[Title 17 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2024 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 17

Commodity and Securities Exchanges


________________________

Part 241 to End

                         Revised as of April 1, 2024

          Containing a codification of documents of general 
          applicability and future effect

          As of April 1, 2024
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

          U.S. GOVERNMENT OFFICIAL EDITION NOTICE

          Legal Status and Use of Seals and Logos
          
          
          The seal of the National Archives and Records Administration 
              (NARA) authenticates the Code of Federal Regulations (CFR) as 
              the official codification of Federal regulations established 
              under the Federal Register Act. Under the provisions of 44 
              U.S.C. 1507, the contents of the CFR, a special edition of the 
              Federal Register, shall be judicially noticed. The CFR is 
              prima facie evidence of the original documents published in 
              the Federal Register (44 U.S.C. 1510).

          It is prohibited to use NARA's official seal and the stylized Code 
              of Federal Regulations logo on any republication of this 
              material without the express, written permission of the 
              Archivist of the United States or the Archivist's designee. 
              Any person using NARA's official seals and logos in a manner 
              inconsistent with the provisions of 36 CFR part 1200 is 
              subject to the penalties specified in 18 U.S.C. 506, 701, and 
              1017.

          Use of ISBN Prefix

          This is the Official U.S. Government edition of this publication 
              and is herein identified to certify its authenticity. Use of 
              the 0-16 ISBN prefix is for U.S. Government Publishing Office 
              Official Editions only. The Superintendent of Documents of the 
              U.S. Government Publishing Office requests that any reprinted 
              edition clearly be labeled as a copy of the authentic work 
              with a new ISBN.

              
              
          U . S . G O V E R N M E N T P U B L I S H I N G O F F I C E

          ------------------------------------------------------------------

          U.S. Superintendent of Documents  Washington, DC 
              20402-0001

          http://bookstore.gpo.gov

          Phone: toll-free (866) 512-1800; DC area (202) 512-1800

[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 17:
          Chapter II--Securities and Exchange Commission 
          (Continued)                                                3
          Chapter IV--Department of the Treasury                   643
  Finding Aids:
      Table of CFR Titles and Chapters........................     721
      Alphabetical List of Agencies Appearing in the CFR......     741
      Table of OMB Control Numbers............................     751
      List of CFR Sections Affected...........................     757

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 17 CFR 242.100 
                       refers to title 17, part 
                       242, section 100.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, April 1, 2024), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
in the past by using the appropriate List of CFR Sections Affected 
(LSA). For the convenience of the reader, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not accidentally dropped due to a printing or computer error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed as 
an approved incorporation by reference, please contact the agency that 
issued the regulation containing that incorporation. If, after 
contacting the agency, you find the material is not available, please 
notify the Director of the Federal Register, National Archives and 
Records Administration, 8601 Adelphi Road, College Park, MD 20740-6001, 
or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Authorities 
and Rules. A list of CFR titles, chapters, subchapters, and parts and an 
alphabetical list of agencies publishing in the CFR are also included in 
this volume.

[[Page vii]]

    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, 8601 Adelphi Road, College Park, MD 
20740-6001 or e-mail [email protected].

SALES

    The Government Publishing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call toll-free, 
866-512-1800, or DC area, 202-512-1800, M-F 8 a.m. to 4 p.m. e.s.t. or 
fax your order to 202-512-2104, 24 hours a day. For payment by check, 
write to: US Government Publishing Office - New Orders, P.O. Box 979050, 
St. Louis, MO 63197-9000.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers of the Presidents of the United 
States, Compilation of Presidential Documents and the Privacy Act 
Compilation are available in electronic format via www.govinfo.gov. For 
more information, contact the GPO Customer Contact Center, U.S. 
Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-
free). E-mail, [email protected].
    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.archives.gov/federal-
register.
    The e-CFR is a regularly updated, unofficial editorial compilation 
of CFR material and Federal Register amendments, produced by the Office 
of the Federal Register and the Government Publishing Office. It is 
available at www.ecfr.gov.

    Oliver A. Potts,
    Director,
    Office of the Federal Register
    April 1, 2024.







[[Page ix]]



                               THIS TITLE

    Title 17--Commodity and Securities Exchanges is composed of five 
volumes. The first two volumes, containing parts 1-40 and 41-199, 
comprise Chapter I--Commodity Futures Trading Commission. The third 
volume contains Chapter II--Securities and Exchange Commission, parts 
200-239. The fourth volume, comprising part 240, contains additional 
regulations of the Securities and Exchange Commission. The fifth volume, 
comprising part 241 to end, contains the remaining regulations of the 
Securities and Exchange Commission and Chapter IV--Department of the 
Treasury. The contents of these volumes represent all current 
regulations codified under this title by the Commodity Futures Trading 
Commission, the Securities and Exchange Commission, and the Department 
of the Treasury as of April 1, 2024.

    The OMB control numbers for the Securities and Exchange Commission 
appear in Sec.  200.800 of chapter II. For the convenience of the user, 
Sec.  200.800 is reprinted in the Finding Aids sections of volume 4, 
containing part 240, and volume 5, containing part 241 to end.

    For this volume, Robert J. Sheehan, III was Chief Editor. The Code 
of Federal Regulations publication program is under the direction of 
John Hyrum Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



              TITLE 17--COMMODITY AND SECURITIES EXCHANGES




                  (This book contains part 241 to end)

  --------------------------------------------------------------------
                                                                    Part

chapter ii--Securities and Exchange Commission (Continued)..         241

chapter iv--Department of the Treasury......................         400

[[Page 3]]



       CHAPTER II--SECURITIES AND EXCHANGE COMMISSION (CONTINUED)




  --------------------------------------------------------------------
Part                                                                Page
241             Interpretative releases relating to the 
                    Securities Exchange Act of 1934 and 
                    general rules and regulations thereunder           5
242             Regulations M, SHO, ATS, AC, NMS, SE, and 
                    SBSR, and customer margin requirements 
                    for security futures....................          11
243             Regulation FD...............................         160
244             Regulation G................................         162
245             Regulation blackout trading restriction.....         164
246             Credit risk retention.......................         170
247             Regulation R--Exemptions and definitions 
                    related to the exceptions for banks from 
                    the definition of broker................         212
248             Regulations S-P, S-AM, and S-ID.............         226
249             Forms, Securities Exchange Act of 1934......         277
249a

Forms, Securities Investor Protection Act of 1970 [Reserved]

249b            Further forms, Securities Exchange Act of 
                    1934....................................         299
250             Cross-border antifraud law-enforcement 
                    authority...............................         301
251-254

[Reserved]

255             Proprietary trading and certain interests in 
                    and relationships with covered funds....         301
256-259

[Reserved]

260             General rules and regulations, Trust 
                    Indenture Act of 1939...................         348
261             Interpretative releases relating to the 
                    Trust Indenture Act of 1939 and general 
                    rules and regulations thereunder........         366
269             Forms prescribed under the Trust Indenture 
                    Act of 1939.............................         366
270             Rules and regulations, Investment Company 
                    Act of 1940.............................         369
271             Interpretative releases relating to the 
                    Investment Company Act of 1940 and 
                    general rules and regulations thereunder         546

[[Page 4]]

274             Forms prescribed under the Investment 
                    Company Act of 1940.....................         549
275             Rules and regulations, Investment Advisers 
                    Act of 1940.............................         557
276             Interpretative releases relating to the 
                    Investment Advisers Act of 1940 and 
                    general rules and regulations thereunder         613
279             Forms prescribed under the Investment 
                    Advisers Act of 1940....................         614
281             Interpretative releases relating to 
                    corporate reorganizations under Chapter 
                    X of the Bankruptcy Act.................         615
285             Rules and regulations pursuant to section 
                    15(a) of the Bretton Woods Agreements 
                    Act.....................................         615
286             General rules and regulations pursuant to 
                    section 11(a) of the Inter-American 
                    Development Bank Act....................         617
287             General rules and regulations pursuant to 
                    section 11(a) of the Asian Development 
                    Bank Act................................         619
288             General rules and regulations pursuant to 
                    section 9(a) of the African Development 
                    Bank Act................................         621
289             General rules and regulations pursuant to 
                    section 13(a) of the International 
                    Finance Corporation Act.................         623
290             General rules and regulations pursuant to 
                    section 9(a) of the European Bank for 
                    Reconstruction and Development Act......         625
300             Rules of the Securities Investor Protection 
                    Corporation.............................         627
301             Forms, Securities Investor Protection 
                    Corporation.............................         634
302             Orderly liquidation of covered brokers or 
                    dealers.................................         635
303-399

[Reserved]

[[Page 5]]



        PART 241_INTERPRETATIVE RELEASES RELATING TO THE SECURITIES 
        EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER-
        -Table of Contents

    Authority: 15 U.S.C. 78a et seq.

----------------------------------------------------------------------------------------------------------------
                                                      Release
                      Subject                           No.         Date            Fed. Reg. Vol. and Page
----------------------------------------------------------------------------------------------------------------
Excerpt from letter relating to section 16(a)......        21    Oct. 1, 1934  11 FR 10968.
Statement by Commission to correct the erroneous           68   July 22, 1934   Do.
 impression created by certain commercial
 institutions with respect to the necessity for
 filing reports with the Commission.
Letter of General Counsel relating to section 16(a)       116    Mar. 9, 1935   Do.
Opinion of General Counsel relating to section            175   Apr. 16, 1935   Do.
 16(a).
Excerpt from a general letter relating to section         227    May 14, 1935   Do.
 16(a).
Opinion of the Director of the Division of Forms         1131    Apr. 7, 1937   Do.
 and Regulations discussing the definition of
 ``parent'' as used in various forms under the
 Securities Act of 1933 and the Securities Exchange
 Act of 1934.
Statement by Commission with respect to the purpose      1350   Aug. 13, 1937  11 FR 10969.
 of the disclosure requirements of section 14 and
 the rules adopted thereunder.
Opinion of Director of the Trading and Exchange          1411    Oct. 7, 1937   Do.
 Division relating to Rules X-15C1-6 (17 CFR
 240.15c1-6) and X-10B-2 (17 CFR 240.10b-2).
Opinion of Director of the Trading and Exchange          1462   Nov. 15, 1937   Do.
 Division relating to Rule X-15C1-1(a) (17 CFR,
 240.15c1-1a).
Partial text of letter of February 2, 1938, from         1571    Feb. 5, 1938   Do.
 the Secretary of the New York Stock Exchange to
 its members, relating to Rules X-3B-3 (17 CFR
 240.3b-3), X-10A-1 (17 CFR 240.10a-1), and X-10A-2
 (17 CFR 240.10a-2), together with a letter from
 Director of Trading and Exchange Division,
 concurring in the opinions expressed by the
 Exchange.
Opinion of General Counsel relating to section           1965   Dec. 21, 1938  11 FR 10970.
 16(a).
Letter of General Counsel concerning the services        2066     May 5, 1939  11 FR 10971.
 of former employees of the Commission in
 connection with matters with which such employees
 become familiar during their course of employment
 with the Commission.
Statement of Commission and separate statement by        2446   Mar. 18, 1940   Do.
 Commissioner Healy on the problem of regulating
 the ``pegging, fixing and stabilizing'' of
 security prices under sections 9(a)(2), 9(a)(6)
 and 15(c)(1) of the Securities Exchange Act.
Statement of Commission respecting distinctions          2687   Nov. 16, 1940  11 FR 10981.
 between the reporting requirements of section
 16(a) of the Securities Exchange Act of 1934 and
 section 30(f) of the Investment Company Act of
 1940.
Statement of Commission issued in connection with        2690   Nov. 15, 1940  11 FR 10982.
 the adoption of Rules X-8C-1 (17 CFR, 240.8c-1)
 and X-15-C2-1 (17 CFR, 240.15c 2-1) under the
 Securities Exchange Act of 1934 relating to the
 hypothecation of customers' securities by members
 of national securities exchanges and other brokers
 and dealers.
Opinion of General Counsel relating to paragraph         2822   Mar. 17, 1941  11 FR 10983.
 (b)(2)(ii) of Rules X-8C-1 (17 CFR, 240.8c-1) and
 X-15C2-1 (17 CFR, 240.15C 2-1) under the
 Securities Exchange Act.
Partial text of letter sent by Director of the           3040   Oct. 13, 1941  11 FR 10984.
 Trading and Exchange Division to certain
 securities dealers who had failed to keep records
 of the times of their securities transactions, as
 required by Rules X-17A-3 (17 CFR, 240.17a-3) and
 X-17A-4 (17 CFR, 240.17a-4) under the Securities
 Exchange Act.
Opinion of General Counsel relating to the anti-         3056   Oct. 27, 1941   Do.
 manipulation provisions of sections 9(a)(2), 10(b)
 and 15(c)(1) of the Securities Exchange Act of
 1934, as well as section 17(a) of the Securities
 Act of 1933.
Opinion of Chief Counsel to the Corporation Finance      3069    Jan. 4, 1945  11 FR 10985.
 Division relating to when-issued trading of
 securities the issuance of which has already been
 approved by a Federal district court under Chapter
 X of the Bankruptcy Act.
Statement of Commission policy with respect to the       3085    Dec. 6, 1941   Do.
 acceleration of the effective date of a
 registration statement.
Letter of Director of the Corporation Finance            3380    Feb. 2, 1943   Do.
 Division relating to sections 14 and 18.
Excerpts from letters of Director of the                 3385   Feb. 17, 1943   Do.
 Corporation Finance Division relating to section
 14 and Schedule 14A under Regulation X-14 (17 CFR,
 240.14a-9).
Opinion of Director of the Trading and Exchange          3505   Nov. 16, 1943  11 FR 10986.
 Division relating to the anti-manipulation
 provisions of sections 9(a)(2), 10(b), and
 15(c)(1) of the Securities Exchange Act of 1934,
 and 17(a) of the Securities Act of 1933.
Opinion of Director of the Trading and Exchange          3506   Nov. 16, 1943  11 FR 10987.
 Division relating to the anti-manipulation
 provisions of sections 9(a)(2), 10(b), and
 15(c)(1) of the Securities Exchange Act of 1934,
 and 17(a) of the Securities Act of 1933.

[[Page 6]]

 
Statement of the Commission relating to the anti-        3572    June 1, 1944   Do.
 fraud provisions of section 17(a) of the
 Securities Act of 1933, and sections 10(b) and
 15(c)(1) of the Securities Exchange Act of 1934.
Letter of Director of the Corporation Finance            3638    Jan. 3, 1945  11 FR 10988.
 Division relating to section 20 and to Rule X-14A-
 7 (17 CFR, 240.14a-7) under the Securities
 Exchange Act of 1934.
Statement by Commission relating to section 3(a)(1)      3639    Jan. 4, 1945   Do.
Statement of the Commission in connection with the       3674    Apr. 9, 1945   Do.
 adoption of certain amendments to Form 3-M, one of
 the forms for registration of over-the-counter
 brokers or dealers under section 15(b) of the
 Securities Exchange Act of 1934, and to Rule X-15B-
 2 (17 CFR, 240.15b-2), the rule governing the
 filing of supplemental statements to such
 applications.
Statement by Commission relating to the adoption of      3803   Mar. 28, 1946   Do.
 Rule X-13A-6B (17 CFR, 240.13a-6b).
Statement of the Commission in connection with           4163  Sept. 16, 1948  13 FR 4163.
 notice of opportunity to submit proposals for
 regulations or legislation regarding the
 stabilization of market prices by persons offering
 securities to the public.
Statement of the Commission accompanying November        4185    Nov. 5, 1948  13 FR 6680.
 5, 1948, revision of Sec.   240.14 of this chapter
 (Regulation X-14).
Opinion of the General Counsel, relating to the use      4593   Apr. 18, 1951  16 FR 3387.
 of ``hedge clauses'' by brokers, dealers,
 investment advisers, and others.
Statement of the Commission regarding public             5633   Jan. 31, 1958  23 FR 841.
 offerings of investment contracts providing for
 the acquisition, sale or servicing of mortgages or
 deeds of trust.
Statement of the Commission as to the applicability      6419   Nov. 18, 1960  25 FR 12178.
 of the Federal securities laws to real estate
 investment trusts.
Statement of the Commission concerning standards of      6721    Feb. 2, 1962  27 FR 1251.
 conduct for registered broker-dealers in the
 distribution of unregistered securities.
Opinion of Philip A. Loomis, Jr., Director of            6726    Feb. 8, 1962  27 FR 1415.
 Division of Trading and Exchanges of the
 Commission, on the application of section
 11(d)(1), Securities Exchange Act of 1934, to
 broker-dealers engaged in ``equity funding'',
 ``secured funding'', and ``life funding''.
Statement of the Commission cautioning broker-           6778   Apr. 16, 1962  27 FR 3991.
 dealers about violating the anti-fraud provisions
 of the Federal securities laws when making short
 sales in which they delay effecting the covering
 transaction to acquire the security.
Statement of Commission showing circumstances in 7       6982   Dec. 28, 1962  28 FR 276.
 cases where profits in real estate transactions
 were not earned at time transactions were recorded
 but that the sales were designed to create the
 illusion of profits or value as a basis for the
 sale of securities.
Answer of the Commission to four questions relating      7078    May 15, 1963  28 FR 5133.
 to the solicitation of proxies.
Statement by the Commission on the maintenance of        7169   Nov. 13, 1963  28 FR 12617.
 rec-ords of transactions by brokers-dealers as
 underwriters of investment company shares
 according to Rule 17a-3 under section 17(a) of the
 Securities Exchange Act of 1934 (17 CFR 240.17a-3).
Opinion of the General Counsel relating to               7208    Jan. 7, 1964  29 FR 341.
 participation by broker-dealer firms in proxy
 solicitations.
Statement of the Commission re applicability of          7366    July 9, 1964  29 FR 9828.
 Securities Act of 1933 to offerings of securities
 outside the U.S. and re applicability of section
 15(a) of the Securities Exchange Act of 1934 to
 foreign underwriters as part of program of
 Presidential Task Force to reduce U.S. balance of
 payments deficit and protect U.S. gold reserves.
Summary and interpretation by the Commission of          7425  Sept. 14, 1964  29 FR 13455.
 amendments to the Securities Act of 1933 and
 Securities Exchange Act of 1934 as contained in
 the Securities Acts Amendments of 1964.
Opinion and statement of the Commission in regard        7763    Dec. 7, 1965  30 FR 15420.
 to proper reporting of deferred income taxes
 arising from installment sales.
Statement of the Commission to clarify the meaning       7793   Jan. 19, 1966  31 FR 1005.
 of ``beneficial ownership of securities'' as
 relates to beneficial ownership of securities held
 by family members.
Program by the Commission which it requests that         7805   Jan. 26, 1966  31 FR 2475.
 issuing companies follow in order to expedite the
 processing of proxy material.
Statement of the Commission setting the date of May      7824   Feb. 14, 1966  31 FR 3175.
 1, 1966 after which filings must reflect
 beneficial ownership of securities held by family
 members.
Policy statement by the Director of the Division of      7920   July 19, 1966  31 FR 10076.
 Trading and Markets re consummation of securities
 transactions by brokers-dealers when trading is
 suspended.
Opinions of the Commission on the acceleration of        8336   June 18, 1968  33 FR 10086.
 the effective date of a registration statement
 under the Securities Act of 1933 and on the
 clearance of proxy material such as convertible
 preferred shares considered residual securities in
 determining earnings per share applicable to
 common stock.

[[Page 7]]

 
Statement of the Commission to alert prospective         8351    July 5, 1968  33 FR 10134.
 borrowers obtaining loans for real estate
 development about recent fraudulent schemes.
Statement of the Commission warning broker-dealers       8363   July 29, 1968  33 FR 11150.
 to be prompt in the consummation of securities
 transactions and about the penalty for not so
 doing.
Statement of the Commission re broker-dealer             8389   Aug. 29, 1968  33 FR 13005.
 registration of insurance companies acting as
 agents for distribution of ``variable annuities''
 and application of regulations for such under the
 Securities Exchange Act of 1934.
Statement of the Commission reminding broker-dealer      8404  Sept. 11, 1968  33 FR 14286.
 managements to establish and maintain an effective
 supervisory system and failure to do so will
 result in disciplinary action against the firm and
 responsible individuals.
Statement of the Commission clarifying that              8409  Sept. 16, 1968  33 FR 14545.
 industrial revenue bonds sold according to Rule
 131 (17 CFR 230.131) and Rule 3b-5 (17 CFR 240.3b-
 5) are not affected if acquired and paid for by
 the underwriters on or before December 31, 1968.
Statement of the Commission cautioning brokers and       8638    July 2, 1969  34 FR 11581.
 dealers with respect to effecting transactions of
 ``spin offs'' and ``shell corporations''.
Commission's statement about publicity concerning        8728   Oct. 20, 1969  34 FR 17433.
 the petroleum discoveries on the North Slope of
 Alaska.
Commission's warning statement re sale and               8733    Nov. 4, 1969  34 FR 18160.
 distribution of whisky warehouse receipts.
Letter by Philip A. Loomis, Jr., General Counsel         8746   Nov. 10, 1969  34 FR 18543.
 for the Commission, explaining obligations of
 mutual fund managements and brokers with respect
 to commissions on portfolio brokerage of mutual
 funds.
Publication of the Commission's guidelines re            8907   June 23, 1970  35 FR 12103.
 applicability of Federal securities laws to offer
 and sale outside the U.S. of shares of registered
 open-end investment companies.
Statement of the Commission reminding reporting          8995   Oct. 15, 1970  35 FR 16733.
 companies of obligation re Commission's rules to
 file reports on a timely basis.
Commission's statement re exemption of certain           9016    Nov. 6, 1970  35 FR 17990.
 industrial revenue bonds from registration, etc.
 requirements in view of amendment of Securities
 Act of 1933 and of Securities Exchange Act of 1934
 by ``section 401'' (Pub. L. 91-1037).
Commission's views relating to important questions       9049   Dec. 23, 1970  35 FR 19986.
 re the accounting by registered investment
 companies for investment securities in their
 financial statements and in the periodic
 computations of net asset value for the purpose of
 pricing their shares.
Publication of the Commission's procedure to be          9065   Jan. 25, 1971  36 FR 2600.
 followed if requests are to be met for no action
 or interpretative letters and responses thereto to
 be made available for public use.
Interpretations of the Commission in regard to           9083   Feb. 18, 1971  36 FR 4483.
 requirements for registration statements and
 reports concerning information requested re
 description of business, summary of operations,
 and financial statements.
Statement of the Commission warning the public           9148   Apr. 12, 1971  36 FR 8239.
 about novel unsecured debt securities which appear
 to invite unwarranted comparisons with bank
 savings accounts, savings and loan association
 accounts, and bank time deposit certificates.
Statement of the Commission prohibiting the              9210   June 16, 1971  36 FR 11918.
 reduction of fixed charges by amounts representing
 interest or investment income or gains on
 retirement of debt in registration statements or
 reports filed with the Commission.
Statement of the Commission calling attention to         9252   July 19, 1971  36 FR 13988.
 requirements in its forms and rules under the
 Securities Act of 1933 and the Securities and
 Exchange Act of 1934 for disclosure of legal
 proceedings and descriptions of registrant's
 business as these requirements relate to material
 matters involving the environment and civil rights.
Commission's policy requiring the inclusion in           9279   Aug. 10, 1971  36 FR 15527.
 financial statements of the ratio of earnings to
 fixed charges for the total enterprise in
 equivalent prominence with the ratio for the
 registrant or registrant and consolidated
 subsidiaries.
Policy of Commission's Division of Corporation           9345  Sept. 27, 1971  36 FR 19362.
 Finance to defer processing registration
 statements and amendments filed under the
 Securities Act of 1933 by issuers whose reports
 are delinquent until such reports are brought up
 to date.
Commission's statement concerning applicability of       9387   Nov. 30, 1971  36 FR 23289.
 securities laws to multilevel distributorships and
 other business opportunities offered through
 pyramid sales plans.
Statement by the Commission regarding payment of         9395   Nov. 24, 1971  36 FR 23359.
 solicitation fees in tender offers.
Commission's statement concerning offering and sale      9444   Jan. 14, 1972  37 FR 600.
 of securities in non-public offerings and
 applicability of antifraud provisions of
 securities acts.
Statement of the Commission's views on the present   ........   Mar. 14, 1972  37 FR 5286
 status of the securities markets and the direction
 in which the public interest requires that they
 evolve in the future.

[[Page 8]]

 
Commission endorses the establishment by all             9548    Apr. 5, 1972  37 FR 6850.
 publicly held companies of audit committees
 composed of outside directors.
Applicability of Commission's policy statement on        9598    May 18, 1972  37 FR 9988.
 the future structure of securities markets to
 selection of brokers and payment of commissions by
 institutional managers.
Commission's statement and policy on misleading pro      9618    June 9, 1972  37 FR 11559.
 rata stock distributions to shareholders.
Commission's guidelines on independence of               9662   June 19, 1972  37 FR 14294.
 certifying accountants; example cases and
 Commission's conclusions.
Commission's decisions on recommendations of             9796    Mar. 1, 1973  38 FR 5457.
 advisory committee regarding commencement of
 enforcement proceedings and termination of staff
 investigations.
Commission's interpretation of risk-sharing test in      9798    Oct. 5, 1972  37 FR 20937.
 pooling-of-interest accounting.
Commission's statement that short-selling                9824   Oct. 25, 1972  37 FR 22796.
 securities prior to offering date is a possible
 violation of antifraud and antimanipulative laws.
Commission reaffirms proper accounting treatment to      9867   Dec. 13, 1972  37 FR 26516.
 be followed by a lessee when the lessor is created
 as a conduit for debt financing.
Commission's interpretations of a rule (15c3-3)          9922   Jan. 18, 1973  38 FR 1737.
 dealing with customer protection by securities
 brokers and dealers.
Amendment of previous interpretation (AS-130) of         9927   Jan. 18, 1973  38 FR 1734.
 risk-sharing test in pooling of interest
 accounting.
Commission clarifies effective dates of Rule 15c3-3      9946    Feb. 5, 1973  38 FR 3313.
Commission's designation of control locations for        9969    Feb. 5, 1973   Do.
 foreign securities.
Commission's findings on disclosure of projections       9984   Mar. 19, 1973  38 FR 7220.
 of future economic performance by issuers of
 publicly traded securities.
Commission's views on reporting cash flow and other     10041   Apr. 11, 1973  38 FR 9158.
 related data.
Commission's statement on obligations of                10181    June 1, 1973  38 FR 17201.
 underwriters with respect to discretionary
 accounts.
Commission's opinion on net capital treatment of        10209    June 8, 1973  38 FR 16774.
 securities position, obligation and transactions
 in suspended securities.
Commission expresses concern with failure of            10214   July 10, 1973  38 FR 18366.
 issuers to timely and properly file periodic and
 current report.
Commission's statement and policy on application of     10304    Aug. 3, 1973  38 FR 20820.
 minimum net capital requirement.
Commission's conclusions as to certain problem          10363  Sept. 10, 1973  38 FR 24635.
 relating to the effect of treasury stock
 transactions on accounting for business
 combinations.
Commission's interpretation of market                   10388  Sept. 20, 1973  38 FR 26358.
 identification requirement of rule for reporting
 of market information on transactions in listed
 securities.
Commission's response to the New York Stock             10391  Sept. 25, 1973  38 FR 26716.
 Exchange's proposed interpretation of ``affiliated
 person''.
Commission request for comments on Accounting           10422   Oct. 17, 1973  38 FR 28819.
 Series Release No. 46.
Commission's guidelines for control locations for       10429   Oct. 23, 1973  38 FR 29217.
 foreign securities.
Commission's views and comments relating to             10547    Jan. 7, 1974  39 FR 1261.
 quarterly reporting on Form 10-Q and Form 10-QSB.
Statement by the Commission on disclosure of the        10569   Jan. 10, 1974  39 FR 1511.
 impact of possible fuel shortages on the
 operations of issuers.
Commission's statement on disclosure of inventory       10580   Jan. 17, 1974  39 FR 2085.
 profits reflected in income in periods of rising
 prices.
Commission decision on trading in securities issued     10610   Jan. 31, 1974  39 FR 3932.
 or guaranteed by the governments of Bulgaria,
 Hungary, and Romania.
Commission views on disclosure of illegal campaign      10673   Mar. 11, 1974  39 FR 10237.
 contributions.
Commission's statement of policy and                   10363A   Apr. 12, 1974  39 FR 14588.
 interpretations.
Commission's statement regarding maintenance of         10756     May 9, 1974  39 FR 16440.
 current books and records by brokers and dealers.
Commission's practices on reporting of natural gas      10857   June 14, 1974  39 FR 27556.
 reserve estimates.
Commission's views on business combinations             10898    July 3, 1974  39 FR 26719.
 involving open-end investment companies.
Commission's guidelines for filings related to          10899    July 3, 1974  39 FR 26720.
 extractive reserves and natural gas supplies.
Commission's guidelines for registration and            10961   Aug. 14, 1974  39 FR 31894.
 reporting.
Commission's requirements for financial statements;     11029  Sept. 27, 1974  39 FR 36578.
 limited partnerships in annual reports.
Commission's examples of unusual risks and              11150   Dec. 23, 1994  40 FR 2678.
 uncertainties.
Letters of the Division of Corporation Finance with     11156   Dec. 26, 1994  40 FR 1695.
 respect to certain proposed arrangements for the
 sale of gold bullion.
Commission's statement on disclosure problems           11198   Jan. 23, 1975  40 FR 6483.
 relating to LIFO accounting.
Commission's guidelines on Accounting Series            11470   June 13, 1975  40 FR 27441.
 Release No. 148.
Brokers and dealers effecting transactions in           11854   Nov. 20, 1975  40 FR 57786.
 municipal securities.
Financial responsibility requirements of brokers        11969     Jan 2, 1976  41 FR 5277.
 and dealers.
Brokers and dealers effecting transactions in           12021  ..............  41 FR 3469.
 municipal securities.
Interpretation of certain terms in item 10 of Form      12078   Feb. 17, 1976  41 FR 7089.
 BD.
Brokers and dealers effecting transactions in           12288   Apr. 15, 1976  41 FR 15842.
 municipal securities.

[[Page 9]]

 
Standards for disclosure; oil and gas reserve......     12435    May 12, 1976  41 FR 21764.
Brokers and dealers effecting transactions in           12496   June 11, 1976  41 FR 23668.
 municipal securities.
Statement of informal proposals for the rendering       12599   July 20, 1976  41 FR 29989.
 of staff advice with respect to shareholder
 proposals.
Guides for statistical disclosure by bank holding       12748   Aug. 31, 1976  41 FR 39007.
 companies.
Uniform net capital rule...........................     12766  Sept. 14, 1976  41 FR 39014.
Uniform net capital rule...........................     12927   Oct. 27, 1976  41 FR 48335.
Brokers and dealers effecting transactions in           12932   Oct. 27, 1976  41 FR 48336.
 municipal securities.
Brokers and dealers effecting transactions in           13108    Jan. 4, 1977  42 FR 759.
 municipal securities.
Brokers and dealers effecting transactions in           13362   Mar. 21, 1977  42 FR 15310.
 municipal securities.
Rescission of certain accounting series releases...     13630   June 15, 1977  42 FR 33282.
Guideline regarding the preparation of integrated       13639   June 17, 1977  42 FR 31780.
 reports to shareholders.
Industry segment determination.....................     14523    Mar. 3, 1978  43 FR 9599.
Securities transactions by members of national          14563   Mar. 14, 1978  43 FR 11542.
 securities exchanges.
Application of registration requirements to certain     14699   Apr. 24, 1978  43 FR 18163.
 tender offers and the application of tender offer
 provisions to certain cash-option mergers.
Reporting by certain institutional investors of         14830   June 13, 1978  43 FR 25420.
 beneficial ownership of certain equity securities
 which as of the end of any month exceeds ten
 percent of the class.
Division of investment management's interpretative      15292    Nov. 2, 1978  43 FR 52697.
 positions relating to Rule 13f-1 and related Form
 13F.
Guides for disclosure of projections of future          15305    Nov. 7, 1978  43 FR 53246.
 economic performance.
Commission's statement regarding disclosure of          15371   Nov. 29, 1978  43 FR 57596.
 impact of Wage and Price Standards for 1979 on the
 operations of issuers.
Statement of the views of the Commission's Division     15572   Feb. 15, 1979  44 FR 11541.
 of Corporation Finance with respect to disclosure
 in proxy statements containing certain sale of
 assets transactions.
Short sales; interpretation of rule................     16150   Aug. 30, 1979  44 FR 53159.
Shareholder communications, shareholder                 16163   Sept. 6, 1979  44 FR 53426.
 participation in the corporate electoral process
 and corporate governance generally.
Environmental disclosure requirements..............     16224  Sept. 27, 1979  44 FR 56924.
Pooled income funds................................     16478   Jan. 10, 1980  45 FR 3258.
Tender offer rules.................................     16623    Mar. 5, 1980  45 FR 15521.
Proxy rules........................................     16833    May 23, 1980  45 FR 36374.
Clearing agencies..................................     16900   June 17, 1980  45 FR 41920.
Guides for statistical disclosure by bank holding       16961    July 8, 1980  45 FR 47142.
 companies.
Transfer agents....................................     17111   Sept. 2, 1980  45 FR 59840.
Amendments to guides...............................     17114   Sept. 2, 1980  45 FR 63647.
Extension date of clearing agencies for form filing     17231   Oct. 20, 1980  45 FR 70857.
Beneficial ownership rules.........................     17354    Dec. 4, 1980  45 FR 81559.
Distribution of proxy materials to beneficial           17424    Jan. 7, 1981  46 FR 3204.
 shareowners.
Foreign Corrupt Practices Act of 1977..............     17500   Jan. 29, 1981  46 FR 11544.
Analysis of results of 1980 proxy statement             17518    Feb. 5, 1981  46 FR 11954.
 disclosure monitoring program.
Option and option-related transactions during           17609    Mar. 6, 1981  46 FR 16670.
 underwritten offerings.
Going private transactions under rule 13e-3........     17719   Apr. 13, 1981  46 FR 22571.
Insider reporting and trading......................     18114  Sept. 23, 1981  46 FR 48147.
Retail repurchase agreements by banks and savings       18122  Sept. 25, 1981  46 FR 48637.
 and loan associations.
Analysis of results of 1981 proxy statement             18532    Mar. 3, 1982  47 FR 10794.
 disclosure monitoring program.
Rescission of guides and redesignation of industry      18525    Mar. 3, 1982  47 FR 11481.
 guides (effective May 24, 1982).
Amendments to guides...............................     19337   Dec. 15, 1982  47 FR 57911.
Revision of financial statement requirements and        19570    Mar. 7, 1983  48 FR 11104.
 industry guide disclosure for bank holding
 companies..
Commission's views on Colema Realty Corp. v. R. D.      19756    May 11, 1983  48 FR 23173.
 Bibow, et al.
Revision of industry guide disclosures for bank         20068   Aug. 11, 1983  48 FR 37609.
 holding companies.
Public statements by corporate representatives.....     20560   Jan. 13, 1984  49 FR 2468.
Research reports...................................     21332  Sept. 19, 1984  49 FR 37574.
Commission views on computer brokerage systems.....     21383    Oct. 9, 1984  49 FR 40159.
Guide for disclosures concerning reserves for           21521   Nov. 27, 1984  49 FR 47601.
 unpaid claims and claim adjustment expenses of
 property-casualty underwriters.
Brokerage and research services concerning scope of     23170   Apr. 23, 1986  51 FR 16012.
 section 28(e) of Securities Exchange Act of 1934.
Application of Rule 10b--6 under the Securities         23611  Sept. 11, 1986  51 FR 33248.
 Exchange Act of 1934 to persons participating in
 shelf distributions.
Industry guides for statistical disclosure by bank      23846   Nov. 25, 1986  51 FR 43599.
 holding companies.
Tender offers rules................................     24296    Apr. 3, 1987  52 FR 11458.
Statement of the Commission Regarding Disclosure        25951    Aug. 1, 1988  53 FR 29228.
 Obligations of Companies Affected by the
 Government's Defense Contract Procurement Inquiry
 and Related Issues.
Statement of the Commission Regarding Disclosure by     26508    Feb. 1, 1989  54 FR 5603.
 Issuers of interests in Publicly Offered Commodity
 Pools.
Management's discussion and analysis of financial       26831    May 18, 1989  54 FR 22427.
 condition and results of operations; certain
 investment company disclosures.

[[Page 10]]

 
Modifying and confirming the interpretation of          26985   June 28, 1989  54 FR 28814.
 municipal underwriter securities responsibilities.
Liquidation of Index Arbitrage Positions...........     27938   Apr. 30, 1990  55 FR 17949.
Ownership reports on trading by officers, directors     29131   Apr. 26, 1991  56 FR 19928.
 and principal security holders.
Limited partnership reorganizations and public          29314   June 17, 1991  56 FR 28986.
 offerings of limited partnership interests.
Registration of Successors to Broker-Dealers and        31661    Jan. 4, 1993  58 FR 11.
 Investment Advisors.
Statement of the Commission regarding disclosure        33741    Mar. 9, 1994  59 FR 12758.
 obligations of municipal securities issuers and
 others.
Amendment of interpretation regarding substantive       34061    May 12, 1994  59 FR 26109.
 repossession of collateral.
Use of electronic media for delivery purposes......     36345    Oct. 6, 1995  60 FR 53467.
Use of electronic media for delivery purposes......     37182     May 9, 1996  61 FR 24651.
Statement of the Commission Regarding Use of            39779   Mar. 23, 1998  63 FR 14813
 Internet Web Sites to Offer Securities, Solicit
 Securities Transactions or Advertise Investment
 Services Offshore.
Confirmation and Affirmation of Securities Trades;      39829    Apr. 6, 1998  63 FR 17947
 Matching.
Statement of the Commission Regarding Disclosure of     40277   July 29, 1998  63 FR 41404.
 Year 2000 Issues and Consequences by Public
 Companies, Investment Advisers, Investment
 Companies, and Municipal Securities Issuers.
Use of electronic media............................     42728   Apr. 28, 2000  65 FR 25856.
Commission Guidance on Mini-Tender Offers and           43069   July 24, 2000  65 FR 46588.
 Limited Partnership Tender Offers.
Commission Guidance to Broker-Dealers on the Use of     44238     May 7, 2001  66 FR 22921.
 Electronic Storage Media Under the Electronic
 Signatures in Global and National Commerce Act of
 2000 With Respect to Rule 17a-4(f).
Application of the Electronic Signatures in Global      44424   June 21, 2001  66 FR 33176.
 and National Commerce Act to Record Retention
 Requirements Pertaining to Issuers.
Calculation of Average Weekly Trading Volume.......    44820A  Sept. 27, 2001  66 FR 49274
Commission Guidance on the Scope of Section 28(e)       45194   Dec. 27, 2001  67 FR 8
 of the Exchange Act.
Commission Guidance on Trading in Security Futures      46101   June 21, 2002  67 FR 43246
 Products.
Electronic Storage of Broker-Dealer Records........     47806     May 7, 2003  68 FR 25283
Books and Records Requirements for Brokers and          47910    May 22, 2003  68 FR 32311
 Dealers Under the Securities Exchange Act of 1934.
Commission Guidance on Rule 3b-3 and Married Put        48795    November 17,  68 FR 65822
 Transactions.                                                           2003
Commission Guidance Regarding Management's              48960    December 19,  68 FR 75065
 Discussion and Analysis of Financial Condition and                      2003
 Results of Operations.
Commission Guidance Regarding the Public Company        49708    May 14, 2004  69 FR 29066
 Accounting Oversight Board's Auditing and Related
 Profesional Practice Standard No. 1.
Short Sales........................................     50103   July 28, 2004  69 FR 48029
Prohibited Conduct in Connection with IPO               51500   April 7, 2005  70 FR 19677
 Allocations.
Commission Guidance Regarding Accounting for Sales      52885     December 5,  70 FR 73345
 of Vaccines and Bioterror Countermeasures to the                        2005
 Federal Government for Placement Into the
 Pediatric Vaccine Stockpile or the Strategic
 National Stockpile.
Commission Guidance Regarding Client Commission         54165   July 18, 2006  71 FR 41996
 Practices Under Section 28(e) of the Securities
 and Exchange Act of 1934.
Commission Guidance Regarding Management's Report       55929   June 20, 2007  72 FR 35343
 on Internal Control Over Financial Reporting Under
 Section 13(a) or 15(d) of the Securities and
 Exchange Act of 1934.
Commission Guidance Regarding and Amendment to the      58024   June 25, 2008  73 FR 40152
 Rules Relating to Organization and Program
 Management Concerning Proposed Rule Changes Filed
 by Self-Regulatory Organizations.
Commission Guidance on the Use of Company Web Sites     58288    Aug. 1, 2008  73 FR 45874
Commission Guidance and Revisions to the Cross-         58597  Sept. 19, 2008  73 FR 60094
 Border Tender Offer, Exchange Offer, Rights
 Offerings, and Business Combination Rules and
 Beneficial Ownership Reporting Rules for Certain
 Foreign Institutions.
Regulation SHO Amendments..........................     58775   Oct. 14, 2008  73 FR 61706
Commission Guidance Regarding the Financial            60519A   Aug. 25, 2009  74 FR 42773
 Accounting Standards Board's Accounting Standards
 Codification.
Commission Guidance Regarding Disclosure Related to     61469    Feb. 2, 2010  75 FR 62973
 Climate Change.
Amendment to Municipal Securities Disclosure.......    62184A    May 26, 2010  75 FR 33156
Commission Guidance on Presentation of Liquidity        62934  Sept. 17, 2010  75 FR 59897
 and Capital Resources Disclosures in Management's
 Discussion and Analysis.
Commission Guidance Regarding Auditing,                 62991  Sept. 24, 2010  75 FR 60617
 Attestation, and Related Professional Practice
 Standards Related to Brokers and Dealers.
Commission Guidance Regarding Definitions of            67448   July 17, 2012  77 FR 42988
 Mortgage Related Security and Small Business
 Related Security.
Further Definition of ``Swap,'' ``Security-Based        67453   July 18, 2012  77 FR 48362
 Swap,'' and ``Security-Based Swap Agreement'';
 Mixed Swaps; Security-Based Swap Agreement
 Recordkeeping.

[[Page 11]]

 
Application of ``Security-Based Swap Dealer'' and    34-72472   June 25, 2014  79 FR 47371
 ``Major Security-Based Swap Participant''
 Definitions to Cross-Border Security-Based Swap
 Activities.
Commission Guidance Regarding the Definition of the  34-75250   June 19, 2015  80 FR 37536
 Terms ``Spouse'' and ``Marriage'' Following the
 Supreme Court's Decision in United States v.
 Windsor.
Interpretation of the SEC's Whistleblower Rules      34-75592    Aug. 4, 2015  80 FR 47831
 under Section 21F of the Securities Exchange Act
 of 1934.
Interpretation Regarding Automated Quotations Under  34-78102   June 17, 2016  81 FR 40793
 Regulation NMS.
Commission Guidance Regarding Revenue Recognition    34-81428   Aug. 18, 2017  82 FR 41148
 for Bill-and-Hold Arrangements.
Updates to Commission Guidance Regarding Accounting  34-81429   Aug. 18, 2017  82 FR 41150
 for Sales of Vaccines and Bioterror
 Countermeasures to the Federal Government for
 Placement into the Pediatric Vaccine Stockpile or
 the Strategic National Stockpile.
Commission Interpretation and Guidance Regarding     34-86721   Aug. 21, 2019  84 FR 47419.
 the Applicability of the Proxy Rules to Proxy
 Voting Advice.
Commission Guidance on Management's Discussion and   34-88094   Jan. 30, 2020  85 FR 10571
 Analysis of Financial Condition and Results of
 Operations.
----------------------------------------------------------------------------------------------------------------



PART 242_REGULATIONS M, SHO, ATS, AC, NMS, SE, AND SBSR, AND 
CUSTOMER MARGIN REQUIREMENTS FOR SECURITY FUTURES-
-Table of Contents



                              Regulation M

Sec.
242.100 Preliminary note; definitions.
242.101 Activities by distribution participants.
242.102 Activities by issuers and selling security holders during a 
          distribution.
242.103 Nasdaq passive market making.
242.104 Stabilizing and other activities in connection with an offering.
242.105 Short selling in connection with a public offering.

                Regulation SHO--Regulation of Short Sales

242.200 Definition of ``short sale'' and marking requirements.
242.201 Circuit breaker.
242.203 Borrowing and delivery requirements.
242.204 Close-out requirement.

               Regulation ATS--Alternative Trading Systems

242.300 Definitions.
242.301 Requirements for alternative trading systems.
242.302 Recordkeeping requirements for alternative trading systems.
242.303 Record preservation requirements for alternative trading 
          systems.
242.304 NMS Stock ATSs.

            Customer Margin Requirements for Security Futures

242.400 Customer margin requirements for security futures--authority, 
          purpose, interpretation, and scope.
242.401 Definitions.
242.402 General provisions.
242.403 Required margin.
242.404 Type, form and use of margin.
242.405 Withdrawal of margin.
242.406 Undermargined accounts.

                  Regulation AC--Analyst Certification

242.500 Definitions
242.501 Certifications in connection with research reports.
242.502 Certifications in connection with public appearances.
242.503 Certain foreign research reports.
242.504 Notification to associated persons.
242.505 Exclusion for news media.

        Regulation NMS--Regulation of the National Market System

242.600 NMS security designation and definitions.
242.601 Dissemination of transaction reports and last sale data with 
          respect to transactions in NMS stocks.
242.602 Dissemination of quotations in NMS securities.
242.603 Distribution, consolidation, and display of information with 
          respect to quotations for and transactions in NMS stocks.
242.604 Display of customer limit orders.
242.605 Disclosure of order execution information.
242.606 Disclosure of order routing information.
242.607 Customer account statements.
242.608 Filing and amendment of national market system plans.

[[Page 12]]

242.609 Registration of securities information processors: form of 
          application and amendments.
242.610 Access to quotations.
242.611 Order protection rule.
242.612 Minimum pricing increment.
242.613 Consolidated audit trail.
242.614 Registration and responsibilities of competing consolidators.

   Regulation SE--Registration and Regulation of Security-Based Swap 
                          Execution Facilities

242.800 Scope.
242.801 Applicable provisions.
242.802 Definitions.
242.803 Requirements and procedures for registration.
242.804 Listing products for trading by certification.
242.805 Voluntary submission of new products for Commission review and 
          approval.
242.806 Voluntary submission of rules for Commission review and 
          approval.
242.807 Self-certification of rules.
242.808 Availability of public information.
242.809 Staying of certification and tolling of review period pending 
          jurisdictional determination.
242.810 Product filings by security-based swap execution facilities that 
          are not yet registered and by dormant security-based swap 
          execution facilities.
242.811 Information relating to security-based swap execution facility 
          compliance.
242.812 Enforceability.
242.813 Prohibited use of data collected for regulatory purposes.
242.814 Entity operating both a national securities exchange and 
          security-based swap execution facility.
242.815 Methods of execution for Required and Permitted Transactions.
242.816 Trade execution requirement and exemptions therefrom.
242.817 Trade execution compliance schedule.
242.818 Core Principle 1--Compliance with core principles.
242.819 Core Principle 2--Compliance with rules.
242.820 Core Principle 3--Security-based swaps not readily susceptible 
          to manipulation.
242.821 Core Principle 4--Monitoring of trading and trade processing.
242.822 Core Principle 5--Ability to obtain information.
242.823 Core Principle 6--Financial integrity of transactions.
242.824 Core Principle 7--Emergency authority.
242.825 Core Principle 8--Timely publication of trading information.
242.826 Core Principle 9--Recordkeeping and reporting.
242.827 Core Principle 10--Antitrust considerations.
242.828 Core Principle 11--Conflicts of interest.
242.829 Core Principle 12--Financial resources.
242.830 Core Principle 13--System safeguards.
242.831 Core Principle 14--Designation of chief compliance officer.
242.832 Application of the trade execution requirement to cross-border 
          security-based swap transactions.
242.833 Cross-border exemptions.
242.834 Mitigation of conflicts of interest of security-based swap 
          execution facilities and certain exchanges.
242.835 Notice to Commission by security-based swap execution facility 
          of final disciplinary action or denial or limitation of 
          access.

   Regulation SBSR--Regulatory Reporting and Public Dissemination of 
                     Security-Based Swap Information

242.900 Definitions
242.901 Reporting obligations.
242.902 Public dissemination of transaction reports.
242.903 Coded information.
242.904 Operating hours of registered security-based swap data 
          repositories.
242.905 Correction of errors in security-based swap information.
242.906 Other duties of participants.
242.907 Policies and procedures of registered security-based swap data 
          repositories.
242.908 Cross-border matters.
242.909 Registration of security-based swap data repository as a 
          securities information processor.

             Regulation SCI_Systems Compliance and Integrity

242.1000 Definitions.
242.1001 Obligations related to policies and procedures of SCI entities.
242.1002 Obligations related to SCI events.
242.1003 Obligations related to systems changes; SCI review.
242.1004 SCI entity business continuity and disaster recovery plans 
          testing requirements for members or participants.
242.1005 Recordkeeping requirements related to compliance with 
          Regulation SCI.
242.1006 Electronic filing and submission.
242.1007 Requirements for service bureaus.

    Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78c-4, 
78g(c)(2), 78i(a), 78j, 78k-1(c), 78l, 78m, 78n, 78o(b), 78o(c), 78o(g), 
78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 78mm, 80a-23, 80a-29, 80a-37, 
and 8343.

[[Page 13]]


    Source: 62 FR 544, Jan. 3, 1997, unless otherwise noted.

                              Regulation M



Sec.  242.100  Preliminary note; definitions.

    (a) Preliminary note: Any transaction or series of transactions, 
whether or not effected pursuant to the provisions of Regulation M 
(Sec. Sec.  242.100-242.105 of this chapter), remain subject to the 
antifraud and antimanipulation provisions of the securities laws, 
including, without limitation, Section 17(a) of the Securities Act of 
1933 [15 U.S.C. 77q(a)] and Sections 9, 10(b), and 15(c) of the 
Securities Exchange Act of 1934 [15 U.S.C. 78i, 78j(b), and 78o(c)].
    (b) For purposes of regulation M (Sec. Sec.  242.100 through 242.105 
of this chapter) the following definitions shall apply:
    ADTV means the worldwide average daily trading volume during the two 
full calendar months immediately preceding, or any 60 consecutive 
calendar days ending within the 10 calendar days preceding, the filing 
of the registration statement; or, if there is no registration statement 
or if the distribution involves the sale of securities on a delayed 
basis pursuant to Sec.  230.415 of this chapter, two full calendar 
months immediately preceding, or any consecutive 60 calendar days ending 
within the 10 calendar days preceding, the determination of the offering 
price.
    Affiliated purchaser means:
    (1) A person acting, directly or indirectly, in concert with a 
distribution participant, issuer, or selling security holder in 
connection with the acquisition or distribution of any covered security; 
or
    (2) An affiliate, which may be a separately identifiable department 
or division of a distribution participant, issuer, or selling security 
holder, that, directly or indirectly, controls the purchases of any 
covered security by a distribution participant, issuer, or selling 
security holder, whose purchases are controlled by any such person, or 
whose purchases are under common control with any such person; or
    (3) An affiliate, which may be a separately identifiable department 
or division of a distribution participant, issuer, or selling security 
holder, that regularly purchases securities for its own account or for 
the account of others, or that recommends or exercises investment 
discretion with respect to the purchase or sale of securities; Provided, 
however, That this paragraph (3) shall not apply to such affiliate if 
the following conditions are satisfied:
    (i) The distribution participant, issuer, or selling security 
holder:
    (A) Maintains and enforces written policies and procedures 
reasonably designed to prevent the flow of information to or from the 
affiliate that might result in a violation of Sec. Sec.  242.101, 
242.102, and 242.104; and
    (B) Obtains an annual, independent assessment of the operation of 
such policies and procedures; and
    (ii) The affiliate has no officers (or persons performing similar 
functions) or employees (other than clerical, ministerial, or support 
personnel) in common with the distribution participant, issuer, or 
selling security holder that direct, effect, or recommend transactions 
in securities; and
    (iii) The affiliate does not, during the applicable restricted 
period, act as a market maker (other than as a specialist in compliance 
with the rules of a national securities exchange), or engage, as a 
broker or a dealer, in solicited transactions or proprietary trading, in 
covered securities.
    Agent independent of the issuer means a trustee or other person who 
is independent of the issuer. The agent shall be deemed to be 
independent of the issuer only if:
    (1) The agent is not an affiliate of the issuer; and
    (2) Neither the issuer nor any affiliate of the issuer exercises any 
direct or indirect control or influence over the prices or amounts of 
the securities to be purchased, the timing of, or the manner in which, 
the securities are to be purchased, or the selection of a broker or 
dealer (other than the independent agent itself) through which purchases 
may be executed; Provided, however, That the issuer or its affiliate 
will not be deemed to have such control or influence solely because it 
revises not more than once in any three-month period the source of the 
shares to fund the plan the basis for determining the amount of its 
contributions to a plan, or the basis for determining

[[Page 14]]

the frequency of its allocations to a plan, or any formula specified in 
a plan that determines the amount or timing of securities to be 
purchased by the agent.
    Asset-backed security has the meaning contained in Sec.  229.1101 of 
this chapter.
    At-the-market offering means an offering of securities at other than 
a fixed price.
    Business day refers to a 24 hour period determined with reference to 
the principal market for the securities to be distributed, and that 
includes a complete trading session for that market.
    Completion of participation in a distribution. Securities acquired 
in the distribution for investment by any person participating in a 
distribution, or any affiliated purchaser of such person, shall be 
deemed to be distributed. A person shall be deemed to have completed its 
participation in a distribution as follows:
    (1) An issuer or selling security holder, when the distribution is 
completed;
    (2) An underwriter, when such person's participation has been 
distributed, including all other securities of the same class that are 
acquired in connection with the distribution, and any stabilization 
arrangements and trading restrictions in connection with the 
distribution have been terminated; Provided, however, That an 
underwriter's participation will not be deemed to have been completed if 
a syndicate overallotment option is exercised in an amount that exceeds 
the net syndicate short position at the time of such exercise; and
    (3) Any other person participating in the distribution, when such 
person's participation has been distributed.
    Covered security means any security that is the subject of a 
distribution, or any reference security.
    Current exchange rate means the current rate of exchange between two 
currencies, which is obtained from at least one independent entity that 
provides or disseminates foreign exchange quotations in the ordinary 
course of its business.
    Distribution means an offering of securities, whether or not subject 
to registration under the Securities Act, that is distinguished from 
ordinary trading transactions by the magnitude of the offering and the 
presence of special selling efforts and selling methods.
    Distribution participant means an underwriter, prospective 
underwriter, broker, dealer, or other person who has agreed to 
participate or is participating in a distribution.
    Electronic communications network has the meaning provided in Sec.  
242.600.
    Employee has the meaning contained in Form S-8 (Sec.  239.16b of 
this chapter) relating to employee benefit plans.
    Exchange Act means the Securities Exchange Act of 1934 (15 U.S.C. 
78a et seq.).
    Independent bid means a bid by a person who is not a distribution 
participant, issuer, selling security holder, or affiliated purchaser.
    NASD means the National Association of Securities Dealers, Inc. or 
any of its subsidiaries.
    Nasdaq means the electronic dealer quotation system owned and 
operated by The Nasdaq Stock Market, Inc.
    Nasdaq security means a security that is authorized for quotation on 
Nasdaq, and such authorization is not suspended, terminated, or 
prohibited.
    Net purchases means the amount by which a passive market maker's 
purchases exceed its sales.
    Offering price means the price at which the security is to be or is 
being distributed.
    Passive market maker means a market maker that effects bids or 
purchases in accordance with the provisions of Sec.  242.103.
    Penalty bid means an arrangement that permits the managing 
underwriter to reclaim a selling concession from a syndicate member in 
connection with an offering when the securities originally sold by the 
syndicate member are purchased in syndicate covering transactions.
    Plan means any bonus, profit-sharing, pension, retirement, thrift, 
savings, incentive, stock purchase, stock option, stock ownership, stock 
appreciation, dividend reinvestment, or similar plan; or any dividend or 
interest reinvestment plan or employee benefit plan as defined in Sec.  
230.405 of this chapter.
    Principal market means the single securities market with the largest 
aggregate reported trading volume for the

[[Page 15]]

class of securities during the 12 full calendar months immediately 
preceding the filing of the registration statement; or, if there is no 
registration statement or if the distribution involves the sale of 
securities on a delayed basis pursuant to Sec.  230.415 of this chapter, 
during the 12 full calendar months immediately preceding the 
determination of the offering price. For the purpose of determining the 
aggregate trading volume in a security, the trading volume of depositary 
shares representing such security shall be included, and shall be 
multiplied by the multiple or fraction of the security represented by 
the depositary share. For purposes of this paragraph, depositary share 
means a security, evidenced by a depositary receipt, that represents 
another security, or a multiple or fraction thereof, deposited with a 
depositary.
    Prospective underwriter means a person:
    (1) Who has submitted a bid to the issuer or selling security 
holder, and who knows or is reasonably certain that such bid will be 
accepted, whether or not the terms and conditions of the underwriting 
have been agreed upon; or
    (2) Who has reached, or is reasonably certain to reach, an 
understanding with the issuer or selling security holder, or managing 
underwriter that such person will become an underwriter, whether or not 
the terms and conditions of the underwriting have been agreed upon.
    Public float value shall be determined in the manner set forth on 
the front page of Form 10-K (Sec.  249.310 of this chapter), even if the 
issuer of such securities is not required to file Form 10-K, relating to 
the aggregate market value of common equity securities held by non-
affiliates of the issuer.
    Reference period means the two full calendar months immediately 
preceding the filing of the registration statement or, if there is no 
registration statement or if the distribution involves the sale of 
securities on a delayed basis pursuant to Sec.  230.415 of this chapter, 
the two full calendar months immediately preceding the determination of 
the offering price.
    Reference security means a security into which a security that is 
the subject of a distribution (``subject security'') may be converted, 
exchanged, or exercised or which, under the terms of the subject 
security, may in whole or in significant part determine the value of the 
subject security.
    Restricted period means:
    (1) For any security with an ADTV value of $100,000 or more of an 
issuer whose common equity securities have a public float value of $25 
million or more, the period beginning on the later of one business day 
prior to the determination of the offering price or such time that a 
person becomes a distribution participant, and ending upon such person's 
completion of participation in the distribution; and
    (2) For all other securities, the period beginning on the later of 
five business days prior to the determination of the offering price or 
such time that a person becomes a distribution participant, and ending 
upon such person's completion of participation in the distribution.
    (3) In the case of a distribution involving a merger, acquisition, 
or exchange offer, the period beginning on the day proxy solicitation or 
offering materials are first disseminated to security holders, and 
ending upon the completion of the distribution.
    Securities Act means the Securities Act of 1933 (15 U.S.C. 77a et 
seq.).
    Selling security holder means any person on whose behalf a 
distribution is made, other than an issuer.
    Stabilize or stabilizing means the placing of any bid, or the 
effecting of any purchase, for the purpose of pegging, fixing, or 
maintaining the price of a security.
    Structural credit risk model means any commercially or publicly 
available model that calculates, based on an issuer's balance sheet, the 
probability that the value of the issuer will fall below the threshold 
at which the issuer would fail to make scheduled debt payments, at or by 
the expiration of a defined period.
    Syndicate covering transaction means the placing of any bid or the 
effecting of any purchase on behalf of the sole distributor or the 
underwriting syndicate or group to reduce a short position created in 
connection with the offering.

