation will promote compliance and facilitate enforcement of the proposed amendments to Rule G-37.
Section 15B(b)(2)(C) of the Exchange Act
The Board's Policy on the Use of Economic Analysis in Rulemaking, according to its transitional terms, does not apply to the Board's consideration of the proposed rule change, as the rulemaking process for the proposed rule change began prior to the adoption of the policy. However, the policy can still be used to guide the consideration of the proposed rule change's burden on competition. The MSRB also considered other economic impacts of the proposed rule change and has addressed any comments relevant to these impacts in other sections of this filing.
The Board has evaluated the potential impacts of the proposed rule change, including in comparison to reasonable alternative regulatory approaches, relative to the baseline. The MSRB does not believe that the proposed rule change will impose any additional burdens, relative to the baseline, that are not necessary or appropriate in
“Pay to play” practices may interfere with the process by which municipal advisors or the third-party clients of a municipal advisor third-party solicitor are chosen since the receipt of contributions made by such persons might influence an ME official to award business based, not on merit, but on the contributions received. “Pay to play” practices may also raise artificial barriers to entry and detract from fair competition among municipal advisors and the third-party clients of municipal advisor third-party solicitors.
The MSRB believes that the proposed rule change will make it more likely that municipal advisors (and the third-party clients of a municipal advisor third-party solicitor) will be selected based on merit and cost, rather than on contributions to political officials. By serving to level the playing field upon which municipal advisors compete for business and solicit business for others, the proposed rule change will help curb manipulation of the market for municipal advisory services (and municipal securities business and investment advisory services, to the extent a municipal advisor third-party solicitor is used to obtain or retain such business). Municipal entities are, in turn, more likely to receive higher-quality advice and lower costs in procuring such business and services.
As noted by the SEC in the IA Pay to Play Approval Order, the efficient allocation of advisory business may be enhanced when it is awarded to investment advisers that compete on the basis of price, quality of performance and service and not on the influence of political contributions.
In addition, the proposed rule change subjects municipal advisory activities to a regulatory regime comparable to the regulatory regimes for other entities and persons in the financial services industry, in particular those such as dealers or investment advisers who provide services to municipal entities and are subject to existing “pay to play” rules including Rule G-37 and the IA Pay to Play Rule, respectively.
The MSRB considered whether costs associated with the proposed rule change, relative to the baseline, could affect the competitive landscape. The MSRB recognizes that the compliance, supervisory and recordkeeping requirements associated with the proposed rule change may impose costs and that those costs may disproportionately affect municipal advisors that are not also broker-dealers or that have not otherwise previously been regulated in this area. During the comment period, the MSRB sought information that would support quantitative estimates of these costs, but did not receive any relevant data.
The MSRB believes that the SEC estimates of the costs associated with implementing the IA Pay to Play Rule may provide a guide to the initial, one-time costs that previously unregulated municipal advisors might incur under the proposed rule change. Because even the largest municipal advisory firms are generally smaller than large investment advisory firms, however, the MSRB believes the costs of compliance associated with the proposed rule change will be lower than those associated with the IA Pay to Play Rule.
The MSRB also recognizes that the proposed rule change may cause some firms—either because they have engaged in competition primarily on the basis of political contributions or because of the costs of compliance—to exit the market. Some municipal advisors may consolidate with other municipal advisors in order to benefit from economies of scale (
The MSRB recognizes that small municipal advisors and sole proprietors may not employ full-time compliance staff and that the cost of ensuring compliance with the requirements of the proposed rule change may be proportionally higher for these smaller firms, potentially leading to exit from the industry or consolidation. However, as the SEC recognized in its Order Adopting SEC Final Rule, the market for municipal advisory services is likely to remain competitive despite the potential exit of some municipal advisors (including small entity municipal advisors) or the consolidation of municipal advisors.
The MSRB also believes that the proposed amendments to Rule G-37(i) regarding application for an exemption from a ban on applicable business and proposed amendments to Rule G-37(j) regarding the automatic exemption from a ban on applicable business provide significant relief to all municipal advisors, including small municipal advisors, from the consequences of an inadvertent triggering contribution. In particular, the automatic exemption provision would provide a regulated entity relief from a ban on applicable business without the need to resort to a formal application for an exemption, which may involve the use of outside legal counsel or compliance professionals.
