I. Comments

FHFA invites comments on all aspects of the ANPR, and will develop proposed regulations after taking all comments into consideration. Copies of all comments will be posted on the internet Web site at https://www.fhfa.gov. In addition, copies of all comments received will be available for examination by the public on business days between the hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an appointment to inspect comments, please call the Office of General Counsel at 202-414-6924.

Effective July 30, 2008, the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110-289, 122 Stat. 2654, created FHFA as a new independent agency of the Federal Government, and transferred to FHFA the supervisory and oversight responsibilities of the Office of Federal Housing Enterprise Oversight (OFHEO) over the Enterprises, the supervisory and oversight responsibilities of the Federal Housing Finance Board (Finance Board) over the Banks and the Office of Finance (OF) (which acts as the Banks' fiscal agent) and certain functions of the Department of Housing and Urban Development. See id. at section 1101, 122 Stat. 2661-62. FHFA is responsible for ensuring that the Enterprises and the Banks operate in a safe and sound manner, including that they maintain adequate capital and internal controls, that their activities foster liquid, efficient, competitive and resilient national housing finance markets, and that they carry out their public policy missions through authorized activities. See id. at section 1102, 122 Stat. 2663-64. The Enterprises, the Banks, and the OF continue to operate under regulations promulgated by OFHEO and the Finance Board until such regulations are superseded by regulations issued by FHFA. See id. at sections 1302, 1312, 122 Stat. 2795, 2798.

The Enterprises are chartered by Congress for the purpose of establishing secondary market facilities for residential mortgages. See 12 U.S.C. 1716 et seq.; 12 U.S.C. 1451 et seq. Congress established the Enterprises to provide stability in the secondary mortgage market for residential mortgages, to respond appropriately to the private capital market, to provide ongoing assistance to the secondary market for residential mortgages, and to promote access to mortgage credit throughout the nation. Id.

On September 6, 2008, the Director of FHFA appointed FHFA as conservator of the Enterprises in accordance with the Safety and Soundness Act, as amended by HERA. The Enterprises remain under conservatorship at this time. Although the Enterprises' substantial market presence has been important to restoring market stability, neither company would be capable of serving the mortgage market today without the ongoing financial support provided by the United States Department of Treasury. The Administration has announced its intention to develop and present to Congress a proposal for the future of the nation's housing finance system that will include a proposal for the ultimate resolution of the Enterprises in conservatorship. While reliance on the Treasury Department's backing will continue until legislation produces a final resolution to the Enterprises' future, FHFA is monitoring the activities of the Enterprises to: (a) limit their risk and exposure by avoiding new lines of business; (b) ensure profitability in their new books of business without deterring market participation or hindering market recovery; and (c) minimize losses on the mortgages already on their books.

The twelve Banks are instrumentalities of the United States organized under the Federal Home Loan Bank Act (Bank Act). 1 See 12 U.S.C. 1423, 1432(a). The Banks are cooperatives; only members of a Bank may purchase the capital stock of a Bank, and only members or certain eligible housing associates (such as state housing finance agencies) may obtain access to secured loans, known as advances, or other products provided by a Bank. See 12 U.S.C. 1426(a)(4), 1430(a), 1430(b). Each Bank is managed by its own board of directors and serves the public interest by enhancing the availability of residential credit through its member institutions. See 12 U.S.C. 1427. Any eligible institution (generally a federally insured depository institution or state-regulated insurance company) may become a member of a Bank if it satisfies certain criteria and purchases a specified amount of the Bank's capital stock. See 12 U.S.C. 1424; 12 CFR part 1263.

As government-sponsored enterprises, the Banks are granted certain privileges under federal law. In light of those privileges, the Banks typically can borrow funds at spreads over the rates on U.S. Treasury securities of comparable maturity lower than most other entities. The Banks pass along a portion of their funding advantage to their members—and ultimately to consumers—by providing advances and other financial services at rates that would not otherwise be available to their members. Consolidated obligations (COs), consisting of bonds and discount notes, are the principal funding source for the Banks. The OF issues all COs on behalf of the twelve Banks. Although each Bank is primarily liable for the portion of COs corresponding to the proceeds received by that Bank, each Bank is also jointly and severally liable with the other eleven Banks for the payment of principal and interest on all COs. 12 CFR 966.9.

Section 939A of the recently enacted Dodd-Frank Act requires Federal agencies within one-year to: (i) Review regulations that require the use of an assessment of the credit-worthiness of a security or money market instrument; and (ii) to the extent those regulations contain any references to, or requirements regarding credit ratings, remove such references or requirements. See section 939A, Public Law 111-203, 124 Stat. 1887 (July 21, 2010). In place of such credit-rating based requirements, agencies are instructed to substitute appropriate standards for determining credit-worthiness. The new law further provides that, to the extent feasible, an agency should adopt a uniform standard of credit-worthiness for use in its regulations, taking into account the entities regulated by it and the purposes for which such regulated entities would rely on the credit-worthiness standard. At the conclusion of the review, each agency is required to transmit a report to Congress describing the modifications to its regulations that were made.

A number of regulations applicable to the Enterprises or the Bank System (which were previously adopted by OFHEO or the Finance Board, but remain in effect, or more recently adopted by FHFA) contain specific references to credit ratings issued by NRSROs for purposes of assigning capital requirements or setting investment or counterparty exposure limits. FHFA is issuing this ANPR to help it assess how it can change these regulations and to identify standards that may be appropriate as replacements for credit ratings issued by NRSROs. Federal banking agencies have also issued ANPRs as part of their process to address similar issues with regard to references to credit ratings in their capital regulations and prudential standards. See 75 FR 49423 (Aug. 13, 2010), and 75 FR 52283 (Aug. 25, 2010). The specific FHFA regulations at issue are discussed more fully below.

Section 1201 of HERA requires the Director, when promulgating regulations relating to the Banks, to consider the following differences between the Banks and the Enterprises: cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; and joint and several liability. See section 1201 Public Law 110-289, 122 Stat. 2782-83 ( amending 12 U.S.C. 4513). The Director also may consider any other differences that are deemed appropriate. While the Dodd-Frank Act mandates that each agency try, to the extent feasible, to develop uniform standards of credit-worthiness for use in its regulations in preparing any proposed rules, FHFA also will consider the differences between the Banks and the Enterprises as they relate to the above factors and how such factors may lead to differences between any standards ultimately adopted. To aid it in developing proposed regulations, FHFA requests comments from the public about whether or how differences related to these factors should be reflected in any possible regulations.

The regulations in question can be divided into two broad categories. The first category contains regulations that relate to capital requirements and apply specific capital charges based on NRSRO ratings of financial instruments or counterparties. The second category involves prudential standards and limits that may be applied to a regulated entity or on a regulated entity's investment or other business activities that reference or are otherwise based on credit ratings issued by NRSROs.

The risk-based capital requirements applicable to the Enterprises apply capital charges in part based on reference to credit ratings issued by NRSROs. Soon after placing the Enterprises in conservatorship, FHFA announced that, although it would closely monitor Enterprise capital levels, existing statutory and FHFA-directed regulatory capital requirements would not be binding on the Enterprises during the conservatorship. Even though not currently binding, the regulations for the Enterprises described below are still in effect, and FHFA might need to adopt new risk-based requirements for the Enterprises or their successors in a post-conservatorship environment. Thus, the question of credit-worthiness in applying a risk-based credit charge is relevant in considering risk-based capital requirements.

The current Enterprise risk-based capital regulations set forth detailed criteria for a stress test that is used to estimate losses for an Enterprise over a specific period. Under the requirements, an Enterprise's total capital must be sufficient so that it would remain positive during the entire stress period. See 12 CFR 1750.13. One component of the test, the Counterparty Default component, accounts for the risk of default by credit enhancement and derivative contract counterparties, and by corporate, municipal and mortgage-related securities. 12 CFR part 1750, subpart B, Appendix A, section 3.5. In calculating the Counterparty Default component, the regulations establish five rating categories, and slot counterparties and securities into these categories by reference to ratings issued by an NRSRO for the counterparty or security. The regulations, in turn, specify the maximum reduction in cash flows during the stress period to reflect the risk of default by a counterparty or for a specific security based in part on the assigned ratings category. Id. The reduced cash flows decrease earnings, or increase losses, which then translate to lower equity during the stress test. The difference between equity during the binding month of the stress test and starting equity forms the basis of an Enterprise's risk-based capital requirement.

Similarly, the risk-based capital requirements applicable to the Banks require the Banks to hold risk-based capital sufficient to meet the credit risk capital requirement for all assets, off-balance sheet items, and derivative contracts. See 12 CFR 932.4. The credit risk capital requirement is calculated in large part based on the credit ratings assigned by the NRSROs to a particular counterparty or to a specific financial instrument, and on maturity. Id.

The other area of FHFA regulations that may reference or otherwise be based on credit ratings issued by NRSROs involves prudential standards or limits that may be applied to a regulated entity or to its investment activity. This is especially true for the Banks, for which a number of regulations reference such ratings.

With regard to the Enterprises, the references to credit ratings are found in guidance on non-mortgage liquidity investments set forth in Appendix B to part 1720. 12 CFR part 1720, Appendix B. Specifically, the guidance states that, as a safety and soundness matter, the Enterprises should establish minimum credit standards for any security eligible for purchase, and if such standards involve or cite credit ratings, NRSRO ratings should be used. Id. at section C(3)(c)(i). The policy also provides that sound risk management practices include disclosure about the risk of non-mortgage liquidity investments, including disclosure concerning credit quality or ratings of investments. Id. at section D(1). These provisions, however, unlike many of the requirements that apply to the Banks, do not necessarily require the Enterprises to take or refrain from specific actions based on NRSRO ratings or to use NRSRO ratings for specific purposes and therefore may be outside the scope of section 939A of the Dodd-Frank Act.

There are currently six regulations that apply to the Banks which contain various provisions that reference credit ratings or impose limitations or other requirements on the Banks based on ratings issued by NRSROs. A brief description of these regulations follows.