[[Page 16]]

    30% ADTV limitation means 30 percent of the market maker's ADTV in a 
covered security during the reference period, as obtained from the NASD.
    Underwriter means a person who has agreed with an issuer or selling 
security holder:
    (1) To purchase securities for distribution; or
    (2) To distribute securities for or on behalf of such issuer or 
selling security holder; or
    (3) To manage or supervise a distribution of securities for or on 
behalf of such issuer or selling security holder.

[62 FR 544, Jan. 3, 1997, as amended at 62 FR 11323, Mar. 12, 1997; 70 
FR 1623, Jan. 7, 2005; 70 FR 37619, June 29, 2005; 88 FR 39994, June 20, 
2023]



Sec.  242.101  Activities by distribution participants.

    (a) Unlawful Activity. In connection with a distribution of 
securities, it shall be unlawful for a distribution participant or an 
affiliated purchaser of such person, directly or indirectly, to bid for, 
purchase, or attempt to induce any person to bid for or purchase, a 
covered security during the applicable restricted period; Provided, 
however, That if a distribution participant or affiliated purchaser is 
the issuer or selling security holder of the securities subject to the 
distribution, such person shall be subject to the provisions of Sec.  
242.102, rather than this section.
    (b) Excepted Activity. The following activities shall not be 
prohibited by paragraph (a) of this section:
    (1) Research. The publication or dissemination of any information, 
opinion, or recommendation, if the conditions of Sec.  230.138, Sec.  
230.139, or Sec.  230.139b of this chapter are met; or
    (2) Transactions complying with certain other sections. Transactions 
complying with Sec. Sec.  242.103 or 242.104; or
    (3) Odd-lot transactions. Transactions in odd-lots; or transactions 
to offset odd-lots in connection with an odd-lot tender offer conducted 
pursuant to Sec.  240.13e-4(h)(5) of this chapter; or
    (4) Exercises of securities. The exercise of any option, warrant, 
right, or any conversion privilege set forth in the instrument governing 
a security; or
    (5) Unsolicited transactions. Unsolicited brokerage transactions; or 
unsolicited purchases that are not effected from or through a broker or 
dealer, on a securities exchange, or through an inter-dealer quotation 
system or electronic communications network; or
    (6) Basket transactions. (i) Bids or purchases, in the ordinary 
course of business, in connection with a basket of 20 or more securities 
in which a covered security does not comprise more than 5% of the value 
of the basket purchased; or
    (ii) Adjustments to such a basket in the ordinary course of business 
as a result of a change in the composition of a standardized index; or
    (7) De minimis transactions. Purchases during the restricted period, 
other than by a passive market maker, that total less than 2% of the 
ADTV of the security being purchased, or unaccepted bids; Provided, 
however, That the person making such bid or purchase has maintained and 
enforces written policies and procedures reasonably designed to achieve 
compliance with the other provisions of this section; or
    (8) Transactions in connection with a distribution. Transactions 
among distribution participants in connection with a distribution, and 
purchases of securities from an issuer or selling security holder in 
connection with a distribution, that are not effected on a securities 
exchange, or through an inter-dealer quotation system or electronic 
communications network; or
    (9) Offers to sell or the solicitation of offers to buy. Offers to 
sell or the solicitation of offers to buy the securities being 
distributed (including securities acquired in stabilizing), or 
securities offered as principal by the person making such offer or 
solicitation; or
    (10) Transactions in Rule 144A securities. Transactions in 
securities eligible for resale under Sec.  230.144A(d)(3) of this 
chapter, or any reference security, if the Rule 144A securities are sold 
in the United States solely to:
    (i) Qualified institutional buyers, as defined in Sec.  
230.144A(a)(1) of this chapter, or to purchasers that the seller and any 
person acting on behalf of the seller reasonably believes are qualified 
institutional buyers, in transactions exempt from registration under 
section 4(2) of the Securities Act (15 U.S.C.

[[Page 17]]

77d(2)) or Sec. Sec.  230.144A or Sec.  230.500 et seq of this chapter; 
or
    (ii) Persons not deemed to be ``U.S. persons'' for purposes of 
Sec. Sec.  230.902(o)(2) or 230.902(o)(7) of this chapter, during a 
distribution qualifying under paragraph (b)(10)(i) of this section.
    (c) Excepted Securities. The provisions of this section shall not 
apply to any of the following securities:
    (1) Actively-traded securities. Securities that have an ADTV value 
of at least $1 million and are issued by an issuer whose common equity 
securities have a public float value of at least $150 million; Provided, 
however, That such securities are not issued by the distribution 
participant or an affiliate of the distribution participant; or
    (2) Certain nonconvertible and asset-backed securities. (i) 
Nonconvertible debt securities and nonconvertible preferred securities 
of issuers for which the probability of default, estimated as of the 
sixth business day immediately preceding the determination of the 
offering price and over the horizon of 12 full calendar months from such 
day, is 0.055% or less, as determined and documented, in writing, by the 
distribution participant acting as the lead manager (or in a similar 
capacity) of a distribution, as derived from a structural credit risk 
model; or
    (ii) Asset-backed securities that are offered pursuant to an 
effective shelf registration statement filed on Form SF-3 (Sec.  239.45 
of this chapter); or
    (3) Exempted securities. ``Exempted securities'' as defined in 
section 3(a)(12) of the Exchange Act (15 U.S.C. 78c(a)(12)); or
    (4) Face-amount certificates or securities issued by an open-end 
management investment company or unit investment trust. Face-amount 
certificates issued by a face-amount certificate company, or redeemable 
securities issued by an open-end management investment company or a unit 
investment trust. Any terms used in this paragraph (c)(4) that are 
defined in the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) 
shall have the meanings specified in such Act.
    (d) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, to any transaction or class of transactions, or to any 
security or class of securities.

[62 FR 544, Jan. 3, 1997, as amended at 77 FR 18685, Mar. 28, 2012; 78 
FR 44805, July 24, 2013; 83 FR 64222, Dec. 13, 2018; 88 FR 39994, June 
20, 2023]



Sec.  242.102  Activities by issuers and selling security holders
during a distribution.

    (a) Unlawful Activity. In connection with a distribution of 
securities effected by or on behalf of an issuer or selling security 
holder, it shall be unlawful for such person, or any affiliated 
purchaser of such person, directly or indirectly, to bid for, purchase, 
or attempt to induce any person to bid for or purchase, a covered 
security during the applicable restricted period; Except That if an 
affiliated purchaser is a distribution participant, such affiliated 
purchaser may comply with Sec.  242.101, rather than this section.
    (b) Excepted Activity. The following activities shall not be 
prohibited by paragraph (a) of this section:
    (1) Odd-lot transactions. Transactions in odd-lots, or transactions 
to offset odd-lots in connection with an odd-lot tender offer conducted 
pursuant to Sec.  240.13e-4(h)(5) of this chapter; or
    (2) Transactions by closed-end investment companies. (i) 
Transactions complying with Sec.  270.23c-3 of this chapter; or
    (ii) Periodic tender offers of securities, at net asset value, 
conducted pursuant to Sec.  240.13e-4 of this chapter by a closed-end 
investment company that engages in a continuous offering of its 
securities pursuant to Sec.  230.415 of this chapter; Provided, however, 
That such securities are not traded on a securities exchange or through 
an inter-dealer quotation system or electronic communications network; 
or
    (3) Redemptions by commodity pools or limited partnerships. 
Redemptions by commodity pools or limited partnerships, at a price based 
on net asset value, which are effected in accordance with the terms and 
conditions of the instruments governing the securities; Provided, 
however, That such securities are not traded on a securities exchange, 
or through an inter-dealer

[[Page 18]]

quotation system or electronic communications network; or
    (4) Exercises of securities. The exercise of any option, warrant, 
right, or any conversion privilege set forth in the instrument governing 
a security; or
    (5) Offers to sell or the solicitation of offers to buy. Offers to 
sell or the solicitation of offers to buy the securities being 
distributed; or
    (6) Unsolicited purchases. Unsolicited purchases that are not 
effected from or through a broker or dealer, on a securities exchange, 
or through an inter-dealer quotation system or electronic communications 
network; or
    (7) Transactions in Rule 144A securities. Transactions in securities 
eligible for resale under Sec.  230.144A(d)(3) of this chapter, or any 
reference security, if the Rule 144A securities are sold in the United 
States solely to:
    (i) Qualified institutional buyers, as defined in Sec.  
230.144A(a)(1) of this chapter, or to purchasers that the seller and any 
person acting on behalf of the seller reasonably believes are qualified 
institutional buyers, in transactions exempt from registration under 
section 4(2) of the Securities Act (15 U.S.C. 77d(2)) or Sec. Sec.  
230.144A or Sec.  230.500 et seq of this chapter; or
    (ii) Persons not deemed to be ``U.S. persons'' for purposes of 
Sec. Sec.  230.902(o)(2) or 230.902(o)(7) of this chapter, during a 
distribution qualifying under paragraph (b)(7)(i) of this section.
    (c) Plans. (1) Paragraph (a) of this section shall not apply to 
distributions of securities pursuant to a plan, which are made:
    (i) Solely to employees or security holders of an issuer or its 
subsidiaries, or to a trustee or other person acquiring such securities 
for the accounts of such persons; or
    (ii) To persons other than employees or security holders, if bids 
for or purchases of securities pursuant to the plan are effected solely 
by an agent independent of the issuer and the securities are from a 
source other than the issuer or an affiliated purchaser of the issuer.
    (2) Bids for or purchases of any security made or effected by or for 
a plan shall be deemed to be a purchase by the issuer unless the bid is 
made, or the purchase is effected, by an agent independent of the 
issuer.
    (d) Excepted Securities. The provisions of this section shall not 
apply to any of the following securities:
    (1) Actively-traded reference securities. Reference securities with 
an ADTV value of at least $1 million that are issued by an issuer whose 
common equity securities have a public float value of at least $150 
million; Provided, however, That such securities are not issued by the 
issuer, or any affiliate of the issuer, of the security in distribution.
    (2) Certain nonconvertible and asset-backed securities. (i) 
Nonconvertible debt securities and nonconvertible preferred securities 
of issuers for which the probability of default, estimated as of the 
sixth business day immediately preceding the determination of the 
offering price and over the horizon of 12 full calendar months from such 
day, is 0.055% or less, as determined and documented, in writing, by the 
distribution participant acting as the lead manager (or in a similar 
capacity) of a distribution, as derived from a structural credit risk 
model, pursuant to Sec.  242.101(c)(2)(i); or
    (ii) Asset-backed securities that are offered pursuant to an 
effective shelf registration statement filed on Form SF-3 (Sec.  239.45 
of this chapter); or
    (3) Exempted securities. ``Exempted securities'' as defined in 
section 3(a)(12) of the Exchange Act (15 U.S.C. 78c(a)(12)); or
    (4) Face-amount certificates or securities issued by an open-end 
management investment company or unit investment trust. Face-amount 
certificates issued by a face-amount certificate company, or redeemable 
securities issued by an open-end management investment company or a unit 
investment trust. Any terms used in this paragraph (d)(4) that are 
defined in the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) 
shall have the meanings specified in such Act.
    (e) Exemptive Authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, to any

[[Page 19]]

transaction or class of transactions, or to any security or class of 
securities.

[62 FR 544, Jan. 3, 1997, as amended at 62 FR 11323, Mar. 12, 1997; 77 
FR 18685, Mar. 28, 2012; 78 FR 44805, July 24, 2013; 88 FR 39994, June 
20, 2023]



Sec.  242.103  Nasdaq passive market making.

    (a) Scope of section. This section permits broker-dealers to engage 
in market making transactions in covered securities that are Nasdaq 
securities without violating the provisions of Sec.  242.101; Except 
That this section shall not apply to any security for which a 
stabilizing bid subject to Sec.  242.104 is in effect, or during any at-
the-market offering or best efforts offering.
    (b) Conditions to be met--(1) General limitations. A passive market 
maker must effect all transactions in the capacity of a registered 
market maker on Nasdaq. A passive market maker shall not bid for or 
purchase a covered security at a price that exceeds the highest 
independent bid for the covered security at the time of the transaction, 
except as permitted by paragraph (b)(3) of this section or required by a 
rule promulgated by the Commission or the NASD governing the handling of 
customer orders.
    (2) Purchase limitation. On each day of the restricted period, a 
passive market maker's net purchases shall not exceed the greater of its 
30% ADTV limitation or 200 shares (together, ``purchase limitation''); 
Provided, however, That a passive market maker may purchase all of the 
securities that are part of a single order that, when executed, results 
in its purchase limitation being equalled or exceeded. If a passive 
market maker's net purchases equal or exceed its purchase limitation, it 
shall withdraw promptly its quotations from Nasdaq. If a passive market 
maker withdraws its quotations pursuant to this paragraph, it may not 
effect any bid or purchase in the covered security for the remainder of 
that day, irrespective of any later sales during that day, unless 
otherwise permitted by Sec.  242.101.
    (3) Requirement to lower the bid. If all independent bids for a 
covered security are reduced to a price below the passive market maker's 
bid, the passive market maker must lower its bid promptly to a level not 
higher than the then highest independent bid; Provided, however, That a 
passive market maker may continue to bid and effect purchases at its bid 
at a price exceeding the then highest independent bid until the passive 
market maker purchases an aggregate amount of the covered security that 
equals or, through the purchase of all securities that are part of a 
single order, exceeds the lesser of two times the minimum quotation size 
for the security, as determined by NASD rules, or the passive market 
maker's remaining purchasing capacity under paragraph (b)(2) of this 
section.
    (4) Limitation on displayed size. At all times, the passive market 
maker's displayed bid size may not exceed the lesser of the minimum 
quotation size for the covered security, or the passive market maker's 
remaining purchasing capacity under paragraph (b)(2) of this section; 
Provided, however, That a passive market maker whose purchasing capacity 
at any time is between one and 99 shares may display a bid size of 100 
shares.
    (5) Identification of a passive market making bid. The bid displayed 
by a passive market maker shall be designated as such.
    (6) Notification and reporting to the NASD. A passive market maker 
shall notify the NASD in advance of its intention to engage in passive 
market making, and shall submit to the NASD information regarding 
passive market making purchases, in such form as the NASD shall 
prescribe.
    (7) Prospectus disclosure. The prospectus for any registered 
offering in which any passive market maker intends to effect 
transactions in any covered security shall contain the information 
required in Sec. Sec.  228.502, 228.508, 229.502, and 229.508 of this 
chapter.
    (c) Transactions at prices resulting from unlawful activity. No 
transaction shall be made at a price that the passive market maker knows 
or has reason to know is the result of activity that is fraudulent, 
manipulative, or deceptive under the securities laws, or any rule or 
regulation thereunder.

[[Page 20]]



Sec.  242.104  Stabilizing and other activities in connection with
an offering.

    (a) Unlawful activity. It shall be unlawful for any person, directly 
or indirectly, to stabilize, to effect any syndicate covering 
transaction, or to impose a penalty bid, in connection with an offering 
of any security, in contravention of the provisions of this section. No 
stabilizing shall be effected at a price that the person stabilizing 
knows or has reason to know is in contravention of this section, or is 
the result of activity that is fraudulent, manipulative, or deceptive 
under the securities laws, or any rule or regulation thereunder.
    (b) Purpose. Stabilizing is prohibited except for the purpose of 
preventing or retarding a decline in the market price of a security.
    (c) Priority. To the extent permitted or required by the market 
where stabilizing occurs, any person stabilizing shall grant priority to 
any independent bid at the same price irrespective of the size of such 
independent bid at the time that it is entered.
    (d) Control of stabilizing. No sole distributor or syndicate or 
group stabilizing the price of a security or any member or members of 
such syndicate or group shall maintain more than one stabilizing bid in 
any one market at the same price at the same time.
    (e) At-the-market offerings. Stabilizing is prohibited in an at-the-
market offering.
    (f) Stabilizing levels--(1) Maximum stabilizing bid. Notwithstanding 
the other provisions of this paragraph (f), no stabilizing shall be made 
at a price higher than the lower of the offering price or the 
stabilizing bid for the security in the principal market (or, if the 
principal market is closed, the stabilizing bid in the principal market 
at its previous close).
    (2) Initiating stabilizing--(i) Initiating stabilizing when the 
principal market is open. After the opening of quotations for the 
security in the principal market, stabilizing may be initiated in any 
market at a price no higher than the last independent transaction price 
for the security in the principal market if the security has traded in 
the principal market on the day stabilizing is initiated or on the most 
recent prior day of trading in the principal market and the current 
asked price in the principal market is equal to or greater than the last 
independent transaction price. If both conditions of the preceding 
sentence are not satisfied, stabilizing may be initiated in any market 
after the opening of quotations in the principal market at a price no 
higher than the highest current independent bid for the security in the 
principal market.
    (ii) Initiating stabilizing when the principal market is closed. (A) 
When the principal market for the security is closed, but immediately 
before the opening of quotations for the security in the market where 
stabilizing will be initiated, stabilizing may be initiated at a price 
no higher than the lower of:
    (1) The price at which stabilizing could have been initiated in the 
principal market for the security at its previous close; or
    (2) The most recent price at which an independent transaction in the 
security has been effected in any market since the close of the 
principal market, if the person stabilizing knows or has reason to know 
of such transaction.
    (B) When the principal market for the security is closed, but after 
the opening of quotations in the market where stabilizing will be 
initiated, stabilizing may be initiated at a price no higher than the 
lower of:
    (1) The price at which stabilization could have been initiated in 
the principal market for the security at its previous close; or
    (2) The last independent transaction price for the security in that 
market if the security has traded in that market on the day stabilizing 
is initiated or on the last preceding business day and the current asked 
price in that market is equal to or greater than the last independent 
transaction price. If both conditions of the preceding sentence are not 
satisfied, under this paragraph (f)(2)(ii)(B)(2), stabilizing may be 
initiated at a price no higher than the highest current independent bid 
for the security in that market.
    (iii) Initiating stabilizing when there is no market for the 
security or before the offering price is determined. If no bona fide 
market for the security being distributed exists at the time stabilizing

[[Page 21]]

is initiated, no stabilizing shall be initiated at a price in excess of 
the offering price. If stabilizing is initiated before the offering 
price is determined, then stabilizing may be continued after 
determination of the offering price at the price at which stabilizing 
then could be initiated.
    (3) Maintaining or carrying over a stabilizing bid. A stabilizing 
bid initiated pursuant to paragraph (f)(2) of this section, which has 
not been discontinued, may be maintained, or carried over into another 
market, irrespective of changes in the independent bids or transaction 
prices for the security.
    (4) Increasing or reducing a stabilizing bid. A stabilizing bid may 
be increased to a price no higher than the highest current independent 
bid for the security in the principal market if the principal market is 
open, or, if the principal market is closed, to a price no higher than 
the highest independent bid in the principal market at the previous 
close thereof. A stabilizing bid may be reduced, or carried over into 
another market at a reduced price, irrespective of changes in the 
independent bids or transaction prices for the security. If stabilizing 
is discontinued, it shall not be resumed at a price higher than the 
price at which stabilizing then could be initiated.
    (5) Initiating, maintaining, or adjusting a stabilizing bid to 
reflect the current exchange rate. If a stabilizing bid is expressed in 
a currency other than the currency of the principal market for the 
security, such bid may be initiated, maintained, or adjusted to reflect 
the current exchange rate, consistent with the provisions of this 
section. If, in initiating, maintaining, or adjusting a stabilizing bid 
pursuant to this paragraph (f)(5), the bid would be at or below the 
midpoint between two trading differentials, such stabilizing bid shall 
be adjusted downward to the lower differential.
    (6) Adjustments to stabilizing bid. If a security goes ex-dividend, 
ex-rights, or ex-distribution, the stabilizing bid shall be reduced by 
an amount equal to the value of the dividend, right, or distribution. 
If, in reducing a stabilizing bid pursuant to this paragraph (f)(6), the 
bid would be at or below the midpoint between two trading differentials, 
such stabilizing bid shall be adjusted downward to the lower 
differential.
    (7) Stabilizing of components. When two or more securities are being 
offered as a unit, the component securities shall not be stabilized at 
prices the sum of which exceeds the then permissible stabilizing price 
for the unit.
    (8) Special prices. Any stabilizing price that otherwise meets the 
requirements of this section need not be adjusted to reflect special 
prices available to any group or class of persons (including employees 
or holders of warrants or rights).
    (g) Offerings with no U.S. stabilizing activities. (1) Stabilizing 
to facilitate an offering of a security in the United States shall not 
be deemed to be in violation of this section if all of the following 
conditions are satisfied:
    (i) No stabilizing is made in the United States;
    (ii) Stabilizing outside the United States is made in a jurisdiction 
with statutory or regulatory provisions governing stabilizing that are 
comparable to the provisions of this section; and
    (iii) No stabilizing is made at a price above the offering price in 
the United States, except as permitted by paragraph (f)(5) of this 
section.
    (2) For purposes of this paragraph (g), the Commission by rule, 
regulation, or order may determine whether a foreign statute or 
regulation is comparable to this section considering, among other 
things, whether such foreign statute or regulation: specifies 
appropriate purposes for which stabilizing is permitted; provides for 
disclosure and control of stabilizing activities; places limitations on 
stabilizing levels; requires appropriate recordkeeping; provides other 
protections comparable to the provisions of this section; and whether 
procedures exist to enable the Commission to obtain information 
concerning any foreign stabilizing transactions.
    (h) Disclosure and notification. (1) Any person displaying or 
transmitting a bid that such person knows is for the purpose of 
stabilizing shall provide prior notice to the market on which such 
stabilizing will be effected, and shall disclose its purpose to the 
person with whom the bid is entered.

[[Page 22]]

    (2) Any person effecting a syndicate covering transaction or 
imposing a penalty bid shall provide prior notice to the self-regulatory 
organization with direct authority over the principal market in the 
United States for the security for which the syndicate covering 
transaction is effected or the penalty bid is imposed.
    (3) Any person subject to this section who sells to, or purchases 
for the account of, any person any security where the price of such 
security may be or has been stabilized, shall send to the purchaser at 
or before the completion of the transaction, a prospectus, offering 
circular, confirmation, or other document containing a statement similar 
to that comprising the statement provided for in Item 502(d) of 
Regulation S-B (Sec.  228.502(d) of this chapter) or Item 502(d) of 
Regulation S-K (Sec.  229.502(d) of this chapter).
    (i) Recordkeeping requirements. A person subject to this section 
shall keep the information and make the notification required by Sec.  
240.17a-2 of this chapter.
    (j) Excepted securities. The provisions of this section shall not 
apply to:
    (1) Exempted securities. ``Exempted securities,'' as defined in 
section 3(a)(12) of the Exchange Act (15 U.S.C. 78c(a)(12)); or
    (2) Transactions of Rule 144A securities. Transactions in securities 
eligible for resale under Sec.  230.144A(d)(3) of this chapter, if such 
securities are sold in the United States solely to:
    (i) Qualified institutional buyers, as defined in Sec.  
230.144A(a)(1) of this chapter, or to purchasers that the seller and any 
person acting on behalf of the seller reasonably believes are qualified 
institutional buyers, in a transaction exempt from registration under 
section 4(2) of the Securities Act (15 U.S.C. 77d(2)) or Sec. Sec.  
230.144A or Sec.  230.500 et seq of this chapter; or
    (ii) Persons not deemed to be ``U.S. persons'' for purposes of 
Sec. Sec.  230.902(o)(2) or 230.902(o)(7) of this chapter, during a 
distribution qualifying under paragraph (j)(2)(i) of this section.
    (k) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, to any transaction or class of transactions, or to any 
security or class of securities.

[62 FR 544, Jan. 3, 1997, as amended at 62 FR 11323, Mar. 12, 1997; 62 
FR 13213, Mar. 19, 1997; 77 FR 18685, Mar. 28, 2012; 78 FR 44805, July 
24, 2013]



Sec.  242.105  Short selling in connection with a public offering.

    (a) Unlawful activity. In connection with an offering of equity 
securities for cash pursuant to a registration statement or a 
notification on Form 1-A (Sec.  239.90 of this chapter) or Form 1-E 
(Sec.  239.200 of this chapter) filed under the Securities Act of 1933 
(``offered securities''), it shall be unlawful for any person to sell 
short (as defined in Sec.  242.200(a)) the security that is the subject 
of the offering and purchase the offered securities from an underwriter 
or broker or dealer participating in the offering if such short sale was 
effected during the period (``Rule 105 restricted period'') that is the 
shorter of the period:
    (1) Beginning five business days before the pricing of the offered 
securities and ending with such pricing; or
    (2) Beginning with the initial filing of such registration statement 
or notification on Form 1-A or Form 1-E and ending with the pricing.
    (b) Excepted activity--(1) Bona fide purchase. It shall not be 
prohibited for such person to purchase the offered securities as 
provided in paragraph (a) of this section if:
    (i) Such person makes a bona fide purchase(s) of the security that 
is the subject of the offering that is:
    (A) At least equivalent in quantity to the entire amount of the Rule 
105 restricted period short sale(s);
    (B) Effected during regular trading hours;
    (C) Reported to an ``effective transaction reporting plan'' (as 
defined in Sec.  242.600(b)(30); and
    (D) Effected after the last Rule 105 restricted period short sale, 
and no later than the business day prior to the day of pricing; and
    (ii) Such person did not effect a short sale, that is reported to an 
effective transaction reporting plan, within the 30 minutes prior to the 
close of regular trading hours (as defined in

[[Page 23]]

Sec.  242.600(b)(77)) on the business day prior to the day of pricing.
    (2) Separate accounts. Paragraph (a) of this section shall not 
prohibit the purchase of the offered security in an account of a person 
where such person sold short during the Rule 105 restricted period in a 
separate account, if decisions regarding securities transactions for 
each account are made separately and without coordination of trading or 
cooperation among or between the accounts.
    (3) Investment companies. Paragraph (a) of this section shall not 
prohibit an investment company (as defined by Section 3 of the 
Investment Company Act) that is registered under Section 8 of the 
Investment Company Act, or a series of such company (investment company) 
from purchasing an offered security where any of the following sold the 
offered security short during the Rule 105 restricted period:
    (i) An affiliated investment company, or any series of such a 
company; or
    (ii) A separate series of the investment company.
    (c) Excepted offerings. This section shall not apply to offerings 
that are not conducted on a firm commitment basis.
    (d) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, to any transaction or class of transactions, or to any 
security or class of securities.

[62 FR 544, Jan. 3, 1997, as amended at 69 FR 48029, Aug. 6, 2004; 72 FR 
45107, Aug. 10, 2007; 83 FR 58427, Nov. 19, 2018; 86 FR 18809, Apr. 9, 
2021]

                Regulation SHO--Regulation of Short Sales



Sec.  242.200  Definition of ``short sale'' and marking requirements.

    (a) The term short sale shall mean any sale of a security which the 
seller does not own or any sale which is consummated by the delivery of 
a security borrowed by, or for the account of, the seller.
    (b) A person shall be deemed to own a security if:
    (1) The person or his agent has title to it; or
    (2) The person has purchased, or has entered into an unconditional 
contract, binding on both parties thereto, to purchase it, but has not 
yet received it; or
    (3) The person owns a security convertible into or exchangeable for 
it and has tendered such security for conversion or exchange; or
    (4) The person has an option to purchase or acquire it and has 
exercised such option; or
    (5) The person has rights or warrants to subscribe to it and has 
exercised such rights or warrants; or
    (6) The person holds a security futures contract to purchase it and 
has received notice that the position will be physically settled and is 
irrevocably bound to receive the underlying security.
    (c) A person shall be deemed to own securities only to the extent 
that he has a net long position in such securities.
    (d) A broker or dealer shall be deemed to own a security, even if it 
is not net long, if:
    (1) The broker or dealer acquired that security while acting in the 
capacity of a block positioner; and
    (2) If and to the extent that the broker or dealer's short position 
in the security is the subject of offsetting positions created in the 
course of bona fide arbitrage, risk arbitrage, or bona fide hedge 
activities.
    (e) A broker-dealer shall be deemed to own a security even if it is 
not net long, if:
    (1) The broker-dealer is unwinding index arbitrage position 
involving a long basket of stock and one or more short index futures 
traded on a board of trade or one or more standardized options contracts 
as defined in 17 CFR 240.9b-1(a)(4); and
    (2) If and to the extent that the broker-dealer's short position in 
the security is the subject of offsetting positions created and 
maintained in the course of bona-fide arbitrage, risk arbitrage, or bona 
fide hedge activities; and
    (3) The sale does not occur during a period commencing at the time 
that the NYSE Composite Index has declined by two percent or more from 
its closing value on the previous day and

[[Page 24]]

terminating upon the end of the trading day. The two percent shall be 
calculated at the beginning of each calendar quarter and shall be two 
percent, rounded down to the nearest 10 points, of the average closing 
value of the NYSE Composite Index for the last month of the previous 
quarter.
    (f) In order to determine its net position, a broker or dealer shall 
aggregate all of its positions in a security unless it qualifies for 
independent trading unit aggregation, in which case each independent 
trading unit shall aggregate all of its positions in a security to 
determine its net position. Independent trading unit aggregation is 
available only if:
    (1) The broker or dealer has a written plan of organization that 
identifies each aggregation unit, specifies its trading objective(s), 
and supports its independent identity;
    (2) Each aggregation unit within the firm determines, at the time of 
each sale, its net position for every security that it trades;
    (3) All traders in an aggregation unit pursue only the particular 
trading objective(s) or strategy(s) of that aggregation unit and do not 
coordinate that strategy with any other aggregation unit; and
    (4) Individual traders are assigned to only one aggregation unit at 
any time.
    (g) A broker or dealer must mark all sell orders of any equity 
security as ``long,'' ``short,'' or ``short exempt.''
    (1) An order to sell shall be marked ``long'' only if the seller is 
deemed to own the security being sold pursuant to paragraphs (a) through 
(f) of this section and either:
    (i) The security to be delivered is in the physical possession or 
control of the broker or dealer; or
    (ii) It is reasonably expected that the security will be in the 
physical possession or control of the broker or dealer no later than the 
settlement of the transaction.
    (2) A sale order shall be marked ``short exempt'' only if the 
provisions of Sec.  242.201(c) or (d) are met.
    (h) Upon written application or upon its own motion, the Commission 
may grant an exemption from the provisions of this section, either 
unconditionally or on specified terms and conditions, to any transaction 
or class of transactions, or to any security or class of securities, or 
to any person or class of persons.

[69 FR 48029, Aug. 6, 2004, as amended at 72 FR 36359, July 3, 2007; 72 
FR 45557, Aug. 14, 2007; 75 FR 11323, Mar. 10, 2010]



Sec.  242.201  Circuit breaker.

    (a) Definitions. For the purposes of this section:
    (1) The term covered security shall mean any NMS stock as defined in 
Sec.  242.600(b)(55).
    (2) The term effective transaction reporting plan for a covered 
security shall have the same meaning as in Sec.  242.600(b)(30).
    (3) The term listing market shall have the same meaning as the term 
``primary listing exchange'' as defined in Sec.  242.600(b)(68).
    (4) The term national best bid shall have the same meaning as in 
Sec.  242.600(b)(50).
    (5) The term odd lot shall have the same meaning as in Sec.  
242.600(b)(58).
    (6) The term plan processor shall have the same meaning as in Sec.  
242.600(b)(67).
    (7) The term regular trading hours shall have the same meaning as in 
Sec.  242.600(b)(77).
    (8) The term riskless principal shall mean a transaction in which a 
broker or dealer, after having received an order to buy a security, 
purchases the security as principal at the same price to satisfy the 
order to buy, exclusive of any explicitly disclosed markup or markdown, 
commission equivalent, or other fee, or, after having received an order 
to sell, sells the security as principal at the same price to satisfy 
the order to sell, exclusive of any explicitly disclosed markup or 
markdown, commission equivalent, or other fee.
    (9) The term trading center shall have the same meaning as in Sec.  
242.600(b)(95).
    (b)(1) A trading center shall establish, maintain, and enforce 
written policies and procedures reasonably designed to:
    (i) Prevent the execution or display of a short sale order of a 
covered security at a price that is less than or equal to the current 
national best bid if the price of that covered security decreases by 10% 
or more from the covered security's closing price as determined by

[[Page 25]]

the listing market for the covered security as of the end of regular 
trading hours on the prior day; and
    (ii) Impose the requirements of paragraph (b)(1)(i) of this section 
for the remainder of the day and the following day when a national best 
bid for the covered security is calculated and disseminated on a current 
and continuing basis pursuant to an effective national market system 
plan.
    (iii) Provided, however, that the policies and procedures must be 
reasonably designed to permit:
    (A) The execution of a displayed short sale order of a covered 
security by a trading center if, at the time of initial display of the 
short sale order, the order was at a price above the current national 
best bid; and
    (B) The execution or display of a short sale order of a covered 
security marked ``short exempt'' without regard to whether the order is 
at a price that is less than or equal to the current national best bid.
    (2) A trading center shall regularly surveil to ascertain the 
effectiveness of the policies and procedures required by paragraph 
(b)(1) of this section and shall take prompt action to remedy 
deficiencies in such policies and procedures.
    (3) The determination regarding whether the price of a covered 
security has decreased by 10% or more from the covered security's 
closing price as determined by the listing market for the covered 
security as of the end of regular trading hours on the prior day shall 
be made by the listing market for the covered security and, if such 
decrease has occurred, the listing market shall immediately make such 
information available as provided in Sec.  242.603(b).
    (c) Following any determination and notification pursuant to 
paragraph (b)(3) of this section with respect to a covered security, a 
broker or dealer submitting a short sale order of the covered security 
in question to a trading center may mark the order ``short exempt'' if 
the broker or dealer identifies the order as being at a price above the 
current national best bid at the time of submission; provided, however:
    (1) The broker or dealer that identifies a short sale order of a 
covered security as ``short exempt'' in accordance with this paragraph 
(c) must establish, maintain, and enforce written policies and 
procedures reasonably designed to prevent incorrect identification of 
orders for purposes of this paragraph; and
    (2) The broker or dealer shall regularly surveil to ascertain the 
effectiveness of the policies and procedures required by paragraph 
(c)(1) of this section and shall take prompt action to remedy 
deficiencies in such policies and procedures.
    (d) Following any determination and notification pursuant to 
paragraph (b)(3) of this section with respect to a covered security, a 
broker or dealer may mark a short sale order of a covered security 
``short exempt'' if the broker or dealer has a reasonable basis to 
believe that:
    (1) The short sale order of a covered security is by a person that 
is deemed to own the covered security pursuant to Sec.  242.200, 
provided that the person intends to deliver the security as soon as all 
restrictions on delivery have been removed.
    (2) The short sale order of a covered security is by a market maker 
to offset customer odd-lot orders or to liquidate an odd-lot position 
that changes such broker's or dealer's position by no more than a unit 
of trading.
    (3) The short sale order of a covered security is for a good faith 
account of a person who then owns another security by virtue of which he 
is, or presently will be, entitled to acquire an equivalent number of 
securities of the same class as the securities sold; provided such sale, 
or the purchase which such sale offsets, is effected for the bona fide 
purpose of profiting from a current difference between the price of the 
security sold and the security owned and that such right of acquisition 
was originally attached to or represented by another security or was 
issued to all the holders of any such securities of the issuer.
    (4) The short sale order of a covered security is for a good faith 
account and submitted to profit from a current price difference between 
a security on a foreign securities market and a security on a securities 
market subject to the jurisdiction of the United States, provided that 
the short seller has an

[[Page 26]]

offer to buy on a foreign market that allows the seller to immediately 
cover the short sale at the time it was made. For the purposes of this 
paragraph (d)(4), a depository receipt of a security shall be deemed to 
be the same security as the security represented by such receipt.
    (5)(i) The short sale order of a covered security is by an 
underwriter or member of a syndicate or group participating in the 
distribution of a security in connection with an over-allotment of 
securities; or
    (ii) The short sale order of a covered security is for purposes of a 
lay-off sale by an underwriter or member of a syndicate or group in 
connection with a distribution of securities through a rights or standby 
underwriting commitment.
    (6) The short sale order of a covered security is by a broker or 
dealer effecting the execution of a customer purchase or the execution 
of a customer ``long'' sale on a riskless principal basis. In addition, 
for purposes of this paragraph (d)(6), a broker or dealer must have 
written policies and procedures in place to assure that, at a minimum:
    (i) The customer order was received prior to the offsetting 
transaction;
    (ii) The offsetting transaction is allocated to a riskless principal 
or customer account within 60 seconds of execution; and
    (iii) The broker or dealer has supervisory systems in place to 
produce records that enable the broker or dealer to accurately and 
readily reconstruct, in a time-sequenced manner, all orders on which a 
broker or dealer relies pursuant to this exception.
    (7) The short sale order is for the sale of a covered security at 
the volume weighted average price (VWAP) that meets the following 
criteria:
    (i) The VWAP for the covered security is calculated by:
    (A) Calculating the values for every regular way trade reported in 
the consolidated system for the security during the regular trading 
session, by multiplying each such price by the total number of shares 
traded at that price;
    (B) Compiling an aggregate sum of all values; and
    (C) Dividing the aggregate sum by the total number of reported 
shares for that day in the security.
    (ii) The transactions are reported using a special VWAP trade 
modifier.
    (iii) The VWAP matched security:
    (A) Qualifies as an ``actively-traded security'' pursuant to Sec.  
242.101 and Sec.  242.102; or
    (B) The proposed short sale transaction is being conducted as part 
of a basket transaction of twenty or more securities in which the 
subject security does not comprise more than 5% of the value of the 
basket traded.
    (iv) The transaction is not effected for the purpose of creating 
actual, or apparent, active trading in or otherwise affecting the price 
of any security.
    (v) A broker or dealer shall be permitted to act as principal on the 
contra-side to fill customer short sale orders only if the broker's or 
dealer's position in the covered security, as committed by the broker or 
dealer during the pre-opening period of a trading day and aggregated 
across all of its customers who propose to sell short the same security 
on a VWAP basis, does not exceed 10% of the covered security's relevant 
average daily trading volume.
    (e) No self-regulatory organization shall have any rule that is not 
in conformity with, or conflicts with, this section.
    (f) Upon written application or upon its own motion, the Commission 
may grant an exemption from the provisions of this section, either 
unconditionally or on specified terms and conditions, to any person or 
class of persons, to any transaction or class of transactions, or to any 
security or class of securities to the extent that such exemption is 
necessary or appropriate, in the public interest, and is consistent with 
the protection of investors.

[75 FR 11323, Mar. 10, 2010, as amended at 83 FR 58427, Nov. 19, 2018; 
86 FR 18809, Apr. 9, 2021]



Sec.  242.203  Borrowing and delivery requirements.

    (a) Long sales. (1) If a broker or dealer knows or has reasonable 
grounds to believe that the sale of an equity security was or will be 
effected pursuant to an

[[Page 27]]

order marked ``long,'' such broker or dealer shall not lend or arrange 
for the loan of any security for delivery to the purchaser's broker 
after the sale, or fail to deliver a security on the date delivery is 
due.
    (2) The provisions of paragraph (a)(1) of this section shall not 
apply:
    (i) To the loan of any security by a broker or dealer through the 
medium of a loan to another broker or dealer;
    (ii) If the broker or dealer knows, or has been reasonably informed 
by the seller, that the seller owns the security, and that the seller 
would deliver the security to the broker or dealer prior to the 
scheduled settlement of the transaction, but the seller failed to do so; 
or
    (iii) If, prior to any loan or arrangement to loan any security for 
delivery, or failure to deliver, a national securities exchange, in the 
case of a sale effected thereon, or a national securities association, 
in the case of a sale not effected on an exchange, finds:
    (A) That such sale resulted from a mistake made in good faith;
    (B) That due diligence was used to ascertain that the circumstances 
specified in Sec.  242.200(g) existed; and
    (C) Either that the condition of the market at the time the mistake 
was discovered was such that undue hardship would result from covering 
the transaction by a ``purchase for cash'' or that the mistake was made 
by the seller's broker and the sale was at a permissible price under any 
applicable short sale price test.
    (b) Short sales. (1) A broker or dealer may not accept a short sale 
order in an equity security from another person, or effect a short sale 
in an equity security for its own account, unless the broker or dealer 
has:
    (i) Borrowed the security, or entered into a bona-fide arrangement 
to borrow the security; or
    (ii) Reasonable grounds to believe that the security can be borrowed 
so that it can be delivered on the date delivery is due; and
    (iii) Documented compliance with this paragraph (b)(1).
    (2) The provisions of paragraph (b)(1) of this section shall not 
apply to:
    (i) A broker or dealer that has accepted a short sale order from 
another registered broker or dealer that is required to comply with 
paragraph (b)(1) of this section, unless the broker or dealer relying on 
this exception contractually undertook responsibility for compliance 
with paragraph (b)(1) of this section;
    (ii) Any sale of a security that a person is deemed to own pursuant 
to Sec.  242.200, provided that the broker or dealer has been reasonably 
informed that the person intends to deliver such security as soon as all 
restrictions on delivery have been removed. If the person has not 
delivered such security within 35 days after the trade date, the broker-
dealer that effected the sale must borrow securities or close out the 
short position by purchasing securities of like kind and quantity;
    (iii) Short sales effected by a market maker in connection with 
bona-fide market making activities in the security for which this 
exception is claimed; and
    (iv) Transactions in security futures.
    (3) If a participant of a registered clearing agency has a fail to 
deliver position at a registered clearing agency in a threshold security 
for thirteen consecutive settlement days, the participant shall 
immediately thereafter close out the fail to deliver position by 
purchasing securities of like kind and quantity:
    (i) Provided, however, that a participant of a registered clearing 
agency that has a fail to deliver position at a registered clearing 
agency in a threshold security on the effective date of this amendment 
and which, prior to the effective date of this amendment, had been 
previously grandfathered from the close-out requirement in this 
paragraph (b)(3) (i.e., because the participant of a registered clearing 
agency had a fail to deliver position at a registered clearing agency on 
the settlement day preceding the day that the security became a 
threshold security), shall close out that fail to deliver position 
within thirty-five consecutive settlement days of the effective date of 
this amendment by purchasing securities of like kind and quantity;
    (ii) Provided, however, that if a participant of a registered 
clearing agency has a fail to deliver position at a registered clearing 
agency in a threshold

[[Page 28]]

security that was sold pursuant to Sec.  230.144 of this chapter for 
thirty-five consecutive settlement days, the participant shall 
immediately thereafter close out the fail to deliver position in the 
security by purchasing securities of like kind and quantity;
    (iii) Provided, however, that a participant of a registered clearing 
agency that has a fail to deliver position at a registered clearing 
agency in a threshold security on the effective date of this amendment 
and which, prior to the effective date of this amendment, had been 
previously excepted from the close-out requirement in paragraph (b)(3) 
of this section (i.e., because the participant of a registered clearing 
agency had a fail to deliver position in the threshold security that is 
attributed to short sales effected by a registered options market maker 
to establish or maintain a hedge on options positions that were created 
before the security became a threshold security), shall immediately 
close out that fail to deliver position, including any adjustments to 
the fail to deliver position, within 35 consecutive settlement days of 
the effective date of this amendment by purchasing securities of like 
kind and quantity;
    (iv) If a participant of a registered clearing agency has a fail to 
deliver position at a registered clearing agency in a threshold security 
for thirteen consecutive settlement days, the participant and any broker 
or dealer for which it clears transactions, including any market maker 
that would otherwise be entitled to rely on the exception provided in 
paragraph (b)(2)(iii) of this section, may not accept a short sale order 
in the threshold security from another person, or effect a short sale in 
the threshold security for its own account, without borrowing the 
security or entering into a bona-fide arrangement to borrow the 
security, until the participant closes out the fail to deliver position 
by purchasing securities of like kind and quantity;
    (v) If a participant of a registered clearing agency entitled to 
rely on the 35 consecutive settlement day close-out requirement 
contained in paragraph (b)(3)(i), (b)(3)(ii), or (b)(3)(iii) of this 
section has a fail to deliver position at a registered clearing agency 
in the threshold security for 35 consecutive settlement days, the 
participant and any broker or dealer for which it clears transactions, 
including any market maker, that would otherwise be entitled to rely on 
the exception provided in paragraph (b)(2)(ii) of this section, may not 
accept a short sale order in the threshold security from another person, 
or effect a short sale in the threshold security for its own account, 
without borrowing the security or entering into a bona fide arrangement 
to borrow the security, until the participant closes out the fail to 
deliver position by purchasing securities of like kind and quantity;
    (vi) If a participant of a registered clearing agency reasonably 
allocates a portion of a fail to deliver position to another registered 
broker or dealer for which it clears trades or for which it is 
responsible for settlement, based on such broker or dealer's short 
position, then the provisions of this paragraph (b)(3) relating to such 
fail to deliver position shall apply to the portion of such registered 
broker or dealer that was allocated the fail to deliver position, and 
not to the participant; and
    (vii) A participant of a registered clearing agency shall not be 
deemed to have fulfilled the requirements of this paragraph (b)(3) where 
the participant enters into an arrangement with another person to 
purchase securities as required by this paragraph (b)(3), and the 
participant knows or has reason to know that the other person will not 
deliver securities in settlement of the purchase.
    (c) Definitions. (1) For purposes of this section, the term market 
maker has the same meaning as in section 3(a)(38) of the Securities 
Exchange Act of 1934 (``Exchange Act'') (15 U.S.C. 78c(a)(38)).
    (2) For purposes of this section, the term participant has the same 
meaning as in section 3(a)(24) of the Exchange Act (15 U.S.C. 
78c(a)(24)).
    (3) For purposes of this section, the term registered clearing 
agency means a clearing agency, as defined in section 3(a)(23)(A) of the 
Exchange Act (15 U.S.C. 78c(a)(23)(A)), that is registered with the 
Commission pursuant to section 17A of the Exchange Act (15 U.S.C. 78q-
1).

[[Page 29]]

    (4) For purposes of this section, the term security future has the 
same meaning as in section 3(a)(55) of the Exchange Act (15 U.S.C. 
78c(a)(55)).
    (5) For purposes of this section, the term settlement day means any 
business day on which deliveries of securities and payments of money may 
be made through the facilities of a registered clearing agency.
    (6) For purposes of this section, the term threshold security means 
any equity security of an issuer that is registered pursuant to section 
12 of the Exchange Act (15 U.S.C. 78l) or for which the issuer is 
required to file reports pursuant to section 15(d) of the Exchange Act 
(15 U.S.C. 78o(d)):
    (i) For which there is an aggregate fail to deliver position for 
five consecutive settlement days at a registered clearing agency of 
10,000 shares or more, and that is equal to at least 0.5% of the issue's 
total shares outstanding;
    (ii) Is included on a list disseminated to its members by a self-
regulatory organization; and
    (iii) Provided, however, that a security shall cease to be a 
threshold security if the aggregate fail to deliver position at a 
registered clearing agency does not exceed the level specified in 
paragraph (c)(6)(i) of this section for five consecutive settlement 
days.
    (d) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, to any transaction or class of transactions, or to any 
security or class of securities, or to any person or class of persons.

[69 FR 48029, Aug. 6, 2004, as amended at 72 FR 45557, Aug. 14, 2007; 73 
FR 61706, Oct. 17, 2008]



Sec.  242.204  Close-out requirement.

    (a) A participant of a registered clearing agency must deliver 
securities to a registered clearing agency for clearance and settlement 
on a long or short sale in any equity security by settlement date, or if 
a participant of a registered clearing agency has a fail to deliver 
position at a registered clearing agency in any equity security for a 
long or short sale transaction in that equity security, the participant 
shall, by no later than the beginning of regular trading hours on the 
settlement day following the settlement date, immediately close out its 
fail to deliver position by borrowing or purchasing securities of like 
kind and quantity; Provided, however:
    (1) If a participant of a registered clearing agency has a fail to 
deliver position at a registered clearing agency in any equity security 
and the participant can demonstrate on its books and records that such 
fail to deliver position resulted from a long sale, the participant 
shall by no later than the beginning of regular trading hours on the 
third consecutive settlement day following the settlement date, 
immediately close out the fail to deliver position by purchasing or 
borrowing securities of like kind and quantity;
    (2) If a participant of a registered clearing agency has a fail to 
deliver position at a registered clearing agency in any equity security 
resulting from a sale of a security that a person is deemed to own 
pursuant to Sec.  242.200 and that such person intends to deliver as 
soon as all restrictions on delivery have been removed, the participant 
shall, by no later than the begining of regular trading hours on the 
thirty-fifth consecutive calendar day following the trade date for the 
transaction, immediately close out the fail to deliver position by 
purchasing securities of like kind and quantity; or
    (3) If a participant of a registered clearing agency has a fail to 
deliver position at a registered clearing agency in any equity security 
that is attributable to bona fide market making activities by a 
registered market maker, options market maker, or other market maker 
obligated to quote in the over-the-counter market, the participant shall 
by no later than the beginning of regular trading hours on the third 
consecutive settlement day following the settlement date, immediately 
close out the fail to deliver position by purchasing or borrowing 
securities of like kind and quantity.
    (b) If a participant of a registered clearing agency has a fail to 
deliver position in any equity security at a registered clearing agency 
and does not close out such fail to deliver position in accordance with 
the requirements of

[[Page 30]]

paragraph (a) of this section, the participant and any broker or dealer 
from which it receives trades for clearance and settlement, including 
any market maker that would otherwise be entitled to rely on the 
exception provided in Sec.  242.203(b)(2)(iii), may not accept a short 
sale order in the equity security from another person, or effect a short 
sale in the equity security for its own account, to the extent that the 
broker or dealer submits its short sales to that participant for 
clearance and settlement, without first borrowing the security, or 
entering into a bona fide arrangement to borrow the security, until the 
participant closes out the fail to deliver position by purchasing 
securities of like kind and quantity and that purchase has cleared and 
settled at a registered clearing agency; Provided, however: A broker or 
dealer shall not be subject to the requirements of this paragraph if the 
broker or dealer timely certifies to the participant of a registered 
clearing agency that it has not incurred a fail to deliver position on 
settlement date for a long or short sale in an equity security for which 
the participant has a fail to deliver position at a registered clearing 
agency or that the broker or dealer is in compliance with paragraph (e) 
of this section.
    (c) The participant must notify any broker or dealer from which it 
receives trades for clearance and settlement, including any market maker 
that would otherwise be entitled to rely on the exception provided in 
Sec.  242.203(b)(2)(iii):
    (1) That the participant has a fail to deliver position in an equity 
security at a registered clearing agency that has not been closed out in 
accordance with the requirements of paragraph (a) of this section; and
    (2) When the purchase that the participant has made to close out the 
fail to deliver position has cleared and settled at a registered 
clearing agency.
    (d) If a participant of a registered clearing agency reasonably 
allocates a portion of a fail to deliver position to another registered 
broker or dealer for which it clears trades or from which it receives 
trades for settlement, based on such broker's or dealer's short 
position, the provisions of paragraphs (a) and (b) of this section 
relating to such fail to deliver position shall apply to such registered 
broker or dealer that was allocated the fail to deliver position, and 
not to the participant. A broker or dealer that has been allocated a 
portion of a fail to deliver position that does not comply with the 
provisions of paragraph (a) of this section must immediately notify the 
participant that it has become subject to the requirements of paragraph 
(b) of this section.
    (e) Even if a participant of a registered clearing agency has not 
closed out a fail to deliver position at a registered clearing agency in 
accordance with paragraph (a) of this section, or has not allocated a 
fail to deliver position to a broker or dealer in accordance with 
paragraph (d) of this section, a broker or dealer shall not be subject 
to the requirements of paragraph (a) or (b) of this section if the 
broker or dealer purchases or borrows the securities, and if:
    (1) The purchase or borrow is bona fide;
    (2) The purchase or borrow is executed after trade date but by no 
later than the end of regular trading hours on settlement date for the 
transaction;
    (3) The purchase or borrow is of a quantity of securities sufficient 
to cover the entire amount of that broker's or dealer's fail to deliver 
position at a registered clearing agency in that security; and
    (4) The broker or dealer can demonstrate that it has a net flat or 
net long position on its books and records on the day of the purchase or 
borrow.
    (f) A participant of a registered clearing agency shall not be 
deemed to have fulfilled the requirements of this section where the 
participant enters into an arrangement with another person to purchase 
or borrow securities as required by this section, and the participant 
knows or has reason to know that the other person will not deliver 
securities in settlement of the purchase or borrow.
    (g) Definitions. (1) For purposes of this section, the term 
settlement date shall mean the business day on which delivery of a 
security and payment of money is to be made through the facilities of a 
registered clearing agency in connection with the sale of a security.

[[Page 31]]

    (2) For purposes of this section, the term regular trading hours has 
the same meaning as in Sec.  242.600(b)(77) (Rule 600(b)(77) of 
Regulation NMS).

[74 FR 38292, July 31, 2009, as amended at 83 FR 58427, Nov. 19, 2018; 
86 FR 18809, Apr. 9, 2021]

               Regulation ATS--Alternative Trading Systems

    Source: Sections 242.300 through 242.303 appear at 63 FR 70921, Dec. 
22, 1998, unless otherwise noted.

                            Preliminary Notes

    1. An alternative trading system is required to comply with the 
requirements in this Regulation ATS, unless such alternative trading 
system:
    (a) Is registered as a national securities exchange;
    (b) Is exempt from registration as a national securities exchange 
based on the limited volume of transactions effected on the alternative 
trading system; or
    (c) Trades only government securities and certain other related 
instruments.
    All alternative trading systems must comply with the antifraud, 
antimanipulation, and other applicable provisions of the federal 
securities laws.
    2. The requirements imposed upon an alternative trading system by 
Regulation ATS are in addition to any requirements applicable to broker-
dealers registered under section 15 of the Act, (15 U.S.C. 78o).
    3. An alternative trading system must comply with any applicable 
state law relating to the offer or sale of securities or the 
registration or regulation of persons or entities effecting transactions 
in securities.
    4. The disclosures made pursuant to the provisions of this section 
are in addition to any other disclosure requirements under the federal 
securities laws.



Sec.  242.300  Definitions.