Overall, the MSRB believes that the proposed rule will not, on its own, significantly change the number or concentration of firms offering municipal advisory services and that the increased focus on merit and cost will result in a more competitive market.
The MSRB solicited comment on the potential burdens of the draft amendments to Rules G-37, G-8 and G-9 in a notice requesting comment, which notice incorporated the MSRB's preliminary economic analysis.
The MSRB received thirteen comment letters in response to the Request for Comment.
Most commenters supported to some degree the initiative to extend the policies contained in Rule G-37 to municipal advisors. The Public Interest Groups stated that, by recognizing that municipal advisors may play a key role in underwriting and other municipal funding decisions, the MSRB's expansion of the scope of the rule will help promote the integrity of the contracting process. BDA supported the objective of the draft amendments on the grounds that it would create a level playing field between dealers and municipal advisors. SIFMA maintained that it is important that all market participants are subject to the same rules applicable to political activity, and that the draft amendments significantly advance that interest. NAIPFA supported the draft amendments without qualification. Sanchez noted the draft amendments would address practices that create artificial barriers to competition.
Several commenters expressed support for specific provisions in the draft amendments. The Public Interest Groups and CCP supported replacing the term “official of an issuer” with the new defined term “official of a municipal entity.” CCP further supported the draft amendments' creation of different categories of “officials of a municipal entity.” SIFMA and CCP both expressed support for the purpose for which these categories were created—namely, to ensure that there is a nexus between a contribution and the awarding of business that gives rise to a sufficient risk of corruption, or the appearance thereof, to warrant a ban on applicable business.
Under draft amended Rule G-37(b)(ii)(A), contributions made by an MFP or MAP to an ME official for whom the MFP or MAP is entitled to vote would be
The five commenters that supported greater harmonization agreed that Rule G-37 should be modified to raise the threshold from $250 to $350 for the existing
SIFMA, BDA and C&D supported a $350
CCP and Callcott framed their arguments for a $350
The MSRB is sensitive to the effect of differing “pay to play”
Moreover, as acknowledged by several of the commenters, in
Three of the five commenters that supported greater harmonization also urged the MSRB to add an additional
In contrast, BDA, SIFMA and Sanchez did not advocate establishing a second
As discussed above, the MSRB has determined to extend the current
SIFMA requested that the MSRB revise the “look-back” for MFPs and MAPs, which would provide that a regulated entity would be subject to a ban on applicable business for a period of two years from the making of a triggering contribution, even if such contributions were made by a person before he or she became a “municipal finance representative” or “municipal advisor representative” of the regulated entity. Under SIFMA's proposed revision, a new exclusion would be added to the “look-back” for a contribution made by an individual that, at the time of the contribution, was subject to either the IA Pay to Play Rule or the Swap Dealer Rule if the contribution was made within the
The MSRB has determined not to adopt SIFMA's proposed exclusion. The goal of Rule G-37, and the proposed amendments, is to address
WMFS suggested that the MSRB remove the concept of the different types of ME officials from the draft definition of “official of a municipal entity.”
CCP, by contrast, welcomed the constitutional “tailoring” of the definition of “official of a municipal entity” through the creation of different categories of ME officials, although it suggested the definition was otherwise overbroad and vague. CCP noted that the definition of the term “official of a municipal entity” would extend to losing candidates who ultimately do not play a role in the selection of any dealer or municipal advisor, and, thus pose “little to no danger of pay-to-play corruption.”