Bank Capital, 12 CFR part 932. In addition to the specific credit risk capital charge provisions discussed above, other prudential provisions in the part 932 capital regulations reference NRSRO ratings and establish limits on Bank activity based on such ratings. First, a Bank, with the permission of FHFA, is allowed to reduce the operations risk component of its risk-based capital charge if the Bank obtains insurance to cover operations risk from an insurer with a credit rating no lower than the second highest investment grade rating from an NRSRO. 12 CFR 932.6(b)(2). To date, however, no Bank has ever relied on this provision or sought the regulator's approval to reduce its operations risk capital charge by obtaining insurance. The capital provisions also impose limits on a Bank's unsecured credit exposure to a single counterparty and group of affiliated counterparties, and set those limits based on credit ratings issued by an NRSRO. 12 CFR 932.9. The limits become more restrictive as the credit rating declines. 2

Acquired Member Assets, 12 CFR part 955. The acquired member asset regulations authorize Banks to purchase certain mortgage loans from their members, subject to a number of conditions. Among these conditions, is one that requires pools of loans to be credit enhanced by the member to the equivalent of an instrument having at least the fourth highest credit rating from an NRSRO, or such higher rating as the Bank may require. 12 CFR 955.3(a) and (b). The Bank rating must be determined using a methodology that is comparable to one used by an NRSRO, and the Bank must obtain written confirmation from the NRSRO that its methodology is equivalent. Id.; 12 CFR 955.3(b)(4) and (c). In addition, the regulation requires that, to the extent a Bank allows supplemental loan-level mortgage insurance as part of its AMA credit enhancement, such insurance must be from an insurer rated no lower than the second highest credit rating category by an NRSRO. 12 CFR 955.3(b)(1)(ii)(A). These provisions are all meant to assure that the Banks only buy pools of high quality mortgages and to limit the Banks' exposure to credit losses from these pools. 3

Investments, 12 CFR part 956. 4 A number of provisions in the investment regulation limit Bank investments by reference to the rating issued by an NRSRO for a particular instrument. First, the Banks are prohibited from investing in any debt instrument that is rated below investment grade by an NRSRO at the time the investment is made. 12 CFR 956.3(a)(3). Another provision, which sets forth exceptions to a general prohibition on a Bank's investment in mortgages or other whole loans, specifically allows for investment in marketable direct obligations of state, local, or tribal government units or agencies, having at least the second highest credit rating from an NRSRO where the purchase would generate customized terms, necessary liquidity, or favorable pricing for the issuer's funding of housing or community lending. 12 CFR 956.3(a)(4)(iii). As with other prudential requirements, these regulatory provisions are intended to limit a Bank's exposure to credit and other risks, arising from its investment activities. 5

Consolidated Obligations, 12 CFR part 966. The regulations in part 966 governing COs contain a number of references to and requirements based on NRSRO ratings. FHFA already has identified these provisions and sought comment both on potential credit-worthiness standards that could be applied to replace these provisions and on other action FHFA could take with regard to them, when it proposed amending and transferring the regulations in part 966 in conjunction with the recent proposed rule on Bank liabilities. See Proposed Rule: Federal Home Loan Bank Liabilities, 75 FR 68534, 68536-37 (Nov. 8, 2010). FHFA will consider the relevant comments received on the proposed Bank liability rule, along with the comments on this ANPR.

Letters of Credit, 12 CFR part 1269. 6 The regulation provides that a standby letter of credit issued or confirmed by a Bank on behalf of a member to assist the member in facilitating residential housing finance or community lending may be collateralized by obligations of a state or local government unit or agency, if the obligation is rated investment grade by an NRSRO. 12 CFR 1269.2(c)(2).

Office of Finance, 12 CFR part 1273. 7 The regulation assigns to OF the responsibility to manage the Bank System's relationship with NRSROs with regard to NRSRO ratings for COs. Because this provision does not impose a substantive requirement based on credit ratings issued by an NRSRO, but instead only assigns to OF the responsibility to manage the Bank System's relationship with NRSROs in connection with the rating of COs, the provision may be outside the scope of the Dodd-Frank Act.

Using NRSRO ratings in the regulations provided a supposedly objective, and neutral, third-party assessment of the credit risk of particular instruments and counterparties. The ratings also were transparent in that they were readily available to regulators, the regulated entities and the public at large, and information about changes in ratings was quickly made available. The use of NRSRO ratings also helped assure consistency in credit risk capital charges across regulated entities that were subject to the same rules with regard to a particular counterparty or financial instrument. The NRSRO ratings approach was also fairly straightforward to apply and did not create an undue burden on the regulated entities. Ideally, these general principles would carry over to any new approach, but now such principles must be achieved without reference to a third-party ratings system such as those developed by the NRSROs.

Specifically, FHFA believes that any new standard of credit-worthiness should: (i) Distinguish between different levels of credit risk, in an accurate and meaningful manner; (ii) be a transparent approach; (iii) be able to be applied consistently across regulated entities to the extent that they are subject to the same regulatory requirements; (iv) be straightforward and not unduly burdensome to apply; and (v) not be readily subject to manipulation. FHFA recognizes that there may be trade-offs among these principles. For example, an approach that is fairly standard and easy to apply may not sufficiently capture differences between high and low risk exposure and thereby may create perverse investment incentives. On the other hand, an approach that attempts to differentiate levels of credit risk may be complex or burdensome to apply and may not be readily transparent. In consideration of the alternative standards for determining credit-worthiness, we request comments on the following questions.

Question 1: What core principles would be most important in FHFA's development of new standards of credit-worthiness? Which principles are least important to developing robust new standards? Are there principles in addition to those above that should be incorporated into new standards? Do differences in the business models, structures and core mission and activities of the Banks and the Enterprises justify or compel developing approaches that may emphasize different core principles depending on whether the rule applies to the Banks or the Enterprises?

In order for FHFA to eliminate the use of NRSRO ratings in calculating risk-based capital charges for regulated entities, it would need to develop an alternative basis on which it could assess credit risk capital charges. One approach would be to identify objective criteria that could be applied by each regulated entity in order to categorize credit exposures into different “buckets” and assess credit charges accordingly. The criteria could be broadly designated. For example, credit exposures could be divided into government and non-government, secured and un-secured, or other such categories, including maturity. Such a broad approach, however, may not be able to sufficiently and consistently account for difference in riskiness among exposures that fall into the same category.

FHFA could also consider adopting criteria that reference certain financial or other metrics related to the obligor or counterparty. To be meaningful, the criteria would need to account for or bear a reasonable correlation to the potential riskiness of default among different obligors or counterparties. Any criteria would also need to be readily obtainable by both FHFA and the regulated entities if this approach is to be workable.

Question 2: What types of objective criteria could be used to differentiate credit exposures and apply meaningful credit risk capital charges? Should different criteria be used for different broad classes of investments or exposures? Could there be perverse incentives or other “downsides” to this approach? What might be the problems with this approach?

Another approach could be to build on each regulated entity's internal credit review process and allow an entity to assign exposure to various categories and assess risk charges based on qualitative and quantitative standards set by FHFA. For example, FHFA could assign limits or capital requirements based on regulated entities' internal ratings or some modification of such, as reviewed or approved by FHFA. This approach would be more subjective than the alternative discussed above but could allow FHFA to leverage the data collection and analysis already performed by the regulated entities.

Question 3: What qualitative and quantitative standards would FHFA need to set to implement an approach that relied on the regulated entities to generate internal estimates of credit risk exposures? What are the strengths and weaknesses of such an approach? What would be the strengths and weaknesses of having FHFA itself set credit risk capital charges based on its own estimates of risk?

Question 4: In order to apply a meaningful risk-based capital charge, FHFA needs to set forth requirements for the regulated entities to estimate the credit risk of their various exposures. Could an approach be developed that estimates a meaningful risk-based capital charge that avoids requiring a specific credit risk charge or specifying criteria to estimate credit risk? What might such an approach be?

FHFA could follow various approaches in replacing the NRSRO-referenced requirements in the regulations described above. One approach could be to require a regulated entity to analyze and document compliance with certain specific credit-worthiness standards or metrics set forth by FHFA. These standards would need to assure that the investment or activity is not speculative in nature, and instead carries credit risk appropriate for the regulated entity's risk profile and risk management practices. FHFA could also require the regulated entity to consider specific, broader investment criteria that go beyond credit-worthiness considerations in its analysis.

FHFA could also rely on the regulated entity's internal credit assessment process and let the regulated entities decide on what specific investments or exposures may be appropriate. Under this approach, FHFA would likely need to provide regulatory and policy guidance on how any internal credit assessment process is to be structured and to rely heavily on the supervisory process to make sure that the regulated entities are strictly following their own guidelines and are not assuming high levels of credit risk.

Finally, some of the regulations described in this ANPR could be deleted without necessarily exposing the regulated entities to significant risks. At the same time, FHFA could consider other approaches, such as a prohibition on investment in broad categories of instruments or on assumption of particular types of exposures to replace the ratings based requirements.

Question 5: What are the strengths and weaknesses of these various approaches? Are there any existing, objective tools or approaches that could readily replace references to ratings issued by NRSROs in the regulations discussed in this ANPR? Are there other approaches not discussed above that may be appropriate?

Question 6: What specific credit-worthiness or investment criteria should FHFA incorporate into a new regulation, if it decided to adopt such a regulation? For example, should FHFA limit investments by regulated entities to securities that would be eligible investments for money market funds, or to securities with original maturities of one-year or less, or based on other objective criteria? What principles would FHFA need to incorporate into any regulation or policy that was meant to govern a regulated entity's internal credit assessment process?

Question 7: Can any of the current prudential requirements that reference NRSROs or credit ratings be eliminated without compromising FHFA's ability to monitor and promote the safe or sound operations of the regulated entities?

Question 8: Is it important that FHFA's approach to replacing requirements in its regulations that reference credit ratings issued by NRSROs be consistent with that of other financial regulators, especially federal banking agencies?

Question 9: What are some other safeguards or requirements (not necessarily based on credit-worthiness standards) that might provide protections similar to those afforded under FHFA's current regulations that reference ratings issued by NRSROs?

See the “Additional Information” section for information on how to comment on this proposal and how the FAA will handle comments received. The “Additional Information” section also contains related information about the docket, privacy, and the handling of proprietary or confidential business information. In addition, there is information on obtaining copies of related rulemaking documents.

On November 5, 2010, the FAA published Notice No. 10-15, entitled “Safety Management Systems for Part 121 Certificate Holders” (75 FR 68224). Comments to that document were to be received on or before February 3, 2011.

In a letter dated January 14, 2011 the Aeronautical Repair Station Association, Aircraft Electronics Association, Aircraft Owners and Pilots Association, Aviation Suppliers Association, Experimental Aircraft Association, Modification and Replacement Parts Association, National Air Transportation Association, and the National Business Aircraft Association requested that the FAA extend the comment period for Notice No. 10-15 for 90 days. The petitioners requested the extension to allow time to adequately assess the impact of the NPRM and prepare comments.

While the FAA concurs with the petitioners' requests for an extension of the comment period on Notice No. 10-15, it does not support a 90-day extension. The FAA finds that providing an additional 30 days is sufficient for commenters to analyze the NPRM and provide meaningful comment to Notice No. 10-15. The Airline Safety and Federal Aviation Extension Act of 2010 (Pub. L. 111-216) directs the FAA to issue an SMS for part 121 final rule by July 30, 2012. In order to fulfill the final rule requirement of Public Law 111-216, the FAA is working on an accelerated schedule to complete the SMS for part 121 final rule.

Absent unusual circumstances, the FAA does not anticipate any further extension of the comment period for this rulemaking.