    For purposes of this section, the following definitions shall apply:
    (a) Alternative trading system means any organization, association, 
person, group of persons, or system:
    (1) That constitutes, maintains, or provides a market place or 
facilities for bringing together purchasers and sellers of securities or 
for otherwise performing with respect to securities the functions 
commonly performed by a stock exchange within the meaning of Sec.  
240.3b-16 of this chapter; and
    (2) That does not:
    (i) Set rules governing the conduct of subscribers other than the 
conduct of such subscribers' trading on such organization, association, 
person, group of persons, or system; or
    (ii) Discipline subscribers other than by exclusion from trading.
    (b) Subscriber means any person that has entered into a contractual 
agreement with an alternative trading system to access such alternative 
trading system for the purpose of effecting transactions in securities 
or submitting, disseminating, or displaying orders on such alternative 
trading system, including a customer, member, user, or participant in an 
alternative trading system. A subscriber, however, shall not include a 
national securities exchange or national securities association.
    (c) Affiliate of a subscriber means any person that, directly or 
indirectly, controls, is under common control with, or is controlled by, 
the subscriber, including any employee.
    (d) Debt security shall mean any security other than an equity 
security, as defined in Sec.  240.3a11-1 of this chapter, as well as 
non-participatory preferred stock.
    (e) Order means any firm indication of a willingness to buy or sell 
a security, as either principal or agent, including any bid or offer 
quotation, market order, limit order, or other priced order.
    (f) Control means the power, directly or indirectly, to direct the 
management or policies of the broker-dealer of an alternative trading 
system, whether through ownership of securities, by contract, or 
otherwise. A person is presumed to control the broker-dealer of an 
alternative trading system, if that person:
    (1) Is a director, general partner, or officer exercising executive 
responsibility (or having similar status or performing similar 
functions);
    (2) Directly or indirectly has the right to vote 25 percent or more 
of a class of voting security or has the power to sell or direct the 
sale of 25 percent or more of a class of voting securities of the 
broker-dealer of the alternative trading system; or
    (3) In the case of a partnership, has contributed, or has the right 
to receive

[[Page 32]]

upon dissolution, 25 percent or more of the capital of the broker-dealer 
of the alternative trading system.
    (g) NMS stock shall have the meaning provided in Sec.  242.600; 
provided, however, that a debt or convertible debt security shall not be 
deemed an NMS stock for purposes of this Regulation ATS.
    (h) Effective transaction reporting plan shall have the meaning 
provided in Sec.  242.600.
    (i) Corporate debt security shall mean any security that:
    (1) Evidences a liability of the issuer of such security;
    (2) Has a fixed maturity date that is at least one year following 
the date of issuance; and
    (3) Is not an exempted security, as defined in section 3(a)(12) of 
the Act (15 U.S.C. 78c(a)(12)).
    (j) Commercial paper shall mean any note, draft, or bill of exchange 
which arises out of a current transaction or the proceeds of which have 
been or are to be used for current transactions, and which has a 
maturity at the time of issuance of not exceeding nine months, exclusive 
of days of grace, or any renewal thereof the maturity of which is 
likewise limited.
    (k) NMS Stock ATS means an alternative trading system, as defined in 
paragraph (a) of this section, that trades NMS stocks, as defined in 
paragraph (g) of this section.

[62 FR 544, Jan. 3, 1997, as amended at 70 FR 37619, June 29, 2005; 74 
FR 52372, Oct. 9, 2009; 83 FR 38911, Aug. 7, 2018]



Sec.  242.301  Requirements for alternative trading systems.

    (a) Scope of section. An alternative trading system shall comply 
with the requirements in paragraph (b) of this section, unless such 
alternative trading system:
    (1) Is registered as an exchange under section 6 of the Act, (15 
U.S.C. 78f);
    (2) Is exempted by the Commission from registration as an exchange 
based on the limited volume of transactions effected;
    (3) Is operated by a national securities association;
    (4)(i) Is registered as a broker-dealer under sections 15(b) or 15C 
of the Act (15 U.S.C. 78o(b), and 78o-5), or is a bank, and
    (ii) Limits its securities activities to the following instruments:
    (A) Government securities, as defined in section 3(a)(42) of the 
Act, (15 U.S.C. 78c(a)(42));
    (B) Repurchase and reverse repurchase agreements solely involving 
securities included within paragraph (a)(4)(ii)(A) of this section;
    (C) Any put, call, straddle, option, or privilege on a government 
security, other than a put, call, straddle, option, or privilege that:
    (1) Is traded on one or more national securities exchanges; or
    (2) For which quotations are disseminated through an automated 
quotation system operated by a registered securities association; and
    (D) Commercial paper.
    (5) Is exempted, conditionally or unconditionally, by Commission 
order, after application by such alternative trading system, from one or 
more of the requirements of paragraph (b) of this section or Sec.  
242.304. The Commission will grant such exemption only after determining 
that such an order is consistent with the public interest, the 
protection of investors, and the removal of impediments to, and 
perfection of the mechanisms of, a national market system.
    (b) Requirements. Every alternative trading system subject to this 
Regulation ATS, pursuant to paragraph (a) of this section, shall comply 
with the requirements in this paragraph (b).
    (1) Broker-dealer registration. The alternative trading system shall 
register as a broker-dealer under section 15 of the Act, (15 U.S.C. 
78o).
    (2) Notice. (i) The alternative trading system shall file an initial 
operation report on Form ATS, Sec.  249.637 of this chapter, in 
accordance with the instructions therein, at least 20 days prior to 
commencing operation as an alternative trading system.
    (ii) The alternative trading system shall file an amendment on Form 
ATS at least 20 calendar days prior to implementing a material change to 
the operation of the alternative trading system.
    (iii) If any information contained in the initial operation report 
filed under paragraph (b)(2)(i) of this section becomes inaccurate for 
any reason and

[[Page 33]]

has not been previously reported to the Commission as an amendment on 
Form ATS, the alternative trading system shall file an amendment on Form 
ATS correcting such information within 30 calendar days after the end of 
each calendar quarter in which the alternative trading system has 
operated.
    (iv) The alternative trading system shall promptly file an amendment 
on Form ATS correcting information previously reported on Form ATS after 
discovery that any information filed under paragraphs (b)(2)(i), (ii) or 
(iii) of this section was inaccurate when filed.
    (v) The alternative trading system shall promptly file a cessation 
of operations report on Form ATS in accordance with the instructions 
therein upon ceasing to operate as an alternative trading system.
    (vi) Every notice or amendment filed pursuant to this paragraph 
(b)(2) shall constitute a ``report'' within the meaning of sections 11A, 
17(a), 18(a), and 32(a), (15 U.S.C. 78k-1, 78q(a), 78r(a), and 78ff(a)), 
and any other applicable provisions of the Act.
    (vii) The reports provided for in paragraph (b)(2) of this section 
shall be considered filed upon receipt by the Division of Trading and 
Markets, at the Commission's principal office in Washington, DC. 
Duplicate originals of the reports provided for in paragraphs (b)(2)(i) 
through (v) of this section must be filed with surveillance personnel 
designated as such by any self-regulatory organization that is the 
designated examining authority for the alternative trading system 
pursuant to Sec.  240.17d-1 of this chapter simultaneously with filing 
with the Commission. Duplicates of the reports required by paragraph 
(b)(9) of this section shall be provided to surveillance personnel of 
such self-regulatory authority upon request. All reports filed pursuant 
to this paragraph (b)(2) and paragraph (b)(9) of this section shall be 
deemed confidential when filed.
    (viii) An NMS Stock ATS that is operating pursuant to an initial 
operation report on Form ATS on file with the Commission as of January 
7, 2019 (``Legacy NMS Stock ATS'') shall be subject to the requirements 
of paragraphs (b)(2)(i) through (vii) of this section until that ATS 
files an initial Form ATS-N with the Commission pursuant to Sec.  
242.304(a)(1)(iv)(A). Thereafter, the Legacy NMS Stock ATS shall file 
reports pursuant to Sec.  242.304. An alternative trading system that 
trades NMS stocks and securities other than NMS stocks shall be subject 
to the requirements of Sec.  242.304 of this chapter with respect to NMS 
stocks and paragraph (b)(2) of this section with respect to non-NMS 
stocks. As of January 7, 2019, an entity seeking to operate as an NMS 
Stock ATS shall not be subject to the requirements of paragraphs 
(b)(2)(i) through (vii) of this section and shall file reports pursuant 
to Sec.  242.304.
    (3) Order display and execution access. (i) An alternative trading 
system shall comply with the requirements set forth in paragraph 
(b)(3)(ii) of this section, with respect to any NMS stock in which the 
alternative trading system:
    (A) Displays subscriber orders to any person (other than alternative 
trading system employees); and
    (B) During at least 4 of the preceding 6 calendar months, had an 
average daily trading volume of 5 percent or more of the aggregate 
average daily share volume for such NMS stock as reported by an 
effective transaction reporting plan.
    (ii) Such alternative trading system shall provide to a national 
securities exchange or national securities association the prices and 
sizes of the orders at the highest buy price and the lowest sell price 
for such NMS stock, displayed to more than one person in the alternative 
trading system, for inclusion in the quotation data made available by 
the national securities exchange or national securities association to 
vendors pursuant to Sec.  242.602.
    (iii) With respect to any order displayed pursuant to paragraph 
(b)(3)(ii) of this section, an alternative trading system shall provide 
to any broker-dealer that has access to the national securities exchange 
or national securities association to which the alternative trading 
system provides the prices and sizes of displayed orders pursuant to 
paragraph (b)(3)(ii) of this section, the ability to effect a 
transaction with such orders that is:
    (A) Equivalent to the ability of such broker-dealer to effect a 
transaction

[[Page 34]]

with other orders displayed on the exchange or by the association; and
    (B) At the price of the highest priced buy order or lowest priced 
sell order displayed for the lesser of the cumulative size of such 
priced orders entered therein at such price, or the size of the 
execution sought by such broker-dealer.
    (4) Fees. The alternative trading system shall not charge any fee to 
broker-dealers that access the alternative trading system through a 
national securities exchange or national securities association, that is 
inconsistent with equivalent access to the alternative trading system 
required by paragraph (b)(3)(iii) of this section. In addition, if the 
national securities exchange or national securities association to which 
an alternative trading system provides the prices and sizes of orders 
under paragraphs (b)(3)(ii) and (b)(3)(iii) of this section establishes 
rules designed to assure consistency with standards for access to 
quotations displayed on such national securities exchange, or the market 
operated by such national securities association, the alternative 
trading system shall not charge any fee to members that is contrary to, 
that is not disclosed in the manner required by, or that is inconsistent 
with any standard of equivalent access established by such rules.
    (5) Fair access. (i) An alternative trading system shall comply with 
the requirements in paragraph (b)(5)(ii) of this section, if during at 
least 4 of the preceding 6 calendar months, such alternative trading 
system had:
    (A) With respect to any NMS stock, 5 percent or more of the average 
daily volume in that security reported by an effective transaction 
reporting plan;
    (B) With respect to an equity security that is not an NMS stock and 
for which transactions are reported to a self-regulatory organization, 5 
percent or more of the average daily trading volume in that security as 
calculated by the self-regulatory organization to which such 
transactions are reported;
    (C) With respect to municipal securities, 5 percent or more of the 
average daily volume traded in the United States; or
    (D) With respect to corporate debt securities, 5 percent or more of 
the average daily volume traded in the United States.
    (ii) An alternative trading system shall:
    (A) Establish written standards for granting access to trading on 
its system;
    (B) Not unreasonably prohibit or limit any person in respect to 
access to services offered by such alternative trading system by 
applying the standards established under paragraph (b)(5)(ii)(A) of this 
section in an unfair or discriminatory manner;
    (C) Make and keep records of:
    (1) All grants of access including, for all subscribers, the reasons 
for granting such access; and
    (2) All denials or limitations of access and reasons, for each 
applicant, for denying or limiting access; and
    (D) Report the information required on Form ATS-R (Sec.  249.638 of 
this chapter) regarding grants, denials, and limitations of access.
    (iii) Notwithstanding paragraph (b)(5)(i) of this section, an 
alternative trading system shall not be required to comply with the 
requirements in paragraph (b)(5)(ii) of this section, if such 
alternative trading system:
    (A) Matches customer orders for a security with other customer 
orders;
    (B) Such customers' orders are not displayed to any person, other 
than employees of the alternative trading system; and
    (C) Such orders are executed at a price for such security 
disseminated by an effective transaction reporting plan, or derived from 
such prices.
    (6) Capacity, integrity, and security of automated systems. (i) The 
alternative trading system shall comply with the requirements in 
paragraph (b)(6)(ii) of this section, if during at least 4 of the 
preceding 6 calendar months, such alternative trading system had:
    (A) With respect to municipal securities, 20 percent or more of the 
average daily volume traded in the United States; or
    (B) With respect to corporate debt securities, 20 percent or more of 
the average daily volume traded in the United States.

[[Page 35]]

    (ii) With respect to those systems that support order entry, order 
routing, order execution, transaction reporting, and trade comparison, 
the alternative trading system shall:
    (A) Establish reasonable current and future capacity estimates;
    (B) Conduct periodic capacity stress tests of critical systems to 
determine such system's ability to process transactions in an accurate, 
timely, and efficient manner;
    (C) Develop and implement reasonable procedures to review and keep 
current its system development and testing methodology;
    (D) Review the vulnerability of its systems and data center computer 
operations to internal and external threats, physical hazards, and 
natural disasters;
    (E) Establish adequate contingency and disaster recovery plans;
    (F) On an annual basis, perform an independent review, in accordance 
with established audit procedures and standards, of such alternative 
trading system's controls for ensuring that paragraphs (b)(6)(ii)(A) 
through (E) of this section are met, and conduct a review by senior 
management of a report containing the recommendations and conclusions of 
the independent review; and
    (G) Promptly notify the Commission staff of material systems outages 
and significant systems changes.
    (iii) Notwithstanding paragraph (b)(6)(i) of this section, an 
alternative trading system shall not be required to comply with the 
requirements in paragraph (b)(6)(ii) of this section, if such 
alternative trading system:
    (A) Matches customer orders for a security with other customer 
orders;
    (B) Such customers' orders are not displayed to any person, other 
than employees of the alternative trading system; and
    (C) Such orders are executed at a price for such security 
disseminated by an effective transaction reporting plan, or derived from 
such prices.
    (7) Examinations, inspections, and investigations. The alternative 
trading system shall permit the examination and inspection of its 
premises, systems, and records, and cooperate with the examination, 
inspection, or investigation of subscribers, whether such examination is 
being conducted by the Commission or by a self-regulatory organization 
of which such subscriber is a member.
    (8) Recordkeeping. The alternative trading system shall:
    (i) Make and keep current the records specified in Sec.  242.302; 
and
    (ii) Preserve the records specified in Sec.  242.303.
    (9) Reporting. The alternative trading system shall:
    (i) Separately file the information required by Form ATS-R (Sec.  
249.638 of this chapter) for transactions in NMS stocks, as defined in 
paragraph (g) of this section, and transactions in securities other than 
NMS stocks within 30 calendar days after the end of each calendar 
quarter in which the market has operated after the effective date of 
this section; and
    (ii) Separately file the information required by Form ATS-R for 
transactions in NMS stocks and transactions in securities other than NMS 
stocks within 10 calendar days after an alternative trading system 
ceases to operate.
    (10)  Written procedures to ensure the confidential treatment of 
trading information. (i) The alternative trading system shall establish 
adequate written safeguards and written procedures to protect 
subscribers' confidential trading information. Such written safeguards 
and written procedures shall include:
    (A) Limiting access to the confidential trading information of 
subscribers to those employees of the alternative trading system who are 
operating the system or responsible for its compliance with these or any 
other applicable rules;
    (B) Implementing standards controlling employees of the alternative 
trading system trading for their own accounts; and
    (ii) The alternative trading system shall adopt and implement 
adequate written oversight procedures to ensure that the written 
safeguards and procedures established pursuant to paragraph (b)(10)(i) 
of this section are followed.
    (11) Name. The alternative trading system shall not use in its name 
the word ``exchange,'' or derivations of the

[[Page 36]]

word ``exchange,'' such as the term ``stock market.''

[63 FR 70921, Dec. 22, 1998, as amended at 65 FR 13235, Mar. 13, 2000; 
70 FR 37619, June 29, 2005; 74 FR 52372, Oct. 9, 2009; 79 FR 72436, Dec. 
5, 2014; 83 FR 38911, Aug. 7, 2018]



Sec.  242.302  Recordkeeping requirements for alternative trading systems.

    To comply with the condition set forth in paragraph (b)(8) of Sec.  
242.301, an alternative trading system shall make and keep current the 
following records:
    (a) A record of subscribers to such alternative trading system 
(identifying any affiliations between the alternative trading system and 
subscribers to the alternative trading system, including common 
directors, officers, or owners);
    (b) Daily summaries of trading in the alternative trading system 
including:
    (1) Securities for which transactions have been executed;
    (2) Transaction volume, expressed with respect to equity securities 
in:
    (i) Number of trades;
    (ii) Number of shares traded; and
    (iii) Total settlement value in terms of U.S. dollars; and
    (3) Transaction volume, expressed with respect to debt securities 
in:
    (i) Number of trades; and
    (ii) Total U.S. dollar value; and
    (c) Time-sequenced records of order information in the alternative 
trading system, including:
    (1) Date and time (expressed in terms of hours, minutes, and 
seconds) that the order was received;
    (2) Identity of the security;
    (3) The number of shares, or principal amount of bonds, to which the 
order applies;
    (4) An identification of the order as related to a program trade or 
an index arbitrage trade as defined in New York Stock Exchange Rule 80A;
    (5) The designation of the order as a buy or sell order;
    (6) The designation of the order as a short sale order;
    (7) The designation of the order as a market order, limit order, 
stop order, stop limit order, or other type or order;
    (8) Any limit or stop price prescribed by the order;
    (9) The date on which the order expires and, if the time in force is 
less than one day, the time when the order expires;
    (10) The time limit during which the order is in force;
    (11) Any instructions to modify or cancel the order;
    (12) The type of account, i.e., retail, wholesale, employee, 
proprietary, or any other type of account designated by the alternative 
trading system, for which the order is submitted;
    (13) Date and time (expressed in terms of hours, minutes, and 
seconds) that the order was executed;
    (14) Price at which the order was executed;
    (15) Size of the order executed (expressed in number of shares or 
units or principal amount); and
    (16) Identity of the parties to the transaction.



Sec.  242.303  Record preservation requirements for alternative 
trading systems.

    (a) To comply with the condition set forth in paragraph (b)(8) of 
Sec.  242.301, an alternative trading system shall preserve the 
following records:
    (1) For a period of not less than three years, the first two years 
in an easily accessible place, an alternative trading system shall 
preserve:
    (i) All records required to be made pursuant to Sec.  242.302;
    (ii) All notices provided by such alternative trading system to 
subscribers generally, whether written or communicated through automated 
means, including, but not limited to, notices addressing hours of system 
operations, system malfunctions, changes to system procedures, 
maintenance of hardware and software, instructions pertaining to access 
to the market and denials of, or limitations on, access to the 
alternative trading system;
    (iii) If subject to paragraph (b)(5)(ii) of Sec.  242.301, at least 
one copy of such alternative trading system's standards for access to 
trading, all documents relevant to the alternative trading systems 
decision to grant, deny, or limit access to any person, and all other 
documents made or received by the alternative trading system in the 
course of complying with paragraph (b)(5) of Sec.  242.301; and

[[Page 37]]

    (iv) At least one copy of all documents made or received by the 
alternative trading system in the course of complying with paragraph 
(b)(6) of Sec.  242.301, including all correspondence, memoranda, 
papers, books, notices, accounts, reports, test scripts, test results, 
and other similar records.
    (v) At least one copy of the written safeguards and written 
procedures to protect subscribers' confidential trading information and 
the written oversight procedures created in the course of complying with 
paragraph (b)(10) of Sec.  242.301.
    (2) During the life of the enterprise and of any successor 
enterprise, an alternative trading system shall preserve:
    (i) All partnership articles or, in the case of a corporation, all 
articles of incorporation or charter, minute books and stock certificate 
books; and
    (ii) Copies of reports filed pursuant to paragraph (b)(2) of Sec.  
242.301 or Sec.  242.304 of this chapter and records made pursuant to 
paragraph (b)(5) of Sec.  242.301 of this chapter.
    (b) The records required to be maintained and preserved pursuant to 
paragraph (a) of this section must be produced, reproduced, and 
maintained in paper form or in any of the forms permitted under Sec.  
240.17a-4(f) of this chapter.
    (c) Alternative trading systems must comply with any other 
applicable recordkeeping or reporting requirement in the Act, and the 
rules and regulations thereunder. If the information in a record 
required to be made pursuant to this section is preserved in a record 
made pursuant to Sec.  240.17a-3 or Sec.  240.17a-4 of this chapter, or 
otherwise preserved by the alternative trading system (whether in 
summary or some other form), this section shall not require the sponsor 
to maintain such information in a separate file, provided that the 
sponsor can promptly sort and retrieve the information as if it had been 
kept in a separate file as a record made pursuant to this section, and 
preserves the information in accordance with the time periods specified 
in paragraph (a) of this section.
    (d) The records required to be maintained and preserved pursuant to 
this section may be prepared or maintained by a service bureau, 
depository, or other recordkeeping service on behalf of the alternative 
trading system. An agreement with a service bureau, depository, or other 
recordkeeping service shall not relieve the alternative trading system 
from the responsibility to prepare and maintain records as specified in 
this section. The service bureau, depository, or other recordkeeping 
service shall file with the Commission a written undertaking in a form 
acceptable to the Commission, signed by a duly authorized person, to the 
effect that such records are the property of the alternative trading 
system required to be maintained and preserved and will be surrendered 
promptly on request of the alternative trading system, and shall include 
the following provision: With respect to any books and records 
maintained or preserved on behalf of (name of alternative trading 
system), the undersigned hereby undertakes to permit examination of such 
books and records at any time, or from time to time, during business 
hours by the staff of the Securities and Exchange Commission, any self-
regulatory organization of which the alternative trading system is a 
member, or any State securities regulator having jurisdiction over the 
alternative trading system, and to promptly furnish to the Commission, 
self-regulatory organization of which the alternative trading system is 
a member, or any State securities regulator having jurisdiction over the 
alternative trading system a true, correct, complete and current hard 
copy of any, all, or any part of, such books and records.
    (e) Every alternative trading system shall furnish to any 
representative of the Commission promptly upon request, legible, true, 
and complete copies of those records that are required to be preserved 
under this section.

[63 FR 70921, Dec. 22, 1998, as amended at 66 FR 55841, Nov. 2, 2001; 83 
FR 38911, Aug. 7, 2018]



Sec.  242.304  NMS Stock ATSs.

    (a) Conditions to the exemption. Unless not required to comply with 
Regulation ATS pursuant to Sec.  242.301(a), an NMS Stock ATS must 
comply with Sec. Sec.  242.300 through 242.304 (except

[[Page 38]]

Sec.  242.301(b)(2)(i) through (vii)) to be exempt pursuant to Sec.  
240.3a1-1(a)(2).
    (1) Initial Form ATS-N. (i) Filing and effectiveness requirement. No 
exemption is available to an NMS Stock ATS pursuant to Sec.  240.3a1-
1(a)(2) unless the NMS Stock ATS files with the Commission an initial 
Form ATS-N, in accordance with the conditions of this section, and the 
initial Form ATS-N is effective pursuant to paragraph (a)(1)(iii) or 
(a)(1)(iv)(A) of this section.
    (ii) Commission review period. (A) The Commission may, by order, as 
provided in paragraph (a)(1)(iii) of this section, declare an initial 
Form ATS-N filed by an NMS Stock ATS ineffective no later than 120 
calendar days from the date of filing with the Commission, or, if 
applicable, the end of the extended review period. The Commission may 
extend the initial Form ATS-N review period for:
    (1) An additional 90 calendar days, if the Form ATS-N is unusually 
lengthy or raises novel or complex issues that require additional time 
for review, in which case the Commission will notify the NMS Stock ATS 
in writing within the initial 120-calendar day review period and will 
briefly describe the reason for the determination for which additional 
time for review is required; or
    (2) Any extended review period to which a duly authorized 
representative of the NMS Stock ATS agrees in writing.
    (B) During review by the Commission of the initial Form ATS-N, the 
NMS Stock ATS shall amend its initial Form ATS-N pursuant to the 
requirements of paragraphs (a)(2)(i)(B) and (C) of this section. To make 
material changes to its initial Form ATS-N during the Commission review 
period, the NMS Stock ATS shall withdraw its filed initial Form ATS-N 
and may refile an initial Form ATS-N pursuant to paragraph (a)(1) of 
this section.
    (iii) Effectiveness; Ineffectiveness determination. (A) An initial 
Form ATS-N, as amended, filed by an NMS Stock ATS will become effective, 
unless declared ineffective, upon the earlier of:
    (1) The completion of review by the Commission and publication 
pursuant to paragraph (b)(2)(i) of this section; or
    (2) The expiration of the review period, or, if applicable, the end 
of the extended review period, pursuant to paragraph (a)(1)(ii) of this 
section.
    (B) The Commission will, by order, declare an initial Form ATS-N 
ineffective if it finds, after notice and opportunity for hearing, that 
such action is necessary or appropriate in the public interest, and is 
consistent with the protection of investors. If the Commission declares 
an initial Form ATS-N ineffective, the NMS Stock ATS shall be prohibited 
from operating as an NMS Stock ATS pursuant to Sec.  240.3a1-1(a)(2). An 
initial Form ATS-N declared ineffective does not prevent the NMS Stock 
ATS from subsequently filing a new Form ATS-N.
    (iv) Transition for Legacy NMS Stock ATSs. (A) Initial Form ATS-N 
filing requirements. A Legacy NMS Stock ATS shall file with the 
Commission an initial Form ATS-N, in accordance with the conditions of 
this section, no earlier than January 7, 2019, and no later than 
February 8, 2019. An initial Form ATS-N filed by a Legacy NMS Stock ATS 
shall supersede and replace for purposes of the exemption the previously 
filed Form ATS of the Legacy NMS Stock ATS. The Legacy NMS Stock ATS may 
operate, on a provisional basis, pursuant to the filed initial Form ATS-
N, and any amendments thereto, during the review of the initial Form 
ATS-N by the Commission. An initial Form ATS-N filed by a Legacy NMS 
Stock ATS, as amended, will become effective, unless declared 
ineffective, upon the earlier of:
    (1) The completion of review by the Commission and publication 
pursuant to paragraph (b)(2)(i) of this section; or
    (2) The expiration of the review period, or, if applicable, the end 
of the extended review period, pursuant to paragraph (a)(1)(iv)(B) of 
this section.
    (B) Commission review period; Ineffectiveness determination. The 
Commission may, by order, as provided in paragraph (a)(1)(iii) of this 
section, declare an initial Form ATS-N filed by a Legacy NMS Stock ATS 
ineffective no later than 120 calendar days from the date of filing with 
the Commission, or, if applicable, the end of the extended review 
period. The Commission may extend the initial Form ATS-N review period 
for a Legacy NMS Stock ATS for:

[[Page 39]]

    (1) An additional 120 calendar days if the initial Form ATS-N is 
unusually lengthy or raises novel or complex issues that require 
additional time for review, in which case the Commission will notify the 
Legacy NMS Stock ATS in writing within the initial 120-calendar day 
review period and will briefly describe the reason for the determination 
for which additional time for review is required; or
    (2) Any extended review period to which a duly-authorized 
representative of the Legacy NMS Stock ATS agrees in writing.
    (C) Amendments to initial Form ATS-N. During review by the 
Commission of the initial Form ATS-N filed by a Legacy NMS Stock ATS, 
the Legacy NMS Stock ATS shall amend its initial Form ATS-N pursuant to 
the requirements of paragraphs (a)(2)(i)(A) through (D) of this section.
    (2) Form ATS-N amendment. (i) Filing requirements. An NMS Stock ATS 
shall amend a Form ATS-N, in accordance with the conditions of this 
section:
    (A) At least 30 calendar days, except as provided by paragraph 
(a)(2)(i)(D) of this section, prior to the date of implementation of a 
material change to the operations of the NMS Stock ATS or to the 
activities of the broker-dealer operator or its affiliates that are 
subject to disclosure on Form ATS-N (``Material Amendment'');
    (B) No later than 30 calendar days after the end of each calendar 
quarter to correct information that has become inaccurate or incomplete 
for any reason and was not required to be reported to the Commission as 
a Form ATS-N amendment pursuant to paragraphs (a)(2)(i)(A), (C), or (D) 
of this section (``Updating Amendment'');
    (C) Promptly, to correct information in any previous disclosure on 
Form ATS-N, after discovery that any information previously filed on 
Form ATS-N was materially inaccurate or incomplete when filed 
(``Correcting Amendment''); or
    (D) No later than seven calendar days after information required to 
be disclosed in Part III, Items 24 and 25 on Form ATS-N has become 
inaccurate or incomplete (``Order Display and Fair Access Amendment'').
    (ii) Commission review period; Ineffectiveness determination. The 
Commission will, by order, declare ineffective any Form ATS-N amendment 
filed pursuant to paragraphs (a)(2)(i)(A) through (D) of this section, 
no later than 30 calendar days from filing with the Commission, if the 
Commission finds that such action is necessary or appropriate in the 
public interest, and is consistent with the protection of investors. A 
Form ATS-N amendment declared ineffective shall prohibit the NMS Stock 
ATS from operating pursuant to the ineffective Form ATS-N amendment. A 
Form ATS-N amendment declared ineffective does not prevent the NMS Stock 
ATS from subsequently filing a new Form ATS-N amendment. During review 
by the Commission of a Material Amendment, the NMS Stock ATS shall amend 
the Material Amendment pursuant to the requirements of paragraphs 
(a)(2)(i)(B) through (C) of this section. To make material changes to a 
filed Material Amendment during the Commission review period, an NMS 
Stock ATS shall withdraw its filed Material Amendment and must file the 
new Material Amendment pursuant to (a)(2)(i)(A) of this section.
    (3) Notice of cessation. An NMS Stock ATS shall notice its cessation 
of operations on Form ATS-N at least 10 business days prior to the date 
the NMS Stock ATS will cease to operate as an NMS Stock ATS. The notice 
of cessation shall cause the Form ATS-N to become ineffective on the 
date designated by the NMS Stock ATS.
    (4) Suspension, limitation, and revocation of the exemption from the 
definition of exchange. (i) The Commission will, by order, if it finds, 
after notice and opportunity for hearing, that such action is necessary 
or appropriate in the public interest, and is consistent with the 
protection of investors, suspend for a period not exceeding twelve 
months, limit, or revoke the exemption for an NMS Stock ATS pursuant to 
Sec.  240.3a1-1(a)(2) of this chapter.
    (ii) If the exemption for an NMS Stock ATS is suspended or revoked 
pursuant to paragraph (a)(4)(i) of this section, the NMS Stock ATS shall 
be prohibited from operating pursuant to the exemption pursuant to Sec.  
240.3a1-1(a)(2) of this chapter. If the exemption

[[Page 40]]

for an NMS Stock ATS is limited pursuant to paragraph (a)(4)(i) of this 
section, the NMS Stock ATS shall be prohibited from operating in a 
manner otherwise inconsistent with the terms and conditions of the 
Commission order.
    (b) Public disclosures. (1) Every Form ATS-N filed pursuant to this 
section shall constitute a ``report'' within the meaning of sections 
11A, 17(a), 18(a), and 32(a) (15 U.S.C. 78k-1, 78q(a), 78r(a), and 
78ff(a)), and any other applicable provisions of the Act.
    (2) The Commission will make public via posting on the Commission's 
website, each:
    (i) Effective initial Form ATS-N, as amended;
    (ii) Order of ineffective initial Form ATS-N;
    (iii) Form ATS-N amendment to an effective Form ATS-N:
    (A) Material Amendments: The cover page of the Material Amendment 
will be made public by the Commission upon filing and, unless the 
Commission declares the Material Amendment ineffective, the entirety of 
the Material Amendment, as amended, will be made public by the 
Commission following the expiration of the review period pursuant to 
paragraph (a)(2)(ii) of this section.
    (B) Updating, Correcting, and Order Display and Fair Access 
Amendments: The entirety of Updating, Correcting, and Order Display and 
Fair Access Amendments will be made public by the Commission upon 
filing. Notwithstanding the foregoing, an Updating or Correcting 
Amendment filed to a Material Amendment will be made public by the 
Commission following the expiration of the review period for such 
Material Amendment pursuant to paragraph (a)(2)(ii) of this section.
    (iv) Order of ineffective Form ATS-N amendment;
    (v) Notice of cessation; and
    (vi) Order suspending, limiting, or revoking the exemption for an 
NMS Stock ATS from the definition of an ``exchange'' pursuant to Sec.  
240.3a1-1(a)(2) of this chapter.
    (3) Each NMS Stock ATS shall make public via posting on its website 
a direct URL hyperlink to the Commission's website that contains the 
documents enumerated in paragraph (b)(2) of this section.
    (c) Form ATS-N disclosure requirements. (1) An NMS Stock ATS must 
file a Form ATS-N in accordance with the instructions therein.
    (2) Any report required to be filed with the Commission under this 
section shall be filed on Form ATS-N, and include all information as 
prescribed in Form ATS-N and the instructions thereto. Such document 
shall be executed at, or prior to, the time Form ATS-N is filed and 
shall be retained by the NMS Stock ATS in accordance with Sec. Sec.  
242.303 and Sec.  232.302 of this chapter, and the instructions in Form 
ATS-N.

[83 FR 38911, Aug. 7, 2018]

            Customer Margin Requirements for Security Futures

    Source: 67 FR 53176, Aug. 14, 2002, unless otherwise noted.



Sec.  242.400  Customer margin requirements for security futures-
-authority, purpose, interpretation, and scope.

    (a) Authority and purpose. Sections 242.400 through 242.406 and 17 
CFR 41.42 through 41.49 (``this Regulation, Sec. Sec.  242.400 through 
242.406'') are issued by the Securities and Exchange Commission 
(``Commission'') jointly with the Commodity Futures Trading Commission 
(``CFTC''), pursuant to authority delegated by the Board of Governors of 
the Federal Reserve System under section 7(c)(2)(A) of the Securities 
Exchange Act of 1934 (``Act'') (15 U.S.C. 78g(c)(2)(A)). The principal 
purpose of this Regulation (Sec. Sec.  242.400 through 242.406) is to 
regulate customer margin collected by brokers, dealers, and members of 
national securities exchanges, including futures commission merchants 
required to register as brokers or dealers under section 15(b)(11) of 
the Act (15 U.S.C. 78o(b)(11)), relating to security futures.
    (b) Interpretation. This Regulation (Sec. Sec.  242.400 through 
242.406) shall be jointly interpreted by the Commission and the CFTC, 
consistent with the criteria set forth in clauses (i) through (iv) of 
section 7(c)(2)(B) of the Act (15

[[Page 41]]

U.S.C. 78g(c)(2)(B)) and the provisions of Regulation T (12 CFR part 
220).
    (c) Scope. (1) This Regulation (Sec. Sec.  242.400 through 242.406) 
does not preclude a self-regulatory authority, under rules that are 
effective in accordance with section 19(b)(2) of the Act (15 U.S.C. 
78s(b)(2)) or section 19(b)(7) of the Act (15 U.S.C. 78s(b)(7)) and, as 
applicable, section 5c(c) of the Commodity Exchange Act (``CEA'') (7 
U.S.C. 7a-2(c)), or a security futures intermediary from imposing 
additional margin requirements on security futures, including higher 
initial or maintenance margin levels, consistent with this Regulation 
(Sec. Sec.  242.400 through 242.406), or from taking appropriate action 
to preserve its financial integrity.
    (2) This Regulation (Sec. Sec.  242.400 through 242.406) does not 
apply to:
    (i) Financial relations between a customer and a security futures 
intermediary to the extent that they comply with a portfolio margining 
system under rules that meet the criteria set forth in section 
7(c)(2)(B) of the Act (15 U.S.C. 78g(c)(2)(B)) and that are effective in 
accordance with section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) and, 
as applicable, section 5c(c) of the CEA (7 U.S.C. 7a-2(c));
    (ii) Financial relations between a security futures intermediary and 
a foreign person involving security futures traded on or subject to the 
rules of a foreign board of trade;
    (iii) Margin requirements that clearing agencies registered under 
section 17A of the Exchange Act (15 U.S.C. 78q-1) or derivatives 
clearing organizations registered under section 5b of the CEA (7 U.S.C. 
7a-1) impose on their members;
    (iv) Financial relations between a security futures intermediary and 
a person based on a good faith determination by the security futures 
intermediary that such person is an exempted person; and
    (v) Financial relations between a security futures intermediary and, 
or arranged by a security futures intermediary for, a person relating to 
trading in security futures by such person for its own account, if such 
person:
    (A) Is a member of a national securities exchange or national 
securities association registered pursuant to section 15A(a) of the Act 
(15 U.S.C. 78o-3(a)); and
    (B) Is registered with such exchange or such association as a 
security futures dealer pursuant to rules that are effective in 
accordance with section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) and, 
as applicable, section 5c(c) of the CEA (7 U.S.C. 7a-2(c)), that:
    (1) Require such member to be registered as a floor trader or a 
floor broker with the CFTC under Section 4f(a)(1) of the CEA (7 U.S.C. 
6f(a)(1)), or as a dealer with the Commission under section 15(b) of the 
Act (15 U.S.C. 78o(b));
    (2) Require such member to maintain records sufficient to prove 
compliance with this paragraph (c)(2)(v) and the rules of the exchange 
or association of which it is a member;
    (3) Require such member to hold itself out as being willing to buy 
and sell security futures for its own account on a regular or continuous 
basis; and
    (4) Provide for disciplinary action, including revocation of such 
member's registration as a security futures dealer, for such member's 
failure to comply with this Regulation (Sec. Sec.  242.400 through 
242.406) or the rules of the exchange or association.
    (d) Exemption. The Commission may exempt, either unconditionally or 
on specified terms and conditions, financial relations involving any 
security futures intermediary, customer, position, or transaction, or 
any class of security futures intermediaries, customers, positions, or 
transactions, from one or more requirements of this Regulation 
(Sec. Sec.  242.400 through 242.406), if the Commission determines that 
such exemption is necessary or appropriate in the public interest and 
consistent with the protection of investors. An exemption granted 
pursuant to this paragraph shall not operate as an exemption from any 
CFTC rules. Any exemption that may be required from such rules must be 
obtained separately from the CFTC.



Sec.  242.401  Definitions.

    (a) For purposes of this Regulation (Sec. Sec.  242.400 through 
242.406) only, the following terms shall have the meanings set forth in 
this section.

[[Page 42]]

    (1) Applicable margin rules and margin rules applicable to an 
account mean the rules and regulations applicable to financial relations 
between a security futures intermediary and a customer with respect to 
security futures and related positions carried in a securities account 
or futures account as provided in Sec.  242.402(a) of this Regulation 
(Sec. Sec.  242.400 through 242.406).
    (2) Broker shall have the meaning provided in section 3(a)(4) of the 
Act (15 U.S.C. 78c(a)(4)).
    (3) Contract multiplier means the number of units of a narrow-based 
security index expressed as a dollar amount, in accordance with the 
terms of the security future contract.
    (4) Current market value means, on any day:
    (i) With respect to a security future:
    (A) If the instrument underlying such security future is a stock, 
theproduct of the daily settlement price of such security future as 
shown by any regularly published reporting or quotation service, and the 
applicable number of shares per contract; or
    (B) If the instrument underlying such security future is a narrow-
based security index, as defined in section 3(a)(55)(B) of the Act (15 
U.S.C. 78c(a)(55)(B)), the product of the daily settlement price of such 
security future as shown by any regularly published reporting or 
quotation service, and the applicable contract multiplier.
    (ii) With respect to a security other than a security future, the 
most recent closing sale price of the security, as shown by any 
regularly published reporting or quotation service. If there is no 
recent closing sale price, the security futures intermediary may use any 
reasonable estimate of the market value of the security as of the most 
recent close of business.
    (5) Customer excludes an exempted person and includes:
    (i) Any person or persons acting jointly:
    (A) On whose behalf a security futures intermediary effects a 
security futures transaction or carries a security futures position; or
    (B) Who would be considered a customer of the security futures 
intermediary according to the ordinary usage of the trade;
    (ii) Any partner in a security futures intermediary that is 
organized as a partnership who would be considered a customer of the 
security futures intermediary absent the partnership relationship; and
    (iii) Any joint venture in which a security futures intermediary 
participates and which would be considered a customer of the security 
futures intermediary if the security futures intermediary were not a 
participant.
    (6) Daily settlement price means, with respect to a security future, 
the settlement price of such security future determined at the close of 
trading each day, under the rules of the applicable exchange, clearing 
agency, or derivatives clearing organization.
    (7) Dealer shall have the meaning provided in section 3(a)(5) of the 
Act (15 U.S.C. 78c(a)(5)).
    (8) Equity means the equity or margin equity in a securities or 
futures account, as computed in accordance with the margin rules 
applicable to the account and subject to adjustment under Sec.  
242.404(c), (d) and (e) of this Regulation (Sec. Sec.  242.400 through 
242.406).
    (9) Exempted person means:
    (i) A member of a national securities exchange, a registered broker 
or dealer, or a registered futures commission merchant, a substantial 
portion of whose business consists of transactions in securities, 
commodity futures, or commodity options with persons other than brokers, 
dealers, futures commission merchants, floor brokers, or floor traders, 
and includes a person who:
    (A) Maintains at least 1000 active accounts on an annual basis for 
persons other than brokers, dealers, persons associated with a broker or 
dealer, futures commission merchants, floor brokers, floor traders, and 
persons affiliated with a futures commission merchant, floor broker, or 
floor trader that are effecting transactions in securities, commodity 
futures, or commodity options;
    (B) Earns at least $10 million in gross revenues on an annual basis 
from transactions in securities, commodity futures, or commodity options 
with persons other than brokers, dealers, persons associated with a 
broker or dealer, futures commission merchants,

[[Page 43]]

floor brokers, floor traders, and persons affiliated with a futures 
commission merchant, floor broker, or floor trader; or
    (C) Earns at least 10 percent of its gross revenues on an annual 
basis from transactions in securities, commodity futures, or commodity 
options with persons other than brokers, dealers, persons associated 
with a broker or dealer, futures commission merchants, floor brokers, 
floor traders, and persons affiliated with a futures commission 
merchant, floor broker, or floor trader.
    (ii) For purposes of paragraph (a)(9)(i) of this section only, 
persons affiliated with a futures commission merchant, floor broker, or 
floor trader means any partner, officer, director, or branch manager of 
such futures commission merchant, floor broker, or floor trader (or any 
person occupying a similar status or performing similar functions), any 
person directly or indirectly controlling, controlled by, or under 
common control with such futures commission merchant, floor broker, or 
floor trader, or any employee of such a futures commission merchant, 
floor broker, or floor trader.
    (iii) A member of a national securities exchange, a registered 
broker or dealer, or a registered futures commission merchant that has 
been in existence for less than one year may meet the definition of 
exempted person based on a six-month period.
    (10) Exempted security shall have the meaning provided in section 
3(a)(12) of the Act (15 U.S.C. 78c(a)(12)).
    (11) Floor broker shall have the meaning provided in Section 1a(16) 
of the CEA (7 U.S.C. 1a(16)).
    (12) Floor trader shall have the meaning provided in Section 1a(17) 
of the CEA (7 U.S.C. 1a(17)).
    (13) Futures account shall have the meaning provided in Sec.  
240.15c3-3(a) of this chapter.
    (14) Futures commission merchant shall have the meaning provided in 
Section 1a of the CEA (7 U.S.C. 1a).
    (15) Good faith, with respect to making a determination or accepting 
a statement concerning financial relations with a person, means that the 
security futures intermediary is alert to the circumstances surrounding 
such financial relations, and if in possession of information that would 
cause a prudent person not to make the determination or accept the 
notice or certification without inquiry, investigates and is satisfied 
that it is correct.
    (16) Listed option means a put or call option that is:
    (i) Issued by a clearing agency that is registered under section 17A 
of the Act (15 U.S.C. 17q-1) or cleared and guaranteed by a derivatives 
clearing organization that is registered under Section 5b of the CEA (7 
U.S.C. 7a-1); and
    (ii) Traded on or subject to the rules of a self-regulatory 
authority.
    (17) Margin call means a demand by a security futures intermediary 
to a customer for a deposit of cash, securities or other assets to 
satisfy the required margin for security futures or related positions or 
a special margin requirement.
    (18) Margin deficiency means the amount by which the required margin 
in an account is not satisfied by the equity in the account, as computed 
in accordance with Sec.  242.404 of this Regulation (Sec. Sec.  242.400 
through 242.406).
    (19) Margin equity security shall have the meaning provided in 
Regulation T.
    (20) Margin security shall have the meaning provided in Regulation 
T.
    (21) Member shall have the meaning provided in section 3(a)(3) of 
the Act (15 U.S.C. 78c(a)(3)), and shall include persons registered 
under section 15(b)(11) of the Act (15 U.S.C. 78o(b)(11)) that are 
permitted to effect transactions on a national securities exchange 
without the services of another person acting as executing broker.
    (22) Money market mutual fund means any security issued by an 
investment company registered under section 8 of the Investment Company 
Act of 1940 (15 U.S.C. 80a-8) that is considered a money market fund 
under Sec.  270.2a-7 of this chapter.
    (23) Persons associated with a broker or dealer shall have the 
meaning provided in section 3(a)(18) of the Act (15 U.S.C. 78c(a)(18)).
    (24) Regulation T means Regulation T promulgated by the Board of 
Governors of the Federal Reserve System, 12 CFR part 220, as amended 
from time to time.

[[Page 44]]

    (25) Regulation T collateral value, with respect to a security, 
means the current market value of the security reduced by the percentage 
of required margin for a position in the security held in a margin 
account under Regulation T.
    (26) Related position, with respect to a security future, means any 
position in an account that is combined with the security future to 
create an offsetting position as provided in Sec.  242.403(b)(2) of this 
Regulation (Sec. Sec.  242.400 through 242.406).
    (27) Related transaction, with respect to a position or transaction 
in a security future, means:
    (i) Any transaction that creates, eliminates, increases or reduces 
an offsetting position involving a security future and a related 
position, as provided in Sec.  242.403(b)(2) of this Regulation 
(Sec. Sec.  242.400 through 242.406); or
    (ii) Any deposit or withdrawal of margin for the security future or 
a related position, except as provided in Sec.  242.405(b) of this 
Regulation (Sec. Sec.  242.400 through 242.406).
    (28) Securities account shall have the meaning provided in Sec.  
240.15c3-3(a) of this chapter.
    (29) Security futures intermediary means any creditor as defined in 
Regulation T with respect to its financial relations with any person 
involving security futures.
    (30) Self-regulatory authority means a national securities exchange 
registered under section 6 of the Act (15 U.S.C. 78f), a national 
securities association registered under section 15A of the Act (15 
U.S.C. 78o-3), a contract market registered under Section 5 of the CEA 
(7 U.S.C. 7) or Section 5f of the CEA (7 U.S.C. 7b-1), or a derivatives 
transaction execution facility registered under Section 5a of the CEA (7 
U.S.C. 7a).
    (31) Special margin requirement shall have the meaning provided in 
Sec.  242.404(e)(1)(ii) of this Regulation (Sec. Sec.  242.400 through 
242.406).
    (32) Variation settlement means any credit or debit to a customer 
account, made on a daily or intraday basis, for the purpose of marking 
to market a security future or any other contract that is:
    (i) Issued by a clearing agency that is registered under section 17A 
of the Act (15 U.S.C. 78q-1) or cleared and guaranteed by a derivatives 
clearing organization that is registered under Section 5b of the CEA (7 
U.S.C. 7a-1); and
    (ii) Traded on or subject to the rules of a self-regulatory 
authority.
    (b) Terms used in this Regulation (Sec. Sec.  242.400 through 
242.406) and not otherwise defined in this section shall have the 
meaning set forth in the margin rules applicable to the account.
    (c) Terms used in this Regulation (Sec. Sec.  242.400 through 
242.406) and not otherwise defined in this section or in the margin 
rules applicable to the account shall have the meaning set forth in the 
Act and the CEA; if the definitions of a term in the Act and the CEA are 
inconsistent as applied in particular circumstances, such term shall 
have the meaning set forth in rules, regulations, or interpretations 
jointly promulgated by the Commission and the CFTC.



Sec.  242.402  General provisions.

    (a) Applicable margin rules. Except to the extent inconsistent with 
this Regulation (Sec. Sec.  242.400 through 242.406):
    (1) A security futures intermediary that carries a security future 
on behalf of a customer in a securities account shall record and conduct 
all financial relations with respect to such security future and related 
positions in accordance with Regulation T and the margin rules of the 
self-regulatory authorities of which the security futures intermediary 
is a member.
    (2) A security futures intermediary that carries a security future 
on behalf of a customer in a futures account shall record and conduct 
all financial relations with respect to such security future and related 
positions in accordance with the margin rules of the self-regulatory 
authorities of which the security futures intermediary is a member.
    (b) Separation and consolidation of accounts. (1) The requirements 
for security futures and related positions in one account may not be met 
by considering items in any other account, except as permitted or 
required under paragraph (b)(2) of this section or applicable margin 
rules. If withdrawals of

[[Page 45]]

cash, securities or other assets deposited as margin are permitted under 
this Regulation (Sec. Sec.  242.400 through 242.406), bookkeeping 
entries shall be made when such cash, securities, or assets are used for 
purposes of meeting requirements in another account.
    (2) Notwithstanding paragraph (b)(1) of this section, the security 
futures intermediary shall consider all futures accounts in which 
security futures and related positions are held that are within the same 
regulatory classification or account type and are owned by the same 
customer to be a single account for purposes of this Regulation 
(Sec. Sec.  242.400 through 242.406). The security futures intermediary 
may combine such accounts with other futures accounts that are within 
the same regulatory classification or account type and are owned by the 
same customer for purposes of computing a customer's overall margin 
requirement, as permitted or required by applicable margin rules.
    (c) Accounts of partners. If a partner of the security futures 
intermediary has an account with the security futures intermediary in 
which security futures or related positions are held, the security 
futures intermediary shall disregard the partner's financial relations 
with the firm (as shown in the partner's capital and ordinary drawing 
accounts) in calculating the margin or equity of any such account.
    (d) Contribution to joint venture. If an account in which security 
futures or related positions are held is the account of a joint venture 
in which the security futures intermediary participates, any interest of 
the security futures intermediary in the joint account in excess of the 
interest which the security futures intermediary would have on the basis 
of its right to share in the profits shall be margined in accordance 
with this Regulation (Sec. Sec.  242.400 through 242.406).
    (e) Extensions of credit. (1) No security futures intermediary may 
extend or maintain credit to or for any customer for the purpose of 
evading or circumventing any requirement under this Regulation 
(Sec. Sec.  242.400 through 242.406).
    (2) A security futures intermediary may arrange for the extension or 
maintenance of credit to or for any customer by any person, provided 
that the security futures intermediary does not willfully arrange credit 
that would constitute a violation of Regulation T, U or X of the Board 
of Governors of the Federal Reserve System (12 CFR parts 220, 221, and 
224) by such person.
    (f) Change in exempted person status. Once a person ceases to 
qualify as an exempted person, it shall notify the security futures 
intermediary of this fact before entering into any new security futures 
transaction or related transaction that would require additional margin 
to be deposited under this Regulation (Sec. Sec.  242.400 through 
242.406). Financial relations with respect to any such transactions 
shall be subject to the provisions of this Regulation (Sec. Sec.  
242.400 through 242.406).



Sec.  242.403  Required margin.

    (a) Applicability. Each security futures intermediary shall 
determine the required margin for the security futures and related 
positions held on behalf of a customer in a securities account or 
futures account as set forth in this section.
    (b) Required margin--(1) General rule. The required margin for each 
long or short position in a security future shall be fifteen (15) 
percent of the current market value of such security future.
    (2) Offsetting positions. Notwithstanding the margin levels 
specified in paragraph (b)(1) of this section, a self-regulatory 
authority may set the required initial or maintenance margin level for 
an offsetting position involving security futures and related positions 
at a level lower than the level that would be required under paragraph 
(b)(1) of this section if such positions were margined separately, 
pursuant to rules that meet the criteria set forth in section 7(c)(2)(B) 
of the Act (15 U.S.C. 78g(c)(2)(B)) and are effective in accordance with 
section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) and, as applicable, 
Section 5c(c) of the CEA (7 U.S.C. 7a-2(c)).
    (c) Procedures for certain margin level adjustments. An exchange 
registered under section 6(g) of the Act (15 U.S.C. 78f(g)), or a 
national securities association registered under section 15A(k) of the 
Act (15 U.S.C. 78o-3(k)), may raise or lower the required margin level 
for a

[[Page 46]]

security future to a level not lower than that specified in this 
section, in accordance with section 19(b)(7) of the Act (15 U.S.C. 
78s(b)(7)).

[67 FR 53176, Aug. 14, 2002, as amended at 85 FR 75146, Nov. 24, 2020]



Sec.  242.404  Type, form and use of margin.

    (a) When margin is required. Margin is required to be deposited 
whenever the required margin for security futures and related positions 
in an account is not satisfied by the equity in the account, subject to 
adjustment under paragraph (c) of this section.
    (b) Acceptable margin deposits. (1) The required margin may be 
satisfied by a deposit of cash, margin securities (subject to paragraph 
(b)(2) of this section), exempted securities, any other asset permitted 
under Regulation T to satisfy a margin deficiency in a securities margin 
account, or any combination thereof, each as valued in accordance with 
paragraph (c) of this section.
    (2) Shares of a money market mutual fund may be accepted as a margin 
deposit for purposes of this Regulation (Sec. Sec.  242.400 through 
242.406), provided that:
    (i) The customer waives any right to redeem the shares without the 
consent of the security futures intermediary and instructs the fund or 
its transfer agent accordingly;
    (ii) The security futures intermediary (or clearing agency or 
derivatives clearing organization with which the shares are deposited as 
margin) obtains the right to redeem the shares in cash, promptly upon 
request; and
    (iii) The fund agrees to satisfy any conditions necessary or 
appropriate to ensure that the shares may be redeemed in cash, promptly 
upon request.
    (c) Adjustments--(1) Futures accounts. For purposes of this section, 
the equity in a futures account shall be computed in accordance with the 
margin rules applicable to the account, subject to the following:
    (i) A security future shall have no value;
    (ii) Each net long or short position in a listed option on a 
contract for future delivery shall be valued in accordance with the 
margin rules applicable to the account;
    (iii) Except as permitted in paragraph (e) of this section, each 
margin equity security shall be valued at an amount no greater than its 
Regulation T collateral value;
    (iv) Each other security shall be valued at an amount no greater 
than its current market value reduced by the percentage specified for 
such security in Sec.  240.15c3-1(c)(2)(vi) of this chapter;
    (v) Freely convertible foreign currency may be valued at an amount 
no greater than its daily marked-to-market U.S. dollar equivalent;
    (vi) Variation settlement receivable (or payable) by an account at 
the close of trading on any day shall be treated as a credit (or debit) 
to the account on that day; and
    (vii) Each other acceptable margin deposit or component of equity 
shall be valued at an amount no greater than its value under Regulation 
T.
    (2) Securities accounts. For purposes of this section, the equity in 
a securities account shall be computed in accordance with the margin 
rules applicable to the account, subject to the following:
    (i) A security future shall have no value;
    (ii) Freely convertible foreign currency may be valued at an amount 
no greater than its daily mark-to-market U.S. dollar equivalent; and
    (iii) Variation settlement receivable (or payable) to an account at 
the close of trading on any day shall be treated as a credit (or debit) 
by the account on that day.
    (d) Satisfaction restriction. Any transaction, position or deposit 
that is used to satisfy the required margin for security futures or 
related positions under this Regulation (Sec. Sec.  242.400 through 
242.406), including a related position, shall be unavailable to satisfy 
the required margin for any other position or transaction or any other 
requirement.
    (e) Alternative collateral valuation for margin equity securities in 
a futures account. (1) Notwithstanding paragraph (c)(1)(iii) of this 
section, a security futures intermediary need not value a margin equity 
security at its Regulation T collateral value when determining whether 
the required margin

[[Page 47]]

for the security futures and related positions in a futures account is 
satisfied, provided that:
    (i) The margin equity security is valued at an amount no greater 
than the current market value of the security reduced by the lowest 
percentage level of margin required for a long position in the security 
held in a margin account under the rules of a national securities 
exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 
78f(a));
    (ii) Additional margin is required to be deposited on any day when 
the day's security futures transactions and related transactions would 
create or increase a margin deficiency in the account if the margin 
equity securities were valued at their Regulation T collateral value, 
and shall be for the amount of the margin deficiency so created or 
increased (a ``special margin requirement''); and
    (iii) Cash, securities, or other assets deposited as margin for the 
positions in an account are not permitted to be withdrawn from the 
account at any time that:
    (A) Additional cash, securities, or other assets are required to be 
deposited as margin under this section for a transaction in the account 
on the same or a previous day; or
    (B) The withdrawal, together with other transactions, deposits, and 
withdrawals on the same day, would create or increase a margin 
deficiency if the margin equity securities were valued at their 
Regulation T collateral value.
    (2) All security futures transactions and related transactions on 
any day shall be combined to determine the amount of a special margin 
requirement. Additional margin deposited to satisfy a special margin 
requirement shall be valued at an amount no greater than its Regulation 
T collateral value.
    (3) If the alternative collateral valuation method set forth in 
paragraph (e) of this section is used with respect to an account in 
which security futures or related positions are carried:
    (i) An account that is transferred from one security futures 
intermediary to another may be treated as if it had been maintained by 
the transferee from the date of its origin, if the transferee accepts, 
in good faith, a signed statement of the transferor (or, if that is not 
practicable, of the customer), that any margin call issued under this 
Regulation (Sec. Sec.  242.400 through 242.406) has been satisfied; and
    (ii) An account that is transferred from one customer to another as 
part of a transaction, not undertaken to avoid the requirements of this 
Regulation (Sec. Sec.  242.400 through 242.406), may be treated as if it 
had been maintained for the transferee from the date of its origin, if 
the security futures intermediary accepts in good faith and keeps with 
the transferee account a signed statement of the transferor describing 
the circumstances for the transfer.
    (f) Guarantee of accounts. No guarantee of a customer's account 
shall be given any effect for purposes of determining whether the 
required margin in an account is satisfied, except as permitted under 
applicable margin rules.