The MSRB recognizes that it may be uncommon for an ME official to have the ability to influence the selection of only one type of professional. However, the MSRB has not received any comments that categorically state, much less demonstrate, that there are no such officials. Further, as CCP and other commenters acknowledged, the categories of ME officials are designed to narrowly tailor the rule to ensure that there is a nexus between a contribution made to an ME official and the ability of that ME official to influence the awarding of business to the contributor's firm (or in the case of a municipal advisor third-party solicitor, a regulated entity client or investment adviser client). With regard to CCP's remaining arguments, apart from the creation of the separate categories and the renaming of the “official of an issuer” term to “official of a municipal entity,” all other elements of the longstanding “official of an issuer” definition are unchanged from that found in current Rule G-37. The fact that losing candidates ultimately have no influence in the selection of professionals does not avoid the potential appearance of
SIFMA stated that the cross-ban provision in draft amended Rule G-37(b)(i)(C) (proposed paragraph (b)(i)(D)) should be eliminated. SIFMA argued that the cross-ban provision is overly broad and does not comport with the MSRB's stated goal of requiring a link between a triggering contribution and the business banned by that contribution.
In contrast, The Public Interest Groups supported the cross-ban provision, noting that otherwise permitting contributions from one line of business of a dealer-municipal advisory firm to an ME official that has influence over awarding business to the other line of business within the same firm would invite firms to “create legal fictions for [contributions] between its dealer and advisory services.” Sanchez stated that the cross-ban would be appropriate for dealer-municipal advisors because many individuals within such firms engage in both dealer and municipal advisory activity, and to the extent that they do not, the business lines can be very closely related. Thus, Sanchez concluded, a contribution from persons or entities associated with one line of business of a dealer-municipal advisory firm and the awarding of business to the other line of business within the same firm will usually constitute
The MSRB does not believe that the cross-ban provision is inconsistent with the MSRB's goal of requiring a link between a ban on applicable business and a contribution made to an ME official with the ability to influence the awarding of that type of business. On the contrary, the cross-ban is a special provision narrowly tailored to ensure that the only business a dealer-municipal advisor will be prohibited from engaging in during the two-year period is the business that the ME official to whom the contribution was made had the ability to influence. While the cross-ban would subject a dealer-municipal advisor to a ban of a scope consistent with the type of influence held by the ME official to whom the contribution was made, the scope of the ban would not be dependent on the particular line of business with which the contributor is associated. The MSRB believes that this is the appropriate result given that, even though a dealer-municipal advisor may have two lines of business, the entity should be considered a single economic unit.
Moreover, the goal of the cross-ban is to address actual
Under draft amended Rule G-37(b)(i)(A)(2) and (b)(i)(B)(2) (proposed paragraph (b)(i)(C)(2)), the triggering contributions made to an ME official by a municipal advisor third-party solicitor could trigger a ban on municipal securities business for a dealer that engaged the solicitor, or a ban on municipal advisory business for a municipal advisor that engaged the solicitor. SIFMA opposed these provisions, arguing that they would “turn back a well-established precept that market participants do not control third parties.” If not removed, SIFMA suggested, alternatively, that these provisions impose a ban only when the contribution is made to an ME official with selection influence over the type of business the solicitor was engaged to solicit.
The MSRB does not believe that the imposition of a two-year ban on a dealer client or municipal advisor client under these provisions as a result of political contributions made by an engaged municipal advisor third-party solicitor (or its MAP or a PAC controlled by either the municipal advisor third-party solicitor or an MAP of the municipal advisor third-party solicitor) is inappropriate or onerous. In order to achieve the purposes of the rule, the MSRB believes the two-year ban must be extended to apply to such contributions and has determined not to substantively amend the provision as suggested by SIFMA.
These provisions are narrowly tailored in that they would subject the regulated entity client to a ban on business with a municipal entity only when the regulated entity client engages a municipal advisor third-party solicitor to solicit a municipal entity for business on behalf of the regulated entity. A regulated entity may have a number of means available to help prevent its municipal advisor third-party solicitor from making triggering contributions, including as SIFMA identified, contractual provisions and the training of solicitor personnel. While such actions may not guarantee compliance with the proposed rule change, in such situations, regulated entity clients could possibly avail themselves of an automatic exemption from a ban on business under section (j), as amended by the proposed amendments to Rule G-37. Moreover, if a regulated entity becomes subject to a ban on business in such circumstances, and requests exemptive relief from the relevant agency under proposed Rule G-37(i), the extent to which, prior to the triggering contribution, the regulated entity developed and instituted procedures reasonably designed to ensure compliance with the rule, including procedures designed to ensure the compliance of any engaged municipal advisor third-party solicitor, would be among the factors that would be considered by the agency in determining whether to grant such exemptive relief.