In accordance with § 11.47(c) of title 14, Code of Federal Regulations, the FAA has reviewed the petitions made by the Aeronautical Repair Station Association, Aircraft Electronics Association, Aircraft Owners and Pilots Association, Aviation Suppliers Association, Experimental Aircraft Association, Modification and Replacement Parts Association, National Air Transportation Association, and the National Business Aircraft Association for extension of the comment period to Notice No. 10-15. These petitioners have shown a substantive interest in the proposed rule and good cause for the extension. The FAA has determined that extension of the comment period is consistent with the public interest, and that good cause exists for taking this action.

Accordingly, the comment period for Notice No. 10-15 is extended until March 7, 2011.

The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. The agency also invites comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the proposals in this document. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit only one time.

The FAA will file in the docket all comments it receives, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, the FAA will consider all comments it receives on or before the closing date for comments. The FAA will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. The agency may change this proposal in light of the comments it receives.

Proprietary or Confidential Business Information: Do not file proprietary or confidential business information in the docket. Such information must be sent or delivered directly to the person identified in the FOR FURTHER INFORMATION CONTACT section of this document, and marked as proprietary or confidential. If submitting information on a disk or CD-ROM, mark the outside of the disk or CD-ROM, and identify electronically within the disk or CD-ROM the specific information that is proprietary or confidential.

Under 14 CFR 11.35(b), when the FAA is aware of proprietary information filed with a comment, the agency does not place it in the docket. It is held in a separate file to which the public does not have access, and the FAA places a note in the docket that it has received it. If the FAA receives a request to examine or copy this information, it treats it as any other request under the Freedom of Information Act (5 U.S.C. 552). The FAA processes such a request under Department of Transportation procedures found in 49 CFR part 7.

An electronic copy of rulemaking documents may be obtained from the Internet by—

1. Searching the Federal eRulemaking Portal ( http://www.regulations.gov );

2. Visiting the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies or

3. Accessing the Government Printing Office's Web page at http://www.gpoaccess.gov/fr/index.html.

Copies may also be obtained by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Commenters must identify the docket or notice number of this rulemaking.

All documents the FAA considered in developing this proposed rule, including economic analyses and technical reports, may be accessed from the Internet through the Federal eRulemaking Portal referenced in item (1) above.

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2011-0088; Directorate Identifier 2010-CE-072-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

The AGÊNCIA NACIONAL DE AVIAÇÃO CIVIL—BRAZIL (ANAC), which is the aviation authority for Brazil, has issued AD No.: 2010-11-01, dated December 20, 2010 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

EMBRAER has issued PHENOM Service Bulletin SB No.: 500-27-0006, dated September 2, 2010, and PHENOM Service Bulletin SB No.: 500-27-0006, Revision No.: 01, dated November 29, 2010. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a NOTE within the proposed AD.

We estimate that this proposed AD will affect 89 products of U.S. registry. We also estimate that it would take about 7.5 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $1,550 per product.

Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $194,687.50, or $2,187.50 per product.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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.

For the reasons discussed above, I certify this proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2010-1169/Airspace Docket No. 10-AGL-24.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office ( see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking (202) 267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), part 71 by modifying Class E airspace extending upward from 700 feet above the surface for standard instrument approach procedures at Cable Union Airport, Cable Union, WI. Airspace reconfiguration is necessary due to the decommissioning of the Mosby NDB and the cancellation of the NDB approach. Geographic coordinates would also be adjusted in accordance with the FAA's Aeronautical Products. Controlled airspace is necessary for the safety and management of IFR operations at the airport.

Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify controlled airspace at Cable Union Airport, Cable Union, WI.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2010-1026/Airspace Docket No. 10-AGL-14.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office ( see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking 202-267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), Part 71 by adding additional Class E airspace extending upward from 700 feet above the surface for a new COPTER RNAV (POINT-IN-SPACE) standard instrument approach procedure at Bedford Medical Center Heliport, Bedford, IN. Controlled airspace is needed for the safety and management of IFR operations at the airport.

Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would add additional controlled airspace at Bedford Medical Center Heliport, Bedford, IN.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR Part 71 as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2010-1034/Airspace Docket No. 10-AGL-22.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office ( see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRM's should contact the FAA's Office of Rulemaking 202-267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), Part 71 by adding Class E airspace extending upward from 700 feet above the surface for a new COPTER RNAV (POINT-IN-SPACE) SIAP at Union Hospital Heliport, Terre Haute, IN. Controlled airspace is needed for the safety and management of IFR operations. This action also would change Hulman Regional Airport to Terre Haute International Airport-Hulman Field, Terre Haute, IN, and adjust the geographic coordinates to coincide with the FAA's Aeronautical Products.

Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would add controlled airspace at Union Hospital Heliport, Terre Haute, IN.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2010-0877/Airspace Docket No. 10-ASW-13.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office ( see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking 202-267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), part 71 by adding Class E airspace extending upward from 700 feet above the surface for standard instrument approach procedures at Faith Ranch Airport, Carrizo Springs, TX. Controlled airspace is needed for the safety and management of IFR operations at the airport.

Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would add controlled airspace at Faith Ranch Airport, Carrizo Springs, TX.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2010-1239/Airspace Docket No. 10-ASW-17.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office ( see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking (202) 267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), part 71 by amending Class E airspace extending upward from 700 feet above the surface to accommodate new standard instrument approach procedures at Raton Municipal Airport/Crews Field, Raton, NM. Controlled airspace is needed for the safety and management of IFR operations at the airport.

Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010 and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would establish controlled airspace at Raton Municipal Airport/Crews Field, Raton, NM.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2010-1027/Airspace Docket No. 10-AGL-15.” The postcard will be date/time stamped and returned to the commenter.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office ( see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Central Service Center, 2601 Meacham Blvd., Fort Worth, TX 76137.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking 202-267-9677, to request a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

This action proposes to amend Title 14, Code of Federal Regulations (14 CFR), Part 71 by adding Class E airspace extending upward from 700 feet above the surface for new COPTER RNAV (POINT-IN-SPACE) standard instrument approach procedures at Clarian North Medical Center Heliport, Carmel, IN, and Methodist Hospital of Indiana Heliport, Indianapolis, IN. Controlled airspace is needed for the safety and management of IFR operations at the heliports.

Class E airspace areas are published in Paragraph 6005 of FAA Order 7400.9U, dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document would be published subsequently in the Order.

The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would add controlled airspace at Clarian North Medical Center Heliport, Carmel, IN, and Methodist Hospital of Indiana Heliport, Indianapolis, IN.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

We are requesting public comment on proposed amendments to Rule 144(a)(3)(viii), 1 Rule 155(a), 2 Rule 215, 3 and Rule 501(a)(5)  4 of Regulation D  5 of our general rules under the Securities Act of 1933 (“Securities Act”);  6 Rule 500(a)(1)  7 of our Securities Act form rules; Form D  8 under the Securities Act; Rule 17j-1(a)(8)  9 under the Investment Company Act of 1940;  10 and Rule 204A-1(e)(7) 11 under the Investment Advisers Act of 1940. 12

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) became law on July 21, 2010. 13 Among other things, the Dodd-Frank Act changed certain legal requirements governing private and other limited offers and sales of securities without registration under the Securities Act.

Section 413(a) of the Dodd-Frank Act requires us to adjust the net worth standards for accredited investors in our rules under the Securities Act. 14 These standards delineate investors to whom issuers may sell securities in specified private and other limited offerings without registration of the offering under the Securities Act. The Dodd-Frank Act requires us to adjust the net worth standards in these rules that apply to a natural person individually, or jointly with the spouse of that person, to “more than $1,000,000 * * * excluding the value of the primary residence of such natural person.”  15 Previously, these standards required a minimum net worth of more than $1,000,000, but permitted the primary residence to be included in calculating net worth. 16 Under Section 413(a), the change to remove the value of the primary residence from the net worth calculation became effective upon enactment of the Dodd-Frank Act.

In addition, Section 413(b) specifically authorizes us to undertake a review of the definition of the term “accredited investor” as it applies to natural persons, and requires us to undertake a review of the definition “in its entirety” every four years, beginning four years after enactment of the Dodd-Frank Act. We are also authorized to engage in rulemaking to make adjustments to the definition after each such review. We are not proposing to make revisions to the definitions of “accredited investor” that are not required by the Dodd-Frank Act at this time, but may consider doing so in future rulemaking. Section 415 of the Dodd-Frank Act requires the Comptroller General of the United States to conduct a “Study and Report on Accredited Investors” examining “the appropriate criteria for determining the financial thresholds or other criteria needed to qualify for accredited investor status and eligibility to invest in private funds.”  17 The study is due three years after enactment of the legislation. We expect that the results of this study will inform any future rulemaking in this area that takes place after the study is completed. 18

Section 944 of the Dodd-Frank Act deleted former Section 4(5) of the Securities Act and renumbered former Section 4(6) as Section 4(5). 19 Former Section 4(6) provides an exemption from the registration requirements of the Securities Act for certain limited offerings to accredited investors if there is no advertising or public solicitation by the issuer. Our proposals include technical corrections to cross-references necessitated by this change. 20

As discussed above, Section 413(a) of the Dodd-Frank Act requires us to adjust the net worth standards for an accredited investor in our Securities Act rules that apply to any natural person individually, or jointly with the spouse of that person, to “more than $1,000,000 * * * excluding the value of the primary residence of such natural person.” Previously, these standards required a minimum net worth of more than $1,000,000, but permitted the primary residence to be included in calculating net worth. The relevant rules are Securities Act Rules 501 and 215. 21

Rule 501 sets the standards for accredited investor status under certain exemptive provisions for private and other limited offerings under Regulation D. Rule 215 defines the term “accredited investor” under Section 2(a)(15) of the Securities Act. 22 Section 2(a)(15) and Rule 215 set the standards for accredited investor status under Section 4(5) of the Securities Act, formerly Section 4(6). 23 While Regulation D is frequently relied upon, 24 exclusive reliance on Section 4(5) is rare. 25

Neither the Securities Act nor our rules promulgated under the Securities Act define the term “net worth.” The conventional or commonly understood meaning of the term is the difference between the value of a person's assets and the value of the person's liabilities. 26

The proposed amendments would set the same standard under both Rule 501 and Rule 215 for individuals to qualify as accredited investors on the basis of net worth, either individually or with their spouses. 27 The amendments would implement Section 413(a) by adding to the relevant rules the language from Section 413(a)—“excluding the value of the primary residence of such natural person”—after the requirement that the investor's net worth “exceeds $1,000,000” currently in the rules.