Sec.  242.405  Withdrawal of margin.

    (a) By the customer. Except as otherwise provided in Sec.  
242.404(e)(1)(ii) of this Regulation (Sec. Sec.  242.400 through 
242.406), cash, securities, or other assets deposited as margin for 
positions in an account may be withdrawn, provided that the equity in 
the account after such withdrawal is sufficient to satisfy the required 
margin for the security futures and related positions in the account 
under this Regulation (Sec. Sec.  242.400 through 242.406).
    (b) By the security futures intermediary. Notwithstanding paragraph 
(a) of this section, the security futures intermediary, in its usual 
practice, may deduct the following items from an account in which 
security futures or related positions are held if they are considered in 
computing the balance of such account:
    (1) Variation settlement payable, directly or indirectly, to a 
clearing agency that is registered under section 17A of the Act (15 
U.S.C. 78q-1) or a derivatives clearing organization that is registered 
under section 5b of the CEA (7 U.S.C. 7a-1);
    (2) Interest charged on credit maintained in the account;

[[Page 48]]

    (3) Communication or shipping charges with respect to transactions 
in the account;
    (4) Payment of commissions, brokerage, taxes, storage and other 
charges lawfully accruing in connection with the positions and 
transactions in the account;
    (5) Any service charges that the security futures intermediary may 
impose; or
    (6) Any other withdrawals that are permitted from a securities 
margin account under Regulation T, to the extent permitted under 
applicable margin rules.



Sec.  242.406  Undermargined accounts.

    (a) Failure to satisfy margin call. If any margin call required by 
this Regulation (Sec. Sec.  242.400 through 242.406) is not met in full, 
the security futures intermediary shall take the deduction required with 
respect to an undermargined account in computing its net capital under 
Commission or CFTC rules.
    (b) Accounts that liquidate to a deficit. If at any time there is a 
liquidating deficit in an account in which security futures are held, 
the security futures intermediary shall take steps to liquidate 
positions in the account promptly and in an orderly manner.
    (c) Liquidation of undermargined accounts not required. 
Notwithstanding Section 402(a) of this Regulation (Sec. Sec.  242.400 
through 242.406), section 220.4(d) of Regulation T (12 CFR 220.4(d)) 
respecting liquidation of positions in lieu of deposit shall not apply 
with respect to security futures carried in a securities account.

                  Regulation AC--Analyst Certification

    Source: 68 FR 9492, February 27, 2003, unless otherwise noted.



Sec.  242.500  Definitions.

    For purposes of Regulation AC (Sec. Sec.  242.500 through 242.505 of 
this chapter) the term:
    Covered person of a broker or dealer means an associated person of 
that broker or dealer but does not include:
    (1) An associated person:
    (i) If the associated person has no officers (or persons performing 
similar functions) or employees in common with the broker or dealer who 
can influence the activities of research analysts or the content of 
research reports; and
    (ii) If the broker or dealer maintains and enforces written policies 
and procedures reasonably designed to prevent the broker or dealer, any 
controlling persons, officers (or persons performing similar functions), 
and employees of the broker or dealer from influencing the activities of 
research analysts and the content of research reports prepared by the 
associated person.
    (2) An associated person who is an investment adviser:
    (i) Not registered with the Commission as an investment adviser 
because of the prohibition of section 203A of the Investment Advisers 
Act of 1940 (15 U.S.C. 80b-3a); and
    (ii) Not registered or required to be registered with the Commission 
as a broker or dealer.

    Note to definition of covered person: An associated person of a 
broker or dealer who is not a covered person continues to be subject to 
the federal securities laws, including the anti-fraud provisions of the 
federal securities laws.

    Foreign person means any person who is not a U.S. person.
    Foreign security means a security issued by a foreign issuer for 
which a U.S. market is not the principal trading market.
    Public appearance means any participation by a research analyst in a 
seminar, forum (including an interactive electronic forum), or radio or 
television or other interview, in which the research analyst makes a 
specific recommendation or provides information reasonably sufficient 
upon which to base an investment decision about a security or an issuer.
    Registered broker or dealer means a broker or dealer registered or 
required to register pursuant to section 15 or section 15B of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o or 78o-4) or a government 
securities broker or government securities dealer registered or required 
to register pursuant to section 15C(a)(1)(A) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78o-5(a)(1)(A)).

[[Page 49]]

    Research analyst means any natural person who is primarily 
responsible for the preparation of the content of a research report.
    Research report means a written communication (including an 
electronic communication) that includes an analysis of a security or an 
issuer and provides information reasonably sufficient upon which to base 
an investment decision.
    Third party research analyst means:
    (1) With respect to a broker or dealer, any research analyst not 
employed by that broker or dealer or any associated person of that 
broker or dealer; and
    (2) With respect to a covered person of a broker or dealer, any 
research analyst not employed by that covered person, by the broker or 
dealer with whom that covered person is associated, or by any other 
associated person of the broker or dealer with whom that covered person 
is associated.
    United States has the meaning contained in Sec.  230.902(l) of this 
chapter.
    U.S. person has the meaning contained in Sec.  230.902(k) of this 
chapter.



Sec.  242.501  Certifications in connection with research reports.

    (a) A broker or dealer or covered person that publishes, circulates, 
or provides a research report prepared by a research analyst to a U.S. 
person in the United States shall include in that research report a 
clear and prominent certification by the research analyst containing the 
following:
    (1) A statement attesting that all of the views expressed in the 
research report accurately reflect the research analyst's personal views 
about any and all of the subject securities or issuers; and
    (2)(i) A statement attesting that no part of the research analyst's 
compensation was, is, or will be, directly or indirectly, related to the 
specific recommendations or views expressed by the research analyst in 
the research report; or
    (ii) A statement:
    (A) Attesting that part or all of the research analyst's 
compensation was, is, or will be, directly or indirectly, related to the 
specific recommendations or views expressed by the research analyst in 
the research report;
    (B) Identifying the source, amount, and purpose of such 
compensation; and
    (C) Further disclosing that the compensation could influence the 
recommendations or views expressed in the research report.
    (b) A broker or dealer or covered person that publishes, circulates, 
or provides a research report prepared by a third party research analyst 
to a U.S. person in the United States shall be exempt from the 
requirements of this section with respect to such research report if the 
following conditions are satisfied:
    (1) The employer of the third party research analyst has no officers 
(or persons performing similar functions) or employees in common with 
the broker or dealer or covered person; and
    (2) The broker or dealer (or, with respect to a covered person, the 
broker or dealer with whom the covered person is associated) maintains 
and enforces written policies and procedures reasonably designed to 
prevent the broker or dealer, any controlling persons, officers (or 
persons performing similar functions), and employees of the broker or 
dealer from influencing the activities of the third party research 
analyst and the content of research reports prepared by the third party 
research analyst.



Sec.  242.502  Certifications in connection with public appearances.

    (a) If a broker or dealer publishes, circulates, or provides a 
research report prepared by a research analyst employed by the broker or 
dealer or covered person to a U.S. person in the United States, the 
broker or dealer must make a record within 30 days after any calendar 
quarter in which the research analyst made a public appearance that 
contains the following:
    (1) A statement by the research analyst attesting that the views 
expressed by the research analyst in all public appearances during the 
calendar quarter accurately reflected the research analyst's personal 
views at that time about any and all of the subject securities or 
issuers; and
    (2) A statement by the research analyst attesting that no part of 
the research analyst's compensation was, is,

[[Page 50]]

or will be, directly or indirectly, related to the specific 
recommendations or views expressed by the research analyst in such 
public appearances.
    (b) If the broker or dealer does not obtain a statement by the 
research analyst in accordance with paragraph (a) of this section:
    (1) The broker or dealer shall promptly notify in writing its 
examining authority, designated pursuant to section 17(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78q(d)) and Sec.  240.17d-2 
of this chapter, that the research analyst did not provide the 
certifications specified in paragraph (a) of this section; and
    (2) For 120 days following notification pursuant to paragraph (b)(1) 
of this section, the broker or dealer shall disclose in any research 
report prepared by the research analyst and published, circulated, or 
provided to a U.S. person in the United States that the research analyst 
did not provide the certifications specified in paragraph (a) of this 
section.
    (c) In the case of a research analyst who is employed outside the 
United States by a foreign person located outside the United States, 
this section shall only apply to a public appearance while the research 
analyst is physically present in the United States.
    (d) A broker or dealer shall preserve the records specified in 
paragraphs (a) and (b) of this section in accordance with Sec.  240.17a-
4 of this chapter and for a period of not less than 3 years, the first 2 
years in an accessible place.



Sec.  242.503  Certain foreign research reports.

    A foreign person, located outside the United States and not 
associated with a registered broker or dealer, who prepares a research 
report concerning a foreign security and provides it to a U.S. person in 
the United States in accordance with the provisions of Sec.  240.15a-
6(a)(2) of this chapter shall be exempt from the requirements of this 
regulation.



Sec.  242.504  Notification to associated persons.

    A broker or dealer shall notify any person with whom that broker or 
dealer is associated who publishes, circulates, or provides research 
reports:
    (a) Whether the broker or dealer maintains and enforces written 
policies and procedures reasonably designed to prevent the broker or 
dealer, any controlling persons, officers (or persons performing similar 
functions), or employees of the broker or dealer from influencing the 
activities of research analysts and the content of research reports 
prepared by the associated person; and
    (b) Whether the associated person has any officers (or persons 
performing similar functions) or employees in common with the broker or 
dealer who can influence the activities of research analysts or the 
content of research reports and, if so, the identity of those persons.



Sec.  242.505  Exclusion for news media.

    No provision of this Regulation AC shall apply to any person who:
    (a) Is the publisher of any bona fide newspaper, news magazine or 
business or financial publication of general and regular circulation; 
and
    (b) Is not registered or required to be registered with the 
Commission as a broker or dealer or investment adviser.

        Regulation NMS--Regulation of the National Market System

    Source: 70 FR 37620, June 29, 2005, unless otherwise noted.



Sec.  242.600  NMS security designation and definitions.

    (a) The term national market system security as used in section 
11A(a)(2) of the Act (15 U.S.C. 78k-1(a)(2)) shall mean any NMS security 
as defined in paragraph (b) of this section.
    (b) For purposes of Regulation NMS (Sec. Sec.  242.600 through 
242.612), the following definitions shall apply:
    (1) Actionable indication of interest means any indication of 
interest that explicitly or implicitly conveys all of the following 
information with respect to any order available at the venue sending the 
indication of interest:
    (i) Symbol;
    (ii) Side (buy or sell);

[[Page 51]]

    (iii) A price that is equal to or better than the national best bid 
for buy orders and the national best offer for sell orders; and
    (iv) A size that is at least equal to one round lot.
    (2) Administrative data means administrative, control, and other 
technical messages made available by national securities exchanges and 
national securities associations pursuant to the effective national 
market system plan or plans required under Sec.  242.603(b) or the 
technical specifications thereto as of April 9, 2021.
    (3) Aggregate quotation size means the sum of the quotation sizes of 
all responsible brokers or dealers who have communicated on any national 
securities exchange bids or offers for an NMS security at the same 
price.
    (4) Alternative trading system has the meaning provided in Sec.  
242.300(a).
    (5) Auction information means all information specified by national 
securities exchange rules or effective national market system plans that 
is generated by a national securities exchange leading up to and during 
auctions, including opening, reopening, and closing auctions, and 
publicly disseminated during the time periods and at the time intervals 
provided in such rules and plans.
    (6) Automated quotation means a quotation displayed by a trading 
center that:
    (i) Permits an incoming order to be marked as immediate-or-cancel;
    (ii) Immediately and automatically executes an order marked as 
immediate-or-cancel against the displayed quotation up to its full size;
    (iii) Immediately and automatically cancels any unexecuted portion 
of an order marked as immediate-or-cancel without routing the order 
elsewhere;
    (iv) Immediately and automatically transmits a response to the 
sender of an order marked as immediate-or-cancel indicating the action 
taken with respect to such order; and
    (v) Immediately and automatically displays information that updates 
the displayed quotation to reflect any change to its material terms.
    (7) Automated trading center means a trading center that:
    (i) Has implemented such systems, procedures, and rules as are 
necessary to render it capable of displaying quotations that meet the 
requirements for an automated quotation set forth in paragraph (b)(6) of 
this section;
    (ii) Identifies all quotations other than automated quotations as 
manual quotations;
    (iii) Immediately identifies its quotations as manual quotations 
whenever it has reason to believe that it is not capable of displaying 
automated quotations; and
    (iv) Has adopted reasonable standards limiting when its quotations 
change from automated quotations to manual quotations, and vice versa, 
to specifically defined circumstances that promote fair and efficient 
access to its automated quotations and are consistent with the 
maintenance of fair and orderly markets.
    (8) Average effective spread means the share-weighted average of 
effective spreads for order executions calculated, for buy orders, as 
double the amount of difference between the execution price and the 
midpoint of the national best bid and national best offer at the time of 
order receipt and, for sell orders, as double the amount of difference 
between the midpoint of the national best bid and national best offer at 
the time of order receipt and the execution price.
    (9) Average realized spread means the share-weighted average of 
realized spreads for order executions calculated, for buy orders, as 
double the amount of difference between the execution price and the 
midpoint of the national best bid and national best offer five minutes 
after the time of order execution and, for sell orders, as double the 
amount of difference between the midpoint of the national best bid and 
national best offer five minutes after the time of order execution and 
the execution price; provided, however, that the midpoint of the final 
national best bid and national best offer disseminated for regular 
trading hours shall be used to calculate a realized spread if it is 
disseminated less than five minutes after the time of order execution.

[[Page 52]]

    (10) Best bid and best offer mean the highest priced bid and the 
lowest priced offer.
    (11) Bid or offer means the bid price or the offer price 
communicated by a member of a national securities exchange or member of 
a national securities association to any broker or dealer, or to any 
customer, at which it is willing to buy or sell one or more round lots 
of an NMS security, as either principal or agent, but shall not include 
indications of interest.
    (12) Block size with respect to an order means it is:
    (i) Of at least 10,000 shares; or
    (ii) For a quantity of stock having a market value of at least 
$200,000.
    (13) Categorized by order size means dividing orders into separate 
categories for sizes from 100 to 499 shares, from 500 to 1999 shares, 
from 2000 to 4999 shares, and 5000 or greater shares.
    (14) Categorized by order type means dividing orders into separate 
categories for market orders, marketable limit orders, inside-the-quote 
limit orders, at-the-quote limit orders, and near-the-quote limit 
orders.
    (15) Categorized by security means dividing orders into separate 
categories for each NMS stock that is included in a report.
    (16) Competing consolidator means a securities information processor 
required to be registered pursuant to Sec.  242.614 (Rule 614) or a 
national securities exchange or national securities association that 
receives information with respect to quotations for and transactions in 
NMS stocks and generates a consolidated market data product for 
dissemination to any person.
    (17) Consolidated display means:
    (i) The prices, sizes, and market identifications of the national 
best bid and national best offer for a security; and
    (ii) Consolidated last sale information for a security.
    (18) Consolidated last sale information means the price, volume, and 
market identification of the most recent transaction report for a 
security that is disseminated pursuant to an effective national market 
system plan.
    (19) Consolidated market data means the following data, consolidated 
across all national securities exchanges and national securities 
associations:
    (i) Core data;
    (ii) Regulatory data;
    (iii) Administrative data;
    (iv) Self-regulatory organization-specific program data; and
    (v) Additional regulatory, administrative, or self-regulatory 
organization-specific program data elements defined as such pursuant to 
the effective national market system plan or plans required under Sec.  
242.603(b).
    (20) Consolidated market data product means any data product 
developed by a competing consolidator that contains consolidated market 
data or data components of consolidated market data. For purposes of 
this paragraph (b)(20), data components of consolidated market data 
include the enumerated elements, and any subcomponent of the enumerated 
elements, of consolidated market data in paragraph (b)(19) of this 
section. All consolidated market data products must reflect data 
consolidated across all national securities exchanges and national 
securities associations.
    (21) Core data means:
    (i) The following information with respect to quotations for, and 
transactions in, NMS stocks:
    (A) Quotation sizes;
    (B) Aggregate quotation sizes;
    (C) Best bid and best offer;
    (D) National best bid and national best offer;
    (E) Protected bid and protected offer;
    (F) Transaction reports;
    (G) Last sale data;
    (H) Odd-lot information;
    (I) Depth of book data; and
    (J) Auction information.
    (ii) For purposes of the calculation and dissemination of core data 
by competing consolidators, as defined in paragraph (b)(16) of this 
section, and the calculation of core data by self-aggregators, as 
defined in paragraph (b)(84) of this section, the best bid and best 
offer, national best bid and national best offer, protected bid and 
protected offer, and depth of book data shall include odd-lots that when 
aggregated are equal to or greater than a round lot; such aggregation 
shall occur

[[Page 53]]

across multiple prices and shall be disseminated at the least aggressive 
price of all such aggregated odd-lots.
    (iii) Competing consolidators shall represent the quotation sizes of 
the following data elements, if disseminated in a consolidated market 
data product as defined in paragraph (b)(20) of this section, as the 
number of shares rounded down to the nearest multiple of a round lot: 
The best bid and best offer, national best bid and national best offer, 
protected bid and protected offer, depth of book data, and auction 
information.
    (iv) Competing consolidators shall attribute the following data 
elements, if disseminated in a consolidated market data product as 
defined in paragraph (b)(20) of this section, to the national securities 
exchange or national securities association that is the source of each 
such data element: Best bid and best offer, national best bid and 
national best offer, protected bid and protected offer, transaction 
reports, last sale data, odd-lot information, depth of book data, and 
auction information.
    (22) Covered order means any market order or any limit order 
(including immediate-or-cancel orders) received by a market center 
during regular trading hours at a time when a national best bid and 
national best offer is being disseminated, and, if executed, is executed 
during regular trading hours, but shall exclude any order for which the 
customer requests special handling for execution, including, but not 
limited to, orders to be executed at a market opening price or a market 
closing price, orders submitted with stop prices, orders to be executed 
only at their full size, orders to be executed on a particular type of 
tick or bid, orders submitted on a ``not held'' basis, orders for other 
than regular settlement, and orders to be executed at prices unrelated 
to the market price of the security at the time of execution.
    (23) Customer means any person that is not a broker or dealer.
    (24) Customer limit order means an order to buy or sell an NMS stock 
at a specified price that is not for the account of either a broker or 
dealer; provided, however, that the term customer limit order shall 
include an order transmitted by a broker or dealer on behalf of a 
customer.
    (25) Customer order means an order to buy or sell an NMS security 
that is not for the account of a broker or dealer, but shall not include 
any order for a quantity of a security having a market value of at least 
$50,000 for an NMS security that is an option contract and a market 
value of at least $200,000 for any other NMS security.
    (26) Depth of book data means all quotation sizes at each national 
securities exchange and on a facility of a national securities 
association at each of the next five prices at which there is a bid that 
is lower than the national best bid and offer that is higher than the 
national best offer. For these five prices, the aggregate size available 
at each price, if any, at each national securities exchange and national 
securities association shall be attributed to such exchange or 
association.
    (27) Directed order means an order from a customer that the customer 
specifically instructed the broker or dealer to route to a particular 
venue for execution.
    (28) Dynamic market monitoring device means any service provided by 
a vendor on an interrogation device or other display that:
    (i) Permits real-time monitoring, on a dynamic basis, of transaction 
reports, last sale data, or quotations with respect to a particular 
security; and
    (ii) Displays the most recent transaction report, last sale data, or 
quotation with respect to that security until such report, data, or 
quotation has been superseded or supplemented by the display of a new 
transaction report, last sale data, or quotation reflecting the next 
reported transaction or quotation in that security.
    (29) Effective national market system plan means any national market 
system plan approved by the Commission (either temporarily or on a 
permanent basis) pursuant to Sec.  242.608.
    (30) Effective transaction reporting plan means any transaction 
reporting plan approved by the Commission pursuant to Sec.  242.601.
    (31) Electronic communications network means, for the purposes of 
Sec.  242.602(b)(5), any electronic system

[[Page 54]]

that widely disseminates to third parties orders entered therein by an 
exchange market maker or OTC market maker, and permits such orders to be 
executed against in whole or in part; except that the term electronic 
communications network shall not include:
    (i) Any system that crosses multiple orders at one or more specified 
times at a single price set by the system (by algorithm or by any 
derivative pricing mechanism) and does not allow orders to be crossed or 
executed against directly by participants outside of such times; or
    (ii) Any system operated by, or on behalf of, an OTC market maker or 
exchange market maker that executes customer orders primarily against 
the account of such market maker as principal, other than riskless 
principal.
    (32) Exchange market maker means any member of a national securities 
exchange that is registered as a specialist or market maker pursuant to 
the rules of such exchange.
    (33) Exchange-traded security means any NMS security or class of NMS 
securities listed and registered, or admitted to unlisted trading 
privileges, on a national securities exchange; provided, however, that 
securities not listed on any national securities exchange that are 
traded pursuant to unlisted trading privileges are excluded.
    (34) Executed at the quote means, for buy orders, execution at a 
price equal to the national best offer at the time of order receipt and, 
for sell orders, execution at a price equal to the national best bid at 
the time of order receipt.
    (35) Executed outside the quote means, for buy orders, execution at 
a price higher than the national best offer at the time of order receipt 
and, for sell orders, execution at a price lower than the national best 
bid at the time of order receipt.
    (36) Executed with price improvement means, for buy orders, 
execution at a price lower than the national best offer at the time of 
order receipt and, for sell orders, execution at a price higher than the 
national best bid at the time of order receipt.
    (37) Inside-the-quote limit order, at-the-quote limit order, and 
near-the-quote limit order mean non-marketable buy orders with limit 
prices that are, respectively, higher than, equal to, and lower by $0.10 
or less than the national best bid at the time of order receipt, and 
non-marketable sell orders with limit prices that are, respectively, 
lower than, equal to, and higher by $0.10 or less than the national best 
offer at the time of order receipt.
    (38) Intermarket sweep order means a limit order for an NMS stock 
that meets the following requirements:
    (i) When routed to a trading center, the limit order is identified 
as an intermarket sweep order; and
    (ii) Simultaneously with the routing of the limit order identified 
as an intermarket sweep order, one or more additional limit orders, as 
necessary, are routed to execute against the full displayed size of any 
protected bid, in the case of a limit order to sell, or the full 
displayed size of any protected offer, in the case of a limit order to 
buy, for the NMS stock with a price that is superior to the limit price 
of the limit order identified as an intermarket sweep order. These 
additional routed orders also must be marked as intermarket sweep 
orders.
    (39) Interrogation device means any securities information retrieval 
system capable of displaying transaction reports, last sale data, or 
quotations upon inquiry, on a current basis on a terminal or other 
device.
    (40) Joint self-regulatory organization plan means a plan as to 
which two or more self-regulatory organizations, acting jointly, are 
sponsors.
    (41) Last sale data means any price or volume data associated with a 
transaction.
    (42) Listed equity security means any equity security listed and 
registered, or admitted to unlisted trading privileges, on a national 
securities exchange.
    (43) Listed option means any option traded on a registered national 
securities exchange or automated facility of a national securities 
association.
    (44) Make publicly available means posting on an Internet Web site 
that is free and readily accessible to the public, furnishing a written 
copy to customers on request without charge, and notifying customers at 
least annually in writing that a written copy will be furnished on 
request.

[[Page 55]]

    (45) Manual quotation means any quotation other than an automated 
quotation.
    (46) Market center means any exchange market maker, OTC market 
maker, alternative trading system, national securities exchange, or 
national securities association.
    (47) Marketable limit order means any buy order with a limit price 
equal to or greater than the national best offer at the time of order 
receipt, or any sell order with a limit price equal to or less than the 
national best bid at the time of order receipt.
    (48) Moving ticker means any continuous real-time moving display of 
transaction reports or last sale data (other than a dynamic market 
monitoring device) provided on an interrogation or other display device.
    (49) Nasdaq security means any registered security listed on The 
Nasdaq Stock Market, Inc.
    (50) National best bid and national best offer means, with respect 
to quotations for an NMS stock, the best bid and best offer for such 
stock that are calculated and disseminated on a current and continuing 
basis by a competing consolidator or calculated by a self-aggregator 
and, for NMS securities other than NMS stocks, the best bid and best 
offer for such security that are calculated and disseminated on a 
current and continuing basis by a plan processor pursuant to an 
effective national market system plan; provided, that in the event two 
or more market centers transmit to the plan processor, a competing 
consolidator or a self-aggregator identical bids or offers for an NMS 
security, the best bid or best offer (as the case may be) shall be 
determined by ranking all such identical bids or offers (as the case may 
be) first by size (giving the highest ranking to the bid or offer 
associated with the largest size), and then by time (giving the highest 
ranking to the bid or offer received first in time).
    (51) National market system plan means any joint self-regulatory 
organization plan in connection with:
    (i) The planning, development, operation or regulation of a national 
market system (or a subsystem thereof) or one or more facilities 
thereof; or
    (ii) The development and implementation of procedures and/or 
facilities designed to achieve compliance by self-regulatory 
organizations and their members with any section of this Regulation NMS 
and part 240, subpart A of this chapter promulgated pursuant to section 
11A of the Act (15 U.S.C. 78k-1).
    (52) National securities association means any association of 
brokers and dealers registered pursuant to section 15A of the Act (15 
U.S.C. 78o-3).
    (53) National securities exchange means any exchange registered 
pursuant to section 6 of the Act (15 U.S.C. 78f).
    (54) NMS security means any security or class of securities for 
which transaction reports are collected, processed, and made available 
pursuant to an effective transaction reporting plan, or an effective 
national market system plan for reporting transactions in listed 
options.
    (55) NMS stock means any NMS security other than an option.
    (56) Non-directed order means any order from a customer other than a 
directed order.
    (57) Non-marketable limit order means any limit order other than a 
marketable limit order.
    (58) Odd-lot means an order for the purchase or sale of an NMS stock 
in an amount less than a round lot.
    (59) Odd-lot information means:
    (i) Odd-lot transaction data disseminated pursuant to the effective 
national market system plan or plans required under Sec.  242.603(b) as 
of April 9, 2021; and
    (ii) Odd-lots at a price greater than or equal to the national best 
bid and less than or equal to the national best offer, aggregated at 
each price level at each national securities exchange and national 
securities association.
    (60) Options class means all of the put option or call option series 
overlying a security, as defined in section 3(a)(10) of the Act (15 
U.S.C. 78c(a)(10)).
    (61) Options series means the contracts in an options class that 
have the same unit of trade, expiration date, and exercise price, and 
other terms or conditions.
    (62) Orders providing liquidity means orders that were executed 
against after resting at a trading center.

[[Page 56]]

    (63) Orders removing liquidity means orders that executed against 
resting trading interest at a trading center.
    (64) OTC market maker means any dealer that holds itself out as 
being willing to buy from and sell to its customers, or others, in the 
United States, an NMS stock for its own account on a regular or 
continuous basis otherwise than on a national securities exchange in 
amounts of less than block size.
    (65) Participants, when used in connection with a national market 
system plan, means any self-regulatory organization which has agreed to 
act in accordance with the terms of the plan but which is not a 
signatory of such plan.
    (66) Payment for order flow has the meaning provided in Sec.  
240.10b-10 of this chapter.
    (67) Plan processor means any self-regulatory organization or 
securities information processor acting as an exclusive processor in 
connection with the development, implementation and/or operation of any 
facility contemplated by an effective national market system plan.
    (68) Primary listing exchange means, for each NMS stock, the 
national securities exchange identified as the primary listing exchange 
in the effective national market system plan or plans required under 
Sec.  242.603(b).
    (69) Profit-sharing relationship means any ownership or other type 
of affiliation under which the broker or dealer, directly or indirectly, 
may share in any profits that may be derived from the execution of non-
directed orders.
    (70) Protected bid or protected offer means a quotation in an NMS 
stock that:
    (i) Is displayed by an automated trading center;
    (ii) Is disseminated pursuant to an effective national market system 
plan; and
    (iii) Is an automated quotation that is the best bid or best offer 
of a national securities exchange, or the best bid or best offer of a 
national securities association.
    (71) Protected quotation means a protected bid or a protected offer.
    (72) Published aggregate quotation size means the aggregate 
quotation size calculated by a national securities exchange and 
displayed by a vendor on a terminal or other display device at the time 
an order is presented for execution to a responsible broker or dealer.
    (73) Published bid and published offer means the bid or offer of a 
responsible broker or dealer for an NMS security communicated by it to 
its national securities exchange or association pursuant to Sec.  
242.602 and displayed by a vendor on a terminal or other display device 
at the time an order is presented for execution to such responsible 
broker or dealer.
    (74) Published quotation size means the quotation size of a 
responsible broker or dealer communicated by it to its national 
securities exchange or association pursuant to Sec.  242.602 and 
displayed by a vendor on a terminal or other display device at the time 
an order is presented for execution to such responsible broker or 
dealer.
    (75) Quotation means a bid or an offer.
    (76) Quotation size, when used with respect to a responsible 
broker's or dealer's bid or offer for an NMS security, means:
    (i) The number of shares (or units of trading) of that security 
which such responsible broker or dealer has specified, for purposes of 
dissemination to vendors, that it is willing to buy at the bid price or 
sell at the offer price comprising its bid or offer, as either principal 
or agent; or
    (ii) In the event such responsible broker or dealer has not so 
specified, a normal unit of trading for that NMS security.
    (77) Regular trading hours means the time between 9:30 a.m. and 4:00 
p.m. Eastern Time, or such other time as is set forth in the procedures 
established pursuant to Sec.  242.605(a)(2).
    (78) Regulatory data means:
    (i) Information required to be collected or calculated by the 
primary listing exchange for an NMS stock and provided to competing 
consolidators and self-aggregators pursuant to the effective national 
market system plan or plans required under Sec.  242.603(b), including, 
at a minimum:
    (A) Information regarding Short Sale Circuit Breakers pursuant to 
Sec.  242.201;
    (B) Information regarding Price Bands required pursuant to the Plan 
to

[[Page 57]]

Address Extraordinary Market Volatility (LULD Plan);
    (C) Information relating to regulatory halts or trading pauses (news 
dissemination/pending, LULD, Market-Wide Circuit Breakers) and 
reopenings or resumptions;
    (D) The official opening and closing prices of the primary listing 
exchange; and
    (E) An indicator of the applicable round lot size.
    (ii) Information required to be collected or calculated by the 
national securities exchange or national securities association on which 
an NMS stock is traded and provided to competing consolidators and self-
aggregators pursuant to the effective national market system plan or 
plans required under Sec.  242.603(b), including, at a minimum:
    (A) Whenever such national securities exchange or national 
securities association receives a bid (offer) below (above) an NMS 
stock's lower (upper) LULD price band, an appropriate regulatory data 
flag identifying the bid (offer) as non-executable; and
    (B) Other regulatory messages including subpenny execution and 
trade-though exempt indicators.
    (iii) For purposes of paragraph (b)(78)(i)(C) of this section, the 
primary listing exchange that has the largest proportion of companies 
included in the S&P 500 Index shall monitor the S&P 500 Index throughout 
the trading day, determine whether a Level 1, Level 2, or Level 3 
decline, as defined in self-regulatory organization rules related to 
Market-Wide Circuit Breakers, has occurred, and immediately inform the 
other primary listing exchanges of all such declines.
    (79) Responsible broker or dealer means:
    (i) When used with respect to bids or offers communicated on a 
national securities exchange, any member of such national securities 
exchange who communicates to another member on such national securities 
exchange, at the location (or locations) or through the facility or 
facilities designated by such national securities exchange for trading 
in an NMS security a bid or offer for such NMS security, as either 
principal or agent; provided, however, that, in the event two or more 
members of a national securities exchange have communicated on or 
through such national securities exchange bids or offers for an NMS 
security at the same price, each such member shall be considered a 
responsible broker or dealer for that bid or offer, subject to the rules 
of priority and precedence then in effect on that national securities 
exchange; and further provided, that for a bid or offer which is 
transmitted from one member of a national securities exchange to another 
member who undertakes to represent such bid or offer on such national 
securities exchange as agent, only the last member who undertakes to 
represent such bid or offer as agent shall be considered the responsible 
broker or dealer for that bid or offer; and
    (ii) When used with respect to bids and offers communicated by a 
member of an association to a broker or dealer or a customer, the member 
communicating the bid or offer (regardless of whether such bid or offer 
is for its own account or on behalf of another person).
    (80) Revised bid or offer means a market maker's bid or offer which 
supersedes its published bid or published offer.
    (81) Revised quotation size means a market maker's quotation size 
which supersedes its published quotation size.
    (82) Round lot means:
    (i) For any NMS stock for which the prior calendar month's average 
closing price on the primary listing exchange was $250.00 or less per 
share, an order for the purchase or sale of an NMS stock of 100 shares;
    (ii) For any NMS stock for which the prior calendar month's average 
closing price on the primary listing exchange was $250.01 to $1,000.00 
per share, an order for the purchase or sale of an NMS stock of 40 
shares;
    (iii) For any NMS stock for which the prior calendar month's average 
closing price on the primary listing exchange was $1,000.01 to 
$10,000.00 per share, an order for the purchase or sale of an NMS stock 
of 10 shares;
    (iv) For any NMS stock for which the prior calendar month's average 
closing price on the primary listing exchange was $10,000.01 or more per 
share, an

[[Page 58]]

order for the purchase or sale of an NMS stock of 1 share; and
    (v) For any NMS stock for which the prior calendar month's average 
closing price is not available, an order for the purchase or sale of an 
NMS stock of 100 shares.
    (83) Self-aggregator means a broker, dealer, national securities 
exchange, national securities association, or investment adviser 
registered with the Commission that receives information with respect to 
quotations for and transactions in NMS stocks, including all data 
necessary to generate consolidated market data, and generates 
consolidated market data solely for internal use. A self-aggregator may 
make consolidated market data available to its affiliates that are 
registered with the Commission for their internal use. Except as 
provided in the preceding sentence, a self-aggregator may not 
disseminate or otherwise make available consolidated market data, or 
components of consolidated market data, as provided in paragraph (b)(20) 
of this section, to any person.
    (84) Self-regulatory organization means any national securities 
exchange or national securities association.
    (85) Self-regulatory organization-specific program data means:
    (i) Information related to retail liquidity programs specified by 
the rules of national securities exchanges and disseminated pursuant to 
the effective national market system plan or plans required under Sec.  
242.603(b) as of April 9, 2021; and
    (ii) Other self-regulatory organization-specific information with 
respect to quotations for or transactions in NMS stocks as specified by 
the effective national market system plan or plans required under Sec.  
242.603(b).
    (86) Specified persons, when used in connection with any 
notification required to be provided pursuant to Sec.  242.602(a)(3) and 
any election (or withdrawal thereof) permitted under Sec.  
242.602(a)(5), means:
    (i) Each vendor;
    (ii) Each plan processor; and
    (iii) The processor for the Options Price Reporting Authority (in 
the case of a notification for a subject security which is a class of 
securities underlying options admitted to trading on any national 
securities exchange).
    (87) Sponsor, when used in connection with a national market system 
plan, means any self-regulatory organization which is a signatory to 
such plan and has agreed to act in accordance with the terms of the 
plan.
    (88) SRO display-only facility means a facility operated by or on 
behalf of a national securities exchange or national securities 
association that displays quotations in a security, but does not execute 
orders against such quotations or present orders to members for 
execution.
    (89) SRO trading facility means a facility operated by or on behalf 
of a national securities exchange or a national securities association 
that executes orders in a security or presents orders to members for 
execution.
    (90) Subject security means:
    (i) With respect to a national securities exchange:
    (A) Any exchange-traded security other than a security for which the 
executed volume of such exchange, during the most recent calendar 
quarter, comprised one percent or less of the aggregate trading volume 
for such security as reported pursuant to an effective transaction 
reporting plan or effective national market system plan; and
    (B) Any other NMS security for which such exchange has in effect an 
election, pursuant to Sec.  242.602(a)(5)(i), to collect, process, and 
make available to a vendor bids, offers, quotation sizes, and aggregate 
quotation sizes communicated on such exchange; and
    (ii) With respect to a member of a national securities association:
    (A) Any exchange-traded security for which such member acts in the 
capacity of an OTC market maker unless the executed volume of such 
member, during the most recent calendar quarter, comprised one percent 
or less of the aggregate trading volume for such security as reported 
pursuant to an effective transaction reporting plan or effective 
national market system plan; and
    (B) Any other NMS security for which such member acts in the 
capacity of an OTC market maker and has in effect an election, pursuant 
to

[[Page 59]]

Sec.  242.602(a)(5)(ii), to communicate to its association bids, offers, 
and quotation sizes for the purpose of making such bids, offers, and 
quotation sizes available to a vendor.
    (91) Time of order execution means the time (to the second) that an 
order was executed at any venue.
    (92) Time of order receipt means the time (to the second) that an 
order was received by a market center for execution.
    (93) Time of the transaction has the meaning provided in Sec.  
240.10b-10 of this chapter.
    (94) Trade-through means the purchase or sale of an NMS stock during 
regular trading hours, either as principal or agent, at a price that is 
lower than a protected bid or higher than a protected offer.
    (95) Trading center means a national securities exchange or national 
securities association that operates an SRO trading facility, an 
alternative trading system, an exchange market maker, an OTC market 
maker, or any other broker or dealer that executes orders internally by 
trading as principal or crossing orders as agent.
    (96) Trading rotation means, with respect to an options class, the 
time period on a national securities exchange during which:
    (i) Opening, re-opening, or closing transactions in options series 
in such options class are not yet completed; and
    (ii) Continuous trading has not yet commenced or has not yet ended 
for the day in options series in such options class.
    (97) Transaction report means a report containing the price and 
volume associated with a transaction involving the purchase or sale of 
one or more round lots of a security.
    (98) Transaction reporting association means any person authorized 
to implement or administer any transaction reporting plan on behalf of 
persons acting jointly under Sec.  242.601(a).
    (99) Transaction reporting plan means any plan for collecting, 
processing, making available or disseminating transaction reports with 
respect to transactions in securities filed with the Commission pursuant 
to, and meeting the requirements of, Sec.  242.601.
    (100) Vendor means any securities information processor engaged in 
the business of disseminating transaction reports, last sale data, or 
quotations with respect to NMS securities to brokers, dealers, or 
investors on a real-time or other current and continuing basis, whether 
through an electronic communications network, moving ticker, or 
interrogation device.

[70 FR 37620, June 29, 2005, as amended at 83 FR 58427, Nov. 19, 2018; 
86 FR 18809, Apr. 9, 2021; 86 FR 29196, June 1, 2021]



Sec.  242.601  Dissemination of transaction reports and last sale
data with respect to transactions in NMS stocks.

    (a) Filing and effectiveness of transaction reporting plans. (1) 
Every national securities exchange shall file a transaction reporting 
plan regarding transactions in listed equity and Nasdaq securities 
executed through its facilities, and every national securities 
association shall file a transaction reporting plan regarding 
transactions in listed equity and Nasdaq securities executed by its 
members otherwise than on a national securities exchange.
    (2) Any transaction reporting plan, or any amendment thereto, filed 
pursuant to this section shall be filed with the Commission, and 
considered for approval, in accordance with the procedures set forth in 
Sec.  242.608(a) and (b). Any such plan, or amendment thereto, shall 
specify, at a minimum:
    (i) The listed equity and Nasdaq securities or classes of such 
securities for which transaction reports shall be required by the plan;
    (ii) Reporting requirements with respect to transactions in listed 
equity securities and Nasdaq securities, for any broker or dealer 
subject to the plan;
    (iii) The manner of collecting, processing, sequencing, making 
available and disseminating transaction reports and last sale data 
reported pursuant to such plan;
    (iv) The manner in which such transaction reports reported pursuant 
to such plan are to be consolidated with transaction reports from 
national securities exchanges and national securities associations 
reported pursuant to any other effective transaction reporting plan;

[[Page 60]]

    (v) The applicable standards and methods which will be utilized to 
ensure promptness of reporting, and accuracy and completeness of 
transaction reports;
    (vi) Any rules or procedures which may be adopted to ensure that 
transaction reports or last sale data will not be disseminated in a 
fraudulent or manipulative manner;
    (vii) Specific terms of access to transaction reports made available 
or disseminated pursuant to the plan; and
    (viii) That transaction reports or last sale data made available to 
any vendor for display on an interrogation device identify the 
marketplace where each transaction was executed.
    (3) No transaction reporting plan filed pursuant to this section, or 
any amendment to an effective transaction reporting plan, shall become 
effective unless approved by the Commission or otherwise permitted in 
accordance with the procedures set forth in Sec.  242.608.
    (b) Prohibitions and reporting requirements. (1) No broker or dealer 
may execute any transaction in, or induce or attempt to induce the 
purchase or sale of, any NMS stock:
    (i) On or through the facilities of a national securities exchange 
unless there is an effective transaction reporting plan with respect to 
transactions in such security executed on or through such exchange 
facilities; or
    (ii) Otherwise than on a national securities exchange unless there 
is an effective transaction reporting plan with respect to transactions 
in such security executed otherwise than on a national securities 
exchange by such broker or dealer.
    (2) Every broker or dealer who is a member of a national securities 
exchange or national securities association shall promptly transmit to 
the exchange or association of which it is a member all information 
required by any effective transaction reporting plan filed by such 
exchange or association (either individually or jointly with other 
exchanges and/or associations).
    (c) Retransmission of transaction reports or last sale data. 
Notwithstanding any provision of any effective transaction reporting 
plan, no national securities exchange or national securities association 
may, either individually or jointly, by rule, stated policy or practice, 
transaction reporting plan or otherwise, prohibit, condition or 
otherwise limit, directly or indirectly, the ability of any vendor to 
retransmit, for display in moving tickers, transaction reports or last 
sale data made available pursuant to any effective transaction reporting 
plan; provided, however, that a national securities exchange or national 
securities association may, by means of an effective transaction 
reporting plan, condition such retransmission upon appropriate 
undertakings to ensure that any charges for the distribution of 
transaction reports or last sale data in moving tickers permitted by 
paragraph (d) of this section are collected.
    (d) Charges. Nothing in this section shall preclude any national 
securities exchange or national securities association, separately or 
jointly, pursuant to the terms of an effective transaction reporting 
plan, from imposing reasonable, uniform charges (irrespective of 
geographic location) for distribution of transaction reports or last 
sale data.
    (e) Appeals. The Commission may, in its discretion, entertain 
appeals in connection with the implementation or operation of any 
effective transaction reporting plan in accordance with the provisions 
of Sec.  242.608(d).
    (f) Exemptions. The Commission may exempt from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, any national securities exchange, national securities 
association, broker, dealer, or specified security if the Commission 
determines that such exemption is consistent with the public interest, 
the protection of investors and the removal of impediments to, and 
perfection of the mechanisms of, a national market system.



Sec.  242.602  Dissemination of quotations in NMS securities.

    (a) Dissemination requirements for national securities exchanges and 
national securities associations. (1) Every national securities exchange 
and national securities association shall establish and maintain 
procedures and mechanisms for collecting bids, offers, quotation sizes, 
and aggregate

[[Page 61]]

quotation sizes from responsible brokers or dealers who are members of 
such exchange or association, processing such bids, offers, and sizes, 
and making such bids, offers, and sizes available to vendors, as 
follows:
    (i) Each national securities exchange shall at all times such 
exchange is open for trading, collect, process, and make available to 
vendors the best bid, the best offer, and aggregate quotation sizes for 
each subject security listed or admitted to unlisted trading privileges 
which is communicated on any national securities exchange by any 
responsible broker or dealer, but shall not include:
    (A) Any bid or offer executed immediately after communication and 
any bid or offer communicated by a responsible broker or dealer other 
than an exchange market maker which is cancelled or withdrawn if not 
executed immediately after communication; and
    (B) Any bid or offer communicated during a period when trading in 
that security has been suspended or halted, or prior to the commencement 
of trading in that security on any trading day, on that exchange.
    (ii) Each national securities association shall, at all times that 
last sale information with respect to NMS securities is reported 
pursuant to an effective transaction reporting plan, collect, process, 
and make available to vendors the best bid, best offer, and quotation 
sizes communicated otherwise than on an exchange by each member of such 
association acting in the capacity of an OTC market maker for each 
subject security and the identity of that member (excluding any bid or 
offer executed immediately after communication), except during any 
period when over-the-counter trading in that security has been 
suspended.
    (2) Each national securities exchange shall, with respect to each 
published bid and published offer representing a bid or offer of a 
member for a subject security, establish and maintain procedures for 
ascertaining and disclosing to other members of that exchange, upon 
presentation of orders sought to be executed by them in reliance upon 
paragraph (b)(2) of this section, the identity of the responsible broker 
or dealer who made such bid or offer and the quotation size associated 
with it.
    (3)(i) If, at any time a national securities exchange is open for 
trading, such exchange determines, pursuant to rules approved by the 
Commission pursuant to section 19(b)(2) of the Act (15 U.S.C. 
78s(b)(2)), that the level of trading activities or the existence of 
unusual market conditions is such that the exchange is incapable of 
collecting, processing, and making available to vendors the data for a 
subject security required to be made available pursuant to paragraph 
(a)(1) of this section in a manner that accurately reflects the current 
state of the market on such exchange, such exchange shall immediately 
notify all specified persons of that determination. Upon such 
notification, responsible brokers or dealers that are members of that 
exchange shall be relieved of their obligation under paragraphs (b)(2) 
and (c)(3) of this section and such exchange shall be relieved of its 
obligations under paragraphs (a)(1) and (2) of this section for that 
security; provided, however, that such exchange will continue, to the 
maximum extent practicable under the circumstances, to collect, process, 
and make available to vendors data for that security in accordance with 
paragraph (a)(1) of this section.
    (ii) During any period a national securities exchange, or any 
responsible broker or dealer that is a member of that exchange, is 
relieved of any obligation imposed by this section for any subject 
security by virtue of a notification made pursuant to paragraph 
(a)(3)(i) of this section, such exchange shall monitor the activity or 
conditions which formed the basis for such notification and shall 
immediately renotify all specified persons when that exchange is once 
again capable of collecting, processing, and making available to vendors 
the data for that security required to be made available pursuant to 
paragraph (a)(1) of this section in a manner that accurately reflects 
the current state of the market on such exchange. Upon such 
renotification, any exchange or responsible broker or dealer which had 
been relieved of any obligation imposed by this section as a consequence 
of the

[[Page 62]]

prior notification shall again be subject to such obligation.
    (4) Nothing in this section shall preclude any national securities 
exchange or national securities association from making available to 
vendors indications of interest or bids and offers for a subject 
security at any time such exchange or association is not required to do 
so pursuant to paragraph (a)(1) of this section.
    (5)(i) Any national securities exchange may make an election for 
purposes of the definition of subject security in Sec.  242.600(b)(90) 
for any NMS security, by collecting, processing, and making available 
bids, offers, quotation sizes, and aggregate quotation sizes in that 
security; except that for any NMS security previously listed or admitted 
to unlisted trading privileges on only one exchange and not traded by 
any OTC market maker, such election shall be made by notifying all 
specified persons, and shall be effective at the opening of trading on 
the business day following notification.
    (ii) Any member of a national securities association acting in the 
capacity of an OTC market maker may make an election for purposes of the 
definition of subject security in Sec.  242.600(b)(90) for any NMS 
security, by communicating to its association bids, offers, and 
quotation sizes in that security; except that for any other NMS security 
listed or admitted to unlisted trading privileges on only one exchange 
and not traded by any other OTC market maker, such election shall be 
made by notifying its association and all specified persons, and shall 
be effective at the opening of trading on the business day following 
notification.
    (iii) The election of a national securities exchange or member of a 
national securities association for any NMS security pursuant to this 
paragraph (a)(5) shall cease to be in effect if such exchange or member 
ceases to make available or communicate bids, offers, and quotation 
sizes in such security.
    (b) Obligations of responsible brokers and dealers. (1) Each 
responsible broker or dealer shall promptly communicate to its national 
securities exchange or national securities association, pursuant to the 
procedures established by that exchange or association, its best bids, 
best offers, and quotation sizes for any subject security.
    (2) Subject to the provisions of paragraph (b)(3) of this section, 
each responsible broker or dealer shall be obligated to execute any 
order to buy or sell a subject security, other than an odd-lot order, 
presented to it by another broker or dealer, or any other person 
belonging to a category of persons with whom such responsible broker or 
dealer customarily deals, at a price at least as favorable to such buyer 
or seller as the responsible broker's or dealer's published bid or 
published offer (exclusive of any commission, commission equivalent or 
differential customarily charged by such responsible broker or dealer in 
connection with execution of any such order) in any amount up to its 
published quotation size.
    (3)(i) No responsible broker or dealer shall be obligated to execute 
a transaction for any subject security as provided in paragraph (b)(2) 
of this section to purchase or sell that subject security in an amount 
greater than such revised quotation size if:
    (A) Prior to the presentation of an order for the purchase or sale 
of a subject security, a responsible broker or dealer has communicated 
to its exchange or association, pursuant to paragraph (b)(1) of this 
section, a revised quotation size; or
    (B) At the time an order for the purchase or sale of a subject 
security is presented, a responsible broker or dealer is in the process 
of effecting a transaction in such subject security, and immediately 
after the completion of such transaction, it communicates to its 
exchange or association a revised quotation size, such responsible 
broker or dealer shall not be obligated by paragraph (b)(2) of this 
section to purchase or sell that subject security in an amount greater 
than such revised quotation size.
    (ii) No responsible broker or dealer shall be obligated to execute a 
transaction for any subject security as provided in paragraph (b)(2) of 
this section if:
    (A) Before the order sought to be executed is presented, such 
responsible broker or dealer has communicated to its exchange or 
association pursuant to

[[Page 63]]

paragraph (b)(1) of this section, a revised bid or offer; or
    (B) At the time the order sought to be executed is presented, such 
responsible broker or dealer is in the process of effecting a 
transaction in such subject security, and, immediately after the 
completion of such transaction, such responsible broker or dealer 
communicates to its exchange or association pursuant to paragraph (b)(1) 
of this section, a revised bid or offer; provided, however, that such 
responsible broker or dealer shall nonetheless be obligated to execute 
any such order in such subject security as provided in paragraph (b)(2) 
of this section at its revised bid or offer in any amount up to its 
published quotation size or revised quotation size.
    (4) Subject to the provisions of paragraph (a)(4) of this section:
    (i) No national securities exchange or OTC market maker may make 
available, disseminate or otherwise communicate to any vendor, directly 
or indirectly, for display on a terminal or other display device any 
bid, offer, quotation size, or aggregate quotation size for any NMS 
security which is not a subject security with respect to such exchange 
or OTC market maker; and
    (ii) No vendor may disseminate or display on a terminal or other 
display device any bid, offer, quotation size, or aggregate quotation 
size from any national securities exchange or OTC market maker for any 
NMS security which is not a subject security with respect to such 
exchange or OTC market maker.
    (5)(i) Entry of any priced order for an NMS security by an exchange 
market maker or OTC market maker in that security into an electronic 
communications network that widely disseminates such order shall be 
deemed to be:
    (A) A bid or offer under this section, to be communicated to the 
market maker's exchange or association pursuant to this paragraph (b) 
for at least the minimum quotation size that is required by the rules of 
the market maker's exchange or association if the priced order is for 
the account of a market maker, or the actual size of the order up to the 
minimum quotation size required if the priced order is for the account 
of a customer; and
    (B) A communication of a bid or offer to a vendor for display on a 
display device for purposes of paragraph (b)(4) of this section.
    (ii) An exchange market maker or OTC market maker that has entered a 
priced order for an NMS security into an electronic communications 
network that widely disseminates such order shall be deemed to be in 
compliance with paragraph (b)(5)(i)(A) of this section if the electronic 
communications network:
    (A)(1) Provides to a national securities exchange or national 
securities association (or an exclusive processor acting on behalf of 
one or more exchanges or associations) the prices and sizes of the 
orders at the highest buy price and the lowest sell price for such 
security entered in, and widely disseminated by, the electronic 
communications network by exchange market makers and OTC market makers 
for the NMS security, and such prices and sizes are included in the 
quotation data made available by such exchange, association, or 
exclusive processor to vendors pursuant to this section; and
    (2) Provides, to any broker or dealer, the ability to effect a 
transaction with a priced order widely disseminated by the electronic 
communications network entered therein by an exchange market maker or 
OTC market maker that is:
    (i) Equivalent to the ability of any broker or dealer to effect a 
transaction with an exchange market maker or OTC market maker pursuant 
to the rules of the national securities exchange or national securities 
association to which the electronic communications network supplies such 
bids and offers; and
    (ii) At the price of the highest priced buy order or lowest priced 
sell order, or better, for the lesser of the cumulative size of such 
priced orders entered therein by exchange market makers or OTC market 
makers at such price, or the size of the execution sought by the broker 
or dealer, for such security; or
    (B) Is an alternative trading system that:
    (1) Displays orders and provides the ability to effect transactions 
with such orders under Sec.  242.301(b)(3); and

[[Page 64]]

    (2) Otherwise is in compliance with Regulation ATS (Sec.  242.300 
through Sec.  242.303).
    (c) Transactions in listed options. (1) A national securities 
exchange or national securities association:
    (i) Shall not be required, under paragraph (a) of this section, to 
collect from responsible brokers or dealers who are members of such 
exchange or association, or to make available to vendors, the quotation 
sizes and aggregate quotation sizes for listed options, if such exchange 
or association establishes by rule and periodically publishes the 
quotation size for which such responsible brokers or dealers are 
obligated to execute an order to buy or sell an options series that is a 
subject security at its published bid or offer under paragraph (b)(2) of 
this section;
    (ii) May establish by rule and periodically publish a quotation 
size, which shall not be for less than one contract, for which 
responsible brokers or dealers who are members of such exchange or 
association are obligated under paragraph (b)(2) of this section to 
execute an order to buy or sell a listed option for the account of a 
broker or dealer that is in an amount different from the quotation size 
for which it is obligated to execute an order for the account of a 
customer; and
    (iii) May establish and maintain procedures and mechanisms for 
collecting from responsible brokers and dealers who are members of such 
exchange or association, and making available to vendors, the quotation 
sizes and aggregate quotation sizes in listed options for which such 
responsible broker or dealer will be obligated under paragraph (b)(2) of 
this section to execute an order from a customer to buy or sell a listed 
option and establish by rule and periodically publish the size, which 
shall not be less than one contract, for which such responsible brokers 
or dealers are obligated to execute an order for the account of a broker 
or dealer.
    (2) If, pursuant to paragraph (c)(1) of this section, the rules of a 
national securities exchange or national securities association do not 
require its members to communicate to it their quotation sizes for 
listed options, a responsible broker or dealer that is a member of such 
exchange or association shall:
    (i) Be relieved of its obligations under paragraph (b)(1) of this 
section to communicate to such exchange or association its quotation 
sizes for any listed option; and
    (ii) Comply with its obligations under paragraph (b)(2) of this 
section by executing any order to buy or sell a listed option, in an 
amount up to the size established by such exchange's or association's 
rules under paragraph (c)(1) of this section.
    (3) Thirty second response. Each responsible broker or dealer, 
within thirty seconds of receiving an order to buy or sell a listed 
option in an amount greater than the quotation size established by a 
national securities exchange's or national securities association's 
rules pursuant to paragraph (c)(1) of this section, or its published 
quotation size must:
    (i) Execute the entire order; or
    (ii)(A) Execute that portion of the order equal to at least:
    (1) The quotation size established by a national securities 
exchange's or national securities association's rules, pursuant to 
paragraph (c)(1) of this section, to the extent that such exchange or 
association does not collect and make available to vendors quotation 
size and aggregate quotation size under paragraph (a) of this section; 
or
    (2) Its published quotation size; and
    (B) Revise its bid or offer.
    (4) Notwithstanding paragraph (c)(3) of this section, no responsible 
broker or dealer shall be obligated to execute a transaction for any 
listed option as provided in paragraph (b)(2) of this section if:
    (i) Any of the circumstances in paragraph (b)(3) of this section 
exist; or
    (ii) The order for the purchase or sale of a listed option is 
presented during a trading rotation in that listed option.
    (d) Exemptions. The Commission may exempt from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, any responsible broker or dealer, electronic communications 
network, national securities exchange, or national securities 
association if the Commission determines that such exemption is 
consistent with the public interest, the

[[Page 65]]

protection of investors and the removal of impediments to and perfection 
of the mechanism of a national market system.