The MSRB understands SIFMA's suggestion that a ban for a regulated entity client should apply only when the municipal advisor third-party solicitor's triggering contribution is made to an ME official with selection influence over the type of business the solicitor was engaged to solicit. However, as with the cross-ban provision, the goal of the municipal advisor third-party solicitor provisions is to address actual
SIFMA suggested that the MSRB narrow the scope of persons that could be a “municipal advisor representative” under draft amended Rule G-37(g)(iii) and thus could trigger a ban on applicable business or disclosure obligations for a municipal advisor. In SIFMA's view, only an associated person of a municipal advisor that is “primarily engaged” in municipal advisory activities should be a municipal advisor representative. By revising the term “municipal advisor representative” in this manner, SIFMA commented, the term would align with the relevant term for dealers and would move closer to the more narrowly defined group of persons subject to “pay to play” regulation under the IA Pay to Play Rule and the Swap Dealer Rule. SIFMA also commented that there is little risk that the political contributions of persons not “primarily engaged in” municipal advisory activities would create an appearance of
The MSRB has determined not to narrow the “municipal advisor representative” definition as suggested by SIFMA. Under the proposed rule change, the term “municipal advisor representative” would cross-reference the MSRB's “municipal advisor representative” definition under its municipal advisor professional qualification rules,
Because they relate to an area of First Amendment protection, many commenters on the draft amendments framed their comments in light of their reading of the applicable constitutional standards. In addition to the policy matters discussed above, commenters expressed concerns as to the application of Rule G-37, as amended by the proposed amendments, to “independent expenditures.” They also urged the consideration of alternatives to the draft amendments and made various other comments, discussed below.
Callcott and CCP stated that the Board should clarify that “independent expenditures” in support of ME officials are permitted under the proposed
The MSRB has previously stated in interpretive guidance under Rule G-37 that MFPs are free to, among other things, solicit votes or other assistance for an issuer official so long as the solicitation does not constitute a solicitation of or coordination of contributions for the issuer official.
CCP stated that the MSRB should consider alternatives to the draft amendments, including tougher penalties, stronger investigative tools, whistleblower protections and providing exemptions for municipal advisory contracts that are put out for bid in a transparent way.
The MSRB has determined not to amend the proposed rule change in response to these comments. As part of its normal rulemaking process and consistent with its policy on economic analysis, the MSRB has considered alternatives to the proposed rule change; however, in each case, it determined that these alternatives would likely fail to achieve the same benefits as the proposed rule change or would achieve the same or substantially similar benefits at likely higher cost.
Callcott interpreted the draft amendments to Rule G-37 to prohibit contributions to political parties, which would in Callcott's view have caused Rule G-37 to be unconstitutional. The proposed amendments to Rule G-37, like current Rule G-37, would not prohibit the making of political contributions to political parties. Rather, proposed amended section (c) would prohibit the solicitation and coordination of payments to a political party of a state or locality where the regulated entity is engaging or seeking to engage in business. Accordingly, the MSRB has determined not to further amend proposed section (c) in response to this comment.
CCP stated that draft amended section (e), the anti-circumvention provision, is insufficiently tailored under the First Amendment. The MSRB believes that this provision, which would be consistent with similar provisions in other federal “pay to play” regulations, including the IA Pay to Play Rule and the Swap Dealer Rule, would be narrowly tailored to prohibit regulated entities and their MFPs and MAPs from, directly or indirectly, doing any act that would result in a violation of sections (b) or (c) of Rule G-37. Accordingly, the MSRB has determined not to make any changes to section (e) in response to this comment.
CCP stated that a number of other terms or provisions under the draft amendments were vague or unclear. Specifically, CCP indicated that the draft amended MFP definition and draft MAP definition would make Rule G-37 less clear and difficult to determine what constitutes a sufficient “control” relationship for purposes of establishing vicarious liability for several categories of MFPs or MAPs. In addition, CCP expressed a belief that the draft amended definition for the term “solicit” was overly broad and vague because it would be difficult to determine when an “indirect communication” constituted a solicitation. CCP also noted that section (c) under draft amended Rule G-37 was overbroad because it would be difficult to determine whether a dealer or municipal advisor was “seeking” to engage in municipal securities business or municipal advisory business with a municipal entity or in a state or locality.