In addition, our proposed amendments would add, after the Dodd-Frank statutory language, the phrase “calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property.”As so amended, the accredited investor net worth standards in the relevant rules would define as an accredited investor:

The purpose of adding the phrase introduced by the words “calculated by” is to clarify that net worth is calculated by excluding only the investor's net equity in the primary residence. 28

We believe this approach is appropriate because it is consistent with, and advances the regulatory purposes of, Section 413(a). It reduces the net worth measure by the amount or “value” that the primary residence contributed to the investor's net worth before enactment of Section 413(a). Consequently, it removes the value of the primary residence from net worth without reducing net worth by more than the amount contributed by the residence before the amendment. 29

We note that some of our existing rules follow an approach similar to our proposal in calculating net worth. For example, Rule 701 under Regulation R, which provides for the exclusion of the value of a person's primary residence in applying a net worth standard, provides for the exclusion of “associated liabilities,” such as mortgages on the property. 30

Under our proposed amendments, if an investor with a net worth of $2 million (calculated in the conventional manner by subtracting from the investor's total assets, including primary residence, the investor's total liabilities, including indebtedness secured by the residence) has a primary residence with an estimated fair market value of $1.2 million and a mortgage loan of $800,000, the investor's net worth for purposes of the new accredited investor standard would be $1.6 million. Before enactment of Section 413(a), the primary residence would have contributed a net amount of $400,000 to the investor's net worth for purposes of the accredited investor net worth standard—the value of the primary residence ($1.2 million) less the mortgage loan ($800,000). Under the proposed rule, exclusion of the value of the primary residence would reduce the investor's net worth by the same amount of $400,000.

We believe our approach is preferable to possible alternative interpretations. One alternative interpretation, excluding the fair market value of the residence without netting out the secured indebtedness, would reduce the net worth of any investor who has a mortgage by more than the amount that the primary residence contributed to the investor's net worth before enactment of Section 413(a). In the example above, if the new standard did not allow exclusion of the associated indebtedness, removal of the primary residence would reduce the investor's net worth by $1.2 million, for a revised net worth of $800,000, since the entire fair market value of the house ($1.2 million) would be subtracted from the investor's net worth of $2 million and the $800,000 mortgage loan would still be included as a liability in the calculation.

We believe that following this alternative approach and reducing the net worth by the value of the primary residence without excluding associated indebtedness would not accord with the manner in which net worth was determined before enactment of Section 413(a). 31 Absent legislative history suggesting Section 413(a) was clearly intended to be implemented in that fashion, we believe our proposed approach is appropriate and consistent with the purpose of Section 413(a)—to remove the “value of the primary residence” from the calculation of net worth for accredited investor determinations. 32

Under our proposed amendments, indebtedness secured by the primary residence would be netted against the value of the primary residence only up to the fair market value of the property. For example, if an investor with a net worth of $2 million has a primary residence with an estimated fair market value of $600,000 and secured indebtedness of $800,000, a $600,000 portion of the secured indebtedness would be netted against the entire $600,000 value of the house, so the investor's net worth for purposes of the new accredited investor standard would remain at $2 million. The $200,000 in secured indebtedness in excess of the value of the property would already have been accounted for (i.e., subtracted from the value of other assets) in determining the investor's net worth.

In comparison, another possible interpretation of Section 413(a) would be to exclude from net worth both the fair market value of the primary residence and all indebtedness secured by the primary residence, regardless of whether the indebtedness exceeds the fair market value of the property. This alternative interpretation is the same as our proposal when the value of the property exceeds the secured indebtedness, but provides a different result if the amount of secured debt exceeds the value of the property ( i.e., the case of an underwater mortgage). For example, under this interpretation, if an investor with a net worth of $2 million has a primary residence with an estimated fair market value of $600,000 and a mortgage loan of $800,000 and no other secured indebtedness, the investor's net worth for purposes of the new accredited investor standard would be $2,200,000. Net worth is effectively increased over the conventional net worth calculation by $200,000 (the amount the underwater mortgage exceeds the value of the property). We do not believe, however, that it would be appropriate for us to implement Section 413(a) in a way that results in increased net worth (compared to a conventional calculation) for investors with underwater mortgages.

As noted above, the requirement to exclude the value of the primary residence became operative when the statute was enacted. Therefore, we are not making any special provision for the transition to the new requirement. We are nevertheless specifically requesting comment below on whether some transition provisions would be appropriate.

We considered a number of issues described below, as to which the proposed amendments reflect our preliminary determinations. These issues are the subject of specific requests for comment at the end of this section.

Defining “Primary Residence.” We considered proposing amendments that would have defined the term “primary residence” for purposes of the rules we are amending. While we are soliciting comment on whether a definition should be added to the rule, the proposal does not contain a definition, consistent with our past policies in this area, 33 and in an attempt to avoid unnecessary complexity. 34

Issuers and investors should be able to use the commonly understood meaning of “primary residence”—the home where a person lives most of the time. 35 If additional analysis is needed under complex or unusual circumstances, helpful guidance may be found in rules that apply in other contexts, such as income tax rules and rules that apply when acquiring a mortgage loan for a primary residence, which often bears a lower interest rate than other mortgage loans. 36

Proceeds of Debt Secured by Primary Residence Incurred to Invest in Securities. The North American Securities Administrators Association (“NASAA”) has recommended that we not permit the exclusion of debt secured by a primary residence from the calculation of net worth if proceeds of the debt are used to invest in securities. 37 NASAA is concerned that, in the absence of such a rule, an “unscrupulous salesperson might encourage a person with a significant amount of equity in the person's home, which is not uncommon for older investors, to take out a mortgage on the residence in order to manipulate their status under the accredited investor test and to use the proceeds to invest in what would otherwise be unsuitable private placement securities.”  38 We agree that such actions would raise serious concerns under the federal securities laws. If broker-dealer sales personnel engage in this type of activity, their conduct can be addressed under the standards governing broker-dealer sales practices. 39 However, we preliminarily do not believe that the potential for inappropriate sales practices, whether by issuers or by broker-dealers, necessitates adding significant complexity to the calculation of net worth. As noted above, Regulation D is designed to be relatively straightforward to apply, and we are concerned that a rule that attempts to trace the use of mortgage or home equity loan proceeds and to distinguish between permissible and impermissible uses of proceeds would introduce undue complexity into Regulation D. We request public comment on this preliminary judgment below.

We also are soliciting comment on whether the proposed amendments should contain a timing provision in order to prevent investors from inflating their net worth by purchasing assets with the proceeds of indebtedness secured by their homes with the intent to qualify as accredited investors and purchase Regulation D securities. For example, the proposed amendments could provide that the net worth calculation must be as of a date 30 or 60 days before the sale of the securities, as well as at the time of sale. Because we have some concern that this could complicate issuers' and investors' calculations, particularly as the date of the sale may not be known sufficiently in advance, we are not proposing such a timing provision, but request comment on this preliminary judgment.

Transition and Other Rules on Subsequent Investments. We are not proposing any special rules for transition to the new accredited investor net worth standards, since these new standards were effective upon enactment of the Dodd-Frank Act. Under the current rules, a company or fund is not permitted to treat an investor as accredited if the investor subsequently loses that status, even if the investor has previously invested in the company or fund at a time when it satisfied the accredited investor standard. Investors must satisfy the applicable accredited investor income or net worth standard in effect at the time of every exempt sale of securities to the investor that is made in reliance upon the investor's status as such. The proposed amendments would not change this situation.

We nevertheless are seeking comment below on whether some transition and other rules might be appropriate to facilitate subsequent investments by an investor who previously qualified as accredited but was disqualified by the change effected by the Dodd-Frank Act. For example, an investor that qualified as an accredited investor in a previous sale under Regulation D before enactment of the Dodd-Frank Act may wish to invest in the same company or fund in order to retain its proportionate interest in the company or fund or to exercise rights that have arisen because of that interest. 40 Or a company may wish to make a rights offering to current investors who invested as accredited investors. In this case, the company may not wish to be subject to the additional information requirements it may incur under Regulation D if it offers and sells securities to non-accredited investors, 41 and the company may be precluded from making the offering if the number of non-accredited investors exceeds the limit of 35 non-accredited investors imposed in Rule 505 and Rule 506 offerings. In some of these cases, the investor may have spent a substantial amount of time and money performing due diligence on the company or fund before his or her previous investments and may be familiar with the issuer as an existing investor. Under these circumstances, some have argued that the investor should be able to invest again as an accredited investor even if the investor does not satisfy the standards applicable at the time of the subsequent investment. 42

1. Should the value of the residence be calculated by netting out the debt secured by the residence, as proposed? Or would it be more appropriate to exclude the entire fair market value of the residence from net worth, without netting out any associated debt?

2. Would it be more appropriate to substitute the word “equity” for the word “value” when referring to the primary residence in our accredited investor net worth standards?

3. Should we interpret Section 413(a) to exclude from the net worth calculation both the fair market value of the primary residence and all indebtedness secured by the primary residence, regardless of whether such indebtedness exceeds the fair market value of the property?

4. Is another interpretation of Section 413(a) superior to those we discussed?

5. Should we define the term “primary residence” for purposes of our accredited investor net worth rules? If we define the term, should we use a definition under the federal income tax code? If so, should we also incorporate into our definition a reference to guidelines issued under the federal income tax code? Alternatively, should we define “primary residence” as the commonly understood meaning of the term—the home where a person lives most of the time? What alternative definitions would you recommend? For example, should we define the term by listing several factors to consider? Would the factors from the IRS publication listed in note 35 be the appropriate factors, or are there different factors that should be included?

6. Should we require inclusion of debt secured by a primary residence in our proposed accredited investor net worth standard if proceeds of the debt are used to invest in securities? How would these proceeds be traced? Would companies and their prospective investors find this standard workable? Should distinctions be made among different kinds of securities? Are there other assets besides securities that should be taken into account?

7. Should the rule provide that the calculation of net worth must be made as of a specified date before the sale of securities under Regulation D, for example, 30, 60 or 90 days, as well as at the time of sale? If not, would investors be likely to inflate their net worth by borrowing against their homes to attain accredited investor status? If we required that the net worth calculation be made a significant period of time in advance of the sale, would such a requirement make the calculation unduly complex or otherwise make exempt offerings to accredited investors less useful for issuers?

8. Issuers and investors have calculated net worth under the Regulation D accredited investor standards for many years without specific instructions in the rules on how the calculation should be performed. Would guidance in the rules on how to calculate net worth, in addition to the new standards governing valuing the primary residence and treating related mortgage debt, be helpful? For example, should we adopt rules specifying what should be included as assets and debt, and how various kinds of assets should be valued? If so, what additional rules would be appropriate?

9. Should we adopt any transition or other rules providing that an investor who previously qualified as an accredited investor before enactment of Section 413(a), or adoption of the proposed amendments, may continue to qualify as such for purposes of subsequent or “follow-on” investments, such as investments to protect its proportionate interest in a company or fund or to exercise rights that arise because of that interest, or would that be inconsistent with the purposes of Section 413(a)? If we should adopt such an approach, are there other types of investments that should qualify for such treatment? Would investors' ability to protect their then-existing investments be inappropriately adversely affected if we did not provide such treatment? Would issuers' ability to raise capital be inappropriately impeded if we did not provide such treatment? If we did this, should we limit the amount of permissible follow-on investments, such as limiting them to the amount necessary to protect the investor from dilution? What conditions should we place on qualifying for such treatment? Is this unnecessary because the Section 4(2) private placement exemption may be available for sales to such an existing investor? Instead, should we provide that an investor who previously qualified as an accredited investor, but no longer qualifies as a result of Section 413(a), would not count towards the 35 non-accredited investor limitation of Rules 505(b) and 506(b)  43 for offerings by issuers in which the investor held investments at the time the Dodd-Frank Act was enacted?