[70 FR 37620, June 29, 20051997, as amended at 83 FR 58427, Nov. 19, 
2018; 86 FR 18811, Apr. 9, 2021]



Sec.  242.603  Distribution, consolidation, and display of information
with respect to quotations for and transactions in NMS stocks.

    (a) Distribution of information. (1) Any exclusive processor, or any 
broker or dealer with respect to information for which it is the 
exclusive source, that distributes information with respect to 
quotations for or transactions in an NMS stock to a securities 
information processor shall do so on terms that are fair and reasonable.
    (2) Any national securities exchange, national securities 
association, broker, or dealer that distributes information with respect 
to quotations for or transactions in an NMS stock to a securities 
information processor, broker, dealer, or other persons shall do so on 
terms that are not unreasonably discriminatory.
    (b) Dissemination of information. Every national securities exchange 
on which an NMS stock is traded and national securities association 
shall act jointly pursuant to one or more effective national market 
system plans for the dissemination of consolidated market data. Every 
national securities exchange on which an NMS stock is traded and 
national securities association shall make available to all competing 
consolidators and self-aggregators its information with respect to 
quotations for and transactions in NMS stocks, including all data 
necessary to generate consolidated market data, in the same manner and 
using the same methods, including all methods of access and the same 
format, as such national securities exchange or national securities 
association makes available any information with respect to quotations 
for and transactions in NMS stocks to any person.
    (c) Display of information. (1) No securities information processor, 
broker, or dealer shall provide, in a context in which a trading or 
order-routing decision can be implemented, a display of any information 
with respect to quotations for or transactions in an NMS stock without 
also providing, in an equivalent manner, a consolidated display for such 
stock.
    (2) The provisions of paragraph (c)(1) of this section shall not 
apply to a display of information on the trading floor or through the 
facilities of a national securities exchange or to a display in 
connection with the operation of a market linkage system implemented in 
accordance with an effective national market system plan.
    (d) Exemptions. The Commission, by order, may exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any person, security, or item of information, or any 
class or classes of persons, securities, or items of information, if the 
Commission determines that such exemption is necessary or appropriate in 
the public interest, and is consistent with the protection of investors.

[70 FR 37620, June 29, 2005, as amended at 86 FR 18811, Apr. 9, 2021]



Sec.  242.604  Display of customer limit orders.

    (a) Specialists and OTC market makers. For all NMS stocks:
    (1) Each member of a national securities exchange that is registered 
by that exchange as a specialist, or is authorized by that exchange to 
perform functions substantially similar to that of a specialist, shall 
publish immediately a bid or offer that reflects:
    (i) The price and the full size of each customer limit order held by 
the specialist that is at a price that would improve the bid or offer of 
such specialist in such security; and
    (ii) The full size of each customer limit order held by the 
specialist that:
    (A) Is priced equal to the bid or offer of such specialist for such 
security;
    (B) Is priced equal to the national best bid or national best offer; 
and
    (C) Represents more than a de minimis change in relation to the size 
associated with the specialist's bid or offer.
    (2) Each registered broker or dealer that acts as an OTC market 
maker shall publish immediately a bid or offer that reflects:

[[Page 66]]

    (i) The price and the full size of each customer limit order held by 
the OTC market maker that is at a price that would improve the bid or 
offer of such OTC market maker in such security; and
    (ii) The full size of each customer limit order held by the OTC 
market maker that:
    (A) Is priced equal to the bid or offer of such OTC market maker for 
such security;
    (B) Is priced equal to the national best bid or national best offer; 
and
    (C) Represents more than a de minimis change in relation to the size 
associated with the OTC market maker's bid or offer.
    (b) Exceptions. The requirements in paragraph (a) of this section 
shall not apply to any customer limit order:
    (1) That is executed upon receipt of the order.
    (2) That is placed by a customer who expressly requests, either at 
the time that the order is placed or prior thereto pursuant to an 
individually negotiated agreement with respect to such customer's 
orders, that the order not be displayed.
    (3) That is an odd-lot order.
    (4) That is a block size order, unless a customer placing such order 
requests that the order be displayed.
    (5) That is delivered immediately upon receipt to a national 
securities exchange or national securities association-sponsored system, 
or an electronic communications network that complies with the 
requirements of Sec.  242.602(b)(5)(ii) with respect to that order.
    (6) That is delivered immediately upon receipt to another exchange 
member or OTC market maker that complies with the requirements of this 
section with respect to that order.
    (7) That is an ``all or none'' order.
    (c) Exemptions. The Commission may exempt from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, any responsible broker or dealer, electronic communications 
network, national securities exchange, or national securities 
association if the Commission determines that such exemption is 
consistent with the public interest, the protection of investors and the 
removal of impediments to and perfection of the mechanism of a national 
market system.



Sec.  242.605  Disclosure of order execution information.

    This section requires market centers to make available standardized, 
monthly reports of statistical information concerning their order 
executions. This information is presented in accordance with uniform 
standards that are based on broad assumptions about order execution and 
routing practices. The information will provide a starting point to 
promote visibility and competition on the part of market centers and 
broker-dealers, particularly on the factors of execution price and 
speed. The disclosures required by this section do not encompass all of 
the factors that may be important to investors in evaluating the order 
routing services of a broker-dealer. In addition, any particular market 
center's statistics will encompass varying types of orders routed by 
different broker-dealers on behalf of customers with a wide range of 
objectives. Accordingly, the statistical information required by this 
section alone does not create a reliable basis to address whether any 
particular broker-dealer failed to obtain the most favorable terms 
reasonably available under the circumstances for customer orders.
    (a) Monthly electronic reports by market centers. (1) Every market 
center shall make available for each calendar month, in accordance with 
the procedures established pursuant to paragraph (a)(2) of this section, 
a report on the covered orders in NMS stocks that it received for 
execution from any person. Such report shall be in electronic form; 
shall be categorized by security, order type, and order size; and shall 
include the following columns of information:
    (i) For market orders, marketable limit orders, inside-the-quote 
limit orders, at-the-quote limit orders, and near-the-quote limit 
orders:
    (A) The number of covered orders;
    (B) The cumulative number of shares of covered orders;
    (C) The cumulative number of shares of covered orders cancelled 
prior to execution;

[[Page 67]]

    (D) The cumulative number of shares of covered orders executed at 
the receiving market center;
    (E) The cumulative number of shares of covered orders executed at 
any other venue;
    (F) The cumulative number of shares of covered orders executed from 
0 to 9 seconds after the time of order receipt;
    (G) The cumulative number of shares of covered orders executed from 
10 to 29 seconds after the time of order receipt;
    (H) The cumulative number of shares of covered orders executed from 
30 seconds to 59 seconds after the time of order receipt;
    (I) The cumulative number of shares of covered orders executed from 
60 seconds to 299 seconds after the time of order receipt;
    (J) The cumulative number of shares of covered orders executed from 
5 minutes to 30 minutes after the time of order receipt; and
    (K) The average realized spread for executions of covered orders; 
and
    (ii) For market orders and marketable limit orders:
    (A) The average effective spread for executions of covered orders;
    (B) The cumulative number of shares of covered orders executed with 
price improvement;
    (C) For shares executed with price improvement, the share-weighted 
average amount per share that prices were improved;
    (D) For shares executed with price improvement, the share-weighted 
average period from the time of order receipt to the time of order 
execution;
    (E) The cumulative number of shares of covered orders executed at 
the quote;
    (F) For shares executed at the quote, the share-weighted average 
period from the time of order receipt to the time of order execution;
    (G) The cumulative number of shares of covered orders executed 
outside the quote;
    (H) For shares executed outside the quote, the share-weighted 
average amount per share that prices were outside the quote; and
    (I) For shares executed outside the quote, the share-weighted 
average period from the time of order receipt to the time of order 
execution.
    (2) Every national securities exchange on which NMS stocks are 
traded and each national securities association shall act jointly in 
establishing procedures for market centers to follow in making available 
to the public the reports required by paragraph (a)(1) of this section 
in a uniform, readily accessible, and usable electronic form. In the 
event there is no effective national market system plan establishing 
such procedures, market centers shall prepare their reports in a 
consistent, usable, and machine-readable electronic format, and make 
such reports available for downloading from an Internet Web site that is 
free and readily accessible to the public. Every market center shall 
keep such reports posted on an internet website that is free and readily 
accessible to the public for a period of three years from the initial 
date of posting on the internet website.
    (3) A market center shall make available the report required by 
paragraph (a)(1) of this section within one month after the end of the 
month addressed in the report.
    (b) Exemptions. The Commission may, by order upon application, 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class or classes of persons, securities, or 
transactions, from any provision or provisions of this section, if the 
Commission determines that such exemption is necessary or appropriate in 
the public interest, and is consistent with the protection of investors.

[70 FR 37620, June 29, 2005, as amended at 83 FR 58427, Nov. 19, 2018]



Sec.  242.606  Disclosure of order routing information.

    (a) Quarterly report on order routing. (1) Every broker or dealer 
shall make publicly available for each calendar quarter a report on its 
routing of non-directed orders in NMS stocks that are submitted on a 
held basis and of non-directed orders that are customer orders in NMS 
securities that are option contracts during that quarter broken down by 
calendar month and keep such report posted on an internet website that 
is free and readily accessible to the public for a period of three years 
from the initial date of posting on the

[[Page 68]]

internet website. Such report shall include a section for NMS stocks--
separated by securities that are included in the S&P 500 Index as of the 
first day of that quarter and other NMS stocks--and a separate section 
for NMS securities that are option contracts. Such report shall be made 
available using the most recent versions of the XML schema and the 
associated PDF renderer as published on the Commission's website for all 
reports required by this section. Each section in a report shall include 
the following information:
    (i) The percentage of total orders for the section that were non-
directed orders, and the percentages of total non-directed orders for 
the section that were market orders, marketable limit orders, non-
marketable limit orders, and other orders;
    (ii) The identity of the ten venues to which the largest number of 
total non-directed orders for the section were routed for execution and 
of any venue to which five percent or more of non-directed orders were 
routed for execution, the percentage of total non-directed orders for 
the section routed to the venue, and the percentages of total non-
directed market orders, total non-directed marketable limit orders, 
total non-directed non-marketable limit orders, and total non-directed 
other orders for the section that were routed to the venue;
    (iii) For each venue identified pursuant to paragraph (a)(1)(ii) of 
this section, the net aggregate amount of any payment for order flow 
received, payment from any profit-sharing relationship received, 
transaction fees paid, and transaction rebates received, both as a total 
dollar amount and per share, for each of the following non-directed 
order types:
    (A) Market orders;
    (B) Marketable limit orders;
    (C) Non-marketable limit orders; and
    (D) Other orders.
    (iv) A discussion of the material aspects of the broker's or 
dealer's relationship with each venue identified pursuant to paragraph 
(a)(1)(ii) of this section, including a description of any arrangement 
for payment for order flow and any profit-sharing relationship and a 
description of any terms of such arrangements, written or oral, that may 
influence a broker's or dealer's order routing decision including, among 
other things:
    (A) Incentives for equaling or exceeding an agreed upon order flow 
volume threshold, such as additional payments or a higher rate of 
payment;
    (B) Disincentives for failing to meet an agreed upon minimum order 
flow threshold, such as lower payments or the requirement to pay a fee;
    (C) Volume-based tiered payment schedules; and
    (D) Agreements regarding the minimum amount of order flow that the 
broker-dealer would send to a venue.
    (2) A broker or dealer shall make the report required by paragraph 
(a)(1) of this section publicly available within one month after the end 
of the quarter addressed in the report.
    (b) Customer requests for information on order routing. (1) Every 
broker or dealer shall, on request of a customer, disclose to its 
customer, for:
    (i) Orders in NMS stocks that are submitted on a held basis;
    (ii) Orders in NMS stocks that are submitted on a not held basis and 
the broker or dealer is not required to provide the customer a report 
under paragraph (b)(3) of this section; and
    (iii) Orders in NMS securities that are option contracts, the 
identity of the venue to which the customer's orders were routed for 
execution in the six months prior to the request, whether the orders 
were directed orders or non-directed orders, and the time of the 
transactions, if any, that resulted from such orders. Such disclosure 
shall be made available using the most recent versions of the XML schema 
and the associated PDF renderer as published on the Commission's website 
for all reports required by this section.
    (2) A broker or dealer shall notify customers in writing at least 
annually of the availability on request of the information specified in 
paragraph (b)(1) of this section.
    (3) Except as provided for in paragraphs (b)(4) and (5) of this 
section, every broker or dealer shall, on request of a customer that 
places, directly or indirectly, one or more orders in NMS stocks that 
are submitted on a not held basis with the broker or dealer, disclose to 
such customer within seven

[[Page 69]]

business days of receiving the request, a report on its handling of such 
orders for that customer for the prior six months by calendar month. 
Such report shall be made available using the most recent versions of 
the XML schema and the associated PDF renderer as published on the 
Commission's website for all reports required by this section. For 
purposes of such report, the handling of a NMS stock order submitted by 
a customer to a broker-dealer on a not held basis includes the handling 
of all child orders derived from that order. Such report shall be 
divided into two sections: One for directed orders and one for non-
directed orders. Each section of such report shall include, with respect 
to such order flow sent by the customer to the broker or dealer, the 
total number of shares sent to the broker or dealer by the customer 
during the relevant period; the total number of shares executed by the 
broker or dealer as principal for its own account; the total number of 
orders exposed by the broker or dealer through an actionable indication 
of interest; and the venue or venues to which orders were exposed by the 
broker or dealer through an actionable indication of interest, provided 
that, where applicable, a broker or dealer must disclose that it exposed 
a customer's order through an actionable indication of interest to other 
customers but need not disclose the identity of such customers. Each 
section of such report also shall include the following columns of 
information for each venue to which the broker or dealer routed such 
orders for the customer, in the aggregate:
    (i) Information on Order Routing.(A) Total shares routed;
    (B) Total shares routed marked immediate or cancel;
    (C) Total shares routed that were further routable; and
    (D) Average order size routed.
    (ii) Information on Order Execution. (A) Total shares executed;
    (B) Fill rate (shares executed divided by the shares routed);
    (C) Average fill size;
    (D) Average net execution fee or rebate (cents per 100 shares, 
specified to four decimal places);
    (E) Total number of shares executed at the midpoint;
    (F) Percentage of shares executed at the midpoint;
    (G) Total number of shares executed that were priced on the side of 
the spread more favorable to the order;
    (H) Percentage of total shares executed that were priced at the side 
of the spread more favorable to the order;
    (I) Total number of shares executed that were priced on the side of 
the spread less favorable to the order; and
    (J) Percentage of total shares executed that were priced on the side 
of the spread less favorable to the order.
    (iii) Information on Orders that Provided Liquidity. (A) Total 
number of shares executed of orders providing liquidity;
    (B) Percentage of shares executed of orders providing liquidity;
    (C) Average time between order entry and execution or cancellation, 
for orders providing liquidity (in milliseconds); and
    (D) Average net execution rebate or fee for shares of orders 
providing liquidity (cents per 100 shares, specified to four decimal 
places).
    (iv) Information on Orders that Removed Liquidity. (A) Total number 
of shares executed of orders removing liquidity;
    (B) Percentage of shares executed of orders removing liquidity; and
    (C) Average net execution fee or rebate for shares of orders 
removing liquidity (cents per 100 shares, specified to four decimal 
places).
    (4) Except as provided below, no broker or dealer shall be required 
to provide reports pursuant to paragraph (b)(3) of this section if the 
percentage of shares of not held orders in NMS stocks the broker or 
dealer received from its customers over the prior six calendar months 
was less than five percent of the total shares in NMS stocks the broker 
or dealer received from its customers during that time (the ``five 
percent threshold'' for purposes of this paragraph). A broker or dealer 
that equals or exceeds this five percent threshold shall be required 
(subject to paragraph (b)(5) of this section) to provide reports 
pursuant to paragraph (b)(3) of this section for at least six calendar 
months (``Compliance Period'') regardless of the percentage of shares of 
not held orders in NMS stocks the

[[Page 70]]

broker or dealer receives from its customers during the Compliance 
Period. The Compliance Period shall begin the first calendar day of the 
next calendar month after the broker or dealer equaled or exceeded the 
five percent threshold, unless it is the first time the broker or dealer 
has equaled or exceeded the five percent threshold, in which case the 
Compliance Period shall begin the first calendar day four calendar 
months later. A broker or dealer shall not be required to provide 
reports pursuant to paragraph (b)(3) of this section for orders that the 
broker or dealer did not receive during a Compliance Period. If, at any 
time after the end of a Compliance Period, the percentage of shares of 
not held orders in NMS stocks the broker or dealer received from its 
customers was less than five percent of the total shares in NMS stocks 
the broker or dealer received from its customers over the prior six 
calendar months, the broker or dealer shall not be required to provide 
reports pursuant to paragraph (b)(3) of this section, except for orders 
that the broker or dealer received during the portion of a Compliance 
Period that remains covered by paragraph (b)(3) of this section.
    (5) No broker or dealer shall be subject to the requirements of 
paragraph (b)(3) of this section with respect to a customer that traded 
on average each month for the prior six months less than $1,000,000 of 
notional value of not held orders in NMS stocks through the broker or 
dealer.
    (c) Exemptions. The Commission may, by order upon application, 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class or classes of persons, securities, or 
transactions, from any provision or provisions of this section, if the 
Commission determines that such exemption is necessary or appropriate in 
the public interest, and is consistent with the protection of investors.

[70 FR 37620, June 29, 2005, as amended at 83 FR 58427, Nov. 19, 2018]



Sec.  242.607  Customer account statements.

    (a) No broker or dealer acting as agent for a customer may effect 
any transaction in, induce or attempt to induce the purchase or sale of, 
or direct orders for purchase or sale of, any NMS stock or a security 
authorized for quotation on an automated inter-dealer quotation system 
that has the characteristics set forth in section 17B of the Act (15 
U.S.C. 78q-2), unless such broker or dealer informs such customer, in 
writing, upon opening a new account and on an annual basis thereafter, 
of the following:
    (1) The broker's or dealer's policies regarding receipt of payment 
for order flow from any broker or dealer, national securities exchange, 
national securities association, or exchange member to which it routes 
customers' orders for execution, including a statement as to whether any 
payment for order flow is received for routing customer orders and a 
detailed description of the nature of the compensation received; and
    (2) The broker's or dealer's policies for determining where to route 
customer orders that are the subject of payment for order flow absent 
specific instructions from customers, including a description of the 
extent to which orders can be executed at prices superior to the 
national best bid and national best offer.
    (b) Exemptions. The Commission, upon request or upon its own motion, 
may exempt by rule or by order, any broker or dealer or any class of 
brokers or dealers, security or class of securities from the 
requirements of paragraph (a) of this section with respect to any 
transaction or class of transactions, either unconditionally or on 
specified terms and conditions, if the Commission determines that such 
exemption is consistent with the public interest and the protection of 
investors.



Sec.  242.608  Filing and amendment of national market system plans.

    (a) Filing of national market system plans and amendments thereto. 
(1) Any two or more self-regulatory organizations, acting jointly, may 
file a national market system plan or may propose an amendment to an 
effective national market system plan (``proposed amendment'') by 
submitting the text of the plan or amendment to the Commission by email, 
together with a statement of the purpose of such plan or

[[Page 71]]

amendment and, to the extent applicable, the documents and information 
required by paragraphs (a)(4) and (5) of this section.
    (2) The Commission may propose amendments to any effective national 
market system plan by publishing the text thereof, together with a 
statement of the purpose of such amendment, in accordance with the 
provisions of paragraph (b) of this section.
    (3) Self-regulatory organizations are authorized to act jointly in:
    (i) Planning, developing, and operating any national market 
subsystem or facility contemplated by a national market system plan;
    (ii) Preparing and filing a national market system plan or any 
amendment thereto; or
    (iii) Implementing or administering an effective national market 
system plan.
    (4) Every national market system plan filed pursuant to this 
section, or any amendment thereto, shall be accompanied by:
    (i) Copies of all governing or constituent documents relating to any 
person (other than a self-regulatory organization) authorized to 
implement or administer such plan on behalf of its sponsors; and
    (ii) To the extent applicable:
    (A) A detailed description of the manner in which the plan or 
amendment, and any facility or procedure contemplated by the plan or 
amendment, will be implemented;
    (B) A listing of all significant phases of development and 
implementation (including any pilot phase) contemplated by the plan or 
amendment, together with the projected date of completion of each phase;
    (C) An analysis of the impact on competition of implementation of 
the plan or amendment or of any facility contemplated by the plan or 
amendment;
    (D) A description of any written understandings or agreements 
between or among plan sponsors or participants relating to 
interpretations of the plan or conditions for becoming a sponsor or 
participant in the plan; and
    (E) In the case of a proposed amendment, a statement that such 
amendment has been approved by the sponsors in accordance with the terms 
of the plan.
    (5) Every national market system plan, or any amendment thereto, 
filed pursuant to this section shall include a description of the manner 
in which any facility contemplated by the plan or amendment will be 
operated. Such description shall include, to the extent applicable:
    (i) The terms and conditions under which brokers, dealers, and/or 
self-regulatory organizations will be granted or denied access 
(including specific procedures and standards governing the granting or 
denial of access);
    (ii) The method by which any fees or charges collected on behalf of 
all of the sponsors and/or participants in connection with access to, or 
use of, any facility contemplated by the plan or amendment will be 
determined and imposed (including any provision for distribution of any 
net proceeds from such fees or charges to the sponsors and/or 
participants) and the amount of such fees or charges;
    (iii) The method by which, and the frequency with which, the 
performance of any person acting as plan processor with respect to the 
implementation and/or operation of the plan will be evaluated; and
    (iv) The method by which disputes arising in connection with the 
operation of the plan will be resolved.
    (6) In connection with the selection of any person to act as plan 
processor with respect to any facility contemplated by a national market 
system plan (including renewal of any contract for any person to so 
act), the sponsors shall file with the Commission a statement 
identifying the person selected, describing the material terms under 
which such person is to serve as plan processor, and indicating the 
solicitation efforts, if any, for alternative plan processors, the 
alternatives considered and the reasons for selection of such person.
    (7) Any national market system plan (or any amendment thereto) which 
is intended by the sponsors to satisfy a plan filing requirement 
contained in any other section of this Regulation NMS and part 240, 
subpart A of this chapter shall, in addition to compliance with this 
section, also comply

[[Page 72]]

with the requirements of such other section.
    (8)(i) A participant in an effective national market system plan 
shall ensure that a current and complete version of the plan is posted 
on a plan website or on a website designated by plan participants within 
two business days after notification by the Commission of effectiveness 
of the plan. Each participant in an effective national market system 
plan shall ensure that such website is updated to reflect amendments to 
such plan within two business days after the plan participants have been 
notified by the Commission of its approval of a proposed amendment 
pursuant to paragraph (b) of this section. If the amendment is not 
effective for a certain period, the plan participants shall clearly 
indicate the effective date in the relevant text of the plan. Each plan 
participant also shall provide a link on its own website to the website 
with the current version of the plan.
    (ii) The plan participants shall ensure that any proposed amendments 
filed pursuant to paragraph (a) of this section are posted on a plan 
website or a designated website no later than two business days after 
the filing of the proposed amendments with the Commission. If the plan 
participants do not post a proposed amendment on a plan website or a 
designated website on the same business day that they file such proposed 
amendment with the Commission, then the plan participants shall inform 
the Commission of the business day on which they posted such proposed 
amendment on a plan website or a designated website. The plan 
participants shall maintain any proposed amendment to the plan on a plan 
website or a designated website until the Commission approves the plan 
amendment and the plan participants update the website to reflect such 
amendment or the plan participants withdraw the proposed amendment or 
the plan participants are notified pursuant to paragraph (b)(1)(iii) of 
this section that the proposed amendment is not filed in compliance with 
requirements or the Commission disapproves the proposed amendment. If 
the plan participants withdraw a proposed amendment or are notified 
pursuant to paragraph (b)(1)(iii) of this section that a proposed 
amendment is not filed in compliance with requirements or the Commission 
disapproves a proposed amendment, the plan participants shall remove 
such amendment from the plan website or designated website within two 
business days of withdrawal, notification of non-compliant filing or 
disapproval. Each plan participant shall provide a link to the website 
with the current version of the plan.
    (b) Effectiveness of national market system plans. (1) The 
Commission shall publish notice of the filing of any national market 
system plan, or any proposed amendment to any effective national market 
system plan (including any amendment initiated by the Commission), 
together with the terms of substance of the filing or a description of 
the subjects and issues involved, and shall provide interested persons 
an opportunity to submit written comments. No national market system 
plan, or any amendment thereto, shall become effective unless approved 
by the Commission or otherwise permitted in accordance with paragraph 
(b)(3) of this section.
    (i) Publication of national market system plans. The Commission 
shall send the notice of the filing of a national market system plan to 
the Federal Register for publication thereof under this paragraph (b)(1) 
within 90 days of the business day on which such plan was filed with the 
Commission pursuant to paragraph (a) of this section. If the Commission 
fails to send the notice to the Federal Register for publication thereof 
within such 90-day period, then the date of publication shall be deemed 
to be the last day of such 90-day period.
    (ii) Publication of proposed amendments. The Commission shall send 
the notice of the filing of a proposed amendment to the Federal Register 
for publication thereof under this paragraph (b)(1) within 15 days of 
the business day on which such proposed amendment was posted on a plan 
website or a website designated by plan participants pursuant to 
paragraph (a) of this section after being filed with the Commission 
pursuant to paragraph (a) of this section. If the Commission fails to 
send the notice to the Federal

[[Page 73]]

Register for publication thereof within such 15-day period, then the 
date of publication shall be deemed to be the business day on which such 
website posting was made.
    (iii) A national market system plan or proposed amendment has not 
been filed with the Commission for purposes of this paragraph (b)(1) if, 
not later than 7 business days after the business day of receipt by the 
Commission, the Commission notifies the plan participants that the 
filing of the national market system plan or proposed amendment does not 
comply with paragraph (a) of this section or plan filing requirements in 
other sections of Regulation NMS and part 240, subpart A of this 
chapter, except that if the Commission determines that the plan or 
amendment is unusually lengthy and is complex or raises novel regulatory 
issues, the Commission shall inform the plan participants of such 
determination not later than 7 business days after the business day of 
receipt by the Commission and, for purposes of this paragraph (b)(1), 
the filing of such plan or amendment has not been made with the 
Commission if, not later than 21 days after the business day of receipt 
by the Commission, the Commission notifies the plan participants that 
the filing of such plan or amendment does not comply with paragraph (a) 
of this section or plan filing requirements in other sections of 
Regulation NMS and part 240, subpart A of this chapter.
    (iv) For purposes of this section, a ``business day'' is any day 
other than a Saturday, Sunday, Federal holiday, a day that the Office of 
Personnel Management has announced that Federal agencies in the 
Washington, DC area are closed to the public, a day on which the 
Commission is subject to a Federal government shutdown or a day on which 
the Commission's Washington, DC office is otherwise not open for regular 
business; provided further, a filing received by the Commission or a 
website posting made at or before 5:30 p.m. Eastern Standard Time or 
Eastern Daylight Saving Time, whichever is currently in effect, on a 
business day, shall be deemed received or made on that business day, and 
a filing received by the Commission or a website posting made after 5:30 
p.m. Eastern Standard Time or Eastern Daylight Saving Time, whichever is 
currently in effect, shall be deemed received or made on the next 
business day.
    (2) The Commission shall approve a national market system plan or 
proposed amendment to an effective national market system plan, with 
such changes or subject to such conditions as the Commission may deem 
necessary or appropriate, if it finds that such plan or amendment is 
necessary or appropriate in the public interest, for the protection of 
investors and the maintenance of fair and orderly markets, to remove 
impediments to, and perfect the mechanisms of, a national market system, 
or otherwise in furtherance of the purposes of the Act. The Commission 
shall disapprove a national market system plan or proposed amendment if 
it does not make such a finding. Approval or disapproval of a national 
market system plan, or an amendment to an effective national market 
system plan (other than an amendment initiated by the Commission), shall 
be by order. Promulgation of an amendment to an effective national 
market system plan initiated by the Commission shall be by rule.
    (i) Within 90 days of the date of publication of notice of the 
filing of a national market system plan or proposed amendment, or within 
such longer period as to which the plan participants consent, the 
Commission shall, by order, approve or disapprove the plan or amendment, 
or institute proceedings to determine whether the plan or amendment 
should be disapproved. Proceedings to determine whether the plan or 
amendment should be disapproved will be conducted pursuant to 17 CFR 
201.700 and 201.701. Such proceedings shall include notice of the 
grounds for disapproval under consideration and opportunity for hearing 
and shall be concluded within 180 days of the date of publication of 
notice of the plan or amendment. At the conclusion of such proceedings 
the Commission shall, by order, approve or disapprove the plan or 
amendment. The time for conclusion of such proceedings may be extended 
for up to 60 days (up to 240 days from the date of notice publication) 
if the Commission determines that a longer period is appropriate and

[[Page 74]]

publishes the reasons for such determination or the plan participants 
consent to the longer period.
    (ii) The time for conclusion of proceedings to determine whether a 
national market system plan or proposed amendment should be disapproved 
may be extended for an additional period up to 60 days beyond the period 
set forth in paragraph (b)(2)(i) of this section (up to 300 days from 
the date of notice publication) if the Commission determines that a 
longer period is appropriate and publishes the reasons for such 
determination or the plan participants consent to the longer period.
    (3) A proposed amendment may be put into effect upon filing with the 
Commission if designated by the sponsors as:
    (i) [Reserved]
    (ii) Concerned solely with the administration of the plan, or 
involving the governing or constituent documents relating to any person 
(other than a self-regulatory organization) authorized to implement or 
administer such plan on behalf of its sponsors; or
    (iii) Involving solely technical or ministerial matters. At any time 
within 60 days of the filing of any such amendment, the Commission may 
summarily abrogate the amendment and require that such amendment be 
refiled in accordance with paragraph (a)(1) of this section and reviewed 
in accordance with paragraph (b)(2) of this section, if it appears to 
the Commission that such action is necessary or appropriate in the 
public interest, for the protection of investors, or the maintenance of 
fair and orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system or otherwise in furtherance of 
the purposes of the Act.
    (4) Notwithstanding the provisions of paragraph (b)(1) of this 
section, a proposed amendment may be put into effect summarily upon 
publication of notice of such amendment, on a temporary basis not to 
exceed 120 days, if the Commission finds that such action is necessary 
or appropriate in the public interest, for the protection of investors 
or the maintenance of fair and orderly markets, to remove impediments 
to, and perfect the mechanisms of, a national market system or otherwise 
in furtherance of the purposes of the Act.
    (5) Any plan (or amendment thereto) in connection with:
    (i) The planning, development, operation, or regulation of a 
national market system (or a subsystem thereof) or one or more 
facilities thereof; or
    (ii) The development and implementation of procedures and/or 
facilities designed to achieve compliance by self-regulatory 
organizations and/or their members of any section of this Regulation NMS 
(Sec. Sec.  242.600 through 242.612) and part 240, subpart A of this 
chapter promulgated pursuant to section 11A of the Act (15 U.S.C. 78k-
1), approved by the Commission pursuant to section 11A of the Act (or 
pursuant to any rule or regulation thereunder) prior to the effective 
date of this section (either temporarily or permanently) shall be deemed 
to have been filed and approved pursuant to this section and no 
additional filing need be made by the sponsors with respect to such plan 
or amendment; provided, however, that all terms and conditions 
associated with any such approval (including time limitations) shall 
continue to be applicable; provided, further, that any amendment to such 
plan filed with or approved by the Commission on or after the effective 
date of this section shall be subject to the provisions of, and 
considered in accordance with the procedures specified in, this section.
    (c) Compliance with terms of national market system plans. Each 
self-regulatory organization shall comply with the terms of any 
effective national market system plan of which it is a sponsor or a 
participant. Each self-regulatory organization also shall, absent 
reasonable justification or excuse, enforce compliance with any such 
plan by its members and persons associated with its members.
    (d) Appeals. The Commission may, in its discretion, entertain 
appeals in connection with the implementation or operation of any 
effective national market system plan as follows:
    (1) Any action taken or failure to act by any person in connection 
with an effective national market system plan (other than a prohibition 
or limitation of access reviewable by the Commission pursuant to section 
11A(b)(5) or

[[Page 75]]

section 19(d) of the Act (15 U.S.C. 78k-1(b)(5) or 78s(d))) shall be 
subject to review by the Commission, on its own motion or upon 
application by any person aggrieved thereby (including, but not limited 
to, self-regulatory organizations, brokers, dealers, issuers, and 
vendors), filed not later than 30 days after notice of such action or 
failure to act or within such longer period as the Commission may 
determine.
    (2) Application to the Commission for review, or the institution of 
review by the Commission on its own motion, shall not operate as a stay 
of any such action unless the Commission determines otherwise, after 
notice and opportunity for hearing on the question of a stay (which 
hearing may consist only of affidavits or oral arguments).
    (3) In any proceedings for review, if the Commission, after 
appropriate notice and opportunity for hearing (which hearing may 
consist solely of consideration of the record of any proceedings 
conducted in connection with such action or failure to act and an 
opportunity for the presentation of reasons supporting or opposing such 
action or failure to act) and upon consideration of such other data, 
views, and arguments as it deems relevant, finds that the action or 
failure to act is in accordance with the applicable provisions of such 
plan and that the applicable provisions are, and were, applied in a 
manner consistent with the public interest, the protection of investors, 
the maintenance of fair and orderly markets, and the removal of 
impediments to, and the perfection of the mechanisms of a national 
market system, the Commission, by order, shall dismiss the proceeding. 
If the Commission does not make any such finding, or if it finds that 
such action or failure to act imposes any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act, the 
Commission, by order, shall set aside such action and/or require such 
action with respect to the matter reviewed as the Commission deems 
necessary or appropriate in the public interest, for the protection of 
investors, and the maintenance of fair and orderly markets, or to remove 
impediments to, and perfect the mechanisms of, a national market system.
    (e) Exemptions. The Commission may exempt from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, any self-regulatory organization, member thereof, or 
specified security, if the Commission determines that such exemption is 
consistent with the public interest, the protection of investors, the 
maintenance of fair and orderly markets and the removal of impediments 
to, and perfection of the mechanisms of, a national market system.

[70 FR 37620, June 29, 2005; 71 FR 232, Jan. 4, 2006, as amended at 85 
FR 65497, Oct. 15, 2020]



Sec.  242.609  Registration of securities information processors: 
form of application and amendments.

    (a) An application for the registration of a securities information 
processor shall be filed on Form SIP (Sec.  249.1001 of this chapter) in 
accordance with the instructions contained therein.
    (b) If any information reported in items 1-13 or item 21 of Form SIP 
or in any amendment thereto is or becomes inaccurate for any reason, 
whether before or after the registration has been granted, the 
securities information processor shall promptly file an amendment on 
Form SIP correcting such information.
    (c) The Commission, upon its own motion or upon application by any 
securities information processor, may conditionally or unconditionally 
exempt any securities information processor from any provision of the 
rules or regulations adopted under section 11A(b) of the Act (15 U.S.C. 
78k-1(b)).
    (d) Every amendment filed pursuant to this section shall constitute 
a ``report'' within the meaning of sections 17(a), 18(a) and 32(a) of 
the Act (15 U.S.C. 78q(a), 78r(a), and 78ff(a)).



Sec.  242.610  Access to quotations.

    (a) Quotations of SRO trading facility. A national securities 
exchange or national securities association shall not impose unfairly 
discriminatory terms that prevent or inhibit any person from obtaining 
efficient access through a member of the national securities exchange or 
national securities association to the quotations in an NMS stock

[[Page 76]]

displayed through its SRO trading facility.
    (b) Quotations of SRO display-only facility. (1) Any trading center 
that displays quotations in an NMS stock through an SRO display-only 
facility shall provide a level and cost of access to such quotations 
that is substantially equivalent to the level and cost of access to 
quotations displayed by SRO trading facilities in that stock.
    (2) Any trading center that displays quotations in an NMS stock 
through an SRO display-only facility shall not impose unfairly 
discriminatory terms that prevent or inhibit any person from obtaining 
efficient access to such quotations through a member, subscriber, or 
customer of the trading center.
    (c) Fees for access to quotations. A trading center shall not 
impose, nor permit to be imposed, any fee or fees for the execution of 
an order against a protected quotation of the trading center or against 
any other quotation of the trading center that is the best bid or best 
offer of a national securities exchange, the best bid or best offer of 
The Nasdaq Stock Market, Inc., or the best bid or best offer of a 
national securities association other than the best bid or best offer of 
The Nasdaq Stock Market, Inc. in an NMS stock that exceed or accumulate 
to more than the following limits:
    (1) If the price of a protected quotation or other quotation is 
$1.00 or more, the fee or fees cannot exceed or accumulate to more than 
$0.003 per share; or
    (2) If the price of a protected quotation or other quotation is less 
than $1.00, the fee or fees cannot exceed or accumulate to more than 
0.3% of the quotation price per share.
    (d) Locking or crossing quotations. Each national securities 
exchange and national securities association shall establish, maintain, 
and enforce written rules that:
    (1) Require its members reasonably to avoid:
    (i) Displaying quotations that lock or cross any protected quotation 
in an NMS stock; and
    (ii) Displaying manual quotations that lock or cross any quotation 
in an NMS stock disseminated pursuant to an effective national market 
system plan;
    (2) Are reasonably designed to assure the reconciliation of locked 
or crossed quotations in an NMS stock; and
    (3) Prohibit its members from engaging in a pattern or practice of 
displaying quotations that lock or cross any protected quotation in an 
NMS stock, or of displaying manual quotations that lock or cross any 
quotation in an NMS stock disseminated pursuant to an effective national 
market system plan, other than displaying quotations that lock or cross 
any protected or other quotation as permitted by an exception contained 
in its rules established pursuant to paragraph (d)(1) of this section.
    (e) Exemptions. The Commission, by order, may exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any person, security, quotations, orders, or fees, or 
any class or classes of persons, securities, quotations, orders, or 
fees, if the Commission determines that such exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.



Sec.  242.611  Order protection rule.

    (a) Reasonable policies and procedures. (1) A trading center shall 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to prevent trade-throughs on that trading center 
of protected quotations in NMS stocks that do not fall within an 
exception set forth in paragraph (b) of this section and, if relying on 
such an exception, that are reasonably designed to assure compliance 
with the terms of the exception.
    (2) A trading center shall regularly surveil to ascertain the 
effectiveness of the policies and procedures required by paragraph 
(a)(1) of this section and shall take prompt action to remedy 
deficiencies in such policies and procedures.
    (b) Exceptions. (1) The transaction that constituted the trade-
through was effected when the trading center displaying the protected 
quotation that was traded through was experiencing a failure, material 
delay, or malfunction of its systems or equipment.

[[Page 77]]

    (2) The transaction that constituted the trade-through was not a 
``regular way'' contract.
    (3) The transaction that constituted the trade-through was a single-
priced opening, reopening, or closing transaction by the trading center.
    (4) The transaction that constituted the trade-through was executed 
at a time when a protected bid was priced higher than a protected offer 
in the NMS stock.
    (5) The transaction that constituted the trade-through was the 
execution of an order identified as an intermarket sweep order.
    (6) The transaction that constituted the trade-through was effected 
by a trading center that simultaneously routed an intermarket sweep 
order to execute against the full displayed size of any protected 
quotation in the NMS stock that was traded through.
    (7) The transaction that constituted the trade-through was the 
execution of an order at a price that was not based, directly or 
indirectly, on the quoted price of the NMS stock at the time of 
execution and for which the material terms were not reasonably 
determinable at the time the commitment to execute the order was made.
    (8) The trading center displaying the protected quotation that was 
traded through had displayed, within one second prior to execution of 
the transaction that constituted the trade-through, a best bid or best 
offer, as applicable, for the NMS stock with a price that was equal or 
inferior to the price of the trade-through transaction.
    (9) The transaction that constituted the trade-through was the 
execution by a trading center of an order for which, at the time of 
receipt of the order, the trading center had guaranteed an execution at 
no worse than a specified price (a ``stopped order''), where:
    (i) The stopped order was for the account of a customer;
    (ii) The customer agreed to the specified price on an order-by-order 
basis; and
    (iii) The price of the trade-through transaction was, for a stopped 
buy order, lower than the national best bid in the NMS stock at the time 
of execution or, for a stopped sell order, higher than the national best 
offer in the NMS stock at the time of execution.
    (c) Intermarket sweep orders. The trading center, broker, or dealer 
responsible for the routing of an intermarket sweep order shall take 
reasonable steps to establish that such order meets the requirements set 
forth in Sec.  242.600(b)(38).
    (d) Exemptions. The Commission, by order, may exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any person, security, transaction, quotation, or order, 
or any class or classes of persons, securities, quotations, or orders, 
if the Commission determines that such exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.

[70 FR 37620, June 29, 2005, as amended at 83 FR 58429, Nov. 19, 2018; 
86 FR 18811, Apr. 9, 2021]



Sec.  242.612  Minimum pricing increment.

    (a) No national securities exchange, national securities 
association, alternative trading system, vendor, or broker or dealer 
shall display, rank, or accept from any person a bid or offer, an order, 
or an indication of interest in any NMS stock priced in an increment 
smaller than $0.01 if that bid or offer, order, or indication of 
interest is priced equal to or greater than $1.00 per share.
    (b) No national securities exchange, national securities 
association, alternative trading system, vendor, or broker or dealer 
shall display, rank, or accept from any person a bid or offer, an order, 
or an indication of interest in any NMS stock priced in an increment 
smaller than $0.0001 if that bid or offer, order, or indication of 
interest is priced less than $1.00 per share.
    (c) The Commission, by order, may exempt from the provisions of this 
section, either unconditionally or on specified terms and conditions, 
any person, security, quotation, or order, or any class or classes of 
persons, securities, quotations, or orders, if the Commission determines 
that such exemption is necessary or appropriate in the public interest, 
and is consistent with the protection of investors.

[[Page 78]]



Sec.  242.613  Consolidated audit trail.

    (a) Creation of a national market system plan governing a 
consolidated audit trail. (1) Each national securities exchange and 
national securities association shall jointly file on or before 270 days 
from the date of publication of the Adopting Release in the Federal 
Register a national market system plan to govern the creation, 
implementation, and maintenance of a consolidated audit trail and 
central repository as required by this section. The national market 
system plan shall discuss the following considerations:
    (i) The method(s) by which data will be reported to the central 
repository including, but not limited to, the sources of such data and 
the manner in which the central repository will receive, extract, 
transform, load, and retain such data; and the basis for selecting such 
method(s);
    (ii) The time and method by which the data in the central repository 
will be made available to regulators, in accordance with paragraph 
(e)(1) of this section, to perform surveillance or analyses, or for 
other purposes as part of their regulatory and oversight 
responsibilities;
    (iii) The reliability and accuracy of the data reported to and 
maintained by the central repository throughout its lifecycle, including 
transmission and receipt from market participants; data extraction, 
transformation and loading at the central repository; data maintenance 
and management at the central repository; and data access by regulators;
    (iv) The security and confidentiality of the information reported to 
the central repository;
    (v) The flexibility and scalability of the systems used by the 
central repository to collect, consolidate and store consolidated audit 
trail data, including the capacity of the consolidated audit trail to 
efficiently incorporate, in a cost-effective manner, improvements in 
technology, additional capacity, additional order data, information 
about additional securities or transactions, changes in regulatory 
requirements, and other developments;
    (vi) The feasibility, benefits, and costs of broker-dealers 
reporting to the consolidated audit trail in a timely manner:
    (A) The identity of all market participants (including broker-
dealers and customers) that are allocated NMS securities, directly or 
indirectly, in a primary market transaction;
    (B) The number of such securities each such market participant is 
allocated; and
    (C) The identity of the broker-dealer making each such allocation;
    (vii) The detailed estimated costs for creating, implementing, and 
maintaining the consolidated audit trail as contemplated by the national 
market system plan, which estimated costs should specify:
    (A) An estimate of the costs to the plan sponsors for establishing 
and maintaining the central repository;
    (B) An estimate of the costs to members of the plan sponsors, 
initially and on an ongoing basis, for reporting the data required by 
the national market system plan;
    (C) An estimate of the costs to the plan sponsors, initially and on 
an ongoing basis, for reporting the data required by the national market 
system plan; and
    (D) How the plan sponsors propose to fund the creation, 
implementation, and maintenance of the consolidated audit trail, 
including the proposed allocation of such estimated costs among the plan 
sponsors, and between the plan sponsors and members of the plan 
sponsors;
    (viii) An analysis of the impact on competition, efficiency and 
capital formation of creating, implementing, and maintaining of the 
national market system plan;
    (ix) A plan to eliminate existing rules and systems (or components 
thereof) that will be rendered duplicative by the consolidated audit 
trail, including identification of such rules and systems (or components 
thereof); to the extent that any existing rules or systems related to 
monitoring quotes, orders, and executions provide information that is 
not rendered duplicative by the consolidated audit trail, an analysis 
of:
    (A) Whether the collection of such information remains appropriate;

[[Page 79]]

    (B) If still appropriate, whether such information should continue 
to be separately collected or should instead be incorporated into the 
consolidated audit trail; and
    (C) If no longer appropriate, how the collection of such information 
could be efficiently terminated; the steps the plan sponsors propose to 
take to seek Commission approval for the elimination of such rules and 
systems (or components thereof); and a timetable for such elimination, 
including a description of how the plan sponsors propose to phase in the 
consolidated audit trail and phase out such existing rules and systems 
(or components thereof);
    (x) Objective milestones to assess progress toward the 
implementation of the national market system plan;
    (xi) The process by which the plan sponsors solicited views of their 
members and other appropriate parties regarding the creation, 
implementation, and maintenance of the consolidated audit trail, a 
summary of the views of such members and other parties, and how the plan 
sponsors took such views into account in preparing the national market 
system plan; and
    (xii) Any reasonable alternative approaches to creating, 
implementing, and maintaining a consolidated audit trail that the plan 
sponsors considered in developing the national market system plan 
including, but not limited to, a description of any such alternative 
approach; the relative advantages and disadvantages of each such 
alternative, including an assessment of the alternative's costs and 
benefits; and the basis upon which the plan sponsors selected the 
approach reflected in the national market system plan.
    (2) The national market system plan, or any amendment thereto, filed 
pursuant to this section shall comply with the requirements in Sec.  
242.608(a), if applicable, and be filed with the Commission pursuant to 
Sec.  242.608.
    (3) The national market system plan submitted pursuant to this 
section shall require each national securities exchange and national 
securities association to:
    (i) Within two months after effectiveness of the national market 
system plan jointly (or under the governance structure described in the 
plan) select a person to be the plan processor;
    (ii) Within four months after effectiveness of the national market 
system plan synchronize their business clocks and require members of 
each such exchange and association to synchronize their business clocks 
in accordance with paragraph (d) of this section;
    (iii) Within one year after effectiveness of the national market 
system plan provide to the central repository the data specified in 
paragraph (c) of this section;
    (iv) Within fourteen months after effectiveness of the national 
market system plan implement a new or enhanced surveillance system(s) as 
required by paragraph (f) of this section;
    (v) Within two years after effectiveness of the national market 
system plan require members of each such exchange and association, 
except those members that qualify as small broker-dealers as defined in 
Sec.  240.0-10(c) of this chapter, to provide to the central repository 
the data specified in paragraph (c) of this section; and
    (vi) Within three years after effectiveness of the national market 
system plan require members of each such exchange and association that 
qualify as small broker-dealers as defined in Sec.  240.0-10(c) of this 
chapter to provide to the central repository the data specified in 
paragraph (c) of this section.
    (4) Each national securities exchange and national securities 
association shall be a sponsor of the national market system plan 
submitted pursuant to this section and approved by the Commission.
    (5) No national market system plan filed pursuant to this section, 
or any amendment thereto, shall become effective unless approved by the 
Commission or otherwise permitted in accordance with the procedures set 
forth in Sec.  242.608. In determining whether to approve the national 
market system plan, or any amendment thereto, and whether the national 
market system plan or any amendment thereto is in the public interest 
under Sec.  242.608(b)(2), the Commission shall consider the impact of 
the national market system plan or amendment, as applicable, on 
efficiency, competition, and capital formation.

[[Page 80]]

    (b) Operation and administration of the national market system plan. 
(1) The national market system plan submitted pursuant to this section 
shall include a governance structure to ensure fair representation of 
the plan sponsors, and administration of the central repository, 
including the selection of the plan processor.
    (2) The national market system plan submitted pursuant to this 
section shall include a provision addressing the requirements for the 
admission of new sponsors of the plan and the withdrawal of existing 
sponsors from the plan.
    (3) The national market system plan submitted pursuant to this 
section shall include a provision addressing the percentage of votes 
required by the plan sponsors to effectuate amendments to the plan.
    (4) The national market system plan submitted pursuant to this 
section shall include a provision addressing the manner in which the 
costs of operating the central repository will be allocated among the 
national securities exchanges and national securities associations that 
are sponsors of the plan, including a provision addressing the manner in 
which costs will be allocated to new sponsors to the plan.
    (5) The national market system plan submitted pursuant to this 
section shall require the appointment of a Chief Compliance Officer to 
regularly review the operation of the central repository to assure its 
continued effectiveness in light of market and technological 
developments, and make any appropriate recommendations for enhancements 
to the nature of the information collected and the manner in which it is 
processed.
    (6) The national market system plan submitted pursuant to this 
section shall include a provision requiring the plan sponsors to provide 
to the Commission, at least every two years after effectiveness of the 
national market system plan, a written assessment of the operation of 
the consolidated audit trail. Such document shall include, at a minimum:
    (i) An evaluation of the performance of the consolidated audit trail 
including, at a minimum, with respect to data accuracy (consistent with 
paragraph (e)(6) of this section), timeliness of reporting, 
comprehensiveness of data elements, efficiency of regulatory access, 
system speed, system downtime, system security (consistent with 
paragraph (e)(4) of this section), and other performance metrics to be 
determined by the Chief Compliance Officer, along with a description of 
such metrics;
    (ii) A detailed plan, based on such evaluation, for any potential 
improvements to the performance of the consolidated audit trail with 
respect to any of the following: improving data accuracy; shortening 
reporting timeframes; expanding data elements; adding granularity and 
details regarding the scope and nature of Customer-IDs; expanding the 
scope of the national market system plan to include new instruments and 
new types of trading and order activities; improving the efficiency of 
regulatory access; increasing system speed; reducing system downtime; 
and improving performance under other metrics to be determined by the 
Chief Compliance Officer;
    (iii) An estimate of the costs associated with any such potential 
improvements to the performance of the consolidated audit trail, 
including an assessment of the potential impact on competition, 
efficiency, and capital formation; and
    (iv) An estimated implementation timeline for any such potential 
improvements, if applicable.
    (7) The national market system plan submitted pursuant to this 
section shall include an Advisory Committee which shall function in 
accordance with the provisions set forth in this paragraph (b)(7). The 
purpose of the Advisory Committee shall be to advise the plan sponsors 
on the implementation, operation, and administration of the central 
repository.
    (i) The national market system plan submitted pursuant to this 
section shall set forth the term and composition of the Advisory 
Committee, which composition shall include representatives of the member 
firms of the plan sponsors.
    (ii) Members of the Advisory Committee shall have the right to 
attend any meetings of the plan sponsors, to

[[Page 81]]

receive information concerning the operation of the central repository, 
and to provide their views to the plan sponsors; provided, however, that 
the plan sponsors may meet without the Advisory Committee members in 
executive session if, by affirmative vote of a majority of the plan 
sponsors, the plan sponsors determine that such an executive session is 
required.
    (c) Data recording and reporting. (1) The national market system 
plan submitted pursuant to this section shall provide for an accurate, 
time-sequenced record of orders beginning with the receipt or 
origination of an order by a member of a national securities exchange or 
national securities association, and further documenting the life of the 
order through the process of routing, modification, cancellation, and 
execution (in whole or in part) of the order.
    (2) The national market system plan submitted pursuant to this 
section shall require each national securities exchange, national 
securities association, and member to report to the central repository 
the information required by paragraph (c)(7) of this section in a 
uniform electronic format, or in a manner that would allow the central 
repository to convert the data to a uniform electronic format, for 
consolidation and storage.
    (3) The national market system plan submitted pursuant to this 
section shall require each national securities exchange, national 
securities association, and member to record the information required by 
paragraphs (c)(7)(i) through (v) of this section contemporaneously with 
the reportable event. The national market system plan shall require that 
information recorded pursuant to paragraphs (c)(7)(i) through (v) of 
this section must be reported to the central repository by 8:00 a.m. 
Eastern Time on the trading day following the day such information has 
been recorded by the national securities exchange, national securities 
association, or member. The national market system plan may accommodate 
voluntary reporting prior to 8:00 a.m. Eastern Time, but shall not 
impose an earlier reporting deadline on the reporting parties.
    (4) The national market system plan submitted pursuant to this 
section shall require each member of a national securities exchange or 
national securities association to record and report to the central 
repository the information required by paragraphs (c)(7)(vi) through 
(viii) of this section by 8:00 a.m. Eastern Time on the trading day 
following the day the member receives such information. The national 
market system plan may accommodate voluntary reporting prior to 8:00 
a.m. Eastern Time, but shall not impose an earlier reporting deadline on 
the reporting parties.
    (5) The national market system plan submitted pursuant to this 
section shall require each national securities exchange and its members 
to record and report to the central repository the information required 
by paragraph (c)(7) of this section for each NMS security registered or 
listed for trading on such exchange or admitted to unlisted trading 
privileges on such exchange.
    (6) The national market system plan submitted pursuant to this 
section shall require each national securities association and its 
members to record and report to the central repository the information 
required by paragraph (c)(7) of this section for each NMS security for 
which transaction reports are required to be submitted to the 
association.
    (7) The national market system plan submitted pursuant to this 
section shall require each national securities exchange, national 
securities association, and any member of such exchange or association 
to record and electronically report to the central repository details 
for each order and each reportable event, including, but not limited to, 
the following information:
    (i) For original receipt or origination of an order:
    (A) Customer-ID(s) for each customer;
    (B) The CAT-Order-ID;
    (C) The CAT-Reporter-ID of the broker-dealer receiving or 
originating the order;
    (D) Date of order receipt or origination;

[[Page 82]]

    (E) Time of order receipt or origination (using time stamps pursuant 
to paragraph (d)(3) of this section); and
    (F) Material terms of the order.
    (ii) For the routing of an order, the following information:
    (A) The CAT-Order-ID;
    (B) Date on which the order is routed;
    (C) Time at which the order is routed (using time stamps pursuant to 
paragraph (d)(3) of this section);
    (D) The CAT-Reporter-ID of the broker-dealer or national securities 
exchange routing the order;
    (E) The CAT-Reporter-ID of the broker-dealer, national securities 
exchange, or national securities association to which the order is being 
routed;
    (F) If routed internally at the broker-dealer, the identity and 
nature of the department or desk to which an order is routed; and
    (G) Material terms of the order.
    (iii) For the receipt of an order that has been routed, the 
following information:
    (A) The CAT-Order-ID;
    (B) Date on which the order is received;
    (C) Time at which the order is received (using time stamps pursuant 
to paragraph (d)(3) of this section);
    (D) The CAT-Reporter-ID of the broker-dealer, national securities 
exchange, or national securities association receiving the order;
    (E) The CAT-Reporter-ID of the broker-dealer or national securities 
exchange routing the order; and
    (F) Material terms of the order.
    (iv) If the order is modified or cancelled, the following 
information:
    (A) The CAT-Order-ID;
    (B) Date the modification or cancellation is received or originated;
    (C) Time the modification or cancellation is received or originated 
(using time stamps pursuant to paragraph (d)(3) of this section);
    (D) Price and remaining size of the order, if modified;
    (E) Other changes in material terms of the order, if modified; and
    (F) The CAT-Reporter-ID of the broker-dealer or Customer-ID of the 
person giving the modification or cancellation instruction.
    (v) If the order is executed, in whole or part, the following 
information:
    (A) The CAT-Order-ID;
    (B) Date of execution;
    (C) Time of execution (using time stamps pursuant to paragraph 
(d)(3) of this section);
    (D) Execution capacity (principal, agency, riskless principal);
    (E) Execution price and size;
    (F) The CAT-Reporter-ID of the national securities exchange or 
broker-dealer executing the order; and
    (G) Whether the execution was reported pursuant to an effective 
transaction reporting plan or the Plan for Reporting of Consolidated 
Options Last Sale Reports and Quotation Information.
    (vi) If the order is executed, in whole or part, the following 
information:
    (A) The account number for any subaccounts to which the execution is 
allocated (in whole or part);
    (B) The CAT-Reporter-ID of the clearing broker or prime broker, if 
applicable; and
    (C) The CAT-Order-ID of any contra-side order(s).
    (vii) If the trade is cancelled, a cancelled trade indicator.
    (viii) For original receipt or origination of an order, the 
following information:
    (A) Information of sufficient detail to identify the customer; and
    (B) Customer account information.
    (8) All plan sponsors and their members shall use the same Customer-
ID and CAT-Reporter-ID for each customer and broker-dealer.
    (d) Clock synchronization and time stamps. The national market 
system plan submitted pursuant to this section shall require:
    (1) Each national securities exchange, national securities 
association, and member of such exchange or association to synchronize 
its business clocks that are used for the purposes of recording the date 
and time of any reportable event that must be reported pursuant to this 
section to the time maintained by the National Institute of Standards 
and Technology, consistent with industry standards;
    (2) Each national securities exchange and national securities 
association to

[[Page 83]]

evaluate annually the clock synchronization standard to determine 
whether it should be shortened, consistent with changes in industry 
standards; and
    (3) Each national securities exchange, national securities 
association, and member of such exchange or association to utilize the 
time stamps required by paragraph (c)(7) of this section, with at 
minimum the granularity set forth in the national market system plan 
submitted pursuant to this section, which shall reflect current industry 
standards and be at least to the millisecond. To the extent that the 
relevant order handling and execution systems of any national securities 
exchange, national securities association, or member of such exchange or 
association utilize time stamps in increments finer than the minimum 
required by the national market system plan, the plan shall require such 
national securities exchange, national securities association, or member 
to utilize time stamps in such finer increments when providing data to 
the central repository, so that all reportable events reported to the 
central repository by any national securities exchange, national 
securities association, or member can be accurately sequenced. The 
national market system plan shall require the sponsors of the national 
market system plan to annually evaluate whether industry standards have 
evolved such that the required time stamp standard should be in finer 
increments.
    (e) Central repository. (1) The national market system plan 
submitted pursuant to this section shall provide for the creation and 
maintenance of a central repository. Such central repository shall be 
responsible for the receipt, consolidation, and retention of all 
information reported pursuant to paragraph (c)(7) of this section. The 
central repository shall store and make available to regulators data in 
a uniform electronic format, and in a form in which all events 
pertaining to the same originating order are linked together in a manner 
that ensures timely and accurate retrieval of the information required 
by paragraph (c)(7) of this section for all reportable events for that 
order.
    (2) Each national securities exchange, national securities 
association, and the Commission shall have access to the central 
repository, including all systems operated by the central repository, 
and access to and use of the data reported to and consolidated by the 
central repository under paragraph (c) of this section, for the purpose 
of performing its respective regulatory and oversight responsibilities 
pursuant to the federal securities laws, rules, and regulations. The 
national market system plan submitted pursuant to this section shall 
provide that such access to and use of such data by each national 
securities exchange, national securities association, and the Commission 
for the purpose of performing its regulatory and oversight 
responsibilities pursuant to the federal securities laws, rules, and 
regulations shall not be limited.
    (3) The national market system plan submitted pursuant to this 
section shall include a provision requiring the creation and maintenance 
by the plan processor of a method of access to the consolidated data 
stored in the central repository that includes the ability to run 
searches and generate reports.
    (4) The national market system plan submitted pursuant to this 
section shall include policies and procedures, including standards, to 
be used by the plan processor to:
    (i) Ensure the security and confidentiality of all information 
reported to the central repository by requiring that:
    (A) All plan sponsors and their employees, as well as all employees 
of the central repository, agree to use appropriate safeguards to ensure 
the confidentiality of such data and agree not to use such data for any 
purpose other than surveillance and regulatory purposes, provided that 
nothing in this paragraph (e)(4)(i)(A) shall be construed to prevent a 
plan sponsor from using the data that it reports to the central 
repository for regulatory, surveillance, commercial, or other purposes 
as otherwise permitted by applicable law, rule, or regulation;
    (B) Each plan sponsor adopt and enforce rules that:
    (1) Require information barriers between regulatory staff and non-
regulatory staff with regard to access and

[[Page 84]]

use of data in the central repository; and
    (2) Permit only persons designated by plan sponsors to have access 
to the data in the central repository;
    (C) The plan processor:
    (1) Develop and maintain a comprehensive information security 
program for the central repository, with dedicated staff, that is 
subject to regular reviews by the Chief Compliance Officer;
    (2) Have a mechanism to confirm the identity of all persons 
permitted to access the data; and
    (3) Maintain a record of all instances where such persons access the 
data; and
    (D) The plan sponsors adopt penalties for non-compliance with any 
policies and procedures of the plan sponsors or central repository with 
respect to information security.
    (ii) Ensure the timeliness, accuracy, integrity, and completeness of 
the data provided to the central repository pursuant to paragraph (c) of 
this section; and
    (iii) Ensure the accuracy of the consolidation by the plan processor 
of the data provided to the central repository pursuant to paragraph (c) 
of this section.
    (5) The national market system plan submitted pursuant to this 
section shall address whether there will be an annual independent 
evaluation of the security of the central repository and:
    (i) If so, provide a description of the scope of such planned 
evaluation; and
    (ii) If not, provide a detailed explanation of the alternative 
measures for evaluating the security of the central repository that are 
planned instead.
    (6) The national market system plan submitted pursuant to this 
section shall:
    (i) Specify a maximum error rate to be tolerated by the central 
repository for any data reported pursuant to paragraphs (c)(3) and 
(c)(4) of this section; describe the basis for selecting such maximum 
error rate; explain how the plan sponsors will seek to reduce such 
maximum error rate over time; describe how the plan will seek to ensure 
compliance with such maximum error rate and, in the event of 
noncompliance, will promptly remedy the causes thereof;
    (ii) Require the central repository to measure the error rate each 
business day and promptly take appropriate remedial action, at a 
minimum, if the error rate exceeds the maximum error rate specified in 
the plan;
    (iii) Specify a process for identifying and correcting errors in the 
data reported to the central repository pursuant to paragraphs (c)(3) 
and (c)(4) of this section, including the process for notifying the 
national securities exchanges, national securities association, and 
members who reported erroneous data to the central repository of such 
errors, to help ensure that such errors are promptly corrected by the 
reporting entity, and for disciplining those who repeatedly report 
erroneous data; and
    (iv) Specify the time by which data that has been corrected will be 
made available to regulators.
    (7) The national market system plan submitted pursuant to this 
section shall require the central repository to collect and retain on a 
current and continuing basis and in a format compatible with the 
information consolidated and stored pursuant to paragraph (c)(7) of this 
section:
    (i) Information, including the size and quote condition, on the 
national best bid and national best offer for each NMS security;
    (ii) Transaction reports reported pursuant to an effective 
transaction reporting plan filed with the Commission pursuant to, and 
meeting the requirements of, Sec.  242.601; and
    (iii) Last sale reports reported pursuant to the Plan for Reporting 
of Consolidated Options Last Sale Reports and Quotation Information 
filed with the Commission pursuant to, and meeting the requirements of, 
Sec.  242.608.
    (8) The national market system plan submitted pursuant to this 
section shall require the central repository to retain the information 
collected pursuant to paragraphs (c)(7) and (e)(7) of this section in a 
convenient and usable standard electronic data format that is directly 
available and searchable electronically without any manual intervention 
for a period of not less than five years.