The MSRB disagrees with each of these assertions. The proposed amendments set forth, for municipal advisors generally, based upon their activities, functions and positions, categories that are analogous and substantially similar to those used to describe various types of MFPs under the current rule. The proposed amendments to the definition of municipal finance professional are non-substantive (
Draft amended Rule G-37(b)(i)(E) would provide for a modification of the ending of the two-year ban on applicable business under certain circumstances when business with the municipal entity is ongoing at the time of the triggering contribution. SIFMA stated that this modification should be tailored to apply only to any municipal entity with which a regulated entity is engaged in business at the time of the contribution. SIFMA explained that, according to its reading of the modified two-year ban, in cases where the recipient of a triggering contribution is an ME official of
To provide additional clarity, the MSRB has amended this provision and consolidated it with the provisions pertaining to the orderly transition period in a single paragraph. Under paragraph (b)(i)(E) in the proposed rule change, a triggered ban on applicable business with a given municipal entity will be extended by the duration of the orderly transition period described in proposed Rule G-37(b)(i)(E). The length of a ban on applicable business for one municipal entity with which a regulated entity is banned from engaging in applicable business is unaffected by the length of the ban on applicable business with another municipal entity. This is the case even where the ban on applicable business with both municipal entities stemmed from the same contribution to an ME official with the ability to influence the awarding of business to both municipal entities.
BDA and Sanchez sought clarification as to whether the draft amendments would require dealer-municipal advisors to keep duplicate books and records. BDA specifically expressed concern that the draft amendments would require employees who act as both a municipal advisor and serve as bankers in an underwriter capacity to keep dual records and disclosures. In addition, Sanchez suggested that Rules G-8 and G-9 should be revised to not require separate maintenance of information that is included on Form G-37 and to make clear that the availability of Form G-37 on EMMA would satisfy the maintenance requirement.
The proposed amendments would not require a dealer-municipal advisor to make and keep dual records and disclosures. The MSRB therefore has determined not to amend Rules G-8 and G-9 as suggested by commenters. In addition, as noted in the Request for Comment, dealer-municipal advisors could make all required disclosures on a single Form G-37. Additionally, the proposed amendments to Rules G-8 and G-9 would not prohibit dealer-municipal advisors from making and keeping a single set of the records that would be required under the proposed amendments. Rather, the proposed amendments would provide dealer-municipal advisors with the flexibility to consolidate such records or to keep such records separate as long as they are kept in compliance with all of the terms of Rules G-8 and G-9. If a dealer-municipal advisor were to elect to keep a consolidated set of such records, such records would need to clearly identify whether an MAP or MFP is solely an MAP, solely an MFP, or both.
The MSRB also has determined, at this time, not to further revise Form G-37 and Rules G-8 and G-9 to require the disclosure of much of the information required to be kept under those rules in lieu of separately maintaining such records. Those data are necessary for examiners to examine for compliance with the provisions of Rule G-37 and the MSRB believes that requiring the public disclosure of such information would likely unjustifiably add to, rather than reduce, the compliance burden for regulated entities.
Castle and WMFS both expressed support for regulation to curb “pay to play” practices, but stated that there should be no books, records or filing requirements for municipal advisors that do not make political contributions. To support this approach, WMFS cited the requirement under the Dodd-Frank Act that the Board not impose an unnecessary burden on small municipal advisors.
The MSRB believes that the information that would be required to be reported to the Board on Form G-37, even in the absence of any reportable contributions for the applicable reporting period, is important to
The MSRB seeks to appropriately balance the burden of complying with the proposed rule change's public reporting requirements with the benefit to the public of such disclosure. Moreover, the MSRB is cognizant of the constitutional implications of the proposed rule change, and seeks to narrowly tailor the rule to achieve its stated objectives. At this juncture, the MSRB does not believe that the additional public disclosure suggested by The Public Interest Groups is warranted for the proposed rule change to achieve its objectives.