In order to avoid confusion, we are proposing to change the reference currently in Rule 501(e)(1)(i) of Regulation D to “principal residence” so that it reads “primary residence” and conforms to the language we are adding to Rule 501 to implement Section 413(a) of the Dodd-Frank Act. We believe the terms are synonymous and should read the same. 44

Also to avoid confusion, we propose to revise the references to former Securities Act Section 4(6) in Form D and several of our rules to refer to Section 4(5), as former Section 4(6) was renumbered by Section 944(a)(2) of the Dodd-Frank Act. Specifically, we propose to amend Rule 144(a)(3)(viii) (definition of “restricted securities”) and Rule 155(a) (integration of abandoned offerings) of the general Securities Act rules; Rule 500(a)(1) of the Securities Act form rules; Form D under the Securities Act; Rule 17j-1(a)(8) (personal investment activities of investment company personnel) under the Investment Company Act, and Rule 204A-1(e)(7) (investment adviser codes of ethics) under the Investment Advisers Act.

We are also removing the authority citation preceding the Preliminary Notes to Regulation D.

We request comment, both specific and general, on each component of the proposals. We request and encourage any interested person to submit comments regarding:

• The proposals that are the subject of this release; and

• Other matters that may have an effect on the proposals contained in this release.

Comment is solicited from the point of view of both investors and issuers, as well as of capital formation facilitators, such as broker-dealers, and other regulatory bodies, such as state securities regulators. Any interested person wishing to submit written comments on any aspect of the proposal is requested to do so.

The proposed amendments do not contain a “collection of information” requirement within the meaning of the Paperwork Reduction Act of 1995. 45 Accordingly, the Paperwork Reduction Act is not applicable.

As discussed above, we are proposing amendments to the accredited investor standards in our rules under the Securities Act to reflect the requirements of Section 413(a) of the Dodd-Frank Act.

Section 413(a) of the Dodd-Frank Act requires the definitions of “accredited investor” in the Securities Act rules to exclude the value of a person's primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of $1 million. Under the previous standard, individuals qualified as accredited investors if they had a net worth of more than $1 million, including the value of the primary residence. The substantive change to the net worth standards was effective by operation of the Dodd-Frank Act upon enactment; however, Section 413 also requires us to adjust the accredited investor definitions in our Securities Act rules to reflect the new standard. We therefore propose to revise Securities Act Rule 501(a)(5) of Regulation D and Securities Act Rule 215(e) to reflect the new standard.

Our proposed revisions go beyond the minimum language necessary to reflect the new standard by providing guidance on how to exclude the value of the primary residence from the net worth calculation. This language would explain that the value of the primary residence would be “calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property.”

Our analysis here focuses on the costs and benefits to the economy of including our proposed explanatory language, as compared to the alternatives discussed, rather than the costs and benefits of the new heightened accredited investor net worth standard, which was mandated by Congress in Section 413(a) of the Dodd-Frank Act.

The language we propose reflects our exercise of discretion in choosing one interpretation of the statutory language set forth in Section 413(a) over two other possible interpretations. These two other interpretations of the Section 413(a) language are: (1) Excluding from net worth the fair market value of the primary residence, without netting out indebtedness secured by the primary residence; and (2) excluding from net worth the fair market value of the primary residence and all indebtedness secured by the primary residence, regardless of whether it exceeds the fair market value of the residence.

We are also proposing technical changes to Form D and a number of rules to conform them to the Dodd-Frank Act, in all but one instance to revise cross-references to former Section 4(6) of the Securities Act, which was renumbered Section 4(5) in Section 944 of the Dodd-Frank Act.

We have identified certain benefits and costs that may result from the proposed explanatory language. We encourage the public to identify, discuss, analyze and supply relevant data regarding these or any additional benefits and costs in comment letters on these proposed amendments.

We preliminarily believe the proposed explanatory language provides the most appropriate interpretation of the words of Section 413(a). The proposed explanatory language would result in the following benefits:

• We believe the proposed amendments most accurately reflect the manner in which net worth has conventionally been determined and understood. We believe investors and issuers would benefit from implementing rules that are easy to understand and consistent with conventional net worth calculation concepts. 46

• The interpretation reflected in the proposed amendments would result in a smaller reduction in the pool of accredited investors than the first alternative interpretation. 47 To the extent that exempt offerings to accredited investors are less costly for issuers to complete than registered offerings, a larger pool of accredited investors that may participate in these offerings could result in cost savings for issuers conducting these offerings.

• Limiting the amount of debt secured by the primary residence that may be excluded from net worth to the estimated fair market value of the property, as proposed, would limit investors' incentives to incur indebtedness secured by their primary residence in an amount greater than the value of their property. This result is preferable to an alternative possible interpretation of Section 413(a) that would allow investors to exclude both the fair market value of the property and all indebtedness secured by the property, regardless of whether such indebtedness exceeded the fair market value of their property. Under this alternative interpretation, investors with underwater mortgages would have a higher net worth than they would under a conventional calculation, since all such indebtedness would be excluded in determining whether they qualify as accredited investors on the basis of their net worth. In contrast, under our proposal, the investor's net worth would continue to be reduced to reflect any liability in the amount of any shortfall between the mortgage indebtedness and the estimated fair market value of the property.

Like our analysis of the benefits, our analysis of the costs focuses on the costs attributable to our proposed language on how to calculate the “value of the primary residence” to be excluded from the net worth calculation. Many of the costs of our proposal are dependent on a number of factors, but may include the following:

• The proposed amendments could encourage investors to obtain indebtedness secured by their primary residence up to the estimated fair market value of the property with the primary motive to inflate their net worth in order to satisfy the new heightened accredited investor net worth standard in Section 413(a) by purchasing assets unrelated to their home, such as stocks, bonds, cars, etc. The net effect would be to increase net worth under the rule, since these assets, unrelated to the home, would be included in their net worth calculation, but the indebtedness secured by the primary residence to acquire these assets would be excluded from the net worth calculation under our proposed amendments. 48

• The proposed approach would require that an investor's net worth reflect the amount that the investor's secured indebtedness exceeds the estimated fair market value of the property. While the 2007 Federal Reserve Board Survey of Consumer Finances does not indicate that there was any difference in the number of households that would qualify under the two standards, 49 given recent downward trends in real estate values, our proposed approach could result in a smaller pool of eligible accredited investors than if we implemented an alternative approach that would exclude all indebtedness secured by the primary residence. This could result in increased costs for companies and funds that are seeking accredited investors to participate in their exempt offerings.

• The proposed approach involves more complex calculations than the two alternative possible approaches we have identified. The proposed approach involves estimating the fair market value of the investor's primary residence, subtracting the indebtedness secured by the residence, and subtracting the difference or net amount from the investor's net worth calculation. Both of the alternative net worth calculations, however, could be performed merely by ignoring the primary residence as an asset in determining the net worth amount, and in the case of the second alternative interpretation also ignoring the indebtedness secured by the primary residence.

We solicit comments on the costs and benefits of the proposed amendments. We request your views on the costs and benefits described above, as well as on any other costs and benefits that could result from the adoption of our proposals. We encourage the public to identify, discuss, analyze, and supply relevant data regarding these or any additional costs and benefits in comment letters.

In general, we request comment on all aspects of this cost-benefit analysis, including identification of any additional costs or benefits of the proposals not already identified, that may result from the adoption of these proposed amendments. We request that comment letters responding to these requests provide empirical data and other factual support for their views to the extent possible.

Section 2(b) of the Securities Act  50 requires us, when engaging in rulemaking where we are required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. We believe our proposed amendments may facilitate capital formation and promote efficiency. We do not anticipate that the proposed amendments would have any effects on competition.

We believe the proposed amendments impose no burden on efficiency, competition and capital formation beyond what is required by implementation of the Dodd-Frank Act. As discussed in the cost-benefit analysis in Part V above, however, the language of Section 413(a) could be subject to alternative interpretations if our rules do not provide guidance on how to calculate the value of the primary residence. In this regard, we propose to add explanatory language to our rules on how to calculate and exclude the value of the primary residence in determining whether a person qualifies under the accredited investor net worth standard. We believe these proposed amendments further the purposes underlying the requirements of Section 413(a) of the Dodd-Frank Act.

The proposed explanatory language states that the value of the primary residence would be “calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property.” As described above, we believe this approach is consistent with Section 413(a) of the Dodd-Frank Act, as well as with the conventional and commonly understood method of determining net worth, and, as a result, is preferable to an alternative approach that would exclude from net worth the fair market value of the primary residence, without netting out indebtedness secured by the primary residence. To the extent that exempt offerings to accredited investors are less costly for issuers to complete compared to registered offerings, since the explanatory language would reduce the size of the accredited investor pool to a lesser extent than the alternative approach, 51 issuers conducting these exempt offerings potentially could experience greater cost savings than under the alternative interpretation.

The least restrictive approach to excluding the value of the primary residence under Section 413(a) would be to exclude from net worth the fair market value of the primary residence and all indebtedness secured by the primary residence, regardless of whether the debt exceeds the fair market value of the property. Based on the survey data, this approach would not result in a larger pool of eligible accredited investors than under our proposal, and therefore would not appear to result in additional cost savings for capital raising transactions by issuers relying on exempt sales to accredited investors compared to our proposal. 52

We do not believe the proposed amendments place any significant burden on or otherwise affect competition beyond what is required by the Congressionally-mandated requirements of Section 413(a). The proposed amendments would apply equally to all investors and issuers participating in exempt offerings under Regulation D and Section 4(5). Nevertheless, we request comment on our proposal in the event members of the public perceive it as advantaging one group or category of issuers or investors over another.

We believe the proposed amendments may positively affect efficiency and capital formation. Providing clear guidance on how to calculate and exclude the value of the primary residence, we believe, should generally benefit investors and issuers by making the requirements of Section 413(a) easier to apply. Clear rules will also serve to promote efficiency by reducing the risk of issuers' inability to raise capital because of uncertainty in interpreting our rules, as well as the risk of sales by issuers to investors who do not meet the new heightened accredited investor net worth standards. Avoiding this latter problem would also serve to lower the risk that an issuer may need to make a rescission offer. Greater clarity and certainty in our accredited investor net worth standards also should foster greater confidence in our private placement markets and ultimately reduce the cost of capital, promoting increased capital formation.