[[Page 85]]

    (f) Surveillance. Every national securities exchange and national 
securities association subject to this section shall develop and 
implement a surveillance system, or enhance existing surveillance 
systems, reasonably designed to make use of the consolidated information 
contained in the consolidated audit trail.
    (g) Compliance by members. (1) Each national securities exchange and 
national securities association shall file with the Commission pursuant 
to section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) and Sec.  240.19b-4 
of this chapter on or before 60 days from approval of the national 
market system plan a proposed rule change to require its members to 
comply with the requirements of this section and the national market 
system plan approved by the Commission.
    (2) Each member of a national securities exchange or national 
securities association shall comply with all the provisions of any 
approved national market system plan applicable to members.
    (3) The national market system plan submitted pursuant to this 
section shall include a provision requiring each national securities 
exchange and national securities association to agree to enforce 
compliance by its members with the provisions of any approved plan.
    (4) The national market system plan submitted pursuant to this 
section shall include a mechanism to ensure compliance with the 
requirements of any approved plan by the members of a national 
securities exchange or national securities association.
    (h) Compliance by national securities exchanges and national 
securities associations. (1) Each national securities exchange and 
national securities association shall comply with the provisions of the 
national market system plan approved by the Commission.
    (2) Any failure by a national securities exchange or national 
securities association to comply with the provisions of the national 
market system plan approved by the Commission shall be considered a 
violation of this section.
    (3) The national market system plan submitted pursuant to this 
section shall include a mechanism to ensure compliance by the sponsors 
of the plan with the requirements of any approved plan. Such enforcement 
mechanism may include penalties where appropriate.
    (i) Other securities and other types of transactions. The national 
market system plan submitted pursuant to this section shall include a 
provision requiring each national securities exchange and national 
securities association to jointly provide to the Commission within six 
months after effectiveness of the national market system plan a document 
outlining how such exchanges and associations could incorporate into the 
consolidated audit trail information with respect to equity securities 
that are not NMS securities, debt securities, primary market 
transactions in equity securities that are not NMS securities, and 
primary market transactions in debt securities, including details for 
each order and reportable event that may be required to be provided, 
which market participants may be required to provide the data, an 
implementation timeline, and a cost estimate.
    (j) Definitions. As used in this section:
    (1) The term CAT-Order-ID shall mean a unique order identifier or 
series of unique order identifiers that allows the central repository to 
efficiently and accurately link all reportable events for an order, and 
all orders that result from the aggregation or disaggregation of such 
order.
    (2) The term CAT-Reporter-ID shall mean, with respect to each 
national securities exchange, national securities association, and 
member of a national securities exchange or national securities 
association, a code that uniquely and consistently identifies such 
person for purposes of providing data to the central repository.
    (3) The term customer shall mean:
    (i) The account holder(s) of the account at a registered broker-
dealer originating the order; and
    (ii) Any person from whom the broker-dealer is authorized to accept 
trading instructions for such account, if different from the account 
holder(s).
    (4) The term customer account information shall include, but not be 
limited

[[Page 86]]

to, account number, account type, customer type, date account opened, 
and large trader identifier (if applicable).
    (5) The term Customer-ID shall mean, with respect to a customer, a 
code that uniquely and consistently identifies such customer for 
purposes of providing data to the central repository.
    (6) The term error rate shall mean the percentage of reportable 
events collected by the central repository in which the data reported 
does not fully and accurately reflect the order event that occurred in 
the market.
    (7) The term material terms of the order shall include, but not be 
limited to, the NMS security symbol; security type; price (if 
applicable); size (displayed and non-displayed); side (buy/sell); order 
type; if a sell order, whether the order is long, short, short exempt; 
open/close indicator; time in force (if applicable); if the order is for 
a listed option, option type (put/call), option symbol or root symbol, 
underlying symbol, strike price, expiration date, and open/close; and 
any special handling instructions.
    (8) The term order shall include:
    (i) Any order received by a member of a national securities exchange 
or national securities association from any person;
    (ii) Any order originated by a member of a national securities 
exchange or national securities association; or
    (iii) Any bid or offer.
    (9) The term reportable event shall include, but not be limited to, 
the original receipt or origination, modification, cancellation, 
routing, and execution (in whole or in part) of an order, and receipt of 
a routed order.

[77 FR 45808, Aug. 1, 2012]



Sec.  242.614  Registration and responsibilities of competing consolidators.

    (a) Competing consolidator registration--(1) Initial Form CC--(i) 
Filing and effectiveness requirement. No person, other than a national 
securities exchange or a national securities association:
    (A) May receive directly, pursuant to an effective national market 
system plan, from a national securities exchange or national securities 
association information with respect to quotations for and transactions 
in NMS stocks; and
    (B) Generate a consolidated market data product for dissemination to 
any person unless the person files with the Commission an initial Form 
CC and the initial Form CC has become effective pursuant to paragraph 
(a)(1)(v) of this section.
    (ii) Electronic filing and submission. Any reports to the Commission 
required under this section shall be filed electronically on Form CC (17 
CFR 249.1002), include all information as prescribed in Form CC and the 
instructions thereto, and contain an electronic signature as defined in 
Sec.  240.19b-4(j) of this chapter.
    (iii) Commission review period. The Commission may, by order, as 
provided in paragraph (a)(1)(v)(B) of this section, declare an initial 
Form CC filed by a competing consolidator ineffective no later than 90 
calendar days from the date of filing with the Commission.
    (iv) Withdrawal of initial Form CC due to inaccurate or incomplete 
disclosures. During the review by the Commission of the initial Form CC, 
if any information disclosed in the initial Form CC is or becomes 
inaccurate or incomplete, the competing consolidator shall promptly 
withdraw the initial Form CC and may refile an initial Form CC pursuant 
to paragraph (a)(1) of this section.
    (v) Effectiveness; ineffectiveness determination. (A) An initial 
Form CC filed by a competing consolidator will become effective, unless 
declared ineffective, no later than the expiration of the review period 
provided in paragraph (a)(1)(iii) of this section and publication 
pursuant to paragraph (b)(2)(i) of this section.
    (B) The Commission shall, by order, declare an initial Form CC 
ineffective if it finds, after notice and opportunity for hearing, that 
such action is necessary or appropriate in the public interest, and is 
consistent with the protection of investors. If the Commission declares 
an initial Form CC ineffective, the competing consolidator shall be 
prohibited from operating as a competing consolidator. An initial Form 
CC declared ineffective does not prevent the competing consolidator from 
subsequently filing a new Form CC.
    (2) Form CC amendments. A competing consolidator shall amend a Form 
CC:

[[Page 87]]

    (i) Prior to the implementation of a material change to the pricing, 
connectivity, or products offered (``material amendment''); and
    (ii) No later than 30 calendar days after the end of each calendar 
year to correct information that has become inaccurate or incomplete for 
any reason and to provide an Annual Report as required under Form CC 
(each a ``Form CC amendment'').
    (3) Notice of cessation. A competing consolidator shall notice its 
cessation of operations on Form CC at least 90 calendar days prior to 
the date the competing consolidator will cease to operate as a competing 
consolidator. The notice of cessation shall cause the Form CC to become 
ineffective on the date designated by the competing consolidator.
    (4) Date of filing. For purposes of filings made pursuant to this 
section:
    (i) The term business day shall have the same meaning as defined in 
Sec.  240.19b-4(b)(2) of this chapter.
    (ii) If the conditions of this section and Form CC are otherwise 
satisfied, all filings submitted electronically on or before 5:30 p.m. 
Eastern Standard Time or Eastern Daylight Saving Time, whichever is 
currently in effect, on a business day, shall be deemed filed on that 
business day, and all filings submitted after 5:30 p.m. Eastern Standard 
Time or Eastern Daylight Saving Time, whichever is currently in effect, 
shall be deemed filed on the next business day.
    (b) Public disclosures. (1) Every Form CC filed pursuant to this 
section shall constitute a ``report'' within the meaning of sections 
11A, 17(a), 18(a), and 32(a) of the Act (15 U.S.C. 78k-1, 78q(a), 
78r(a), and 78ff(a)), and any other applicable provisions of the Act.
    (2) The Commission will make public via posting on the Commission's 
website:
    (i) Identification of each competing consolidator that has filed an 
initial Form CC with the Commission and the date of filing;
    (ii) Each effective initial Form CC, as amended;
    (iii) Each order of ineffective initial Form CC;
    (iv) Each Form CC amendment. The Commission will make public the 
entirety of any Form CC amendment no later than 30 calendar days from 
the date of filing thereof with the Commission; and
    (v) Each notice of cessation.
    (c) Posting of hyperlink to the Commission's website. Each competing 
consolidator shall make public via posting on its website a direct URL 
hyperlink to the Commission's website that contains the documents 
enumerated in paragraphs (b)(2)(ii) through (v) of this section.
    (d) Responsibilities of competing consolidators. Each competing 
consolidator shall:
    (1) Collect from each national securities exchange and national 
securities association, either directly or indirectly, any information 
with respect to quotations for and transactions in NMS stocks as 
provided in Sec.  242.603(b) that is necessary to create a consolidated 
market data product, as defined in Sec.  242.600(b)(20).
    (2) Calculate and generate a consolidated market data product, as 
defined in Sec.  242.600(b)(20), from the information collected pursuant 
to paragraph (d)(1) of this section.
    (3) Make a consolidated market data product, as defined in Sec.  
242.600(b)(20), as timestamped as required by paragraph (d)(4) of this 
section and including the national securities exchange and national 
securities association data generation timestamp required to be provided 
by the national securities exchange and national securities association 
participants by paragraph (e)(2) of this section, available to 
subscribers on a consolidated basis on terms that are not unreasonably 
discriminatory.
    (4) Timestamp the information collected pursuant to paragraph (d)(1) 
of this section upon:
    (i) Receipt from each national securities exchange and national 
securities association;
    (ii) Receipt of such information at its aggregation mechanism; and
    (iii) Dissemination of a consolidated market data product to 
subscribers.
    (5) Within 15 calendar days after the end of each month, publish 
prominently on its website monthly performance metrics, as defined by 
the effective national market system plan(s) for NMS stocks, that shall 
include at least

[[Page 88]]

the information in paragraphs (d)(5)(i) through (v) of this section. All 
information must be publicly posted in downloadable files and must 
remain free and accessible (without any encumbrances or restrictions) by 
the general public on the website for a period of not less than three 
years from the initial date of posting.
    (i) Capacity statistics;
    (ii) Message rate and total statistics;
    (iii) System availability;
    (iv) Network delay statistics; and
    (v) Latency statistics for the following, with distribution 
statistics up to the 99.99th percentile:
    (A) When a national securities exchange or national securities 
association sends an inbound message to a competing consolidator network 
and when the competing consolidator network receives the inbound 
message;
    (B) When the competing consolidator network receives the inbound 
message and when the competing consolidator network sends the 
corresponding consolidated message to a subscriber; and
    (C) When a national securities exchange or national securities 
association sends an inbound message to a competing consolidator network 
and when the competing consolidator network sends the corresponding 
consolidated message to a subscriber.
    (6) Within 15 calendar days after the end of each month, publish 
prominently on its website the information in paragraphs (d)(6)(i) 
through (v) of this section. All information must be publicly posted and 
must remain free and accessible (without any encumbrances or 
restrictions) by the general public on the website for a period of not 
less than three years from the initial date of posting.
    (i) Data quality issues;
    (ii) System issues;
    (iii) Any clock synchronization protocol utilized;
    (iv) For the clocks used to generate the timestamps described in 
paragraph (d)(4) of this section, the clock drift averages and peaks, 
and the number of instances of clock drift greater than 100 
microseconds; and
    (v) Vendor alerts.
    (7) Keep and preserve at least one copy of all documents, including 
all correspondence, memoranda, papers, books, notices, accounts, and 
such other records as shall be made or received by it in the course of 
its business as such and in the conduct of its business. Competing 
consolidators shall keep all such documents for a period of no less than 
five years, the first two years in an easily accessible place.
    (8) Upon request of any representative of the Commission, promptly 
furnish to the possession of such representative copies of any documents 
required to be kept and preserved by it.
    (9) Each competing consolidator that is not required to comply with 
the requirements of Sec. Sec.  242.1000 through 242.1007 regarding 
systems compliance and integrity (Regulation SCI) shall comply with the 
following:
    (i) Definitions. For purposes of this paragraph (d)(9), the 
following definitions shall apply:
    Systems disruption means an event in a competing consolidator's 
systems involved in the collection and consolidation of consolidated 
market data, and dissemination of consolidated market data products, 
that disrupts, or significantly degrades, the normal operation of such 
systems.
    Systems intrusion means any unauthorized entry into a competing 
consolidator's systems involved in the collection and consolidation of 
consolidated market data, and dissemination of consolidated market data 
products.
    (ii) Obligations relating to policies and procedures. (A)(1) 
Establish, maintain, and enforce written policies and procedures 
reasonably designed to ensure: That its systems involved in the 
collection and consolidation of consolidated market data, and 
dissemination of consolidated market data products have levels of 
capacity, integrity, resiliency, availability, and security adequate to 
maintain the competing consolidator's operational capability and promote 
the maintenance of fair and orderly markets; and the prompt, accurate, 
and reliable dissemination of consolidated market data products.
    (2) Such policies and procedures shall be deemed to be reasonably 
designed if they are consistent with current industry standards, which 
shall be comprised of information technology practices that are widely 
available to information technology professionals in the

[[Page 89]]

financial sector and issued by an authoritative body that is a U.S. 
governmental entity or agency, association of U.S. governmental entities 
or agencies, or widely recognized organization. Compliance with such 
current industry standards, however, shall not be the exclusive means to 
comply with the requirements of this paragraph (d)(9)(ii)(A);
    (B) Periodically review the effectiveness of the policies and 
procedures required by paragraph (d)(9)(ii)(A) of this section, and take 
prompt action to remedy deficiencies in such policies and procedures; 
and
    (C) Establish, maintain, and enforce reasonably designed written 
policies and procedures that include the criteria for identifying 
responsible personnel, the designation and documentation of responsible 
personnel, and escalation procedures to quickly inform responsible 
personnel of potential systems disruptions and systems intrusions; and 
periodically review the effectiveness of the policies and procedures, 
and take prompt action to remedy deficiencies.
    (iii) Systems disruptions or systems intrusions. (A) Upon 
responsible personnel having a reasonable basis to conclude that a 
systems disruption or systems intrusion has occurred, begin to take 
appropriate corrective action which shall include, at a minimum, 
mitigating potential harm to investors and market integrity resulting 
from the event and devoting adequate resources to remedy the event as 
soon as reasonably practicable.
    (B) Promptly upon responsible personnel having a reasonable basis to 
conclude that a systems disruption (other than a system disruption that 
has had, or the competing consolidator reasonably estimates would have, 
no or a de minimis impact on the competing consolidator's operations or 
on market participants) has occurred, publicly disseminate information 
relating to the event (including the system(s) affected and a summary 
description); when known, promptly publicly disseminate additional 
information relating to the event (including a detailed description, an 
assessment of those potentially affected, a description of the progress 
of corrective action and when the event has been or is expected to be 
resolved); and until resolved, provide regular updates with respect to 
such information.
    (C) Concurrent with public dissemination of information relating to 
a systems disruption pursuant to paragraph (d)(9)(iii)(B) of this 
section, or promptly upon responsible personnel having a reasonable 
basis to conclude that a systems intrusion (other than a system 
intrusion that has had, or the competing consolidator reasonably 
estimates would have, no or a de minimis impact on the competing 
consolidator's operations or on market participants) has occurred, 
provide the Commission notification and, until resolved, updates of such 
event. Notifications required pursuant to this paragraph (d)(9)(iii)(C) 
shall include information relating to the event (including the system(s) 
affected and a summary description); when known, additional information 
relating to the event (including a detailed description, an assessment 
of those potentially affected, a description of the progress of 
corrective action and when the event has been or is expected to be 
resolved); and until resolved, regular updates with respect to such 
information. Notifications relating to systems disruptions and systems 
intrusions pursuant to this paragraph (d)(9)(iii)(C) shall be submitted 
to the Commission on Form CC.
    (iv) Coordinated testing. Participate in the industry- or sector-
wide coordinated testing of business recovery and disaster recovery 
plans required of SCI entities pursuant to Sec.  242.1004(c).
    (e) Amendment of the effective national market system plan(s) for 
NMS stocks. The participants to the effective national market system 
plan(s) for NMS stocks shall file with the Commission, pursuant to Sec.  
242.608, an amendment that includes the following provisions within 150 
calendar days from June 8, 2021:
    (1) Conforming the effective national market system plan(s) for NMS 
stocks to reflect provision of information with respect to quotations 
for and transactions in NMS stocks that is necessary to generate 
consolidated market

[[Page 90]]

data by the national securities exchange and national securities 
association participants to competing consolidators and self-
aggregators;
    (2) The application of timestamps by the national securities 
exchange and national securities association participants on all 
information with respect to quotations for and transactions in NMS 
stocks that is necessary to generate consolidated market data, including 
the time that such information was generated as applicable by the 
national securities exchange or national securities association and the 
time the national securities exchange or national securities association 
made such information available to competing consolidators and self-
aggregators;
    (3) Assessments of competing consolidator performance, including 
speed, reliability, and cost of data provision and the provision of an 
annual report of such assessment to the Commission, and the Commission 
will make the annual report publicly available on the Commission's 
website;
    (4) The development, maintenance, and publication of a list that 
identifies the primary listing exchange for each NMS stock; and
    (5) The calculation and publication on a monthly basis of 
consolidated market data gross revenues for NMS stocks as specified by:
    (i) Listed on the New York Stock Exchange (NYSE);
    (ii) Listed on Nasdaq; and
    (iii) Listed on exchanges other than NYSE or Nasdaq.

[86 FR 18811, Apr. 9, 2021

   Regulation SE--Registration and Regulation of Security-Based Swap 
                          Execution Facilities

    Source: 88 FR 87285, Dec. 15, 2023, unless otherwise noted.



Sec.  242.800  Scope.

    The provisions of Sec. Sec.  242.800 through 242.835 shall apply to 
every security-based swap execution facility that is registered or is 
applying to become registered as a security-based swap execution 
facility under section 3D of the Securities Exchange Act (``Act'').



Sec.  242.801  Applicable provisions.

    A security-based swap execution facility shall comply with the 
requirements of Sec. Sec.  242.800 through 242.835 and all other 
applicable Commission rules, including any related definitions and 
cross- referenced sections.



Sec.  242.802  Definitions.

    The following terms, and any other terms defined within Sec. Sec.  
242.800 through 242.835, are defined as follows solely for purposes of 
Sec. Sec.  242.800 through 242.835:
    Business day means the intraday period of time starting at 8:15 a.m. 
and ending at 4:45 p.m. eastern standard time or eastern daylight saving 
time, whichever is currently in effect in Washington, DC, on all days 
except Saturdays, Sundays, and Federal holidays in Washington, DC.
    Committee member means a member, or functional equivalent thereof, 
of any committee of a security-based swap execution facility.
    Correcting trade means a trade executed and submitted for clearing 
to a registered clearing agency with the same terms and conditions as an 
error trade other than any corrections to any operational or clerical 
error and the time of execution.
    Disciplinary committee means any person or committee of persons, or 
any subcommittee thereof, that is authorized by a security-based swap 
execution facility or SBS exchange to issue disciplinary charges, to 
conduct disciplinary proceedings, to settle disciplinary charges, to 
impose disciplinary sanctions, or to hear appeals thereof in cases 
involving any violation of the rules of the security-based swap 
execution facility or SBS exchange, except those cases where the person 
or committee is authorized summarily to impose minor penalties for 
violating rules regarding decorum, attire, the timely submission of 
accurate records for clearing or verifying each day's transactions, or 
other similar activities.
    Dormant product means:
    (1) Any security-based swap listed on security-based swap execution 
facility that has no open interest and in which no trading has occurred 
for a period of 12 complete calendar months following a certification 
to, or approval by, the Commission; provided, however, that

[[Page 91]]

no security-based swap initially and originally certified to, or 
approved by, the Commission within the preceding 36 complete calendar 
months shall be considered to be a dormant product;
    (2) Any security-based swap of a dormant security-based swap 
execution facility; or
    (3) Any security-based swap not otherwise a dormant product that a 
security-based swap execution facility self-declares through 
certification to be a dormant product.
    Dormant rule means:
    (1) Any rule of a security-based swap execution facility which 
remains unimplemented for 12 consecutive calendar months following a 
certification with, or an approval by, the Commission; or
    (2) Any rule or rule amendment of a dormant security-based swap 
execution facility.
    Dormant security-based swap execution facility means a security-
based swap execution facility on which no trading has occurred for the 
previous 12 consecutive calendar months; provided, however, that no 
security-based swap execution facility shall be considered to be a 
dormant security-based swap execution facility if its initial and 
original Commission order of registration was issued within the 
preceding 36 consecutive calendar months.
    Electronic trading facility means a trading facility that operates 
by means of an electronic or telecommunications network and maintains an 
automated audit trail of bids, offers, and the matching orders or the 
execution of transactions on the facility.
    Emergency means any occurrence or circumstance that, in the opinion 
of the governing board of a security-based swap execution facility, or a 
person or persons duly authorized to issue such an opinion on behalf of 
the governing board of the security-based swap execution facility under 
circumstances and pursuant to procedures that are specified by rule, 
requires immediate action and threatens or may threaten such things as 
the fair and orderly trading in, or the liquidation of or delivery 
pursuant to, any security-based swaps, including:
    (1) Any manipulative or attempted manipulative activity;
    (2) Any actual, attempted, or threatened corner, squeeze, 
congestion, or undue concentration of positions;
    (3) Any circumstances which may materially affect the performance of 
security-based swaps or transactions, including failure of the payment 
system or the bankruptcy or insolvency of any market participant;
    (4) Any action taken by any governmental body, or any other 
security-based swap execution facility, market, or facility which may 
have a direct impact on trading or clearing and settlement; and
    (5) Any other circumstance which may have a severe, adverse effect 
upon the functioning of the security-based swap execution facility.
    Employee means any person hired or otherwise employed on a salaried 
or contract basis by a security-based swap execution facility, but does 
not include:
    (1) Any governing board member compensated by the security-based 
swap execution facility solely for governing board activities; or
    (2) Any committee member compensated by a security-based swap 
execution facility solely for committee activities; or
    (3) Any consultant hired by a security-based swap execution 
facility.
    Error trade means any trade executed on or subject to the rules of a 
security-based swap execution facility that contains an operational or 
clerical error.
    Governing board means the board of directors of a security-based 
swap execution facility, or for a security-based swap execution facility 
whose organizational structure does not include a board of directors, a 
body performing a function similar to a board of directors.
    Governing board member means a member, or functional equivalent 
thereof, of the governing board of a security-based swap execution 
facility.
    Member, with respect to a national securities exchange, has the same 
meaning as in section 3(a)(3) of the Act. Member, with respect to a 
security-based swap execution facility, means an individual, 
association, partnership, corporation, or trust owning or holding

[[Page 92]]

a membership in, admitted to membership representation on, or having 
trading privileges on the security-based swap execution facility.
    Non-U.S. member means a member of a security-based swap execution 
facility that is not a U.S. person.
    Offsetting trade means a trade executed and submitted for clearing 
to a registered clearing agency with terms and conditions that 
economically reverse an error trade that was accepted for clearing.
    Order book means an electronic trading facility, a trading facility, 
or a trading system or platform in which all market participants in the 
trading system or platform have the ability to enter multiple bids and 
offers, observe or receive bids and offers entered by other market 
participants, and transact on such bids and offers.
    Oversight panel means any panel, or any subcommittee thereof, 
authorized by a security-based swap execution facility or security-based 
swap exchange (``SBS exchange'') to recommend or establish policies or 
procedures with respect to the surveillance, compliance, rule 
enforcement, or disciplinary responsibilities of the security-based swap 
execution facility or SBS exchange.
    Records has the meaning as in section 3(a)(37) of the Act (15 U.S.C. 
78c(a)(37)).
    Rule means any constitutional provision, article of incorporation, 
bylaw, rule, regulation, resolution, interpretation, stated policy, 
advisory, terms and conditions, trading protocol, agreement, or 
instrument corresponding thereto, including those that authorize a 
response or establish standards for responding to a specific emergency, 
and any amendment or addition thereto or repeal thereof, made or issued 
by a security-based swap execution facility or by the governing board 
thereof or any committee thereof, in whatever form adopted.
    SBS exchange means a national securities exchange that posts or 
makes available for trading security-based swaps.
    Security-based swap execution facility has the same meaning as in 
section 3(a)(77) of the Act (15 U.S.C. 78c(a)(77)) but does not include 
an entity that is registered with the Commission as a clearing agency 
pursuant to section 17A of the Act (15 U.S.C. 78q-1) and limits its 
security-based swap execution facility functions to operation of a 
trading session that is designed to further the accuracy of end-of-day 
valuations.
    Senior officer means the chief executive officer or other equivalent 
officer of a security-based swap execution facility.
    Terms and conditions means any definition of the trading unit or the 
specific asset underlying a security-based swap, description of the 
payments to be exchanged under a security-based swap, specification of 
cash settlement or delivery standards and procedures, and establishment 
of buyers' and sellers' rights and obligations under the security-based 
swap. Terms and conditions of a security-based swap include provisions 
relating to the following:
    (1) Identification of the major group, category, type, or class in 
which the security-based swap falls (such as a credit or equity 
security-based swap) and of any further sub-group, category, type, or 
class that further describes the security-based swap;
    (2) Notional amounts, quantity standards, or other unit size 
characteristics;
    (3) Any applicable premiums or discounts for delivery of a non-par 
product;
    (4) Trading hours and the listing of security-based swaps;
    (5) Pricing basis for establishing the payment obligations under, 
and mark-to-market value of, the security-based swap including, as 
applicable, the accrual start dates, termination, or maturity dates, 
and, for each leg of the security-based swap, the initial cash flow 
components, spreads, and points, and the relevant indexes, prices, 
rates, coupons, or other price reference measures;
    (6) Any price limits, trading halts, or circuit breaker provisions, 
and procedures for the establishment of daily settlement prices;
    (7) Payment and reset frequency, day count conventions, business 
calendars, and accrual features;

[[Page 93]]

    (8) If physical delivery applies, delivery standards and procedures, 
including fees related to delivery or the delivery process, alternatives 
to delivery, and applicable penalties or sanctions for failure to 
perform;
    (9) If cash-settled, the definition, composition, calculation, and 
revision of the cash settlement price, and the settlement currency;
    (10) Payment or collection of option premiums or margins;
    (11) Option exercise price, if it is constant, and method for 
calculating the exercise price, if it is variable;
    (12) Threshold prices for an option, the existence of which is 
contingent upon those prices;
    (13) Any restrictions or requirements for exercising an option; and
    (14) Life cycle events.
    Trading facility--(1) In general. The term trading facility means a 
person or group of persons that constitutes, maintains, or provides a 
physical or electronic facility or system in which multiple participants 
have the ability to execute or trade agreements, contracts, or 
transactions:
    (i) By accepting bids or offers made by other participants that are 
open to multiple participants in the facility or system; or
    (ii) Through the interaction of multiple bids or multiple offers 
within a system with a pre- determined non-discretionary automated trade 
matching and execution algorithm.
    (2) Exclusions. (i) The term trading facility does not include:
    (A) A person or group of persons solely because the person or group 
of persons constitutes, maintains, or provides an electronic facility or 
system that enables participants to negotiate the terms of and enter 
into bilateral transactions as a result of communications exchanged by 
the parties and not from interaction of multiple bids and multiple 
offers within a predetermined, nondiscretionary automated trade matching 
and execution algorithm;
    (B) A government securities dealer or government securities broker, 
to the extent that the dealer or broker executes or trades agreements, 
contracts, or transactions in government securities, or assists persons 
in communicating about, negotiating, entering into, executing, or 
trading an agreement, contract, or transaction in government securities 
(as the terms government securities dealer, government securities 
broker, and government securities are defined in section 3(a) of the 
Act); or
    (C) A facility on which bids and offers, and acceptances of bids and 
offers effected on the facility, are not binding.
    (ii) Any person, group of persons, dealer, broker, or facility 
described in paragraphs (2)(i)(A) through (C) of this definition of 
trading facility is excluded from the meaning of the term ``trading 
facility'' without any prior specific approval, certification, or other 
action by the Commission.
    (3) Special rule. A person or group of persons that would not 
otherwise constitute a trading facility shall not be considered to be a 
trading facility solely as a result of the submission to a registered 
clearing agency of transactions executed on or through the person or 
group of persons.
    U.S. person has the same meaning as in Sec.  240.3a71-3(a)(4) of 
this chapter.
    Note 1 to Sec.  242.802: The Commission has not yet adopted a 
definition of ``block trade.''



Sec.  242.803  Requirements and procedures for registration.

    (a) Requirements for registration. (1) Any person operating a 
facility that offers a trading system or platform in which more than one 
market participant has the ability to execute or trade security-based 
swaps with more than one other market participant on the system or 
platform shall register the facility as a security-based swap execution 
facility under this section or as a national securities exchange 
pursuant to section 6 of the Act.
    (2) A security-based swap execution facility shall, at a minimum, 
offer an order book.
    (3) A security-based swap execution facility is not required to 
provide an order book under this section for transactions defined in 
Sec.  242.815(d)(2), (3), and (4) except that a security-based swap 
execution facility must provide an order book under this section for 
Required Transactions that are components of transactions defined in

[[Page 94]]

Sec.  242.815(d)(2), (3), and (4) when such Required Transactions are 
not executed as components of transactions defined in Sec.  
242.815(d)(2), (3), and (4).
    (b) Procedures for full registration--(1) Request to register. An 
entity requesting registration as a security-based swap execution 
facility shall:
    (i) File electronically a complete Form SBSEF (referenced in Sec.  
249.1701), or any successor forms, and all information and documentation 
described in such forms with the Commission using the EDGAR system and, 
for the information specified in the Registration Instructions to Form 
SBSEF, as an Interactive Data File in accordance with Sec.  232.405 of 
this chapter; and
    (ii) Provide to the Commission, upon the Commission's request, any 
additional information and documentation necessary to review an 
application.
    (2) Request for confidential treatment. (i) An applicant requesting 
registration as a security-based swap execution facility shall identify 
with particularity any information in the application that will be 
subject to a request for confidential treatment pursuant to Sec.  
240.24b-2 of this chapter.
    (ii) As set forth in Sec.  242.808, certain information provided in 
an application shall be made publicly available.
    (3) Amendment of application prior to full registration. An 
applicant amending a pending application for registration as a security-
based swap execution facility or requesting an amendment to an order of 
registration shall file an amended application electronically with the 
Commission using the EDGAR system and, for the information specified in 
the Registration Instructions to Form SBSEF, as an Interactive Data File 
in accordance with Sec.  232.405 of this chapter.
    (4) Effect of incomplete application. If an application is 
incomplete pursuant to paragraph (b)(1) of this section, the Commission 
shall notify the applicant that its application will not be deemed to 
have been submitted for purposes of the Commission's review.
    (5) Commission review period. The Commission shall approve or deny 
an application for registration as a security-based swap execution 
facility within 180 days of the filing of the application. If the 
Commission notifies the person that its application is materially 
incomplete and specifies the deficiencies in the application, the 
running of the 180-day period shall be stayed from the time of such 
notification until the application is resubmitted in completed form, 
provided that the Commission shall have not less than 60 days to approve 
or deny the application from the time the application is resubmitted in 
completed form.
    (6) Commission determination. (i) The Commission shall issue an 
order granting registration upon a Commission determination, in its own 
discretion, that the applicant has demonstrated compliance with the Act 
and the Commission's rules applicable to security-based swap execution 
facilities. If deemed appropriate, the Commission may issue an order 
granting registration subject to conditions.
    (ii) The Commission may issue an order denying registration upon a 
Commission determination, in its own discretion, that the applicant has 
not demonstrated compliance with the Act and the Commission's rules 
applicable to security-based swap execution facilities. If the 
Commission denies an application, it shall specify the grounds for the 
denial.
    (c) Reinstatement of dormant registration. A dormant security-based 
swap execution facility may reinstate its registration under the 
procedures of paragraph (b) of this section. The applicant may rely upon 
previously submitted materials if such materials accurately describe the 
dormant security-based swap execution facility's conditions at the time 
that it applies for reinstatement of its registration.
    (d) Request for transfer of registration. (1) A security-based swap 
execution facility seeking to transfer its registration from its current 
legal entity to a new legal entity as a result of a corporate change 
shall file a request for approval to transfer such registration with the 
Commission in the form and manner specified by the Commission.
    (2) A request for transfer of registration shall be filed no later 
than three months prior to the anticipated corporate change; or in the 
event that the security-based swap execution facility could not have 
known of the anticipated change three months prior to the

[[Page 95]]

anticipated change, as soon as it knows of such change.
    (3) The request for transfer of registration shall include the 
following:
    (i) The underlying agreement that governs the corporate change;
    (ii) A description of the corporate change, including the reason for 
the change and its impact on the security-based swap execution facility, 
including its governance and operations, and its impact on the rights 
and obligations of members;
    (iii) A discussion of the transferee's ability to comply with the 
Act, including the core principles applicable to security-based swap 
execution facilities and the Commission's rules thereunder;
    (iv) The governing documents of the transferee, including, but not 
limited to, articles of incorporation and bylaws;
    (v) The transferee's rules marked to show changes from the current 
rules of the security-based swap execution facility;
    (vi) A representation by the transferee that it:
    (A) Will be the surviving entity and successor-in-interest to the 
transferor security-based swap execution facility and will retain and 
assume, without limitation, all of the assets and liabilities of the 
transferor;
    (B) Will assume responsibility for complying with all applicable 
provisions of the Act and the Commission's rules thereunder;
    (C) Will assume, maintain, and enforce all rules implementing and 
complying with the core principles applicable to security-based swap 
execution facilities, including the adoption of the transferor's 
rulebook, as amended in the request, and that any such amendments will 
be submitted to the Commission pursuant to Sec.  242.806 or Sec.  
242.807;
    (D) Will comply with all regulatory responsibilities except if 
otherwise indicated in the request, and will maintain and enforce all 
regulatory programs; and
    (E) Will notify members of all changes to the transferor's rulebook 
prior to the transfer and will further notify members of the concurrent 
transfer of the registration to the transferee upon Commission approval 
and issuance of an order permitting this transfer.
    (vii) A representation by the transferee that upon the transfer:
    (A) It will assume responsibility for and maintain compliance with 
core principles for all security-based swaps previously made available 
for trading through the transferor, whether by certification or 
approval; and
    (B) None of the proposed rule changes will affect the rights and 
obligations of any member.
    (4) Upon review of a request for transfer of registration, the 
Commission, as soon as practicable, shall issue an order either 
approving or denying the request.
    (e) Request for withdrawal of application for registration. An 
applicant for registration as a security-based swap execution facility 
may withdraw its application submitted pursuant to paragraph (b) of this 
section by filing a withdrawal request electronically with the 
Commission using the EDGAR system. Withdrawal of an application for 
registration shall not affect any action taken or to be taken by the 
Commission based upon actions, activities, or events occurring during 
the time that the application was pending with the Commission.
    (f) Request for vacation of registration. A security-based swap 
execution facility may request that its registration be vacated by 
filing a vacation request electronically with the Commission using the 
EDGAR system at least 90 days prior to the date that the vacation is 
requested to take effect. Upon receipt of such request, the Commission 
shall promptly order the vacation to be effective upon the date named in 
the request and send a copy of the request and its order to all other 
security-based swap execution facilities, SBS exchanges, and registered 
clearing agencies that clear security-based swaps. Vacation of 
registration shall not affect any action taken or to be taken by the 
Commission based upon actions, activities, or events occurring during 
the time that the security-based swap execution facility was registered 
by the Commission. From and after the date upon which the vacation 
became effective the said security-based swap execution facility can 
thereafter be

[[Page 96]]

registered again by applying to the Commission in the manner provided in 
paragraph (b) of this section for an original application.



Sec.  242.804  Listing products for trading by certification.

    (a) General. A security-based swap execution facility must comply 
with the submission requirements of this section prior to listing a 
product for trading that has not been approved under Sec.  242.805 or 
that remains a dormant product subsequent to being submitted under this 
section or approved under Sec.  242.805. A submission shall comply with 
the following conditions:
    (1) The security-based swap execution facility has filed its 
submission electronically with the Commission using the EFFS system;
    (2) The Commission has received the submission by the open of 
business on the business day that is 10 business days preceding the 
product's listing; and
    (3) The submission includes:
    (i) A copy of the submission cover sheet in accordance with the 
instructions therein;
    (ii) A copy of the product's rules, including all rules related to 
its terms and conditions;
    (iii) The intended listing date;
    (iv) A certification by the security-based swap execution facility 
that the product to be listed complies with the Act and the Commission's 
rules thereunder;
    (v) A concise explanation and analysis of the product and its 
compliance with applicable provisions of the Act, including core 
principles, and the Commission's rules thereunder. This explanation and 
analysis shall either be accompanied by the documentation relied upon to 
establish the basis for compliance with applicable law, or incorporate 
information contained in such documentation, with appropriate citations 
to data sources;
    (vi) A certification that the security-based swap execution facility 
posted a notice of pending product certification with the Commission and 
a copy of the submission, concurrent with the filing of a submission 
with the Commission, on the security-based swap execution facility's 
website. Information that the security-based swap execution facility 
seeks to keep confidential may be redacted from the documents published 
on the security-based swap execution's website but must be republished 
consistent with any determination made pursuant to Sec.  240.24b-2 of 
this chapter; and
    (vii) A request for confidential treatment, if appropriate, as 
permitted under Sec.  240.24b-2 of this chapter.
    (b) Additional information. If requested by Commission staff, a 
security-based swap execution facility shall provide any additional 
evidence, information, or data that demonstrates that the security-based 
swap meets, initially or on a continuing basis, the requirements of the 
Act or the Commission's rules or policies thereunder.
    (c) Stay of certification of product--(1) General. The Commission 
may stay the certification of a product submitted pursuant to paragraph 
(a) of this section by issuing a notification informing the security-
based swap execution facility that the Commission is staying the 
certification of the product on the grounds that the product presents 
novel or complex issues that require additional time to analyze, the 
product is accompanied by an inadequate explanation, or the product is 
potentially inconsistent with the Act or the Commission's rules 
thereunder. The Commission will have an additional 90 days from the date 
of the notification to conduct the review.
    (2) Public comment. The Commission shall provide a 30-day comment 
period within the 90-day period in which the stay is in effect, as 
described in paragraph (c)(1) of this section. The Commission shall 
publish a notice of the 30-day comment period on the Commission's 
website. Comments from the public shall be submitted as specified in 
that notice.
    (3) Expiration of a stay of certification of product. A product 
subject to a stay pursuant to this paragraph shall become effective, 
pursuant to the certification, at the expiration of the 90-day review 
period described in paragraph (c)(1) of this section, unless the 
Commission withdraws the stay prior to that time, or the Commission 
notifies the security-based swap execution facility during the 90-day 
time period

[[Page 97]]

that it objects to the proposed certification on the grounds that the 
product is inconsistent with the Act or the Commission's rules.



Sec.  242.805  Voluntary submission of new products for Commission
review and approval.

    (a) Request for approval. A security-based swap execution facility 
may request that the Commission approve a new or dormant product prior 
to listing the product for trading, or if a product was initially 
submitted under Sec.  242.804, subsequent to listing the product for 
trading. A submission requesting approval shall:
    (1) Be filed electronically with the Commission using the EFFS 
system;
    (2) Include a copy of the submission cover sheet in accordance with 
the instructions therein;
    (3) Include a copy of the rules that set forth the security-based 
swap's terms and conditions;
    (4) Include an explanation and analysis of the product and its 
compliance with applicable provisions of the Act, including the core 
principles and the Commission's rules thereunder. This explanation and 
analysis shall either be accompanied by the documentation relied upon to 
establish the basis for compliance with the applicable law, or 
incorporate information contained in such documentation, with 
appropriate citations to data sources;
    (5) Describe any agreements or contracts entered into with other 
parties that enable the security-based swap execution facility to carry 
out its responsibilities;
    (6) Include, if appropriate, a request for confidential treatment as 
permitted under Sec.  240.24b-2 of this chapter;
    (7) Certify that the security-based swap execution facility posted a 
notice of its request for Commission approval of the new product and a 
copy of the submission, concurrent with the filing of a submission with 
the Commission, on the security-based swap execution facility's website. 
Information that the security-based swap execution facility seeks to 
keep confidential may be redacted from the documents published on the 
security-based swap execution facility's website but must be republished 
consistent with any determination made pursuant to Sec.  240.24b-2 of 
this chapter; and
    (8) Include, if requested by Commission staff, additional evidence, 
information, or data demonstrating that the security-based swap meets, 
initially or on a continuing basis, the requirements of the Act, or 
other requirement for registration under the Act, or the Commission's 
rules or policies thereunder. The security-based swap execution facility 
shall submit the requested information by the open of business on the 
date that is two business days from the date of request by Commission 
staff, or at the conclusion of such extended period agreed to by 
Commission staff after timely receipt of a written request from the 
security-based swap execution facility.
    (b) Standard for review and approval. The Commission shall approve a 
new product unless the terms and conditions of the product violate the 
Act or the Commission's rules thereunder.
    (c) Forty-five-day review. A product submitted for Commission 
approval under this paragraph shall be deemed approved by the Commission 
45 days after receipt by the Commission, or at the conclusion of an 
extended period as provided under paragraph (d) of this section, unless 
notified otherwise within the applicable period, if:
    (1) The submission complies with the requirements of paragraph (a) 
of this section; and
    (2) The submitting security-based swap execution facility does not 
amend the terms or conditions of the product or supplement the request 
for approval, except as requested by the Commission or for correction of 
typographical errors, renumbering, or other non-substantive revisions, 
during that period. Any voluntary, substantive amendment by the 
security-based swap execution facility will be treated as a new 
submission under this section.
    (d) Extension of time. The Commission may extend the 45-day review 
period in paragraph (c) of this section for:
    (1) An additional 45 days, if the product raises novel or complex 
issues that require additional time to analyze, in which case the 
Commission shall notify the security-based swap execution facility 
within the initial 45-day review period and shall briefly describe the

[[Page 98]]

nature of the specific issue(s) for which additional time for review is 
required; or
    (2) Any extended review period to which the security-based swap 
execution facility agrees in writing.
    (e) Notice of non-approval. The Commission, at any time during its 
review under this section, may notify the security-based swap execution 
facility that it will not, or is unable to, approve the product. This 
notification will briefly specify the nature of the issues raised and 
the specific provision of the Act or the Commission's rules thereunder, 
including the form or content requirements of paragraph (a) of this 
section, that the product violates, appears to violate, or potentially 
violates but which cannot be ascertained from the submission.
    (f) Effect of non-approval. (1) Notification to a security-based 
swap execution facility under paragraph (e) of this section of the 
Commission's determination not to approve a product does not prejudice 
the security-based swap execution facility from subsequently submitting 
a revised version of the product for Commission approval, or from 
submitting the product as initially proposed pursuant to a supplemented 
submission.
    (2) Notification to a security-based swap execution facility under 
paragraph (e) of this section of the Commission's refusal to approve a 
product shall be presumptive evidence that the security-based swap 
execution facility may not truthfully certify under Sec.  242.804 that 
the same, or substantially the same, product does not violate the Act or 
the Commission's rules thereunder.



Sec.  242.806  Voluntary submission of rules for Commission review
and approval.

    (a) Request for approval of rules. A security-based swap execution 
facility may request that the Commission approve a new rule, rule 
amendment, or dormant rule prior to implementation of the rule, or if 
the request was initially submitted under Sec.  242.806 or Sec.  
242.807, subsequent to implementation of the rule. A request for 
approval shall:
    (1) Be filed electronically with the Commission using the EFFS 
system;
    (2) Include a copy of the submission cover sheet in accordance with 
the instructions therein;
    (3) Set forth the text of the rule or rule amendment (in the case of 
a rule amendment, deletions and additions must be indicated);
    (4) Describe the proposed effective date of the rule or rule 
amendment and any action taken or anticipated to be taken to adopt the 
proposed rule by the security-based swap execution facility or by its 
governing board or by any committee thereof, and cite the rules of the 
security-based swap execution facility that authorize the adoption of 
the proposed rule;
    (5) Provide an explanation and analysis of the operation, purpose, 
and effect of the proposed rule or rule amendment and its compliance 
with applicable provisions of the Act, including the core principles 
relating to security-based swap execution facilities and the 
Commission's rules thereunder and, as applicable, a description of the 
anticipated benefits to market participants or others, any potential 
anticompetitive effects on market participants or others, and how the 
rule fits into the security-based swap execution facility's framework of 
regulation;
    (6) Certify that the security-based swap execution facility posted a 
notice of the pending rule with the Commission and a copy of the 
submission, concurrent with the filing of a submission with the 
Commission, on the security-based swap execution facility's website. 
Information that the security-based swap execution facility seeks to 
keep confidential may be redacted from the documents published on the 
security-based swap execution facility's website but must be republished 
consistent with any determination made pursuant to Sec.  240.24b-2 of 
this chapter;
    (7) Provide additional information which may be beneficial to the 
Commission in analyzing the new rule or rule amendment. If a proposed 
rule affects, directly or indirectly, the application of any other rule 
of the security-based swap execution facility, the pertinent text of any 
such rule must be set forth and the anticipated effect described;

[[Page 99]]

    (8) Provide a brief explanation of any substantive opposing views 
expressed to the security-based swap execution facility by governing 
board or committee members, members of the security-based swap execution 
facility, or market participants that were not incorporated into the 
rule, or a statement that no such opposing views were expressed; and
    (9) As appropriate, include a request for confidential treatment as 
permitted under Sec.  240.24b-2 of this chapter.
    (b) Standard for review and approval. The Commission shall approve a 
new rule or rule amendment unless the rule or rule amendment is 
inconsistent with the Act or the Commission's rules thereunder.
    (c) Forty-five-day review. A rule or rule amendment submitted for 
Commission approval under paragraph (a) of this section shall be deemed 
approved by the Commission 45 days after receipt by the Commission, or 
at the conclusion of such extended period as provided under paragraph 
(d) of this section, unless the security-based swap execution facility 
is notified otherwise within the applicable period, if:
    (1) The submission complies with the requirements of paragraph (a) 
of this section;
    (2) The security-based swap execution facility does not amend the 
proposed rule or supplement the submission, except as requested by the 
Commission, during the pendency of the review period, other than for 
correction of typographical errors, renumbering, or other non- 
substantive revisions. Any amendment or supplementation not requested by 
the Commission will be treated as the submission of a new filing under 
this section.
    (d) Extension of time for review. The Commission may further extend 
the review period in paragraph (c) of this section for:
    (1) An additional 45 days, if the proposed rule or rule amendment 
raises novel or complex issues that require additional time for review 
or is of major economic significance, the submission is incomplete, or 
the requestor does not respond completely to Commission questions in a 
timely manner, in which case the Commission shall notify the submitting 
security-based swap execution facility within the initial 45-day review 
period and shall briefly describe the nature of the specific issues for 
which additional time for review shall be required; or
    (2) Any period, beyond the additional 45 days provided in paragraph 
(d)(1) of this section, to which the security-based swap execution 
facility agrees in writing.
    (e) Notice of non-approval. Any time during its review under this 
section, the Commission may notify the security-based swap execution 
facility that it will not, or is unable to, approve the new rule or rule 
amendment. This notification will briefly specify the nature of the 
issues raised and the specific provision of the Act or the Commission's 
rules thereunder, including the form or content requirements of this 
section, with which the new rule or rule amendment is inconsistent or 
appears to be inconsistent with the Act or the Commission's rules 
thereunder.
    (f) Effect of non-approval. (1) Notification to a security-based 
swap execution facility under paragraph (e) of this section does not 
prevent the security-based swap execution facility from subsequently 
submitting a revised version of the proposed rule or rule amendment for 
Commission review and approval or from submitting the new rule or rule 
amendment as initially proposed in a supplemented submission. The 
revised submission will be reviewed without prejudice.
    (2) Notification to a security-based swap execution facility under 
paragraph (e) of this section of the Commission's determination not to 
approve a proposed rule or rule amendment shall be presumptive evidence 
that the security-based swap execution facility may not truthfully 
certify the same, or substantially the same, proposed rule or rule 
amendment under Sec.  242.807(a).
    (g) Expedited approval. Notwithstanding the provisions of paragraph 
(c) of this section, changes to a proposed rule or a rule amendment, 
including changes to terms and conditions of a product that are 
consistent with the Act and the Commission's rules thereunder, may be 
approved by the Commission at such time and

[[Page 100]]

under such conditions as the Commission shall specify in the written 
notification; provided, however, that the Commission may, at any time, 
alter or revoke the applicability of such a notice to any particular 
product or rule amendment.



Sec.  242.807  Self-certification of rules.