Sanchez suggested that the MSRB should enhance the searchability of Form G-37 submitted to the Board in furtherance of the Board's stated objective to promote public scrutiny of the contributions made by regulated entities. Sanchez also suggested that the MSRB not allow the submission of paper versions of Form G-37.
The MSRB agrees and proposed subsection (e)(iv) of Rule G-37 would require all Form G-37 submissions to be submitted to the Board in electronic form, thereby eliminating the option to submit paper versions of these forms. The MSRB also plans to set forth in the
ACEC expressed the view that the “look-back” in the draft amendments would create a potential conflict with existing employment law which, ACEC stated, does not favorably view asking an applicant questions during the hiring process that are not directly related to the job. In addition, ACEC stated that the MSRB should provide guidance as to what constitutes an indirect contribution to a trade association PAC. Regarding PACs, The Public Interest Groups expressed concern regarding political giving by PACs that may or may not be controlled by a dealer or an MFP of the dealer. It stated that the current disclosure and reporting apparatus does not provide the appropriate deterrent to prevent circumvention of Rule G-37 through the use of PACs.
While the MSRB is sensitive to the fact that regulated entities may be subject to many regulatory schemes, it does not believe that the look-back, which has existed under Rule G-37 for approximately two decades, would be inconsistent with other areas of law. The proposed rule change merely extends this same concept to municipal advisors. Similarly, the MSRB intends to extend the existing interpretive guidance under Rule G-37 for dealers to municipal advisors on analogous issues. The MSRB believes at this time that there is sufficient guidance regarding contributions to and through PACs as well as circumvention of Rule G-37.
WMFS stated that the MSRB should consider prohibiting the making of contributions to bond ballot campaigns. While the MSRB is sensitive to concerns about bond ballot contributions, the established objective of this rulemaking initiative is to extend the principles embodied in Rule G-37 to municipal advisors, with appropriate modifications to take into account the differences between the regulated entities and the existence of municipal advisor third-party solicitors and dealer-municipal advisors. While bond ballot contributions are not the subject of this initiative, the MSRB continues to review disclosures regarding contributions made to bond ballot campaigns and will separately make any determination whether to engage in further rulemaking in this area.
ACEC requested that the MSRB clarify whether the
ACEC also urged the MSRB to reserve action on the proposed rule change until the Commission has fully clarified the definition of municipal advisory services. The MSRB has determined not to delay this rulemaking initiative. Since July 1, 2014, all municipal advisors, including municipal advisors that are also engineers and do not qualify for an exclusion or exemption under the SEC Final Rule, have been required to comply with the provisions of the SEC Final Rule. They are also subject to a number of MSRB rules, such as Rule G-17, regarding fair dealing, Rule G-44, regarding supervisory and
Anonymous stated that registered investment advisers that are also municipal advisors should be exempt from the proposed rule change because, in its view, such municipal advisors are already subject to stringent political contribution compliance and recordkeeping requirements. The MSRB has determined not to exempt such municipal advisors from the proposed rule change. As discussed
Lastly, ACEC stated that some commercial entities not primarily in the business of providing advisory services related to municipal securities may, nonetheless, be engaged in activities that are regulated (
There were no comments received that were specific to the preliminary economic analysis presented in the Request for Comment nor did commenters provide any data to support an improved quantification of benefits and costs of the rule. Comments about the compliance burdens of specific elements of the draft amendments are discussed above.
SIFMA requested an implementation period of no less than six months from the effective date of the proposed rule change.
In response to this comment, the MSRB has revised section (h) of the draft amendments to Rule G-37 to provide that the prohibitions in proposed amended section (b) of Rule G-37 (regarding the ban on business) would only arise from contributions made on or after an effective date to be announced by the MSRB in a regulatory notice published no later than two months following SEC approval of the proposed rule change. Such effective date shall be no sooner than six months following publication of the regulatory notice and no later than one year following SEC approval of the proposed rule change. This lengthening of the implementation period should mitigate compliance costs and provide sufficient time for municipal advisors to identify the MAPs and MFPs that will be subject to the proposed rule change and for dealers and municipal advisors to modify existing, or adopt new, relevant policies or procedures.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
For the Commission, pursuant to delegated authority.
| 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 |