We request comment on whether the proposed amendments, if adopted, would promote or burden efficiency, competition and capital formation. Finally, we request those who submit comment letters to provide empirical data and other factual support for their views if possible.

This initial regulatory flexibility analysis has been prepared in accordance with 5 U.S.C. 603. It relates to proposed amendments to our accredited investor rules under the Securities Act to reflect the requirements of Section 413(a) of the Dodd-Frank Act.

The reason for the proposed amendments is to implement the requirements of the Dodd-Frank Act, primarily the requirements of Section 413(a) of that statute. Section 413(a) requires the definitions of “accredited investor” in the Securities Act rules to exclude the value of a person's primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of $1 million. Under the previous standard, individuals qualified as accredited investors if they had a net worth of more than $1 million, including the value of the primary residence. The change to the net worth standard was effective upon enactment by operation of the Dodd-Frank Act. But Section 413(a) also requires us to revise the Securities Act accredited investor definitions to reflect the new standard, which we propose to do by revising Securities Act Rule 501(a)(5) of Regulation D and Rule 215(e).

Our primary objective is to implement the requirements for a new accredited investor net worth standard in Section 413(a) of the Dodd-Frank Act. We also propose to add language explaining how to “exclude the value of the primary residence” properly so that implementation proceeds in the most efficient way possible, with a minimum amount of uncertainty. We believe this proposal will reduce the cost of exempt offerings under Regulation D and Section 4(5) by reducing uncertainty among issuers and investors in interpreting the new heightened accredited investor net worth standard mandated by Section 413(a) of the Dodd-Frank Act. By providing greater specificity, we are attempting to remove a possible impediment to issuers using this form of offering, thereby potentially lowering the cost of capital generally, and facilitating capital formation for smaller issuers, while protecting investors.

We note that Section 413(a) of the Dodd-Frank Act does not prescribe the method for calculating the value of the primary residence, nor does it address specifically the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth determination. Accordingly, we have proposed to exercise our discretion by adding explanatory language to the accredited investor net worth standard stating that the value of the primary residence should be calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property. We believe this interpretation is consistent with conventional and commonly understood methods of determining net worth, and is preferable to other possible interpretations of the statutory language set forth in Section 413(a), such as: (1) Excluding from net worth the fair market value of the primary residence without netting out indebtedness secured by the primary residence; and (2) excluding from net worth the fair market value of the primary residence and all indebtedness secured by the primary residence, regardless of whether it exceeds the fair market value of the property.

The amendments to the accredited investor net worth standards are being proposed under the authority set forth in Sections 2(a)(15), 3(b), 4(2), 19, and 28 of the Securities Act and in Section 413(a) of the Dodd-Frank Act, which is to be codified in a note to Section 2 of the Securities Act, 15 U.S.C. 77b.

The proposals would affect issuers that are small entities, because issuers that are small entities must believe or have a reasonable basis to believe that prospective investors are accredited investors at the time of the sale of securities if they are relying on the definition of “accredited investor” for an exemption under Regulation D or Section 4(5). For purposes of the Regulatory Flexibility Act under our rules, an issuer is a “small business” or “small organization” if it has total assets of $5 million or less as of the end of its most recent fiscal year. 53 For purposes of the Regulatory Flexibility Act, an investment company is a small entity if it, together with other investment companies in the same group of related investment companies, has net assets of $50 million or less as of the end of its most recent fiscal year. The proposed amendments would apply to all issuers that rely on the accredited investor net worth standards in the exemptions to Securities Act registration in Regulation D and Section 4(5).

All issuers that sell securities in reliance on Regulation D and Section 4(5) must file a notice on Form D with the Commission. However, the vast majority of companies and funds filing notices on Form D are not required to provide financial reports to the Commission. For the fiscal year ended Sept. 30, 2010, 22,941 issuers filed a notice on Form D. We believe that many of these issuers are small entities, but we currently do not collect reliable information on total assets to determine if they are small entities for purposes of this analysis.

None of our proposed amendments would increase the information or time required to complete the Form D that must be filed with the Commission in connection with sales under Regulation D and Section 4(5). Our proposed amendments merely adjust our rules so they reflect the requirements of Section 413(a) of the Dodd-Frank Act. They would not require any further disclosure than is currently required in offerings made in reliance on Regulation D and Section 4(5).

We believe that there are no rules that conflict with or duplicate the proposed amendments.

The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish the stated objective of our proposals, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, we considered the following alternatives:

• The establishment of different compliance or reporting requirements or timetables that take into account the resources available to small entities;

• The clarification, consolidation, or simplification of the rule's compliance and reporting requirements for small entities;

• The use of performance rather than design standards; and

• An exemption from coverage of the proposed amendments, or any part thereof, for small entities.

With respect to the establishment of special compliance requirements or timetables under our proposed amendments for small entities, we do not think this is feasible or appropriate. As described earlier, we believe our proposed amendments are preferable to other possible interpretations of the statutory language set forth in Section 413(a) and are consistent with Congressional intent. Our proposals do not establish any compliance requirements or timetables for compliance that we could adjust to take into account the resources available to small entities. Moreover, the proposals are designed to eliminate uncertainty among issuers and investors that may otherwise result from inserting only the bare operative language from Section 413(a) of the Dodd-Frank Act in our rules. Providing greater specificity in our rules should provide issuers, including small entities, and investors with greater certainty concerning the availability of the Regulation D and Section 4(5) exemptions to Securities Act registration and thereby further facilitate efficient access to capital for both large and small entities consistent with investor protection.

Likewise, with respect to potentially clarifying, consolidating, or simplifying compliance and reporting requirements, the proposed rules do not impose any new compliance or reporting requirements or change any existing requirements.

With respect to using performance rather than design standards, we do not believe doing so in this context would be consistent with our objective or with the statutory requirement. Our proposal seeks to specify how issuers should calculate the value of a person's primary residence for purposes of excluding its value in determining whether the person qualifies as an accredited investor on the basis of net worth. Specifying that issuers should calculate the value and leaving the method of attaining that end to the discretion of the issuer, as a performance standard would do, would frustrate our purpose and deny small entities and others of the benefits of certainty that the proposal is designed to provide.

With respect to exempting small entities from coverage of these proposed amendments, we believe such a proposal would increase rather than decrease regulatory burdens on small entities. Our proposals are designed to provide sufficient protection of investors without unduly burdening both issuers and investors, including small entities and their investors. They also are designed to minimize confusion among issuers and investors. Exempting small entities would increase their regulatory burdens and increase confusion. We have endeavored to minimize the regulatory burden on all issuers, including small entities, while meeting our regulatory objectives. Nevertheless, we request comment on ways in which we could exempt small entities from coverage of any aspects of the proposed amendments that members of the public consider unduly onerous.

We encourage comments with respect to any aspect of this initial regulatory flexibility analysis. In particular, we request comments regarding:

• The number of small entities that may be affected by the proposals;

• The existence or nature of the potential impact of the proposals on small entities discussed in this analysis; and

• How to quantify the impact of the proposed amendments.

For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, 54 a rule is “major” if it has resulted, or is likely to result in:

• An annual effect on the economy of $100 million or more;

• A major increase in costs or prices for consumers or individual industries; or

• Significant adverse effects on competition, investment or innovation.

We request comment on whether our proposals would be a “major rule” for purposes of SBREFA. We solicit comment and empirical data on:

• The potential effect on the U.S. economy on an annual basis;

• Any potential increase in costs or prices for consumers or individual industries; and

• Any potential effect on competition, investment or innovation.

We are proposing the amendments contained in this document under the authority set forth in Sections 2(a)(15), 3(b), 4(2), 19 and 28 of the Securities Act, as amended, 55 Section 38(a) of the Investment Company Act, 56 Section 211(a) of the Investment Advisers Act  57 and Sections 413(a) and 944(a) of the Dodd-Frank Act.

For the reasons set out above, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows:

The existing rule for valuation of oil produced from Indian leases, codified at 30 CFR part 1206, subpart B, was published on January 15, 1988 (53 FR 1184), effective March 1, 1988. Since then, many changes have occurred in the oil market. Also, concerns have arisen about the need for revised valuation methodologies to address paragraph 3(c) of standard Indian oil and gas leases, such as the major portion analysis requirement for valuation of oil production from Indian leases.

The Minerals Revenue Management (MRM) division of the Minerals Management Service (MMS), now ONRR, published proposed rules for Indian oil valuation in February 1998 (63 FR 7089) and in January 2000 (65 FR 403). Each of these proposed rules was subsequently withdrawn because of market changes and the passage of time. In addition, eight public meetings were held during 2005 to consult with Indian tribes and individual Indian mineral owners and to obtain information from interested parties. Then a third proposed rule was published in February 2006 (71 FR 7453). Tribal and industry commenters on the 2006 proposed rule did not agree on most issues regarding oil valuation, and none of the commenters supported the major portion provisions.

The Royalty Policy Committee's Indian Oil Valuation Subcommittee evaluated the 2006 proposed rule but was unable to reach consensus about how the Department should proceed. Thus, MRM (now ONRR) decided to make only technical amendments to the existing Indian oil valuation regulations and to convene a negotiated rulemaking committee to make specific recommendations regarding the major portion provision. A final rule was published on December 17, 2007 (72 FR 71231), addressing the technical amendments. After publication of the final rule, MRM (now ONRR) started the process of forming the Indian Oil Valuation Negotiated Rulemaking Committee. However, the process was delayed because of the change in Administration. On June 8, 2010, the Secretary of the Interior signed a decision memorandum giving approval to go forward with establishing the Indian Oil Valuation Negotiated Rulemaking Committee.

The Negotiated Rulemaking Act of 1996 (NRA) (5 U.S.C 561 et seq. ); the Federal Advisory Committee Act (FACA) (5 U.S.C. Appendix 2, section 1 et seq. ); the Indian Mineral Development Act of 1982 (25 U.S.C. 2101-2108); the Indian Mineral Leasing Act of 1938 (25 U.S.C. 396a-g); the Act of March 3, 1909 (25 U.S.C. 396); 25 CFR parts 211, 212; and 225; 30 CFR part 1206; and Indian oil and gas lease and agreement terms.

In a negotiated rulemaking, the provisions for a proposed rule are developed by a committee composed of representatives of government and the interests that will be significantly affected by the rule. Decisions are made by “consensus.”

The negotiated rulemaking process is initiated by the agency's identification of interests potentially affected by the rulemaking under consideration. By this notice, ONRR is soliciting comments on this action.

Following receipt of nominations or comments, ONRR will establish the Negotiated Rulemaking Committee representing the identified interests to develop the provisions of a proposed rule. The ONRR will be a member of the Committee to represent the Federal Government's statutory mission. The Committee will be chaired by a facilitator. After the Committee reaches consensus on the provisions of a proposed rule, as discussed in more detail below, ONRR will develop a proposed rule to be published in the Federal Register .