    (a) Required certification. A security-based swap execution facility 
shall comply with the following conditions prior to implementing any 
rule--other than a rule delisting or withdrawing the certification of a 
product with no open interest and submitted in compliance with 
paragraphs (a)(1), (2), and (6) of this section--that has not obtained 
Commission approval under Sec.  242.806, or that remains a dormant rule 
subsequent to being submitted under this section or approved under Sec.  
242.806.
    (1) The security-based swap execution facility has filed its 
submission electronically with the Commission using the EFFS system.
    (2) The security-based swap execution facility has provided a 
certification that it posted a notice of pending certification with the 
Commission and a copy of the submission, concurrent with the filing of a 
submission with the Commission, on the security-based swap execution 
facility's website. Information that the security-based swap execution 
facility seeks to keep confidential may be redacted from the documents 
published on the security-based swap execution facility's website, but 
it must be republished consistent with any determination made pursuant 
to Sec.  240.24b-2 of this chapter.
    (3) The Commission has received the submission not later than the 
open of business on the business day that is 10 business days prior to 
the security-based swap execution facility's implementation of the rule 
or rule amendment.
    (4) The Commission has not stayed the submission pursuant to Sec.  
242.807(c).
    (5) A new rule or rule amendment that establishes standards for 
responding to an emergency shall be submitted pursuant to Sec.  
242.807(a). A rule or rule amendment implemented under procedures of the 
governing board to respond to an emergency shall, if practicable, be 
filed with the Commission prior to implementation or, if not 
practicable, be filed with the Commission at the earliest possible time 
after implementation, but in no event more than 24 hours after 
implementation. Any such submission shall be subject to the 
certification and stay provisions of paragraphs (b) and (c) of this 
section.
    (6) The rule submission shall include:
    (i) A copy of the submission cover sheet in accordance with the 
instructions therein (in the case of a rule or rule amendment that 
responds to an emergency, ``Emergency Rule Certification'' should be 
noted in the description section of the submission cover sheet);
    (ii) The text of the rule (in the case of a rule amendment, 
deletions and additions must be indicated);
    (iii) The date of intended implementation;
    (iv) A certification by the security-based swap execution facility 
that the rule complies with the Act and the Commission's rules 
thereunder;
    (v) A concise explanation and analysis of the operation, purpose, 
and effect of the proposed rule or rule amendment and its compliance 
with applicable provisions of the Act, including core principles 
relating to security-based swap execution facilities and the 
Commission's rules thereunder;
    (vi) A brief explanation of any substantive opposing views expressed 
to the security-based swap execution facility by governing board or 
committee members, members of the security-based swap execution 
facility, or market participants, that were not incorporated into the 
rule, or a statement that no such opposing views were expressed; and
    (vii) As appropriate, a request for confidential treatment pursuant 
to the procedures provided in Sec.  240.24b-2 of this chapter.
    (7) The security-based swap execution facility shall provide, if 
requested by Commission staff, additional evidence, information, or data 
that may be beneficial to the Commission in conducting a due diligence 
assessment of the filing and the security-based swap execution 
facility's compliance with any of the requirements of the Act or the 
Commission's rules or policies thereunder.

[[Page 101]]

    (b) Review by the Commission. The Commission shall have 10 business 
days to review the new rule or rule amendment before the new rule or 
rule amendment is deemed certified and can be made effective, unless the 
Commission notifies the security-based swap execution facility during 
the 10-business-day review period that it intends to issue a stay of the 
certification under paragraph (c) of this section.
    (c) Stay--(1) Stay of certification of new rule or rule amendment. 
The Commission may stay the certification of a new rule or rule 
amendment submitted pursuant to paragraph (a) of this section by issuing 
a notification informing the security-based swap execution facility that 
the Commission is staying the certification of the rule or rule 
amendment on the grounds that the rule or rule amendment presents novel 
or complex issues that require additional time to analyze, the rule or 
rule amendment is accompanied by an inadequate explanation, or the rule 
or rule amendment is potentially inconsistent with the Act or the 
Commission's rules thereunder. The Commission will have an additional 90 
days from the date of the notification to conduct the review.
    (2) Public comment. The Commission shall provide a 30-day comment 
period within the 90-day period in which the stay is in effect, as 
described in paragraph (c)(1) of this section. The Commission shall 
publish a notice of the 30-day comment period on the Commission website. 
Comments from the public shall be submitted as specified in that notice.
    (3) Expiration of a stay of certification of new rule or rule 
amendment. A new rule or rule amendment subject to a stay pursuant to 
this paragraph shall become effective, pursuant to the certification, at 
the expiration of the 90-day review period described in paragraph (c)(1) 
of this section, unless the Commission withdraws the stay prior to that 
time, or the Commission notifies the security-based swap execution 
facility during the 90-day time period that it objects to the proposed 
certification on the grounds that the proposed rule or rule amendment is 
inconsistent with the Act or the Commission's rules thereunder.
    (d) Notification of rule amendments. Notwithstanding the rule 
certification requirement of paragraph (a) of this section, a security-
based swap execution facility may place the following rules or rule 
amendments into effect without certification to the Commission if the 
following conditions are met:
    (1) The security-based swap execution facility provides to the 
Commission at least weekly a summary notice of all rule amendments made 
effective pursuant to this paragraph during the preceding week. Such 
notice must be labeled ``Weekly Notification of Rule Amendments'' and 
need not be filed for weeks during which no such actions have been 
taken. One copy of each such submission shall be furnished 
electronically using the EFFS system; and
    (2) The rule governs:
    (i) Non-substantive revisions. Corrections of typographical errors, 
renumbering, periodic routine updates to identifying information about 
the security-based swap execution facility, and other such non-
substantive revisions of a product's terms and conditions that have no 
effect on the economic characteristics of the product;
    (ii) Fees. Fees or fee changes, other than fees or fee changes 
associated with market making or trading incentive programs, that:
    (A) Total $1.00 or more per contract, and
    (B) Are established by an independent third party or are unrelated 
to delivery, trading, clearing, or dispute resolution.
    (iii) Survey lists. Changes to lists of banks, brokers, dealers, or 
other entities that provide price or cash market information to an 
independent third party and that are incorporated by reference as 
product terms;
    (iv) Approved brands. Changes in lists of approved brands or 
markings pursuant to previously certified or Commission approved 
standards or criteria;
    (v) Trading months. The initial listing of trading months, which may 
qualify for implementation without notice pursuant to paragraph 
(d)(3)(ii)(F) of this section, within the currently established cycle of 
trading months; or
    (vi) Minimum tick. Reductions in the minimum price fluctuation (or 
``tick'').

[[Page 102]]

    (3) Notification of rule amendments not required. Notwithstanding 
the rule certification requirements of paragraph (a) of this section, a 
security-based swap execution facility may place the following rules or 
rule amendments into effect without certification or notice to the 
Commission if the following conditions are met:
    (i) The security-based swap execution facility maintains 
documentation regarding all changes to rules; and
    (ii) The rule governs:
    (A) Transfer of membership or ownership. Procedures and forms for 
the purchase, sale, or transfer of membership or ownership, but not 
including qualifications for membership or ownership, any right or 
obligation of membership or ownership, or dues or assessments;
    (B) Administrative procedures. The organization and administrative 
procedures of a security-based swap execution facility's governing 
bodies such as a governing board, officers, and committees, but not 
voting requirements, governing board, or committee composition 
requirements or procedures, decision-making procedures, use or 
disclosure of material non-public information gained through the 
performance of official duties, or requirements relating to conflicts of 
interest;
    (C) Administration. The routine daily administration, direction, and 
control of employees, requirements relating to gratuity and similar 
funds, but not guaranty, reserves, or similar funds; declaration of 
holidays; and changes to facilities housing the market, trading floor, 
or trading area;
    (D) Standards of decorum. Standards of decorum or attire or similar 
provisions relating to admission to the floor, badges, or visitors, but 
not the establishment of penalties for violations of such rules;
    (E) Fees. Fees or fee changes, other than fees or fee changes 
associated with market making or trading incentive programs, that:
    (1) Are less than $1.00; or
    (2) Relate to matters such as dues, badges, telecommunication 
services, booth space, real-time quotations, historical information, 
publications, software licenses, or other matters that are 
administrative in nature; and
    (F) Trading months. The initial listing of trading months which are 
within the currently established cycle of trading months.



Sec.  242.808  Availability of public information.

    (a) The Commission shall make publicly available on its website the 
following parts of an application to register as a security-based swap 
execution facility, unless confidential treatment is obtained pursuant 
to Sec.  240.24b-2 of this chapter:
    (1) Transmittal letter and first page of the application cover 
sheet;
    (2) Exhibit C;
    (3) Exhibit G;
    (4) Exhibit L; and
    (5) Exhibit M.
    (b) The Commission shall make publicly available on its website, 
unless confidential treatment is obtained pursuant to Sec.  240.24b-2 of 
this chapter, a security-based swap execution facility's filing of new 
products pursuant to the self-certification procedures of Sec.  242.804, 
new products for Commission review and approval pursuant to Sec.  
242.805, new rules and rule amendments for Commission review and 
approval pursuant to Sec.  242.806, and new rules and rule amendments 
pursuant to the self-certification procedures of Sec.  242.807.
    (c) The terms and conditions of a product submitted to the 
Commission pursuant to Sec.  242.804, Sec.  242.805, Sec.  242.806, or 
Sec.  242.807 shall be made publicly available at the time of submission 
unless confidential treatment is obtained pursuant to Sec.  240.24b-2 of 
this chapter.



Sec.  242.809  Staying of certification and tolling of review period
pending jurisdictional determination.

    (a) A product certification made by a security-based swap execution 
facility pursuant to Sec.  242.804 shall be stayed, or the review period 
for a product that has been submitted for Commission approval by a 
security-based swap execution facility pursuant to Sec.  242.805 shall 
be tolled, upon request for a joint interpretation of whether the 
product is a swap, security-based swap, or mixed swap made pursuant to 
Sec.  240.3a68-2 of this chapter by the security-based swap execution 
facility, the Commission, or

[[Page 103]]

the Commodity Futures Trading Commission.
    (b) The Commission shall provide the security-based swap execution 
facility with a written notice of the stay or tolling pending issuance 
of a joint interpretation.
    (c) The stay shall be withdrawn, or the approval review period shall 
resume, if a joint interpretation finding that the Commission has 
jurisdiction over the product is issued.



Sec.  242.810  Product filings by security-based swap execution
facilities that are not yet registered and by dormant security-based
swap execution facilities.

    (a) An applicant for registration as a security-based swap execution 
facility may submit a security-based swap's terms and conditions prior 
to listing the product as part of its application for registration.
    (b) Any security-based swap terms and conditions or rules submitted 
as part of a security-based swap execution facility's application for 
registration shall be considered for approval by the Commission at the 
time the Commission issues the security-based swap execution facility's 
order of registration.
    (c) After the Commission issues the order of registration, the 
security-based swap execution facility shall submit a security-based 
swap's terms and conditions, including amendments to such terms and 
conditions, new rules, or rule amendments pursuant to the procedures in 
Sec. Sec.  242.804, 242.805, 242.806, and 242.807.
    (d) Any security-based swap terms and conditions or rules submitted 
as part of an application to reinstate the registration of a dormant 
security-based swap execution facility shall be considered for approval 
by the Commission at the time the Commission approves the reinstatement 
of registration of the dormant security-based swap execution facility.



Sec.  242.811  Information relating to security-based swap execution 
facility compliance.

    (a) Request for information. Upon the Commission's request, a 
security-based swap execution facility shall file with the Commission 
information related to its business as a security-based swap execution 
facility in the form and manner, and within the timeframe, specified by 
the Commission.
    (b) Demonstration of compliance. Upon the Commission's request, a 
security-based swap execution facility shall file with the Commission a 
written demonstration, containing supporting data, information, and 
documents, that it is in compliance with one or more core principles or 
with its other obligations under the Act or the Commission's rules 
thereunder, as the Commission specifies in its request. The security-
based swap execution facility shall file such written demonstration in 
the form and manner, and within the timeframe, specified by the 
Commission.
    (c) Equity interest transfer--(1) Equity interest transfer 
notification. A security-based swap execution facility shall file with 
the Commission a notification of any transaction involving the direct or 
indirect transfer of 50 percent or more of the equity interest in the 
security-based swap execution facility. The Commission may, upon 
receiving such notification, request supporting documentation of the 
transaction.
    (2) Timing of notification. The equity interest transfer notice 
described in paragraph (c)(1) of this section shall be filed with the 
Commission in a form and manner specified by the Commission at the 
earliest possible time, but in no event later than the open of business 
10 business days following the date upon which the security-based swap 
execution facility enters into a firm obligation to transfer the equity 
interest.
    (3) Rule filing. Notwithstanding the foregoing, if any aspect of an 
equity interest transfer described in paragraph (c)(1) of this section 
requires a security-based swap execution facility to file a rule, the 
security-based swap execution facility shall comply with the applicable 
rule filing requirements of Sec.  242.806 or Sec.  242.807.
    (4) Certification. Upon an equity interest transfer described in 
paragraph (c)(1) of this section, the security-based swap execution 
facility shall file with the Commission, in a form and manner specified 
by the Commission, a certification that the security-based swap

[[Page 104]]

execution facility meets all of the requirements of section 3D of the 
Act and the Commission rules thereunder, no later than two business days 
following the date on which the equity interest of 50 percent or more 
was acquired.
    (d) Pending legal proceedings. (1) A security-based swap execution 
facility shall submit to the Commission a copy of the complaint, any 
dispositive or partially dispositive decision, any notice of appeal 
filed concerning such decision, and such further documents as the 
Commission may thereafter request filed in any material legal proceeding 
to which the security-based swap execution facility is a party or its 
property or assets is subject.
    (2) A security-based swap execution facility shall submit to the 
Commission a copy of the complaint, any dispositive or partially 
dispositive decision, any notice of appeal filed concerning such 
decision, and such further documents as the Commission may thereafter 
request filed in any material legal proceeding instituted against any 
officer, director, or other official of the security-based swap 
execution facility from conduct in such person's capacity as an official 
of the security-based swap execution facility and alleging violations 
of:
    (i) The Act or any rule, regulation, or order under the Act;
    (ii) The constitution, bylaws, or rules of the security-based swap 
execution facility; or
    (iii) The applicable provisions of State law relating to the duties 
of officers, directors, or other officials of business organizations.
    (3) All documents required by this paragraph (d) to be submitted to 
the Commission shall be submitted electronically in a form and manner 
specified by the Commission within 10 days after the initiation of the 
legal proceedings to which they relate, after the date of issuance, or 
after receipt by the security-based swap execution facility of the 
notice of appeal, as the case may be.
    (4) For purposes of this paragraph (d), a ``material legal 
proceeding'' includes but is not limited to actions involving alleged 
violations of the Act or the Commission rules thereunder. However, a 
legal proceeding is not ``material'' for the purposes of this rule if 
the proceeding is not in a Federal or State court or if the Commission 
is a party.



Sec.  242.812  Enforceability.

    (a) A transaction entered into on or pursuant to the rules of a 
security-based swap execution facility shall not be void, voidable, 
subject to rescission, otherwise invalidated, or rendered unenforceable 
as a result of a violation by the security-based swap execution facility 
of the provisions of section 3D of the Act or the Commission's rules 
thereunder.
    (b) A security-based swap execution facility shall, as soon as 
technologically practicable after the time of execution of a transaction 
entered into on or pursuant to the rules of the facility, provide a 
written record to each counterparty of all of the terms of the 
transaction that were agreed to on the facility, which shall legally 
supersede any previous agreement regarding such terms.



Sec.  242.813  Prohibited use of data collected for regulatory purposes.

    A security-based swap execution facility shall not use for business 
or marketing purposes any proprietary data or personal information it 
collects or receives, from or on behalf of any person, for the purpose 
of fulfilling its regulatory obligations; provided, however, that a 
security-based swap execution facility may use such data or information 
for business or marketing purposes if the person from whom it collects 
or receives such data or information clearly consents to the security-
based swap execution facility's use of such data or information in such 
manner. A security-based swap execution facility shall not condition 
access to its market(s) or market services on a person's consent to the 
security-based swap execution facility's use of proprietary data or 
personal information for business or marketing purposes. A security-
based swap execution facility, where necessary for regulatory purposes, 
may share such data or information with one or more security-based swap 
execution facilities or national securities exchanges registered with 
the Commission.

[[Page 105]]



Sec.  242.814  Entity operating both a national securities exchange 
and security-based swap execution facility.

    (a) An entity that intends to operate both a national securities 
exchange and a security-based swap execution facility shall separately 
register the two facilities pursuant to section 6 of the Act and Sec.  
242.803, respectively.
    (b) A national securities exchange shall, to the extent that the 
exchange also operates a security-based swap execution facility and uses 
the same electronic trade execution system for listing and executing 
trades of security-based swaps on or through the exchange and the 
facility, identify whether electronic trading of such security-based 
swaps is taking place on or through the national securities exchange or 
the security-based swap execution facility.



Sec.  242.815  Methods of execution for Required and Permitted
Transactions.

    (a) Execution methods for Required Transactions--(1) Required 
Transaction means any transaction involving a security-based swap that 
is subject to the trade execution requirement in section 3C(h) of the 
Act.
    (2) Execution methods. (i) Each Required Transaction that is not a 
block trade shall be executed on a security-based swap execution 
facility in accordance with one of the following methods of execution, 
except as provided in paragraph (d) or (e) of this section:
    (A) An order book; or
    (B) A request-for-quote system that operates in conjunction with an 
order book.
    (ii) In providing either one of the execution methods set forth in 
paragraph (a)(2)(i)(A) or (B) of this section, a security-based swap 
execution facility may for purposes of execution and communication use 
any means of interstate commerce, including, but not limited to, the 
mail, internet, email, and telephone, provided that the chosen execution 
method satisfies the requirements for order books in Sec.  242.802 of 
this chapter or in paragraph (a)(3) of this section for request-for-
quote systems.
    (3) Request-for-quote system means a trading system or platform in 
which a market participant transmits a request for a quote to buy or 
sell a specific instrument to no less than three market participants in 
the trading system or platform, to which all such market participants 
may respond. The three market participants shall not be affiliates of or 
controlled by the requester and shall not be affiliates of or controlled 
by each other. A security-based swap execution facility that offers a 
request-for-quote system in connection with Required Transactions shall 
provide the following functionality:
    (i) At the same time that the requester receives the first 
responsive bid or offer, the security-based swap execution facility 
shall communicate to the requester any firm bid or offer pertaining to 
the same instrument resting on any of the security-based swap execution 
facility's order books;
    (ii) The security-based swap execution facility shall provide the 
requester with the ability to execute against such firm resting bids or 
offers along with any responsive orders; and
    (iii) The security-based swap execution facility shall ensure that 
its trading protocols provide each of its market participants with equal 
priority in receiving requests for quotes and in transmitting and 
displaying for execution responsive orders.
    (b) Time delay requirement for Required Transactions on an order 
book--(1) Time delay requirement. With regard to Required Transactions, 
a security-based swap execution facility shall require that a broker or 
dealer who seeks to either execute against its customer's order or 
execute two of its customers' orders against each other through the 
security-based swap execution facility's order book, following some form 
of pre-arrangement or pre-negotiation of such orders, be subject to at 
least a 15-second time delay between the entry of those two orders into 
the order book, such that one side of the potential transaction is 
disclosed and made available to other market participants before the 
second side of the potential transaction, whether for the broker's or 
dealer's own account or for a second customer, is submitted for 
execution.
    (2) Adjustment of time delay requirement. A security-based swap 
execution facility may adjust the time period of

[[Page 106]]

the 15-second time delay requirement described in paragraph (b)(1) of 
this section, based upon a security-based swap's liquidity or other 
product-specific considerations; however, the time delay shall be set 
for a sufficient period of time so that an order is exposed to the 
market and other market participants have a meaningful opportunity to 
execute against such order.
    (c) Execution methods for Permitted Transactions. (1) Permitted 
Transaction means any transaction not involving a security-based swap 
that is subject to the trade execution requirement in section 3C(h) of 
the Act.
    (2) Execution methods. A security-based swap execution facility may 
offer any method of execution for each Permitted Transaction.
    (d) Exceptions to required methods of execution for package 
transactions. (1) For purposes of this paragraph, a package transaction 
consists of two or more component transactions executed between two or 
more counterparties where:
    (i) At least one component transaction is a Required Transaction;
    (ii) Execution of each component transaction is contingent upon the 
execution of all other component transactions; and
    (iii) The component transactions are priced or quoted together as 
one economic transaction with simultaneous or near-simultaneous 
execution of all components.
    (2) A Required Transaction that is executed as a component of a 
package transaction that includes a component security-based swap that 
is subject exclusively to the Commission's jurisdiction, but is not 
subject to the clearing requirement under section 3C of the Act and is 
not intended to be cleared, may be executed on a security-based swap 
execution facility in accordance with paragraph (c)(2) of this section 
as if it were a Permitted Transaction;
    (3) A Required Transaction that is executed as a component of a 
package transaction that includes a component that is not a security-
based swap may be executed on a security-based swap execution facility 
in accordance with paragraph (c)(2) of this section as if it were a 
Permitted Transaction. This provision shall not apply to:
    (i) A Required Transaction that is executed as a component of a 
package transaction in which all other non-security-based swap 
components are U.S. Treasury securities;
    (ii) A Required Transaction that is executed as a component of a 
package transaction in which all other non-security-based swap 
components are contracts for the purchase or sale of a commodity for 
future delivery;
    (iii) A Required Transaction that is executed as a component of a 
package transaction in which all other non-security-based swap 
components are agency mortgage-backed securities;
    (iv) A Required Transaction that is executed as a component of a 
package transaction that includes a component transaction that is the 
issuance of a bond in a primary market; and
    (v) A Required Transaction that is executed as a component of a 
package transaction in which all other non-security-based swap 
components are swaps that are subject to a trade execution requirement 
under 17 CFR 37.9.
    (4) A Required Transaction that is executed as a component of a 
package transaction that includes a component security-based swap that 
is not exclusively subject to the Commission's jurisdiction may be 
executed on a security-based swap in accordance with paragraph (c)(2) of 
this section as if it were a Permitted Transaction.
    (e) Resolution of operational and clerical error trades. (1) A 
security-based swap execution facility shall maintain rules and 
procedures that facilitate the resolution of error trades. Such rules 
shall be fair, transparent, and consistent; allow for timely resolution; 
require members to provide prompt notice of an error trade--and, as 
applicable, offsetting and correcting trades--to the security-based swap 
execution facility; and permit members to:
    (i) Execute a correcting trade, in accordance with paragraph (c)(2) 
of this section, regardless of whether it is a Required or Permitted 
Transaction, for an error trade that has been rejected from clearing as 
soon as technologically practicable, but no later than one hour after a 
registered clearing agency provides notice of the rejection; or

[[Page 107]]

    (ii) Execute an offsetting trade and a correcting trade, in 
accordance with paragraph (c)(2) of this section, regardless of whether 
it is a Required or Permitted Transaction, for an error trade that was 
accepted for clearing as soon as technologically practicable, but no 
later than three days after the error trade was accepted for clearing at 
a registered clearing agency.
    (2) If a correcting trade is rejected from clearing, then the 
security-based swap execution facility shall not allow the 
counterparties to execute another correcting trade.
    (f) Counterparty anonymity. (1) Except as otherwise required under 
the Act or the Commission's rules thereunder, a security-based swap 
execution facility shall not directly or indirectly, including through a 
third-party service provider, disclose the identity of a counterparty to 
a security-based swap that is executed anonymously and intended to be 
cleared.
    (2) A security-based swap execution facility shall establish and 
enforce rules that prohibit any person from directly or indirectly, 
including through a third-party service provider, disclosing the 
identity of a counterparty to a security-based swap that is executed 
anonymously and intended to be cleared.
    (3) For purposes of paragraphs (f)(1) and (2) of this section, 
``executed anonymously'' shall include a security-based swap that is 
pre-arranged or pre-negotiated anonymously, including by a member of the 
security-based swap execution facility.
    (4) For a package transaction that includes a component transaction 
that is not a security-based swap intended to be cleared, disclosing the 
identity of a counterparty shall not violate paragraphs (f)(1) or (2) of 
this section. For purposes of this paragraph (f), a ``package 
transaction'' consists of two or more component transactions executed 
between two or more counterparties where:
    (i) Execution of each component transaction is contingent upon the 
execution of all other component transactions; and
    (ii) The component transactions are priced or quoted together as one 
economic transaction with simultaneous or near-simultaneous execution of 
all components.
    (g) Transactions not accepted for clearing. A security-based swap 
execution facility shall establish and enforce rules that provide that a 
security-based swap that is intended to be cleared at the time of the 
transaction, but is not accepted for clearing at a registered clearing 
agency, shall be void ab initio.



Sec.  242.816  Trade execution requirement and exemptions therefrom.

    (a) General--(1) Required submission. A security-based swap 
execution facility that makes a security-based swap available to trade 
in accordance with paragraph (b) of this section, shall submit to the 
Commission its determination with respect to such security-based swap as 
a rule, pursuant to the procedures under Sec.  242.806 or Sec.  242.807.
    (2) Listing requirement. A security-based swap execution facility 
that makes a security-based swap available to trade must demonstrate 
that it lists or offers that security-based swap for trading on its 
trading system or platform.
    (b) Factors to consider. To make a security-based swap available to 
trade for purposes of section 3C(h) of the Act, a security-based swap 
execution facility shall consider, as appropriate, the following factors 
with respect to such security-based swap:
    (1) Whether there are ready and willing buyers and sellers;
    (2) The frequency or size of transactions;
    (3) The trading volume;
    (4) The number and types of market participants;
    (5) The bid/ask spread; or
    (6) The usual number of resting firm or indicative bids and offers.
    (c) Applicability. Upon a determination that a security-based swap 
is available to trade on a security-based swap execution facility or 
national securities exchange, all other security-based swap execution 
facilities and SBS exchanges shall comply with the requirements of 
section 3C(h) of the Act in listing or offering such security-based swap 
for trading.
    (d) Removal. The Commission may issue a determination that a 
security-

[[Page 108]]

based swap is no longer available to trade upon determining that no 
security-based swap execution facility or SBS exchange lists such 
security-based swap for trading.
    (e) Exemptions to trade execution requirement. (1) A security-based 
swap transaction that is executed as a component of a package 
transaction that also includes a component transaction that is the 
issuance of a bond in a primary market is exempt from the trade 
execution requirement in section 3C(h) of the Act. For purposes of 
paragraph (e) of this section, a package transaction consists of two or 
more component transactions executed between two or more counterparties 
where:
    (i) At least one component transaction is subject to the trade 
execution requirement in section 3C(h) of the Act;
    (ii) Execution of each component transaction is contingent upon the 
execution of all other component transactions; and
    (iii) The component transactions are priced or quoted together as 
one economic transaction with simultaneous or near-simultaneous 
execution of all components.
    (2) Section 3C(h) of the Act does not apply to a security-based swap 
transaction that qualifies for an exception under section 3C(g) of the 
Act, or any exemption from the clearing requirement that is granted by 
the Commission, for which the associated requirements are met.
    (3)(i) Section 3C(h) of the Act does not apply to a security-based 
swap transaction that is executed between counterparties that qualify as 
``eligible affiliate counterparties,'' as defined below.
    (ii) For purposes of this paragraph (e)(3), counterparties will be 
``eligible affiliate counterparties'' if:
    (A) One counterparty, directly or indirectly, holds a majority 
ownership interest in the other counterparty, and the counterparty that 
holds the majority interest in the other counterparty reports its 
financial statements on a consolidated basis under Generally Accepted 
Accounting Principles or International Financial Reporting Standards, 
and such consolidated financial statements include the financial results 
of the majority-owned counterparty; or
    (B) A third party, directly or indirectly, holds a majority 
ownership interest in both counterparties, and the third party reports 
its financial statements on a consolidated basis under Generally 
Accepted Accounting Principles or International Financial Reporting 
Standards, and such consolidated financial statements include the 
financial results of both of the counterparties.
    (iii) For purposes of this paragraph (e)(3), a counterparty or third 
party directly or indirectly holds a majority ownership interest if it 
directly or indirectly holds a majority of the equity securities of an 
entity, or the right to receive upon dissolution, or the contribution 
of, a majority of the capital of a partnership.



Sec.  242.817  Trade execution compliance schedule.

    (a) A security-based swap transaction shall be subject to the 
requirements of section 3C(h) of the Act upon the later of:
    (1) A determination by the Commission that the security-based swap 
is required to be cleared as set forth in section 3C(a) or any later 
compliance date that the Commission may establish as a term or condition 
of such determination or following a stay and review of such 
determination pursuant to section 3C(c) of the Act and Sec.  240.3Ca-1 
of this chapter thereunder; and
    (2) Thirty days after the available-to-trade determination 
submission or certification for that security-based swap is, 
respectively, deemed approved under Sec.  242.806 or deemed certified 
under Sec.  242.807.
    (b) Nothing in this section shall prohibit any counterparty from 
complying voluntarily with the requirements of section 3C(h) of the Act 
sooner than as provided in paragraph (a) of this section.



Sec.  242.818  Core Principle 1--Compliance with core principles.

    (a) In general. To be registered, and maintain registration, as a 
security-based swap execution facility, the security-based swap 
execution facility shall

[[Page 109]]

comply with the core principles described in section 3D of the Act, and 
any requirement that the Commission may impose by rule or regulation.
    (b) Reasonable discretion of security-based swap execution facility. 
Unless otherwise determined by the Commission, by rule or regulation, a 
security-based swap execution facility described in paragraph (a) of 
this section shall have reasonable discretion in establishing the manner 
in which it complies with the core principles described in section 3D of 
the Act.



Sec.  242.819  Core Principle 2--Compliance with rules.

    (a) General. A security-based swap execution facility shall:
    (1) Establish and enforce compliance with any rule established by 
such security-based swap execution facility, including the terms and 
conditions of the security-based swaps traded or processed on or through 
the facility, and any limitation on access to the facility;
    (2) Establish and enforce trading, trade processing, and 
participation rules that will deter abuses and have the capacity to 
detect, investigate, and enforce those rules, including means to provide 
market participants with impartial access to the market and to capture 
information that may be used in establishing whether rule violations 
have occurred; and
    (3) Establish rules governing the operation of the facility, 
including rules specifying trading procedures to be used in entering and 
executing orders traded or posted on the facility.
    (b) Operation of security-based swap execution facility and 
compliance with rules. (1) A security-based swap execution facility 
shall establish rules governing the operation of the security-based swap 
execution facility, including, but not limited to, rules specifying 
trading procedures to be followed by members when entering and executing 
orders traded or posted on the security-based swap execution facility.
    (2) A security-based swap execution facility shall establish and 
impartially enforce compliance with the rules of the security-based swap 
execution facility, including, but not limited to:
    (i) The terms and conditions of any security-based swaps traded or 
processed on or through the security-based swap execution facility;
    (ii) Access to the security-based swap execution facility;
    (iii) Trade practice rules;
    (iv) Audit trail requirements;
    (v) Disciplinary rules; and
    (vi) Mandatory trading requirements.
    (c) Access requirements--(1) Impartial access to markets and market 
services. A security-based swap execution facility shall provide any 
eligible contract participant and any independent software vendor with 
impartial access to its market(s) and market services, including any 
indicative quote screens or any similar pricing data displays, provided 
that the facility has:
    (i) Criteria governing such access that are impartial, transparent, 
and applied in a fair and non-discriminatory manner;
    (ii) Procedures whereby eligible contract participants provide the 
security-based swap execution facility with written or electronic 
confirmation of their status as eligible contract participants, as 
defined by the Act and Commission rules thereunder, prior to obtaining 
access; and
    (iii) Comparable fee structures for eligible contract participants 
and independent software vendors receiving comparable access to, or 
services from, the security-based swap execution facility.
    (2) Jurisdiction. Prior to granting any eligible contract 
participant access to its facilities, a security-based swap execution 
facility shall require that the eligible contract participant consent to 
its jurisdiction.
    (3) Limitations on access. A security-based swap execution facility 
shall establish and impartially enforce rules governing any decision to 
allow, deny, suspend, or permanently bar an eligible contract 
participant's access to the security-based swap execution facility, 
including when a decision is made as part of a disciplinary or emergency 
action taken by the security-based swap execution facility.
    (4) Commission review with respect to a denial or limitation of 
access to any service or a denial or conditioning of membership--(i) In 
general. An application for

[[Page 110]]

review by the Commission may be filed by any person who is aggrieved by 
a determination of a security-based swap execution facility with respect 
to any final action with respect to a denial or limitation of access to 
any service offered by the security-based swap execution facility or any 
final action with respect to a denial or conditioning of membership, as 
defined in Sec.  242.835(b)(2) of this chapter (Rule 835(b)(2)), in 
accordance with Sec.  201.442 of this chapter (Rule of Practice 442).
    (ii) Standard to govern Commission review. In reviewing such a 
determination, if the Commission finds that the specific grounds on 
which such denial, limitation, or conditioning is based exist in fact, 
that such denial, limitation, or conditioning is in accordance with the 
rules of the security-based swap execution facility, and that such rules 
are, and were applied in a manner, consistent with the purposes of the 
Exchange Act, the Commission, by order, shall dismiss the proceeding. If 
the Commission does not make any such finding or if it finds that such 
denial, limitation, or conditioning imposes any burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Exchange Act, the Commission, by order, shall set aside the action of 
the security-based swap execution facility and require it to admit such 
person to membership or participation or grant such person access to 
services offered by the security-based swap execution facility.
    (d) Rule enforcement program. A security-based swap execution 
facility shall establish and enforce trading, trade processing, and 
participation rules that will deter abuses and it shall have the 
capacity to detect, investigate, and enforce those rules.
    (1) Abusive trading practices prohibited. A security-based swap 
execution facility shall prohibit abusive trading practices on its 
markets by members. A security-based swap execution facility that 
permits intermediation shall prohibit customer-related abuses including, 
but not limited to, trading ahead of customer orders, trading against 
customer orders, accommodation trading, and improper cross trading. 
Specific trading practices that shall be prohibited include front-
running, wash trading, pre-arranged trading (except for transactions 
approved by or certified to the Commission pursuant Sec.  242.806 or 
Sec.  242.807, respectively), fraudulent trading, money passes, and any 
other trading practices that a security-based swap execution facility 
deems to be abusive. A security-based swap execution facility shall also 
prohibit any other manipulative or disruptive trading practices 
prohibited by the Act or by the Commission pursuant to Commission 
regulation.
    (2) Capacity to detect and investigate rule violations. A security-
based swap execution facility shall have arrangements and resources for 
effective enforcement of its rules. Such arrangements shall include the 
authority to collect information and documents on both a routine and 
non-routine basis, including the authority to examine books and records 
kept by the security-based swap execution facility's members and by 
persons under investigation. A security-based swap execution facility's 
arrangements and resources shall also facilitate the direct supervision 
of the market and the analysis of data collected to determine whether a 
rule violation has occurred.
    (3) Compliance staff and resources. A security-based swap execution 
facility shall establish and maintain sufficient compliance staff and 
resources to ensure that it can conduct effective audit trail reviews, 
trade practice surveillance, market surveillance, and real-time market 
monitoring. The security-based swap execution facility's compliance 
staff shall also be sufficient to address unusual market or trading 
events as they arise, and to conduct and complete investigations in a 
timely manner, as set forth in paragraph (d)(6) of this section.
    (4) Automated trade surveillance system. A security-based swap 
execution facility shall maintain an automated trade surveillance system 
capable of detecting potential trade practice violations. The automated 
trade surveillance system shall load and process daily orders and trades 
no later than 24 hours after the completion of the trading day. The 
automated trade surveillance system shall have the capability to detect 
and flag specific trade execution patterns and trade anomalies;

[[Page 111]]

compute, retain, and compare trading statistics; reconstruct the 
sequence of market activity; perform market analyses; and support system 
users to perform in-depth analyses and ad hoc queries of trade-related 
data.
    (5) Real-time market monitoring. A security-based swap execution 
facility shall conduct real-time market monitoring of all trading 
activity on its system(s) or platform(s) to identify any market or 
system anomalies. A security-based swap execution facility shall have 
the authority to adjust trade prices or cancel trades when necessary to 
mitigate market disrupting events caused by malfunctions in its 
system(s) or platform(s) or errors in orders submitted by members. Any 
trade price adjustments or trade cancellations shall be transparent to 
the market and subject to standards that are clear, fair, and publicly 
available.
    (6) Investigations and investigation reports--(i) Procedures. A 
security-based swap execution facility shall establish and maintain 
procedures that require its compliance staff to conduct investigations 
of possible rule violations. An investigation shall be commenced upon 
the receipt of a request from Commission staff or upon the discovery or 
receipt of information by the security-based swap execution facility 
that indicates a reasonable basis for finding that a violation may have 
occurred or will occur.
    (ii) Timeliness. Each compliance staff investigation shall be 
completed in a timely manner. Absent mitigating factors, a timely manner 
is no later than 12 months after the date that an investigation is 
opened. Mitigating factors that may reasonably justify an investigation 
taking longer than 12 months to complete include the complexity of the 
investigation, the number of firms or individuals involved as potential 
wrongdoers, the number of potential violations to be investigated, and 
the volume of documents and data to be examined and analyzed by 
compliance staff.
    (iii) Investigation reports when a reasonable basis exists for 
finding a violation. Compliance staff shall submit a written 
investigation report for disciplinary action in every instance in which 
compliance staff determines from surveillance or from an investigation 
that a reasonable basis exists for finding a rule violation. The 
investigation report shall include the reason the investigation was 
initiated; a summary of the complaint, if any; the relevant facts; 
compliance staff's analysis and conclusions; and a recommendation as to 
whether disciplinary action should be pursued.
    (iv) Investigation reports when no reasonable basis exists for 
finding a violation. If after conducting an investigation, compliance 
staff determines that no reasonable basis exists for finding a rule 
violation, it shall prepare a written report including the reason the 
investigation was initiated; a summary of the complaint, if any; the 
relevant facts; and compliance staff's analysis and conclusions.
    (v) Warning letters. The rules of a security-based swap execution 
facility may authorize its compliance staff to issue a warning letter to 
a person or entity under investigation or to recommend that a 
disciplinary panel take such an action. No more than one warning letter 
may be issued to the same person or entity found to have committed the 
same rule violation within a rolling 12-month period.
    (e) Regulatory services provided by a third party--(1) Use of 
regulatory service provider permitted. A security-based swap execution 
facility may choose to contract with a registered futures association 
(under section 17 of the Commodity Exchange Act), a board of trade 
designated as a contract market (under section 5 of the Commodity 
Exchange Act), a national securities exchange, a national securities 
association, or another security-based swap execution facility (each a 
``regulatory service provider''), for the provision of services to 
assist in complying with the Act and Commission rules thereunder, as 
approved by the Commission. A security-based swap execution facility 
that chooses to contract with a regulatory service provider shall ensure 
that such provider has the capacity and resources necessary to provide 
timely and effective regulatory services, including adequate staff and 
automated surveillance systems. A security-based swap execution facility 
shall at all times remain responsible for the performance of any

[[Page 112]]

regulatory services received, for compliance with the security-based 
swap execution facility's obligations under the Act and Commission rules 
thereunder, and for the regulatory service provider's performance on its 
behalf.
    (2) Duty to supervise regulatory service provider. A security-based 
swap execution facility that elects to use the service of a regulatory 
service provider shall retain sufficient compliance staff to supervise 
the quality and effectiveness of the regulatory services provided on its 
behalf. Compliance staff of the security-based swap execution facility 
shall hold regular meetings with the regulatory service provider to 
discuss ongoing investigations, trading patterns, market participants, 
and any other matters of regulatory concern. A security-based swap 
execution facility shall also conduct periodic reviews of the adequacy 
and effectiveness of services provided on its behalf. Such reviews shall 
be documented carefully and made available to the Commission upon 
request.
    (3) Regulatory decisions required from the security-based swap 
execution facility. A security-based swap execution facility that elects 
to use the service of a regulatory service provider shall retain 
exclusive authority in all substantive decisions made by its regulatory 
service provider, including, but not limited to, decisions involving the 
cancellation of trades, the issuance of disciplinary charges against 
members, and denials of access to the trading platform for disciplinary 
reasons. A security-based swap execution facility shall document any 
instances where its actions differ from those recommended by its 
regulatory service provider, including the reasons for the course of 
action recommended by the regulatory service provider and the reasons 
why the security-based swap execution facility chose a different course 
of action.
    (f) Audit trail. A security-based swap execution facility shall 
establish procedures to capture and retain information that may be used 
in establishing whether rule violations have occurred.
    (1) Audit trail required. A security-based swap execution facility 
shall capture and retain all audit trail data necessary to detect, 
investigate, and prevent customer and market abuses. Such data shall be 
sufficient to reconstruct all indications of interest, requests for 
quotes, orders, and trades within a reasonable period of time and to 
provide evidence of any violations of the rules of the security-based 
swap execution facility. An acceptable audit trail shall also permit the 
security-based swap execution facility to track a customer order from 
the time of receipt through execution on the security-based swap 
execution facility.
    (2) Elements of an acceptable audit trail program--(i) Original 
source documents. A security-based swap execution facility's audit trail 
shall include original source documents. Original source documents 
include unalterable, sequentially identified records on which trade 
execution information is originally recorded, whether recorded manually 
or electronically. Records for customer orders (whether filled, 
unfilled, or cancelled, each of which shall be retained or 
electronically captured) shall reflect the terms of the order, an 
account identifier that relates back to the account's owner(s), the time 
of order entry, and the time of trade execution. A security-based swap 
execution facility shall require that all orders, indications of 
interest, and requests for quotes be immediately captured in the audit 
trail.
    (ii) Transaction history database. A security-based swap execution 
facility's audit trail program shall include an electronic transaction 
history database. An adequate transaction history database shall include 
a history of all indications of interest, requests for quotes, orders, 
and trades entered into a security-based swap execution facility's 
trading system or platform, including all order modifications and 
cancellations. An adequate transaction history database shall also 
include:
    (A) All data that are input into the trade entry or matching system 
for the transaction to match and clear;
    (B) The customer type indicator code; and
    (C) Timing and sequencing data adequate to reconstruct trading.
    (iii) Electronic analysis capability. A security-based swap 
execution facility's audit trail program shall include electronic 
analysis capability with respect to all audit trail data in the

[[Page 113]]

transaction history database. Such electronic analysis capability shall 
ensure that the security-based swap execution facility has the ability 
to reconstruct indications of interest, requests for quotes, orders, and 
trades, and identify possible trading violations with respect to both 
customer and market abuse.
    (iv) Safe-storage capability. A security-based swap execution 
facility's audit trail program shall include the capability to safely 
store all audit trail data retained in its transaction history database. 
Such safe-storage capability shall include the capability to store all 
data in the database in a manner that protects it from unauthorized 
alteration, as well as from accidental erasure or other loss. Data shall 
be retained in accordance with the recordkeeping requirements of Sec.  
242.826 (Core Principle 9).
    (3) Enforcement of audit trail requirements--(i) Annual audit trail 
and recordkeeping reviews. A security-based swap execution facility 
shall enforce its audit trail and recordkeeping requirements through at 
least annual reviews of all members and persons and firms subject to the 
security-based swap execution facility's recordkeeping rules to verify 
their compliance with the security-based swap execution facility's audit 
trail and recordkeeping requirements. Such reviews shall include, but 
are not limited to, reviews of randomly selected samples of front-end 
audit trail data for order routing systems; a review of the process by 
which user identifications are assigned and user identification records 
are maintained; a review of usage patterns associated with user 
identifications to monitor for violations of user identification rules; 
and reviews of account numbers and customer type indicator codes in 
trade records to test for accuracy and improper use.
    (ii) Enforcement program required. A security-based swap execution 
facility shall establish a program for effective enforcement of its 
audit trail and recordkeeping requirements. An effective program shall 
identify members, persons, and firms subject to the security-based swap 
execution facility's recordkeeping rules that have failed to maintain 
high levels of compliance with such requirements, and impose meaningful 
sanctions when deficiencies are found. Sanctions shall be sufficient to 
deter recidivist behavior. No more than one warning letter shall be 
issued to the same person or entity found to have committed the same 
violation of audit trail or recordkeeping requirements within a rolling 
12-month period.
    (g) Disciplinary procedures and sanctions. A security-based swap 
execution facility shall establish trading, trade processing, and 
participation rules that will deter abuses and have the capacity to 
enforce such rules through prompt and effective disciplinary action, 
including suspension or expulsion of members that violate the rules of 
the security-based swap execution facility.
    (1) Enforcement staff. (i) A security-based swap execution facility 
shall establish and maintain sufficient enforcement staff and resources 
to effectively and promptly prosecute possible rule violations within 
the disciplinary jurisdiction of the security-based swap execution 
facility.
    (ii) The enforcement staff of a security-based swap execution 
facility shall not include members or other persons whose interests 
conflict with their enforcement duties.
    (iii) A member of the enforcement staff shall not operate under the 
direction or control of any person or persons with trading privileges at 
the security-based swap execution facility.
    (iv) The enforcement staff of a security-based swap execution 
facility may operate as part of the security-based swap execution 
facility's compliance department.
    (2) Disciplinary panels. A security-based swap execution facility 
shall establish one or more disciplinary panels that are authorized to 
fulfill their obligations under the rules of this section. Disciplinary 
panels shall meet the composition requirements of Sec.  242.834(d), and 
shall not include any members of the security-based swap execution 
facility's compliance staff or any person involved in adjudicating any 
other stage of the same proceeding.
    (3) Notice of charges. If compliance staff authorized by a security-
based swap execution facility or disciplinary

[[Page 114]]

panel thereof determines that a reasonable basis exists for finding a 
violation and adjudication is warranted, it shall direct that the person 
or entity alleged to have committed the violation be served with a 
notice of charges. A notice of charges shall adequately state the acts, 
conduct, or practices in which the respondent is alleged to have 
engaged; state the rule or rules alleged to have been violated (or about 
to be violated); advise the respondent that it is entitled, upon 
request, to a hearing on the charges; and prescribe the period within 
which a hearing on the charges may be requested. If the rules of the 
security-based swap execution facility so provide, a notice may also 
advise:
    (i) That failure to request a hearing within the period prescribed 
in the notice, except for good cause, may be deemed a waiver of the 
right to a hearing; and
    (ii) That failure to answer or to deny expressly a charge may be 
deemed to be an admission of such charge.
    (4) Right to representation. Upon being served with a notice of 
charges, a respondent shall have the right to be represented by legal 
counsel or any other representative of its choosing in all succeeding 
stages of the disciplinary process, except by any member of the 
security-based swap execution facility's governing board or disciplinary 
panel, any employee of the security-based swap execution facility, or 
any person substantially related to the underlying investigations, such 
as a material witness or respondent.
    (5) Answer to charges. A respondent shall be given a reasonable 
period of time to file an answer to a notice of charges. The rules of a 
security-based swap execution facility governing the requirements and 
timeliness of a respondent's answer to a notice of charges shall be 
fair, equitable, and publicly available.
    (6) Admission or failure to deny charges. The rules of a security-
based swap execution facility may provide that, if a respondent admits 
or fails to deny any of the charges, a disciplinary panel may find that 
the violations alleged in the notice of charges for which the respondent 
admitted or failed to deny any of the charges have been committed. If 
the security-based swap execution facility's rules so provide, then:
    (i) The disciplinary panel may impose a sanction for each violation 
found to have been committed;
    (ii) The disciplinary panel shall promptly notify the respondent in 
writing of any sanction to be imposed and shall advise the respondent 
that the respondent may request a hearing on such sanction within the 
period of time, which shall be stated in the notice; and
    (iii) The rules of a security-based swap execution facility may 
provide that, if a respondent fails to request a hearing within the 
period of time stated in the notice, the respondent will be deemed to 
have accepted the sanction.
    (7) Denial of charges and right to hearing. Where a respondent has 
requested a hearing on a charge that is denied, or on a sanction set by 
the disciplinary panel, the respondent shall be given an opportunity for 
a hearing in accordance with the rules of the security-based swap 
execution facility.
    (8) Settlement offers. (i) The rules of a security-based swap 
execution facility may permit a respondent to submit a written offer of 
settlement at any time after an investigation report is completed. The 
disciplinary panel presiding over the matter may accept the offer of 
settlement, but may not alter the terms of a settlement offer unless the 
respondent agrees.
    (ii) The rules of a security-based swap execution facility may 
provide that, in its discretion, a disciplinary panel may permit the 
respondent to accept a sanction without either admitting or denying the 
rule violations upon which the sanction is based.
    (iii) If an offer of settlement is accepted, the panel accepting the 
offer shall issue a written decision specifying the rule violations it 
has reason to believe were committed, including the basis or reasons for 
the panel's conclusions, and any sanction to be imposed, which shall 
include full customer restitution where customer harm is demonstrated, 
except where the amount of restitution or to whom

[[Page 115]]

it should be provided cannot be reasonably determined. If an offer of 
settlement is accepted without the agreement of the enforcement staff, 
the decision shall adequately support the disciplinary panel's 
acceptance of the settlement. Where applicable, the decision shall also 
include a statement that the respondent has accepted the sanctions 
imposed without either admitting or denying the rule violations.
    (iv) The respondent may withdraw its offer of settlement at any time 
before final acceptance by a disciplinary panel. If an offer is 
withdrawn after submission, or is rejected by a disciplinary panel, the 
respondent shall not be deemed to have made any admissions by reason of 
the offer of settlement and shall not be otherwise prejudiced by having 
submitted the offer of settlement.
    (9) Hearings. A security-based swap execution facility shall adopt 
rules that provide for the following minimum requirements for any 
hearing:
    (i) The hearing shall be fair, shall be conducted before members of 
the disciplinary panel, and shall be promptly convened after reasonable 
notice to the respondent. A security-based swap execution facility need 
not apply the formal rules of evidence for a hearing; nevertheless, the 
procedures for the hearing may not be so informal as to deny a fair 
hearing;
    (ii) No member of the disciplinary panel for the hearing may have a 
financial, personal, or other direct interest in the matter under 
consideration;
    (iii) In advance of the hearing, the respondent shall be entitled to 
examine all books, documents, or other evidence in the possession or 
under the control of the security-based swap execution facility. The 
security-based swap execution facility may withhold documents that are 
privileged or constitute attorney work product; were prepared by an 
employee of the security-based swap execution facility but will not be 
offered in evidence in the disciplinary proceedings; may disclose a 
technique or guideline used in examinations, investigations, or 
enforcement proceedings; or disclose the identity of a confidential 
source;
    (iv) The security-based swap execution facility's enforcement and 
compliance staffs shall be parties to the hearing, and the enforcement 
staff shall present their case on those charges and sanctions that are 
the subject of the hearing;
    (v) The respondent shall be entitled to appear personally at the 
hearing, to cross-examine any persons appearing as witnesses at the 
hearing, to call witnesses, and to present such evidence as may be 
relevant to the charges;
    (vi) The security-based swap execution facility shall require 
persons within its jurisdiction who are called as witnesses to 
participate in the hearing and produce evidence. The security-based swap 
execution facility shall make reasonable efforts to secure the presence 
of all other persons called as witnesses whose testimony would be 
relevant. The rules of a security-based swap execution facility may 
provide that a sanction may be summarily imposed upon any person within 
its jurisdiction whose actions impede the progress of a hearing; and
    (vii) If the respondent has requested a hearing, a copy of the 
hearing shall be made and shall become a part of the record of the 
proceeding. The record shall not be required to be transcribed unless:
    (A) The transcript is requested by Commission staff or the 
respondent;
    (B) The decision is appealed pursuant to the rules of the security-
based swap execution facility; or
    (C) The decision is reviewed by the Commission pursuant to Sec.  
201.442 of this chapter. In all other instances, a summary record of a 
hearing is permitted.
    (10) Decisions. Promptly following a hearing conducted in accordance 
with the rules of the security-based swap execution facility, the 
disciplinary panel shall render a written decision based upon the weight 
of the evidence contained in the record of the proceeding and shall 
provide a copy to the respondent. The decision shall include:
    (i) The notice of charges or a summary of the charges;
    (ii) The answer, if any, or a summary of the answer;
    (iii) A summary of the evidence produced at the hearing or, where 
appropriate, incorporation by reference of the investigation report;

[[Page 116]]

    (iv) A statement of findings and conclusions with respect to each 
charge and a complete explanation of the evidentiary and other basis for 
such findings and conclusions with respect to each charge;
    (v) An indication of each specific rule that the respondent was 
found to have violated; and
    (vi) A declaration of all sanctions imposed against the respondent, 
including the basis for such sanctions and the effective date of such 
sanctions.
    (11) Emergency disciplinary actions. (i) A security-based swap 
execution facility may impose a sanction, including suspension, or take 
other summary action against a person or entity subject to its 
jurisdiction upon a reasonable belief that such immediate action is 
necessary to protect the best interest of the market place.
    (ii) Any emergency disciplinary action shall be taken in accordance 
with a security-based swap execution facility's procedures that provide 
for the following:
    (A) If practicable, a respondent should be served with a notice 
before the action is taken, or otherwise at the earliest possible 
opportunity. The notice shall state the action, briefly state the 
reasons for the action, and state the effective time and date, and the 
duration of the action.
    (B) The respondent shall have the right to be represented by legal 
counsel or any other representative of its choosing in all proceedings 
subsequent to the emergency action taken. The respondent shall be given 
the opportunity for a hearing as soon as reasonably practicable and the 
hearing shall be conducted before the disciplinary panel pursuant to the 
rules of the security-based swap execution facility.
    (C) Promptly following the hearing, the security-based swap 
execution facility shall render a written decision based upon the weight 
of the evidence contained in the record of the proceeding and shall 
provide a copy to the respondent. The decision shall include a 
description of the summary action taken; the reasons for the summary 
action; a summary of the evidence produced at the hearing; a statement 
of findings and conclusions; a determination that the summary action 
should be affirmed, modified, or reversed; and a declaration of any 
action to be taken pursuant to the determination, and the effective date 
and duration of such action.
    (12) Right to appeal. The rules of a security-based swap execution 
facility may permit the parties to a proceeding to appeal promptly an 
adverse decision of a disciplinary panel in all or in certain classes of 
cases. Such rules may require a party's notice of appeal to be in 
writing and to specify the findings, conclusions, or sanctions to which 
objection are taken. If the rules of a security-based swap execution 
facility permit appeals, then both the respondent and the enforcement 
staff shall have the opportunity to appeal and:
    (i) The security-based swap execution facility shall establish an 
appellate panel that is authorized to hear appeals. The rules of the 
security-based swap execution facility may provide that the appellate 
panel may, on its own initiative, order review of a decision by a 
disciplinary panel within a reasonable period of time after the decision 
has been rendered;
    (ii) The composition of the appellate panel shall be consistent with 
Sec.  242.834(d) and shall not include any members of the security-based 
swap execution facility's compliance staff or any person involved in 
adjudicating any other stage of the same proceeding. The rules of a 
security-based swap execution facility shall provide for the appeal 
proceeding to be conducted before all of the members of the appellate 
panel or a panel thereof;
    (iii) Except for good cause shown, the appeal or review shall be 
conducted solely on the record before the disciplinary panel, the 
written exceptions filed by the parties, and the oral or written 
arguments of the parties; and
    (iv) Promptly following the appeal or review proceeding, the 
appellate panel shall issue a written decision and shall provide a copy 
to the respondent. The decision issued by the appellate panel shall 
adhere to all the requirements of paragraph (g)(10) of this section to 
the extent that a different conclusion is reached from that issued by 
the disciplinary panel.
    (13) Disciplinary sanctions--(i) In general. All disciplinary 
sanctions imposed

[[Page 117]]

by a security-based swap execution facility or its disciplinary panels 
shall be commensurate with the violations committed and shall be clearly 
sufficient to deter recidivism or similar violations by other members. 
All disciplinary sanctions, including sanctions imposed pursuant to an 
accepted settlement offer, shall take into account the respondent's 
disciplinary history. In the event of demonstrated customer harm, any 
disciplinary sanction shall also include full customer restitution, 
except where the amount of restitution or to whom it should be provided 
cannot be reasonably determined.
    (ii) Summary fines for violations of rules regarding timely 
submission of records. A security-based swap execution facility may 
adopt a summary fine schedule for violations of rules relating to the 
failure to timely submit accurate records required for clearing or 
verifying each day's transactions. A security-based swap execution 
facility may permit its compliance staff, or a designated panel of 
security-based swap execution facility officials, to summarily impose 
minor sanctions against persons within the security-based swap execution 
facility's jurisdiction for violating such rules. A security-based swap 
execution facility's summary fine schedule may allow for warning letters 
to be issued for first-time violations or violators. If adopted, a 
summary fine schedule shall provide for progressively larger fines for 
recurring violations.
    (14) Commission review of a disciplinary sanction--(i) In general. 
An application for review by the Commission may be filed by any person 
who is aggrieved by a determination of a security-based swap facility 
with respect to any final disciplinary action, as defined in Sec.  
242.835(b)(1) of this chapter (Rule 835(b)(1)), in accordance with Sec.  
201.442 of this chapter (Rule of Practice 442).
    (ii) Standard to govern Commission review. (A) In reviewing such a 
determination, if the Commission finds that such person has engaged in 
such acts or practices, or has omitted such acts, as the security-based 
swap execution facility has found him to have engaged in or omitted, 
that such acts or practices, or omissions to act, are in violation of 
the Exchange Act, the rules or regulations thereunder, or the rules of 
the security-based swap execution facility, and that such provisions 
are, and were applied in a manner, consistent with the purposes of 
Exchange Act, the Commission, by order, shall so declare and, as 
appropriate, affirm the sanction imposed by the security-based swap 
execution facility, modify the sanction in accordance with paragraph (C) 
of this subsection, or remand to the security-based swap execution 
facility for further proceedings; or
    (B) if the Commission does not make any such finding it shall, by 
order, set aside the sanction imposed by the security-based swap 
execution facility and, if appropriate, remand to the security-based 
swap execution facility for further proceedings.
    (C) If the Commission, having due regard for the public interest and 
the protection of investors, finds that a sanction imposed by a 
security-based swap execution facility upon such person imposes any 
burden on competition not necessary or appropriate in furtherance of the 
purposes of the Exchange Act or is excessive or oppressive, the 
Commission may cancel, reduce, or require the remission of such 
sanction.
    (h) Activities of security-based swap execution facility's 
employees, governing board members, committee members, and consultants--
(1) Definitions. The following definitions shall apply only in this 
paragraph (h):
    (i) Covered interest, with respect to a security-based swap 
execution facility, means:
    (A) A security-based swap that trades on the security-based swap 
execution facility;
    (B) A security of an issuer that has issued a security that 
underlies a security-based swap that is listed on that facility; or
    (C) A derivative based on a security that falls within paragraph 
(h)(1)(i)(B) of this section.
    (ii) Pooled investment vehicle means an investment company 
registered under the Investment Company Act of 1940 in which no covered 
interest constitutes more than 10 percent of the investment company's 
assets.