Under 30 U.S.C. 563, the head of the agency is required to determine that the use of the negotiated rulemaking procedure is in the public interest. In making such a determination, the agency head must consider certain factors. Taking these factors into account, ONRR has determined that a negotiated rulemaking is in the public interest because:

1. A rule is needed. Royalty payors have considerable difficulty in complying with the current regulations.

2. A limited number of identifiable interests will be significantly affected by the rule. Such interests are oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.

3. There is a reasonable likelihood that the Committee can be convened with a balanced representation of persons who can adequately represent the interests discussed in item 2 above and who are willing to negotiate in good faith to attempt to reach a consensus on provisions of a proposed rule.

4. There is a reasonable likelihood that the Committee will reach consensus on a proposed rule within a fixed period of time. This objective was accomplished with the current Indian gas valuation regulations, which added certainty and simplicity through the negotiated rulemaking process.

5. The use of negotiated rulemaking will not unreasonably delay the development of a proposed rule because time limits will be placed on the negotiation. We anticipate that negotiation will expedite a proposed rule and ultimately the acceptance of a final rule.

6. The ONRR is making a commitment to ensure that the Committee has sufficient resources to complete its work in a timely fashion.

7. The ONRR, to the maximum extent possible and consistent with the legal obligations of the agency, will use consensus of the Committee as the basis for a proposed rule for public notice and comment.

In compliance with FACA and NRA, ONRR will use the following procedures and guidelines for this negotiated rulemaking. The ONRR may modify them in response to comments received on this notice or during the negotiation process.

The Committee will be formed and operated in full compliance with the requirements of FACA and NRA and specifically under the guidelines of its charter.

The ONRR intends to ensure full and adequate representation of those interests that are expected to be significantly affected by the proposed rule. Under 30 U.S.C. 562(5), “`interest' means with respect to an issue or matter, multiple parties which have a similar point of view or which are likely to be affected in a similar manner.” As discussed above, ONRR believes the interests significantly affected are oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.

The Committee should not exceed 25 members, and ONRR prefers 15. The ONRR will provide at least two members plus a facilitator. The facilitator will not count against the membership and will not be a voting member.

Responsibility for expenses is stated under 30 U.S.C. 568(c) as follows:

Therefore, ONRR commits to pay the travel and per diem expenses of Committee members if appropriate under the NRA and Federal travel regulations.

The ONRR solicits nominations for appointment to membership on the Committee. Members can be individuals or representatives of organizations. An organization should identify the individual who will be its representative.

Committee members need to have authorization to negotiate on behalf of their interests and be willing to negotiate in good faith. The ONRR interprets good faith to include a willingness to (1) bring all issues to the table; and (2) not to discuss the issues in other forums. Good faith also includes a willingness to move away from taking adversarial positions and instead to explore openly all relevant and productive ideas that may emerge from the discussion of the Committee.

Authorization for each application or nomination must include:

1. The name of the applicant or nominee and a description of the interests such person will represent;

2. A description of the person's qualifications and expertise regarding those interests;

3. A statement whether the participant will be seeking agency resources to participate on the Committee; and

4. A written commitment of the applicant or nominee to actively participate in good faith in the negotiated rulemaking and keep all issues at the table.

If ONRR publishes a notice establishing the Committee, after considering comments and applications submitted in response to this notice, it will publish a list of proposed members as a result of the nominations received from this notice, a solicitation for comments on the proposed membership of the Committee, and an explanation of how a person may apply or nominate another person for membership. The notice establishing the Committee will also include a proposed agenda and schedule for completing the work of the Committee, including a target date for publication by the agency of a proposed rule for notice and comment. Further, the notice establishing the Committee will include a description of administrative support for the committee to be provided by ONRR, including technical assistance. The Committee will agree on dates, times, and locations of meetings. The ONRR plans to terminate the Committee if it does not reach consensus on the provisions of a proposed rule within 24 months of the first meeting. The Committee may end earlier upon the promulgation of the final rule under consideration, or if the ONRR, after consulting with the Committee, or the Committee itself specifies an earlier termination date.

To comply with negotiated rulemaking procedures, ONRR invites written comments on this initiative and nominations for the negotiated rulemaking Committee. Written comments are specifically requested on the suitability of using the negotiated rulemaking procedure to develop a proposed valuation rule for oil production from Indian leases. Nominations are for all interests that could be affected by an Indian oil valuation rulemaking and must comply with paragraph IV. D., Request for Nominations, of this notice. All nominations and written comments must be sent to an appropriate address as listed in the ADDRESSES section of this notice.

For the above reasons, I hereby certify that the Indian Oil Valuation Negotiated Rulemaking Committee is in the public interest.

This proposal addresses the following local rules: VCAPCD Rule 70, AVAQMD Rule 461, PCAPCD Rule 215, and SBAPCD Rule 316. In the Rules and Regulations section of this Federal Register , we are approving these local rules in a direct final action without prior proposal because we believe these SIP revisions are not controversial. If we receive adverse comments, however, we will publish a timely withdrawal of the direct final rule and address the comments in subsequent action based on this proposed rule. Please note that if we receive adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, we may adopt as final those provisions of the rule that are not the subject of an adverse comment.

We do not plan to open a second comment period, so anyone interested in commenting should do so at this time. If we do not receive adverse comments, no further activity is planned. For further information, please see the direct final action.

The contents of today's preamble are listed in the following outline.

Regulated categories and entities potentially affected by this proposed action include those involved with the production, importation, distribution, sale and storage of gasoline motor fuel and diesel motor fuel.

The table below is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this proposed action. This table lists the types of entities that EPA is now aware could be potentially regulated by this proposed action. Other types of entities not listed in the table could also be regulated. To determine whether an entity is regulated by this proposed action, one should carefully examine the existing regulations in 40 CFR part 80. If you have questions regarding the applicability of this proposed action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

1. Submitting Confidential Business Information (CBI). Do not submit CBI to EPA through EDOCKET, regulations.gov or e-mail. Clearly mark the part of all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

2. Tips for Preparing Your Comments. When submitting comments, remember to:

i. Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

ii. Follow directions—The agency may ask you to respond to specific questions or organize comments referencing a Code of Federal Regulations (CFR) part or section number.

iii. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

iv. Describe any assumptions and provide any technical information and/or data that you used.

v. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

vi. Provide specific examples to illustrate your concerns, and suggest alternatives.

vii. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

viii. Make sure to submit your comments by the comment period deadline identified.

Refiners, importers and oxygenate blenders producing gasoline are required to test Reformulated Gasoline (RFG), and conventional gasoline (CG) for various fuel parameters including olefin content. American Society for Testing and Materials (ASTM) D1319 is currently the designated test method for measuring the olefin content of gasoline. 1

On July 6, 2006, the American Petroleum Institute (API) petitioned the Agency to allow ASTM D6550 as an alternative test method for measuring the olefin content of gasoline. 2 The Agency agreed with this request, viewed API's petition as non-controversial, and because no adverse comments were anticipated published a direct final rule, 3 along with a corresponding proposed rule, 4 on December 8, 2008, that would allow ASTM D6550 as an alternative test method provided no adverse comment was received by January 7, 2009, which was the close of the comment period. Before the close of the comment period, however, the Agency received an adverse comment  5 on the proposal for the allowance of ASTM D6550 as an alternative test method. On February 6, 2009, the Agency published a partial withdrawal notice  6 for the allowance of ASTM D6550 as an alternative test method. Since then, the American Petroleum Institute (API) and the New York State Department of Environmental Conservation (NYSDEC) have provided additional comments concerning the use of this alternative test method. These comments have been summarized and our responses to them are in the Response to Comments Document that has been placed in the docket for this rulemaking (Docket ID Number EPA-HQ-OAR-2008-0558).

EPA is proposing to allow ASTM D6550-05 (SFC) as an alternative to the designated test method, ASTM D1319-03 ε 1 (FIA), for measuring olefin content of gasoline, provided the results are correlated to ASTM D1319-03 ε 1 using a site-specific correlation of FIA (volume percent) versus SFC (weight percent). The Agency is also proposing that correlation be completed on a site-specific basis. The Agency believes it is in a test facility's best interest to ensure that the gasoline fuel set used to develop the correlation spans the range of olefin properties representative of that refinery's or importer's gasoline production. This gasoline fuel set would be analyzed by the test facility's laboratory using both ASTM D1319-03 ε 1 (also known as FIA, or the designated test method) and ASTM D6550-05. A resulting correlation equation would then be developed in terms of ASTM D1319-03 ε 1 in volume percent and ASTM D6550-05 in weight percent. Thus, the applicable range of the resulting correlation from a facility's site specific correlation would be consistent with that specific facility's olefin content range. Furthermore, the requirement of correlating SFC test methods results to the FIA designated test method produces an SFC-FIA equivalent result that is suitable for input into the Complex Model or for meeting fuel reporting requirements.

EPA originally proposed a 0.857 factor to convert from mass percent to volume percent when using ASTM D6500-05. NYSDEC commented this conversion factor was not intended for universal use and may not be appropriate for all gasoline. API commented that there is no need to use the 0.857 conversion factor when developing a correlation between ASTM D6500-05 and ASTM D1319-03. ε 1 The Agency agrees with API's recommendation that there is no need to convert olefin content measured by ASTM D6550-05 in weight percent to volume percent. In today's proposal, EPA is omitting the initial conversion of olefin content measured by ASTM D6500-05 in weight percent to volume percent using the 0.857 factor, as earlier proposed on December 8, 2008.

NYSDEC commented that a bias in test measurement results may occur between ASTM D1319-03 ε 1 and ASTM D6550-05. The Agency agrees with NYSDEC that a bias in gasoline olefin measurement results may exist between ASTM D1319-03 ε 1 and ASTM D6550-05. In order to compensate for any bias that may exist between these two analytical test methods, EPA is proposing to require ASTM D6550-05 to be correlated to ASTM D1319-03, ε 1 its respective designated test method. Refiners or importers that choose to use ASTM D6550-05 for the measurement of olefin content in gasoline must report the correlated result, on a site-specific basis, with the designated method, ASTM D1319-03, ε 1 when using the proposed EPA-allowed alternative test method, ASTM D6550-05. The olefin result as determined by SFC (ASTM D6550-05) would be correlated to FIA (ASTM D1319-03 ε 1 ) based on a specific site's production and never used directly for compliance or as an input into the Complex Model.

The Agency believes today's proposal is consistent with past Agency practice with our allowance of other alternative test methods as specified in 40 CFR 80.46. The Agency currently allows eight alternative test methods for the measurement of gasoline or butane properties provided their results are correlated to the fuel parameter's respective EPA designated test method. These alternative test methods are: ASTM D5453, ASTM D6920, ASTM D3120 and ASTM D7039 for sulfur in gasoline, 7 ASTM D4468 and ASTM D3246 for sulfur in butane, 8 ASTM D1319 for aromatics in gasoline, 9 and ASTM D4815 for oxygenate content of gasoline. 10 In addition, ASTM D4294, ASTM D6920 and ASTM D5453 are approved alternative test methods for measuring the sulfur content of 500 ppm diesel fuel provided its test results are correlated to the designated test method, ASTM D2622. 11 The Agency has evaluated ASTM D6550 as an alternative test method for olefins in gasoline and agrees with API's request. 12 EPA invites comments on today's proposal to allow ASTM D6550-05 as an alternative test method for olefin content of gasoline. Comments must be received on or before March 2, 2011.

Although not the subject of today's proposed rule, EPA intends to establish a performance-based test method approach (PBTM) rule which would provide criteria for the qualification of alternative test methods.

This proposed rule is not a “significant regulatory action” under the terms of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under the EO.

This proposed rule does not impose any new information collection burden. However, the Office of Management and Budget (OMB), under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., has approved the information collection requirements contained in the final RFG and anti-dumping rulemaking and has assigned OMB control number 2060-0277. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today's direct final rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administrations' regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's direct final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 USC 603 and 604. Thus an Agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule.

This proposed rule does not impose a regulatory burden on anyone, including small businesses. Instead, this proposed rule will have a positive impact by the allowance of ASTM D 6550-05 which will provide additional flexibility to the regulated community, including small businesses, in meeting olefins in gasoline testing requirements. We have therefore concluded that today's proposed rule will relieve regulatory burden for all affected small entities.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538, requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Federal agencies must also develop a plan to provide notice to small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates and must inform, educate, and advise small governments on compliance with the regulatory requirements.

This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. The proposed allowance of ASTM D 6550-05 will provide additional flexibility to the regulated community in meeting olefins in gasoline testing requirements. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA. This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects 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.”

This proposed rule does not have federalism implications. It will not have substantial direct effects 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, as specified in Executive Order 13132. The proposed allowance of ASTM D 6550-05 will provide additional flexibility to the regulated community in meeting olefins in gasoline testing requirements. Thus, Executive Order 13132 does not apply to this direct final rule.

This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 6, 2000). This action applies to gasoline refiners, blenders and importers that supply gasoline. The proposed allowance of ASTM D6500-05 will provide additional flexibility to the regulated community in meeting olefins in gasoline testing requirements. Thus, Executive Order 13175 does not apply to this action.

EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

This action is not subject to Executive Order 13211(66 FR 18355 (May 22, 2001)) because it is not a significant regulatory action under Executive Order 12866.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

This proposed rule involves a technical standard. EPA is proposing to adopt an ASTM standard as described in Units II.A of the SUPPLEMENTARY INFORMATION section of this document. The technical standard included in today's rule is a standard developed by ASTM, a voluntary consensus standards body, and thus raises no issues under the NTTAA. The ASTM standard in today's action may be obtained from ASTM International at 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, 610-832-9585 (phone), 610-832-9555 (fax), or service@astm.org (e-mail); or through the ASTM Web site ( http://www.astm.org ).

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. The proposed allowance of ASTM D6500-05 will provide additional flexibility to the regulated community in meeting olefins in gasoline testing requirements. This proposed rule amendment does not relax control measures on sources regulated by the rule and therefore will not cause emission increases from these sources.

Statutory authority for today's proposed rule comes from sections 211(c) and 211(k) of the CAA (42.U.S.C. 7545(c) and (k)). Section 211(c) allows EPA to regulate fuels that contribute to air pollution which endangers public health or welfare, or which impairs emission control equipment. Section 211(k) prescribes requirements for RFG and CG and requires EPA to promulgate regulations establishing these requirements. Additional support for the fuels controls in today's proposed rule comes from sections 114(a) and 301(a) of the CAA.

For the reasons set forth in the preamble, part 80 of title 40, chapter I of the Code of Federal Regulations is proposed to be amended as follows:

For further information, please see the direct final action, of the same title, which is located in the Rules section of this Federal Register . EPA is approving the attainment determination as a direct final rule without prior proposal because EPA views this as a noncontroversial action and anticipates no adverse comments. A detailed rationale for the approval is set forth in the preamble to the direct final rule. If EPA receives no adverse comments, EPA will not take further action on this proposed rule.

If EPA receives adverse comments, EPA will withdraw the direct final rule and it will not take effect. EPA will address all public comments in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period on this action. Any parties interested in commenting on this action should do so at this time. Please note that if we receive adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.

On July 25, 2010, FMCSA submitted a draft HOS NPRM to OMB and on December 29, 2010, published the NPRM (75 FR 82170). The NPRM proposed to revise the regulations for hours of service for drivers of property-carrying commercial motor vehicles (CMVs).

The listening session is open to the public. Speakers' remarks will be limited to 5 minutes each. The public may submit material to the FMCSA staff at the session for inclusion in the public docket, FMCSA-2004-19608.

The Agency seeks data and answers relating to the following issues and questions. The comments sought below may be submitted in written form at the session and summarized verbally, if desired.

1. Driving Time. FMCSA is seeking additional studies or data that examine in greater detail the fatigue and safety differences between driving in the 10th and 11th hours. FMCSA is also interested in data that indicate when and how frequently the 11th hour is used. It seeks data on how much of the 11th hour is used when a driver goes beyond the 10th hour.

1a. For example, on days in which the driver both picks up and delivers a truckload, how often does the driver reach the 11th hour of driving?

1b. When the driver drives over 10 hours, is it by 5 minutes or by 55 minutes?

1c. What is the percentage of driving that takes place in each hour compared to total driving that occurs?

2. Duty Time/Driving Window. FMCSA is soliciting information on patterns of work for night drivers:

2a. For drivers who always drive at night, what is the typical length of their duty day?

2b. For drivers who sometimes drive at night, how frequently do they do that?

2c. FMCSA is seeking comments on whether drivers who drive at least 3 hours between midnight and 6 a.m. should have an hour less duty time available (12 hours rather than 13) to provide a longer period to obtain sleep.

3. Time-On-Task (TOT) Function. The Agency seeks comment on whether its approach to estimating its TOT function is reasonable given the lack of good exposure data. The Agency is interested in any suggestions for improving its approach for estimating TOT effects, especially information on where it might obtain better data on exposure and other driver characteristics that would enable it to improve its estimation of how or whether crash risk varies over successive hours of daily driving.

4. Cumulative Fatigue. The Agency seeks comment on whether its methodology for evaluating cumulative fatigue and its impact on driving performance is reasonable. The Agency also welcomes further information on the effects of cumulative fatigue, particularly in the form of scientific studies or data that would allow better evaluation of cumulative fatigue and its impact on workplace safety, driver safety performance, and productivity.

FMCSA will Web cast the listening session on the Internet and will have telephone lines available for those wishing to participate by telephone. FMCSA will also open a window on its Web site for commenters to send in comments and questions. That session will be open from Noon e.t. through Midnight e.t. During the separate Internet question and comment session, FMCSA representatives will respond to questions and provide clarification on the NPRM, subject to Administrative Procedure Act restrictions which prohibit Agency officials from engaging in policy discussions about open rulemaking proceedings. Specific information on how to participate via the Internet and the telephone access number will be on the FMCSA Web site at http://www.fmcsa.dot.gov/rules-regulations/topics/hos/HOS-Listening-Sessions.aspx.

FMCSA will docket the transcripts from the Internet comment and question session, as well as the webcast transcript and a separate transcription of the listening session that will be prepared by an official court reporter.

At the September 2010 meeting, the Council voted to establish a new control date of September 17, 2010, for the snapper-grouper fishery in the South Atlantic, due to concern that the previous control date established for the snapper-grouper fishery of October 14, 2005 (70 FR 60058; October 14, 2005), was almost five years old.

The control date would apply to persons who are contemplating entering the snapper-grouper fishery in the EEZ of the South Atlantic region. The Council requested that this control date be published in the Federal Register to notify fishermen that if they enter such a fishery after September 17, 2010, they may not be assured of future access if the Council and/or NMFS decide to further limit entry or impose other measures to manage the snapper-grouper fishery.

Establishment of the new control date for the snapper-grouper fishery would allow the Council to evaluate the level of participation in the snapper-grouper fishery and address any level of overcapacity. Control dates are intended to discourage speculative entry into a fishery, as new entrants entering the fishery after the control date are forewarned that they are not guaranteed future participation in the fishery.

Establishment of this control date does not commit the Council or NMFS to any particular management regime or criteria for entry into the snapper-grouper fishery. Fishermen are not guaranteed future participation in the fishery regardless of their level of participation before or after the control date. The Council may recommend a different control date or it may recommend a management regime that does not involve a control date. Other criteria, such as documentation of landings or fishing effort, may be used to determine eligibility for participation in a limited access fishery. The Council and/or NMFS also may choose to take no further action to control entry or access to the fisheries, in which case the control date may be rescinded. Any action by the Council will be taken pursuant to the requirements for fishery management plan and amendment development established under the Magnuson-Stevens Act.

This notification also gives the public notice that interested participants should locate and preserve records that substantiate and verify their participation in the snapper-grouper fishery in the South Atlantic EEZ.

At the September 2010 Council meeting, the Council recommended a new control date of September 17, 2010, for king and Spanish mackerel. The Council requested a new control date for the king and Spanish mackerel components because the Gulf of Mexico Fishery Management Council is beginning to look at latent permits which may ultimately impact the Council. A previous control date for the commercial king and Spanish mackerel components had been established on June 15, 2004 (70 FR 67985). The control date would apply to persons who are contemplating fishing for king and Spanish mackerel in the EEZ of the South Atlantic region. The Council requested that this control date be published in the Federal Register to notify fishermen that if they enter such a fishery after September 17, 2010, they may not be assured of future access if the Council and/or NMFS decide to further limit entry or impose other measures to manage this segment of the coastal migratory pelagics fishery.

Establishment of the new control date would allow the Council to evaluate the level of participation in the king and Spanish mackerel components of the coastal migratory pelagic fishery and address any level of overcapacity. Control dates are intended to discourage speculative entry into a fishery, as new entrants entering the fishery after the control date are forewarned that they are not guaranteed future participation in the fishery.

Establishment of this control date does not commit the Council or NMFS to any particular management regime or criteria for entry into the coastal migratory pelagic fishery. Fishermen are not guaranteed future participation in the fishery regardless of their level of participation before or after the control date. The Council may recommend a different control date or it may recommend a management regime that does not involve a control date. Other criteria, such as documentation of landings or fishing effort, may be used to determine eligibility for participation in a limited access fishery. The Council and/or NMFS also may choose to take no further action to control entry or access to the fishery, in which case the control date may be rescinded. Any action by the Council will be taken pursuant to the requirements for fishery management plan and amendment development established under the Magnuson-Stevens Act.

This notification also gives the public notice that interested participants should locate and preserve records that substantiate and verify their participation in the coastal migratory pelagics fishery in the South Atlantic EEZ.

Classification:

Executive Order 12866: This rule has been determined to be not significant for purposes of EO 12866.