[[Page 118]]

    (2) Required rules. A security-based swap execution facility must 
maintain in effect rules which have been submitted to the Commission 
pursuant to Sec.  242.806 or Sec.  242.807 that, at a minimum, prohibit 
an employee of the security-based swap execution facility from:
    (i) Trading, directly or indirectly, any covered interest; and
    (ii) Disclosing to any other person any material, non-public 
information which such employee obtains as a result of their employment 
at the security-based swap execution facility, where such employee has 
or should have a reasonable expectation that the information disclosed 
may assist another person in trading any covered interest; provided, 
however, that such rules shall not prohibit disclosures made in the 
course of an employee's duties, or disclosures made to another security-
based swap execution facility, court of competent jurisdiction, or 
representative of any agency or department of the Federal or State 
government acting in their official capacity.
    (3) Possible exemptions. A security-based swap execution facility 
may adopt rules, which must be submitted to the Commission pursuant to 
Sec.  242.806 or Sec.  242.807, which set forth circumstances under 
which exemptions from the trading prohibition contained in paragraph 
(h)(2)(i) of this section may be granted; such exemptions are to be 
administered by the security-based swap execution facility on a case-by-
case basis. Specifically, such circumstances may include:
    (i) Participation by an employee in a pooled investment vehicle 
where the employee has no direct or indirect control with respect to 
transactions executed for or on behalf of such vehicle;
    (ii) Trading by an employee in a derivative based on a pooled 
investment vehicle that falls within paragraph (h)(3)(i) of this 
section;
    (iii) Trading by an employee in a derivative based on an index in 
which no covered interest constitutes more than 10 percent of the index; 
and
    (iv) Trading by an employee under circumstances enumerated by the 
security-based swap execution facility in rules which the security-based 
swap execution facility determines are not contrary to applicable law, 
the public interest, or just and equitable principles of trade.
    (4) Prohibited conduct. (i) No employee, governing board member, 
committee member, or consultant of a security-based swap execution 
facility shall:
    (A) Trade for such person's own account, or for or on behalf of any 
other account, in any covered interest on the basis of any material, 
non-public information obtained through special access related to the 
performance of such person's official duties as an employee, governing 
board member, committee member, or consultant; or
    (B) Disclose for any purpose inconsistent with the performance of 
such person's official duties as an employee, governing board member, 
committee member, or consultant any material, non-public information 
obtained through special access related to the performance of such 
duties.
    (ii) No person shall trade for such person's own account, or for or 
on behalf of any other account, in any covered interest on the basis of 
any material, non-public information that such person knows was obtained 
in violation of this paragraph (h)(4) from an employee, governing board 
member, committee member, or consultant.
    (i) Service on security-based swap execution facility governing 
boards or committees by persons with disciplinary histories. (1) A 
security-based swap execution facility shall maintain in effect rules 
which have been submitted to the Commission pursuant to Sec.  242.806 or 
Sec.  242.807 that render a person ineligible to serve on its 
disciplinary committees, arbitration panels, oversight panels, or 
governing board who:
    (i) Was found within the prior three years by a final decision of a 
security-based swap execution facility, a self-regulatory organization, 
an administrative law judge, a court of competent jurisdiction, or the 
Commission to have committed a disciplinary offense;
    (ii) Entered into a settlement agreement with a security-based swap 
execution facility, a court of competent jurisdiction, or the Commission 
within the prior three years in which any of the findings or, in the 
absence of such findings, any of the acts charged included a 
disciplinary offense;

[[Page 119]]

    (iii) Currently is suspended from trading on any security-based swap 
execution facility, is suspended or expelled from membership with a 
self-regulatory organization, is serving any sentence of probation, or 
owes any portion of a fine imposed pursuant to:
    (A) A finding by a final decision of a security-based swap execution 
facility, a self-regulatory organization, an administrative law judge, a 
court of competent jurisdiction, or the Commission that such person 
committed a disciplinary offense; or
    (B) A settlement agreement with a security-based swap execution 
facility, a court of competent jurisdiction, or the Commission in which 
any of the findings or, in the absence of such findings, any of the acts 
charged included a disciplinary offense;
    (iv) Currently is subject to an agreement with the Commission, a 
security-based swap execution facility, or a self-regulatory 
organization not to apply for registration with the Commission or 
membership in any self-regulatory organization;
    (v) Currently is subject to or has had imposed on him or her within 
the prior three years a Commission registration revocation or suspension 
in any capacity for any reason, or has been convicted within the prior 
three years of any felony; or
    (vi) Currently is subject to a denial, suspension, or 
disqualification from serving on a disciplinary committee, arbitration 
panel, or governing board of any security-based swap execution facility 
or self-regulatory organization.
    (2) No person may serve on a disciplinary committee, arbitration 
panel, oversight panel or governing board of a security-based swap 
execution facility if such person is subject to any of the conditions 
listed in paragraphs (i)(1)(i) through (vi) of this section.
    (3) A security-based swap execution facility shall submit to the 
Commission a schedule listing all those rule violations which constitute 
disciplinary offenses and, to the extent necessary to reflect revisions, 
shall submit an amended schedule within 30 days of the end of each 
calendar year. A security-based swap execution facility shall maintain 
and keep current the schedule required by this section, and post the 
schedule on the security-based swap execution facility's website so that 
it is in a public place designed to provide notice to members and 
otherwise ensure its availability to the general public.
    (4) A security-based swap execution facility shall submit to the 
Commission within 30 days of the end of each calendar year a certified 
list of any persons who have been removed from its disciplinary 
committees, arbitration panels, oversight panels, or governing board 
pursuant to the requirements of this section during the prior year.
    (5) Whenever a security-based swap execution facility finds by final 
decision that a person has committed a disciplinary offense and such 
finding makes such person ineligible to serve on that security-based 
swap execution facility's disciplinary committees, arbitration panels, 
oversight panels, or governing board, the security-based swap execution 
facility shall inform the Commission of that finding and the length of 
the ineligibility in a form and manner specified by the Commission.
    (6) For purposes of this paragraph:
    (i) Arbitration panel means any person or panel empowered by a 
security-based swap execution facility to arbitrate disputes involving 
the security-based swap execution facility's members or their customers.
    (ii) Disciplinary offense means:
    (A) Any violation of the rules of a security-based swap execution 
facility, except a violation resulting in fines aggregating to less than 
$5,000 within a calendar year involving:
    (1) Decorum or attire;
    (2) Financial requirements; or
    (3) Reporting or recordkeeping;
    (B) Any rule violation which involves fraud, deceit, or conversion 
or results in a suspension or expulsion;
    (C) Any violation of the Act or the Commission's rules thereunder; 
or
    (D) Any failure to exercise supervisory responsibility when such 
failure is itself a violation of either the rules of the security-based 
swap execution facility, the Act, or the Commission's rules thereunder.
    (E) A disciplinary offense must arise out of a proceeding or action 
which is

[[Page 120]]

brought by a security-based swap execution facility, the Commission, any 
Federal or State agency, or other governmental body.
    (iii) Final decision means:
    (A) A decision of a security-based swap execution facility which 
cannot be further appealed within the security-based swap execution 
facility, is not subject to the stay of the Commission or a court of 
competent jurisdiction, and has not been reversed by the Commission or 
any court of competent jurisdiction; or
    (B) Any decision by an administrative law judge, a court of 
competent jurisdiction, or the Commission which has not been stayed or 
reversed.
    (j) Notification of final disciplinary action involving financial 
harm to a customer. (1) Upon any final disciplinary action in which a 
security-based swap execution facility finds that a member has committed 
a rule violation that involved a transaction for a customer, whether 
executed or not, and that resulted in financial harm to the customer:
    (i) The security-based swap execution facility shall promptly 
provide written notice of the disciplinary action to the member; and
    (ii) The security-based swap execution facility shall have 
established a rule pursuant to Sec.  242.806 or Sec.  242.807 that 
requires a member that receives such a notice to promptly provide 
written notice of the disciplinary action to the customer, as disclosed 
on the member's books and records.
    (2) A written notice required by paragraph (j)(1) of this section 
must include the principal facts of the disciplinary action and a 
statement that the security-based swap execution facility has found that 
the member has committed a rule violation that involved a transaction 
for the customer, whether executed or not, and that resulted in 
financial harm to the customer.
    (3) Solely for purposes of this paragraph (j):
    (i) Customer means a person that utilizes an agent in connection 
with trading on a security-based swap execution facility.
    (ii) Final disciplinary action means any decision by or settlement 
with a security-based swap execution facility in a disciplinary matter 
which cannot be further appealed at the security-based swap execution 
facility, is not subject to the stay of the Commission or a court of 
competent jurisdiction, and has not been reversed by the Commission or 
any court of competent jurisdiction.
    (k) Designation of agent for non-U.S. member. (1) A security-based 
swap execution facility that admits a non-U.S. person as a member shall 
be deemed to be the agent of the non-U.S. member with respect to any 
security-based swaps executed by the non-U.S. member. Service or 
delivery of any communication issued by or on behalf of the Commission 
to the security-based swap execution facility shall constitute valid and 
effective service upon the non-U.S. member. The security-based swap 
execution facility which has been served with, or to which there has 
been delivered, a communication issued by or on behalf of the Commission 
to a non-U.S. member shall transmit the communication promptly and in a 
manner which is reasonable under the circumstances, or in a manner 
specified by the Commission in the communication, to the non-U.S. 
member.
    (2) It shall be unlawful for a security-based swap execution 
facility to permit a non-U.S. member to execute security-based swaps on 
the facility unless the security-based swap execution facility prior 
thereto informs the non-U.S. member in writing of the requirements of 
this section.
    (3) The requirements of paragraphs (k)(1) and (2) of this section 
shall not apply if the non-U.S. member has duly executed and maintains 
in effect a written agency agreement in compliance with this paragraph 
with a person domiciled in the United States and has provided a copy of 
the agreement to the security-based swap execution facility prior to 
effecting any transaction on the security-based swap execution facility. 
This agreement must authorize the person domiciled in the United States 
to serve as the agent of the non-U.S. member for purposes of accepting 
delivery and service of all communications issued by or on behalf of the 
Commission to the non-U.S. member and must provide an address in the 
United States where the agent will

[[Page 121]]

accept delivery and service of communications from the Commission. This 
agreement must be filed with the Commission by the security-based swap 
execution facility prior to permitting the non-U.S. member to effect any 
transactions in security-based swaps. Such agreements shall be filed in 
a manner specified by the Commission.
    (4) A non-U.S. member shall notify the Commission immediately if the 
written agency agreement is terminated, revoked, or is otherwise no 
longer in effect. If the security-based swap execution facility knows or 
should know that the agreement has expired, been terminated, or is no 
longer in effect, the security-based swap execution facility shall 
notify the Commission immediately.



Sec.  242.820  Core Principle 3--Security-based swaps not readily
susceptible to manipulation.

    The security-based swap execution facility shall permit trading only 
in security-based swaps that are not readily susceptible to 
manipulation.



Sec.  242.821  Core Principle 4--Monitoring of trading and trade
processing.

    (a) General. The security-based swap execution facility shall:
    (1) Establish and enforce rules or terms and conditions defining, or 
specifications detailing:
    (i) Trading procedures to be used in entering and executing orders 
traded on or through the facilities of the security-based swap execution 
facility; and
    (ii) Procedures for trade processing of security-based swaps on or 
through the facilities of the security-based swap execution facility; 
and
    (2) Monitor trading in security-based swaps to prevent manipulation, 
price distortion, and disruptions of the delivery or cash settlement 
process through surveillance, compliance, and disciplinary practices and 
procedures, including methods for conducting real-time monitoring of 
trading and comprehensive and accurate trade reconstructions.
    (b) Market oversight obligations. A security-based swap execution 
facility shall:
    (1) Collect and evaluate data on its members' market activity on an 
ongoing basis in order to detect and prevent manipulation, price 
distortions, and, where possible, disruptions of the physical-delivery 
or cash-settlement process;
    (2) Monitor and evaluate general market data in order to detect and 
prevent manipulative activity that would result in the failure of the 
market price to reflect the normal forces of supply and demand;
    (3) Demonstrate an effective program for conducting real-time 
monitoring of trading for the purpose of detecting and resolving 
abnormalities. A security-based swap execution facility shall employ 
automated alerts to detect abnormal price movements and unusual trading 
volumes in real time and instances or threats of manipulation, price 
distortion, and disruptions on at least a T + 1 basis. The T + 1 
detection and analysis should incorporate any additional data that 
becomes available on a T + 1 basis, including the trade reconstruction 
data;
    (4) Demonstrate the ability to comprehensively and accurately 
reconstruct daily trading activity for the purpose of detecting 
instances or threats of manipulation, price distortion, and disruptions; 
and
    (5) Have rules in place that allow it to intervene to prevent or 
reduce market disruptions. Once a threatened or actual disruption is 
detected, the security-based swap execution facility shall take steps to 
prevent the market disruption or reduce its severity.
    (c) Monitoring of physical-delivery security-based swaps. For 
physical-delivery security-based swaps, the security-based swap 
execution facility shall demonstrate that it:
    (1) Monitors a security-based swap's terms and conditions as they 
relate to the underlying asset market; and
    (2) Monitors the availability of the supply of the asset specified 
by the delivery requirements of the security-based swap.
    (d) Additional requirements for cash-settled security-based swaps. 
(1) For cash-settled security-based swaps, the security-based swap 
execution facility shall demonstrate that it monitors the pricing of the 
reference price used to determine cash flows or settlement.

[[Page 122]]

    (2) For cash-settled security-based swaps listed on the security-
based swap execution facility where the reference price is formulated 
and computed by the security-based swap execution facility, the 
security-based swap execution facility shall demonstrate that it 
monitors the continued appropriateness of its methodology for deriving 
that price and shall promptly amend any methodologies that result, or 
are likely to result, in manipulation, price distortions, or market 
disruptions, or impose new methodologies to resolve the threat of 
disruptions or distortions.
    (3) For cash-settled security-based swaps listed on the security-
based swap execution facility where the reference price relies on a 
third-party index or instrument, including an index or instrument traded 
on another venue, the security-based swap execution facility shall 
demonstrate that it monitors for pricing abnormalities in the index or 
instrument used to calculate the reference price and shall conduct due 
diligence to ensure that the reference price is not susceptible to 
manipulation.
    (e) Ability to obtain information. (1) A security-based swap 
execution facility shall demonstrate that it has access to sufficient 
information to assess whether trading in security-based swaps listed on 
its market, in the index or instrument used as a reference price, or in 
the underlying asset for its listed security-based swaps is being used 
to affect prices on its market. The security-based swap execution 
facility shall demonstrate that it can obtain position and trading 
information directly from members that conduct substantial trading on 
its facility or through an information-sharing agreement with other 
venues or a third-party regulatory service provider. If the position and 
trading information is not available directly from its members but is 
available through information-sharing agreements with other trading 
venues or a third-party regulatory service provider, the security-based 
swap execution facility should cooperate in such information-sharing 
agreements.
    (2) A security-based swap execution facility shall have rules that 
require its members to keep records of their trading, including records 
of their activity in the underlying asset, and related derivatives 
markets, and make such records available, upon request, to the security-
based swap execution facility or, if applicable, to its regulatory 
service provider and the Commission. The security-based swap execution 
facility may limit the application of this requirement to only those 
members that conduct substantial trading on its facility.
    (f) Risk controls for trading. A security-based swap execution 
facility shall establish and maintain risk control mechanisms to prevent 
and reduce the potential risk of market disruptions, including, but not 
limited to, market restrictions that pause or halt trading under market 
conditions prescribed by the security-based swap execution facility. 
Such risk control mechanisms shall be designed to avoid market 
disruptions without unduly interfering with that market's price 
discovery function. The security-based swap execution facility may 
choose from among controls that include: pre-trade limits on order size, 
price collars or bands around the current price, message throttles, 
daily price limits, and intraday position limits related to financial 
risk to the clearing member, or design other types of controls, as well 
as clear error-trade and order-cancellation policies. Within the 
specific array of controls that are selected, the security-based swap 
execution facility shall set the parameters for those controls, so that 
the specific parameters are reasonably likely to serve the purpose of 
preventing market disruptions and price distortions.
    (g) Trade reconstruction. A security-based swap execution facility 
shall have the ability to comprehensively and accurately reconstruct all 
trading on its facility. All audit-trail data and reconstructions shall 
be made available to the Commission in a form, manner, and time that is 
acceptable to the Commission.
    (h) Regulatory service provider. A security-based swap execution 
facility shall comply with the rules in this section through a dedicated 
regulatory department or by contracting with a regulatory service 
provider pursuant to Sec.  242.819(e).

[[Page 123]]



Sec.  242.822  Core Principle 5--Ability to obtain information.

    (a) General. The security-based swap execution facility shall:
    (1) Establish and enforce rules that will allow the facility to 
obtain any necessary information to perform any of the functions 
described in section 3D of the Act;
    (2) Provide the information to the Commission on request; and
    (3) Have the capacity to carry out such international information-
sharing agreements as the Commission may require.
    (b) Establish and enforce rules. A security-based swap execution 
facility shall establish and enforce rules that will allow the security-
based swap execution facility to have the ability and authority to 
obtain sufficient information to allow it to fully perform its 
operational, risk management, governance, and regulatory functions and 
any requirements under this section, including the capacity to carry out 
international information-sharing agreements as the Commission may 
require.
    (c) Collection of information. A security-based swap execution 
facility shall have rules that allow it to collect information on a 
routine basis, allow for the collection of non-routine data from its 
members, and allow for its examination of books and records kept by 
members on its facility.
    (d) Provide information to the Commission. A security-based swap 
execution facility shall provide information in its possession to the 
Commission upon request, in a form and manner specified by the 
Commission.
    (e) Information-sharing agreements. A security-based swap execution 
facility shall share information with other regulatory organizations, 
data repositories, and third-party data reporting services as required 
by the Commission or as otherwise necessary and appropriate to fulfill 
its regulatory and reporting responsibilities. Appropriate information-
sharing agreements can be established with such entities, or the 
Commission can act in conjunction with the security-based swap execution 
facility to carry out such information sharing.



Sec.  242.823  Core Principle 6--Financial integrity of transactions.

    (a) General. The security-based swap execution facility shall 
establish and enforce rules and procedures for ensuring the financial 
integrity of security-based swaps entered on or through the facilities 
of the security-based swap execution facility, including the clearance 
and settlement of security-based swaps pursuant to section 3C(a)(1) of 
the Act.
    (b) Required clearing. Transactions executed on or through the 
security-based swap execution facility that are required to be cleared 
under section 3C(a)(1) of the Act or are voluntarily cleared by the 
counterparties shall be cleared through a registered clearing agency or 
a clearing agency that has obtained an exemption from clearing agency 
registration to provide central counterparty services for security-based 
swaps.
    (c) General financial integrity. A security-based swap execution 
facility shall provide for the financial integrity of its transactions:
    (1) By establishing minimum financial standards for its members, 
which shall, at a minimum, require that each member qualify as an 
eligible contract participant;
    (2) For transactions cleared by a registered clearing agency:
    (i) By ensuring that the security-based swap execution facility has 
the capacity to route transactions to the registered clearing agency in 
a manner acceptable to the clearing agency for purposes of clearing; and
    (ii) By coordinating with each registered clearing agency to which 
it submits transactions for clearing, in the development of rules and 
procedures to facilitate prompt and efficient transaction processing.
    (d) Monitoring for financial soundness. A security-based swap 
execution facility shall monitor its members to ensure that they 
continue to qualify as eligible contract participants.



Sec.  242.824  Core Principle 7--Emergency authority.

    (a) The security-based swap execution facility shall adopt rules to 
provide for the exercise of emergency authority, in consultation or 
cooperation

[[Page 124]]

with the Commission, as is necessary and appropriate, including the 
authority to liquidate or transfer open positions in any security-based 
swap or to suspend or curtail trading in a security-based swap.
    (b) To comply with this core principle, a security-based swap 
execution facility shall adopt rules that are reasonably designed to:
    (1) Allow the security-based swap execution facility to intervene as 
necessary to maintain markets with fair and orderly trading and to 
prevent or address manipulation or disruptive trading practices, whether 
the need for intervention arises exclusively from the security-based 
swap execution facility's market or as part of a coordinated, cross-
market intervention;
    (2) Have the flexibility and independence to address market 
emergencies in an effective and timely manner consistent with the nature 
of the emergency, as long as all such actions taken by the security-
based swap execution facility are made in good faith to protect the 
integrity of the markets;
    (3) Take market actions as may be directed by the Commission, 
including, in situations where a security-based swap is traded on more 
than one platform, emergency action to liquidate or transfer open 
interest as directed, or agreed to, by the Commission or the 
Commission's staff;
    (4) Include procedures and guidelines for decision-making and 
implementation of emergency intervention that avoid conflicts of 
interest;
    (5) Include alternate lines of communication and approval procedures 
to address emergencies associated with real-time events; and
    (6) Allow the security-based swap execution facility, to address 
perceived market threats, to impose or modify position limits, impose or 
modify price limits, impose or modify intraday market restrictions, 
impose special margin requirements, order the liquidation or transfer of 
open positions in any contract, order the fixing of a settlement price, 
extend or shorten the expiration date or the trading hours, suspend or 
curtail trading in any contract, transfer customer contracts and the 
margin, or alter any contract's settlement terms or conditions, or, if 
applicable, provide for the carrying out of such actions through its 
agreements with its third-party provider of clearing or regulatory 
services.
    (c) A security-based swap execution facility shall promptly notify 
the Commission of its exercise of emergency authority, explaining its 
decision-making process, the reasons for using its emergency authority, 
and how conflicts of interest were minimized, including the extent to 
which the security-based swap execution facility considered the effect 
of its emergency action on the underlying markets and on markets that 
are linked or referenced to the contracts traded on its facility, 
including similar markets on other trading venues. Information on all 
regulatory actions carried out pursuant to a security-based swap 
execution facility's emergency authority shall be included in a timely 
submission of a certified rule pursuant to Sec.  242.807.



Sec.  242.825  Core Principle 8--Timely publication of trading information.

    (a)(1) The security-based swap execution facility shall make public 
timely information on price, trading volume, and other trading data on 
security-based swaps to the extent prescribed by the Commission.
    (2) The security-based swap execution facility shall be required to 
have the capacity to electronically capture and transmit and disseminate 
trade information with respect to transactions executed on or through 
the facility.
    (b) A security-based swap execution facility shall report security-
based swap transaction data as required by Sec. Sec.  242.900 through 
242.909 (Regulation SBSR).
    (c) A security-based swap execution facility shall make available a 
``Daily Market Data Report'' containing the information required in 
paragraphs (c)(1) and (2) of this section in a manner and timeframe 
required by this section.
    (1) Contents. The Daily Market Data Report of a security-based swap 
execution facility for a business day shall contain the following 
information for each tenor of each security-based swap traded on that 
security-based swap execution facility during that business day:

[[Page 125]]

    (i) The trade count (excluding error trades, correcting trades, and 
offsetting trades);
    (ii) The total notional amount traded (excluding error trades, 
correcting trades, and offsetting trades);
    (iii) The total notional amount of block trades, after such time as 
the Commission adopts a definition of ``block trade'' in Sec.  242.802 
of this chapter (Rule 802);
    (iv) The opening and closing price;
    (v) The price that is used for settlement purposes, if different 
from the closing price; and
    (vi) The lowest price of a sale or offer, whichever is lower, and 
the highest price of a sale or bid, whichever is higher, that the 
security-based swap execution facility reasonably determines accurately 
reflects market conditions. Bids and offers vacated or withdrawn shall 
not be used in making this determination. A bid is vacated if followed 
by a higher bid or price and an offer is vacated if followed by a lower 
offer or price.
    (2) Additional information. A security-based swap execution facility 
must record the following information with respect to security-based 
swaps on that reporting market:
    (i) The method used by the security-based swap execution facility in 
determining nominal prices and settlement prices; and
    (ii) If discretion is used by the security-based swap execution 
facility in determining the opening and/or closing ranges or the 
settlement prices, an explanation that certain discretion may be 
employed by the security-based swap execution facility and a description 
of the manner in which that discretion may be employed. Discretionary 
authority must be noted explicitly in each case in which it is applied 
(for example, by use of an asterisk or footnote).
    (3) Form of publication. A security-based swap execution facility 
shall publicly post the Daily Market Data Report on its website:
    (i) In a downloadable and machine-readable format using the most 
recent versions of the associated XML schema and PDF renderer as 
published on the Commission's website;
    (ii) Without fees or other charges;
    (iii) Without any encumbrances on access or usage restrictions; and
    (iv) Without requiring a user to agree to any terms before being 
allowed to view or download the Daily Market Data Report, such as by 
waiving any requirements of this paragraph (c)(3). Any such waiver 
agreed to by a user shall be null and void.
    (4) Timing of publication. A security-based swap execution facility 
shall publish the Daily Market Data Report on its website as soon as 
reasonably practicable on the next business day after the day to which 
the information pertains, but in no event later than 7 a.m. on the next 
business day.
    (5) Duration. A security-based swap execution facility shall keep 
each Daily Market Data Report available on its website in the same 
location as all other Daily Market Data Reports for no less than one 
year after the date of first publication.



Sec.  242.826  Core Principle 9--Recordkeeping and reporting.

    (a) In general. (1) A security-based swap execution facility shall:
    (i) Maintain records of all activities relating to the business of 
the facility, including a complete audit trail, in a form and manner 
acceptable to the Commission for a period of five years; and
    (ii) Report to the Commission, in a form and manner acceptable to 
the Commission, such information as the Commission determines to be 
necessary or appropriate for the Commission to perform the duties of the 
Commission under the Act.
    (2) The Commission shall adopt data collection and reporting 
requirements for security-based swap execution facilities that are 
comparable to corresponding requirements for clearing agencies and 
security-based swap data repositories.
    (b) Required records. A security-based swap execution facility shall 
keep full, complete, and systematic records, together with all pertinent 
data and memoranda, of all activities relating to its business with 
respect to security-based swaps. Such records shall include, without 
limitation, the audit trail information required under Sec.  242.819(f) 
and all other records that a

[[Page 126]]

security-based swap execution facility is required to create or obtain 
under Sec. Sec.  242.800 through 242.835 (Regulation SE).
    (c) Duration of retention. (1) A security-based swap execution 
facility shall keep records of any security-based swap from the date of 
execution until the termination, maturity, expiration, transfer, 
assignment, or novation date of the transaction, and for a period of not 
less than five years, the first two years in an easily accessible place, 
after such date.
    (2) A security-based swap execution facility shall keep each record 
other than the records described in paragraph (c)(1) of this section for 
a period of not less than five years, the first two years in an easily 
accessible place, from the date on which the record was created.
    (d) Record retention. (1) A security-based swap execution facility 
shall retain all records in a form and manner that ensures the 
authenticity and reliability of such records in accordance with the Act 
and the Commission's rules thereunder.
    (2) A security-based swap execution facility shall, upon request of 
any representative of the Commission, promptly furnish to the 
representative legible, true, complete, and current copies of any 
records required to be kept and preserved pursuant to this section.
    (3)(i) An electronic record shall be retained in a form and manner 
that allows for prompt production at the request of any representative 
of the Commission.
    (ii) A security-based swap execution facility maintaining electronic 
records shall establish appropriate systems and controls that ensure the 
authenticity and reliability of electronic records, including, without 
limitation:
    (A) Systems that maintain the security, signature, and data as 
necessary to ensure the authenticity of the information contained in 
electronic records and to monitor compliance with the Act and the 
Commission's rules thereunder;
    (B) Systems that ensure that the security-based swap execution 
facility is able to produce electronic records in accordance with this 
section, and ensure the availability of such electronic records in the 
event of an emergency or other disruption of the security-based swap 
execution facility's electronic record retention systems; and
    (C) The creation and maintenance of an up-to-date inventory that 
identifies and describes each system that maintains information 
necessary for accessing or producing electronic records.
    (e) Record examination. All records required to be kept by a 
security-based swap execution facility pursuant to this section are 
subject to examination by any representative of the Commission pursuant 
to section 17(b) of the Act (15 U.S.C. 78q).
    (f) Records of non-U.S. members. A security-based swap execution 
facility shall keep a record in permanent form, which shall show the 
true name, address, and principal occupation or business of any non-U.S. 
member that executes transactions on the facility. Upon request, the 
security-based swap execution facility shall provide to the Commission 
information regarding the name of any person guaranteeing such 
transactions or exercising any control over the trading of such non-U.S. 
member.



Sec.  242.827  Core Principle 10--Antitrust considerations.

    Unless necessary or appropriate to achieve the purposes of the Act, 
the security-based swap execution facility shall not:
    (a) Adopt any rules or take any actions that result in any 
unreasonable restraint of trade; or
    (b) Impose any material anticompetitive burden on trading or 
clearing.



Sec.  242.828  Core Principle 11--Conflicts of interest.

    (a) The security-based swap execution facility shall:
    (1) Establish and enforce rules to minimize conflicts of interest in 
its decision-making process; and
    (2) Establish a process for resolving the conflicts of interest.
    (b) A security-based swap execution facility shall comply with the 
requirements of Sec.  242.834.

[[Page 127]]



Sec.  242.829  Core Principle 12--Financial resources.

    (a) In general. (1) The security-based swap execution facility shall 
have adequate financial, operational, and managerial resources to 
discharge each responsibility of the security-based swap execution 
facility, as determined by the Commission.
    (2) The financial resources of a security-based swap execution 
facility shall be considered to be adequate if the value of the 
financial resources:
    (i) Enables the organization to meet its financial obligations to 
its members notwithstanding a default by a member creating the largest 
financial exposure for that organization in extreme but plausible market 
conditions; and
    (ii) Exceeds the total amount that would enable the security-based 
swap execution facility to cover the operating costs of the security-
based swap execution facility for a one-year period, as calculated on a 
rolling basis.
    (b) General requirements. A security-based swap execution facility 
shall maintain financial resources on an ongoing basis that are adequate 
to enable it to comply with the core principles set forth in section 3D 
of the Act and any applicable Commission rules. Financial resources 
shall be considered adequate if their value exceeds the total amount 
that would enable the security-based swap execution facility to cover 
its projected operating costs necessary for the security-based swap 
execution facility to comply with section 3D of the Act and applicable 
Commission rules for a one-year period, as calculated on a rolling basis 
pursuant to paragraph (e) of this section.
    (c) Types of financial resources. Financial resources available to 
satisfy the requirements of this section may include:
    (1) The security-based swap execution facility's own capital, 
meaning its assets minus its liabilities calculated in accordance with 
generally accepted accounting principles in the United States; and
    (2) Any other financial resource deemed acceptable by the 
Commission.
    (d) Liquidity of financial resources. The financial resources 
allocated by a security-based swap execution facility to meet the 
ongoing requirements of paragraph (b) of this section shall include 
unencumbered, liquid financial assets (i.e., cash and/or highly liquid 
securities) equal to at least the greater of three months of projected 
operating costs, as calculated on a rolling basis, or the projected 
costs needed to wind down the security-based swap execution facility's 
operations, in each case as determined under paragraph (e) of this 
section. If a security-based swap execution facility lacks sufficient 
unencumbered, liquid financial assets to satisfy its obligations under 
this section, the security-based swap execution facility may satisfy 
this requirement by obtaining a committed line of credit or similar 
facility in an amount at least equal to such deficiency.
    (e) Computation of costs to meet financial resources requirement. 
(1) A security-based swap execution facility shall, each fiscal quarter, 
make a reasonable calculation of its projected operating costs and wind-
down costs in order to determine its applicable obligations under this 
section. The security-based swap execution facility shall have 
reasonable discretion in determining the methodologies used to compute 
such amounts.
    (i) Calculation of projected operating costs. A security-based swap 
execution facility's calculation of its projected operating costs shall 
be deemed reasonable if it includes all expenses necessary for the 
security-based swap execution facility to comply with the core 
principles set forth in section 3D of the Act and any applicable 
Commission rules, and if the calculation is based on the security-based 
swap execution facility's current level of business and business model, 
taking into account any projected modification to its business model 
(e.g., the addition or subtraction of business lines or operations or 
other changes), and any projected increase or decrease in its level of 
business over the next 12 months. A security-based swap execution 
facility may exclude the following expenses (``excludable expenses'') 
from its projected operating cost calculations:
    (A) Costs attributable solely to sales, marketing, business 
development, product development, or recruitment and any related travel, 
entertainment, event, or conference costs;

[[Page 128]]

    (B) Compensation and related taxes and benefits for personnel who 
are not necessary to ensure that the security-based swap execution 
facility is able to comply with the core principles set forth in section 
3D of the Act and any applicable Commission rules;
    (C) Costs for acquiring and defending patents and trademarks for 
security-based swap execution facility products and related intellectual 
property;
    (D) Magazine, newspaper, and online periodical subscription fees;
    (E) Tax preparation and audit fees;
    (F) The variable commissions that a voice-based security-based swap 
execution facility may pay to its trading specialists, calculated as a 
percentage of transaction revenue generated by the voice-based security-
based swap execution facility; and
    (G) Any non-cash costs, including depreciation and amortization.
    (ii) Prorated expenses. A security-based swap execution facility's 
calculation of its projected operating costs shall be deemed reasonable 
if an expense is prorated and the security-based swap execution 
facility:
    (A) Maintains sufficient documentation that reasonably shows the 
extent to which an expense is partially attributable to an excludable 
expense;
    (B) Identifies any prorated expense in the financial reports that it 
submits to the Commission pursuant to paragraph (g) of this section; and
    (C) Sufficiently explains why it prorated any expense. Common 
allocation methodologies that may be used include actual use, headcount, 
or square footage. A security-based swap execution facility may provide 
documentation, such as copies of service agreements, other legal 
documents, firm policies, audit statements, or allocation methodologies 
to support its determination to prorate an expense.
    (iii) Expenses allocated among affiliates. A security-based swap 
execution facility's calculation of its projected operating costs shall 
be deemed reasonable if it prorates any shared expense that the 
security-based swap execution facility pays for, but only to the extent 
that such shared expense is attributable to an affiliate and for which 
the security-based swap execution facility is reimbursed. To prorate a 
shared expense, the security-based swap execution facility shall:
    (A) Maintain sufficient documentation that reasonably shows the 
extent to which the shared expense is attributable to and paid for by 
the security-based swap execution facility and/or affiliated entity. The 
security-based swap execution facility may provide documentation, such 
as copies of service agreements, other legal documents, firm policies, 
audit statements, or allocation methodologies, that reasonably shows how 
expenses are attributable to, and paid for by, the security-based swap 
execution facility and/or its affiliated entities to support its 
determination to prorate an expense;
    (B) Identify any shared expense in the financial reports that it 
submits to the Commission pursuant to paragraph (g) of this section; and
    (C) Sufficiently explain why it prorated the shared expense.
    (2) Notwithstanding any provision of paragraph (e)(1) of this 
section, the Commission may review the methodologies and require changes 
as appropriate.
    (f) Valuation of financial resources. No less than each fiscal 
quarter, a security-based swap execution facility shall compute the 
current market value of each financial resource used to meet its 
obligations under this section. Reductions in value to reflect market 
and credit risk (``haircuts'') shall be applied as appropriate.
    (g) Reporting to the Commission. (1) Each fiscal quarter, or at any 
time upon Commission request, a security-based swap execution facility 
shall provide a report to the Commission that includes:
    (i) The amount of financial resources necessary to meet the 
requirements of this section, computed in accordance with the 
requirements of paragraph (e) of this section, and the market value of 
each available financial resource, computed in accordance with the 
requirements of paragraph (f) of this section; and
    (ii) Financial statements, including the balance sheet, income 
statement, and statement of cash flows of the security-based swap 
execution facility.
    (A) The financial statements shall be prepared in accordance with 
generally

[[Page 129]]

accepted accounting principles in the United States, prepared in 
English, and denominated in U.S. dollars.
    (B) The financial statements of a security-based swap execution 
facility that is not domiciled in the United States, and is not 
otherwise required to prepare financial statements in accordance with 
generally accepted accounting principles in the United States, may 
satisfy the requirement in paragraph (g)(1)(ii)(A) of this section if 
such financial statements are prepared in accordance with either 
International Financial Reporting Standards issued by the International 
Accounting Standards Board, or a comparable international standard as 
the Commission may otherwise accept in its discretion.
    (2) The calculations required by this paragraph (g) shall be made as 
of the last business day of the security-based swap execution facility's 
applicable fiscal quarter.
    (3) With each report required under paragraph (g) of this section, 
the security-based swap execution facility shall also provide the 
Commission with sufficient documentation explaining the methodology used 
to compute its financial requirements under this section. Such 
documentation shall:
    (i) Allow the Commission to reliably determine, without additional 
requests for information, that the security-based swap execution 
facility has made reasonable calculations pursuant to paragraph (e) of 
this section; and
    (ii) Include, at a minimum:
    (A) A total list of all expenses, without any exclusion;
    (B) All expenses and the corresponding amounts, if any, that the 
security-based swap execution facility excluded or prorated when 
determining its operating costs, calculated on a rolling basis, required 
under this section, and the basis for any determination to exclude or 
prorate any such expenses;
    (C) Documentation demonstrating the existence of any committed line 
of credit or similar facility relied upon for the purpose of meeting the 
requirements of this section (e.g., copies of agreements establishing or 
amending a credit facility or similar facility); and
    (D) All costs that a security-based swap execution facility would 
incur to wind down its operations, the projected amount of time for any 
such wind-down period, and the basis of its determination for the 
estimation of its costs and timing.
    (4) The reports and supporting documentation required by this 
section shall be filed not later than 40 calendar days after the end of 
the security-based swap execution facility's first three fiscal 
quarters, and not later than 90 calendar days after the end of the 
security-based swap execution facility's fourth fiscal quarter, or at 
such later time as the Commission may permit, in its discretion, upon 
request by the security-based swap execution facility.
    (5) A security-based swap execution facility shall provide notice to 
the Commission no later than 48 hours after it knows or reasonably 
should know that it no longer meets its obligations under paragraphs (b) 
and (d) of this section.
    (6) A security-based swap execution facility shall provide the 
report and documentation required by this section to the Commission 
electronically using the EDGAR system as an Interactive Data File in 
accordance with Sec.  232.405 of this chapter.



Sec.  242.830  Core Principle 13--System safeguards.

    (a) In general. The security-based swap execution facility shall:
    (1) Establish and maintain a program of risk analysis and oversight 
to identify and minimize sources of operational risk, through the 
development of appropriate controls and procedures, and automated 
systems, that:
    (i) Are reliable and secure; and
    (ii) Have adequate scalable capacity;
    (2) Establish and maintain emergency procedures, backup facilities, 
and a plan for disaster recovery that allow for:
    (i) The timely recovery and resumption of operations; and
    (ii) The fulfillment of the responsibilities and obligations of the 
security-based swap execution facility; and
    (3) Periodically conduct tests to verify that the backup resources 
of the security-based swap execution facility are sufficient to ensure 
continued:

[[Page 130]]

    (i) Order processing and trade matching;
    (ii) Price reporting;
    (iii) Market surveillance; and
    (iv) Maintenance of a comprehensive and accurate audit trail.
    (b) Requirements. (1) A security-based swap execution facility's 
program of risk analysis and oversight with respect to its operations 
and automated systems shall address each of the following categories of 
risk analysis and oversight:
    (i) Enterprise risk management and governance. This category 
includes, but is not limited to: Assessment, mitigation, and monitoring 
of security and technology risk; security and technology capital 
planning and investment; governing board and management oversight of 
technology and security; information technology audit and controls 
assessments; remediation of deficiencies; and any other elements of 
enterprise risk management and governance included in generally accepted 
best practices.
    (ii) Information security. This category includes, but is not 
limited to, controls relating to: Access to systems and data (including 
least privilege, separation of duties, account monitoring, and control); 
user and device identification and authentication; security awareness 
training; audit log maintenance, monitoring, and analysis; media 
protection; personnel security and screening; automated system and 
communications protection (including network port control, boundary 
defenses, and encryption); system and information integrity (including 
malware defenses and software integrity monitoring); vulnerability 
management; penetration testing; security incident response and 
management; and any other elements of information security included in 
generally accepted best practices.
    (iii) Business continuity-disaster recovery planning and resources. 
This category includes, but is not limited to: Regular, periodic testing 
and review of business continuity-disaster recovery capabilities; the 
controls and capabilities described in paragraphs (b)(3) and (10) of 
this section; and any other elements of business continuity-disaster 
recovery planning and resources included in generally accepted best 
practices.
    (iv) Capacity and performance planning. This category includes, but 
is not limited to: Controls for monitoring the security-based swap 
execution facility's systems to ensure adequate scalable capacity 
(including testing, monitoring, and analysis of current and projected 
future capacity and performance, and of possible capacity degradation 
due to planned automated system changes); and any other elements of 
capacity and performance planning included in generally accepted best 
practices.
    (v) Systems operations. This category includes, but is not limited 
to: System maintenance; configuration management (including baseline 
configuration, configuration change and patch management, least 
functionality, and inventory of authorized and unauthorized devices and 
software); event and problem response and management; and any other 
elements of system operations included in generally accepted best 
practices.
    (vi) Systems development and quality assurance. This category 
includes, but is not limited to: Requirements development; pre-
production and regression testing; change management procedures and 
approvals; outsourcing and vendor management; training in secure coding 
practices; and any other elements of systems development and quality 
assurance included in generally accepted best practices.
    (vii) Physical security and environmental controls. This category 
includes, but is not limited to: Physical access and monitoring; power, 
telecommunication, and environmental controls; fire protection; and any 
other elements of physical security and environmental controls included 
in generally accepted best practices.
    (2) In addressing the categories of risk analysis and oversight 
required under paragraph (b)(1) of this section, a security-based swap 
execution facility shall follow generally accepted standards and best 
practices with respect to the development, operation, reliability, 
security, and capacity of automated systems.

[[Page 131]]

    (3) A security-based swap execution facility shall maintain a 
business continuity-disaster recovery plan and business continuity-
disaster recovery resources, emergency procedures, and back-up 
facilities sufficient to enable timely recovery and resumption of its 
operations and resumption of its ongoing fulfillment of its 
responsibilities and obligations as a security-based swap execution 
facility following any disruption of its operations. Such 
responsibilities and obligations include, without limitation: Order 
processing and trade matching; transmission of matched orders to a 
registered clearing agency for clearing, where appropriate; price 
reporting; market surveillance; and maintenance of a comprehensive audit 
trail. A security-based swap execution facility's business continuity-
disaster recovery plan and resources generally should enable resumption 
of trading and clearing of security-based swaps executed on or pursuant 
to the rules of the security-based swap execution facility during the 
next business day following the disruption. A security-based swap 
execution facility shall update its business continuity-disaster 
recovery plan and emergency procedures at a frequency determined by an 
appropriate risk analysis, but at a minimum no less frequently than 
annually.
    (4) A security-based swap execution facility satisfies the 
requirement to be able to resume its operations and resume its ongoing 
fulfillment of its responsibilities and obligations during the next 
business day following any disruption of its operations by maintaining 
either:
    (i) Infrastructure and personnel resources of its own that are 
sufficient to ensure timely recovery and resumption of its operations 
and resumption of its ongoing fulfillment of its responsibilities and 
obligations as a security-based swap execution facility following any 
disruption of its operations; or
    (ii) Contractual arrangements with other security-based swap 
execution facilities or disaster recovery service providers, as 
appropriate, that are sufficient to ensure continued trading and 
clearing of security-based swaps executed on the security-based swap 
execution facility, and ongoing fulfillment of all of the security-based 
swap execution facility's responsibilities and obligations with respect 
to such security-based swaps, in the event that a disruption renders the 
security-based swap execution facility temporarily or permanently unable 
to satisfy this requirement on its own behalf.
    (5) A security-based swap execution facility shall notify Commission 
staff promptly of all:
    (i) Electronic trading halts and material system malfunctions;
    (ii) Cyber-security incidents or targeted threats that actually or 
potentially jeopardize automated system operation, reliability, 
security, or capacity; and
    (iii) Activations of the security-based swap execution facility's 
business continuity-disaster recovery plan.
    (6) A security-based swap execution facility shall provide 
Commission staff timely advance notice of all material:
    (i) Planned changes to automated systems that may impact the 
reliability, security, or adequate scalable capacity of such systems; 
and
    (ii) Planned changes to the security-based swap execution facility's 
program of risk analysis and oversight.
    (7) As part of a security-based swap execution facility's obligation 
to produce books and records in accordance with Sec.  242.826 (Core 
Principle 9), the security-based swap execution facility shall provide 
to the Commission the following system-safeguards-related books and 
records, promptly upon the request of any Commission representative:
    (i) Current copies of its business continuity-disaster recovery 
plans and other emergency procedures;
    (ii) All assessments of its operational risks or system safeguards-
related controls;
    (iii) All reports concerning system safeguards testing and 
assessment required by this chapter, whether performed by independent 
contractors or by employees of the security-based swap execution 
facility; and
    (iv) All other books and records requested by Commission staff in 
connection with Commission oversight of system safeguards pursuant to 
the Act or Commission rules, or in connection with Commission 
maintenance of a current profile of the security-based

[[Page 132]]

swap execution facility's automated systems.
    (v) Nothing in paragraph (b)(7) of this section shall be interpreted 
as reducing or limiting in any way a security-based swap execution 
facility's obligation to comply with Sec.  242.826 (Core Principle 9).
    (8) A security-based swap execution facility shall conduct regular, 
periodic, objective testing and review of its automated systems to 
ensure that they are reliable, secure, and have adequate scalable 
capacity. A security-based swap execution facility shall also conduct 
regular, periodic testing and review of its business continuity-disaster 
recovery capabilities. Such testing and review shall include, without 
limitation, all of the types of testing set forth in this paragraph 
(b)(8).
    (i) Definitions. As used in this paragraph (b)(8):
    Controls means the safeguards or countermeasures employed by the 
security-based swap execution facility to protect the reliability, 
security, or capacity of its automated systems or the confidentiality, 
integrity, and availability of its data and information, and to enable 
the security-based swap execution facility to fulfill its statutory and 
regulatory responsibilities.
    Controls testing means assessment of the security-based swap 
execution facility's controls to determine whether such controls are 
implemented correctly, are operating as intended, and are enabling the 
security-based swap execution facility to meet the requirements of this 
section.
    Enterprise technology risk assessment means a written assessment 
that includes, but is not limited to, an analysis of threats and 
vulnerabilities in the context of mitigating controls. An enterprise 
technology risk assessment identifies, estimates, and prioritizes risks 
to security-based swap execution facility operations or assets, or to 
market participants, individuals, or other entities, resulting from 
impairment of the confidentiality, integrity, and availability of data 
and information or the reliability, security, or capacity of automated 
systems.
    External penetration testing means attempts to penetrate the 
security-based swap execution facility's automated systems from outside 
the systems' boundaries to identify and exploit vulnerabilities. Methods 
of conducting external penetration testing include, but are not limited 
to, methods for circumventing the security features of an automated 
system.
    Internal penetration testing means attempts to penetrate the 
security-based swap execution facility's automated systems from inside 
the systems' boundaries, to identify and exploit vulnerabilities. 
Methods of conducting internal penetration testing include, but are not 
limited to, methods for circumventing the security features of an 
automated system.
    Security incident means a cybersecurity or physical security event 
that actually jeopardizes or has a significant likelihood of 
jeopardizing automated system operation, reliability, security, or 
capacity, or the availability, confidentiality or integrity of data.
    Security incident response plan means a written plan documenting the 
security-based swap execution facility's policies, controls, procedures, 
and resources for identifying, responding to, mitigating, and recovering 
from security incidents, and the roles and responsibilities of its 
management, staff, and independent contractors in responding to security 
incidents. A security incident response plan may be a separate document 
or a business continuity-disaster recovery plan section or appendix 
dedicated to security incident response.
    Security incident response plan testing means testing of a security-
based swap execution facility's security incident response plan to 
determine the plan's effectiveness, identify its potential weaknesses or 
deficiencies, enable regular plan updating and improvement, and maintain 
organizational preparedness and resiliency with respect to security 
incidents. Methods of conducting security incident response plan testing 
may include, but are not limited to, checklist completion, walk-through 
or table-top exercises, simulations, and comprehensive exercises.
    Vulnerability testing means testing of a security-based swap 
execution facility's automated systems to determine what information may 
be discoverable through a reconnaissance analysis of

[[Page 133]]

those systems and what vulnerabilities may be present on those systems.
    (ii) Vulnerability testing. A security-based swap execution facility 
shall conduct vulnerability testing of a scope sufficient to satisfy the 
requirements set forth in paragraph (b)(10) of this section.
    (A) A security-based swap execution facility shall conduct such 
vulnerability testing at a frequency determined by an appropriate risk 
analysis.
    (B) Such vulnerability testing shall include automated vulnerability 
scanning, which shall follow generally accepted best practices.
    (C) A security-based swap execution facility shall conduct 
vulnerability testing by engaging independent contractors or by using 
employees of the security-based swap execution facility who are not 
responsible for development or operation of the systems or capabilities 
being tested.
    (iii) External penetration testing. A security-based swap execution 
facility shall conduct external penetration testing of a scope 
sufficient to satisfy the requirements set forth in paragraph (b)(10) of 
this section.
    (A) A security-based swap execution facility shall conduct such 
external penetration testing at a frequency determined by an appropriate 
risk analysis.
    (B) A security-based swap execution facility shall conduct external 
penetration testing by engaging independent contractors or by using 
employees of the security-based swap execution facility who are not 
responsible for development or operation of the systems or capabilities 
being tested.
    (iv) Internal penetration testing. A security-based swap execution 
facility shall conduct internal penetration testing of a scope 
sufficient to satisfy the requirements set forth in paragraph (b)(10) of 
this section.
    (A) A security-based swap execution facility shall conduct such 
internal penetration testing at a frequency determined by an appropriate 
risk analysis.
    (B) A security-based swap execution facility shall conduct internal 
penetration testing by engaging independent contractors, or by using 
employees of the security-based swap execution facility who are not 
responsible for development or operation of the systems or capabilities 
being tested.
    (v) Controls testing. A security-based swap execution facility shall 
conduct controls testing of a scope sufficient to satisfy the 
requirements set forth in paragraph (b)(10) of this section.
    (A) A security-based swap execution facility shall conduct controls 
testing, which includes testing of each control included in its program 
of risk analysis and oversight, at a frequency determined by an 
appropriate risk analysis. Such testing may be conducted on a rolling 
basis.
    (B) A security-based swap execution facility shall conduct controls 
testing by engaging independent contractors or by using employees of the 
security-based swap execution facility who are not responsible for 
development or operation of the systems or capabilities being tested.
    (vi) Security incident response plan testing. A security-based swap 
execution facility shall conduct security incident response plan testing 
sufficient to satisfy the requirements set forth in paragraph (b)(10) of 
this section.
    (A) A security-based swap execution facility shall conduct such 
security incident response plan testing at a frequency determined by an 
appropriate risk analysis.
    (B) A security-based swap execution facility's security incident 
response plan shall include, without limitation, the security-based swap 
execution facility's definition and classification of security 
incidents, its policies and procedures for reporting security incidents 
and for internal and external communication and information sharing 
regarding security incidents, and the hand-off and escalation points in 
its security incident response process.
    (C) A security-based swap execution facility may coordinate its 
security incident response plan testing with other testing required by 
this section or with testing of its other business continuity-disaster 
recovery and crisis management plans.
    (D) A security-based swap execution facility may conduct security 
incident

[[Page 134]]

response plan testing by engaging independent contractors or by using 
employees of the security-based swap execution facility.
    (vii) Enterprise technology risk assessment. A security-based swap 
execution facility shall conduct enterprise technology risk assessment 
of a scope sufficient to satisfy the requirements set forth in paragraph 
(b)(10) of this section.
    (A) A security-based swap execution facility shall conduct 
enterprise technology risk assessment at a frequency determined by an 
appropriate risk analysis. A security-based swap execution facility that 
has conducted an enterprise technology risk assessment that complies 
with this section may conduct subsequent assessments by updating the 
previous assessment.
    (B) A security-based swap execution facility may conduct enterprise 
technology risk assessments by using independent contractors or 
employees of the security-based swap execution facility who are not 
responsible for development or operation of the systems or capabilities 
being assessed.
    (9) To the extent practicable, a security-based swap execution 
facility shall:
    (i) Coordinate its business continuity-disaster recovery plan with 
those of its members that it depends upon to provide liquidity, in a 
manner adequate to enable effective resumption of activity in its 
markets following a disruption causing activation of the security-based 
swap execution facility's business continuity-disaster recovery plan;
    (ii) Initiate and coordinate periodic, synchronized testing of its 
business continuity- disaster recovery plan with those of members that 
it depends upon to provide liquidity; and
    (iii) Ensure that its business continuity-disaster recovery plan 
takes into account the business continuity-disaster recovery plans of 
its telecommunications, power, water, and other essential service 
providers.
    (10) The scope for all system safeguards testing and assessment 
required by this section shall be broad enough to include the testing of 
automated systems and controls that the security-based swap execution 
facility's required program of risk analysis and oversight and its 
current cybersecurity threat analysis indicate is necessary to identify 
risks and vulnerabilities that could enable an intruder or unauthorized 
user or insider to:
    (i) Interfere with the security-based swap execution facility's 
operations or with fulfillment of its statutory and regulatory 
responsibilities;
    (ii) Impair or degrade the reliability, security, or adequate 
scalable capacity of the security-based swap execution facility's 
automated systems;
    (iii) Add to, delete, modify, exfiltrate, or compromise the 
integrity of any data related to the security-based swap execution 
facility's regulated activities; or
    (iv) Undertake any other unauthorized action affecting the security-
based swap execution facility's regulated activities or the hardware or 
software used in connection with those activities.
    (11) Both the senior management and the governing board of a 
security-based swap execution facility shall receive and review reports 
setting forth the results of the testing and assessment required by this 
section. A security-based swap execution facility shall establish and 
follow appropriate procedures for the remediation of issues identified 
through such review, as provided in paragraph (b)(12) of this section, 
and for evaluation of the effectiveness of testing and assessment 
protocols.
    (12) A security-based swap execution facility shall identify and 
document the vulnerabilities and deficiencies in its systems revealed by 
the testing and assessment required by this section. The security-based 
swap execution facility shall conduct and document an appropriate 
analysis of the risks presented by such vulnerabilities and 
deficiencies, to determine and document whether to remediate or accept 
the associated risk. When the security-based swap execution facility 
determines to remediate a vulnerability or deficiency, it must remediate 
in a timely manner given the nature and magnitude of the associated 
risk.

[[Page 135]]



Sec.  242.831  Core Principle 14--Designation of chief compliance officer.

    (a)(1) In general. Each security-based swap execution facility shall 
designate an individual to serve as a chief compliance officer.
    (2) Duties. The chief compliance officer shall:
    (i) Report directly to the board or to the senior officer of the 
facility;
    (ii) Review compliance with the core principles in this subsection;
    (iii) In consultation with the board of the facility, a body 
performing a function similar to that of a board, or the senior officer 
of the facility, resolve any conflicts of interest that may arise;
    (iv) Be responsible for establishing and administering the policies 
and procedures required to be established pursuant to this section;
    (v) Ensure compliance with the Act and the rules and regulations 
issued under the Act, including rules prescribed by the Commission 
pursuant to section 3D of the Act;
    (vi) Establish procedures for the remediation of noncompliance 
issues found during compliance office reviews, look backs, internal or 
external audit findings, self-reported errors, or through validated 
complaints; and
    (vii) Establish and follow appropriate procedures for the handling, 
management response, remediation, retesting, and closing of 
noncompliance issues.
    (3) Annual reports--(i) In general. In accordance with rules 
prescribed by the Commission, the chief compliance officer shall 
annually prepare and sign a report that contains a description of:
    (A) The compliance of the security-based swap execution facility 
with the Act; and
    (B) The policies and procedures, including the code of ethics and 
conflict of interest policies, of the security-based swap execution 
facility.
    (ii) [Reserved]
    (4) Requirements. The chief compliance officer shall:
    (i) Submit each report described in paragraph (a)(3) of this section 
with the appropriate financial report of the security-based swap 
execution facility that is required to be submitted to the Commission 
pursuant to this section; and
    (ii) Include in the report a certification that, under penalty of 
law, the report is accurate and complete.
    (b) Authority of chief compliance officer. (1) The position of chief 
compliance officer shall carry with it the authority and resources to 
develop, in consultation with the governing board or senior officer, the 
policies and procedures of the security-based swap execution facility 
and enforce such policies and procedures to fulfill the duties set forth 
for chief compliance officers in the Act and the Commission's rules 
thereunder.
    (2) The chief compliance officer shall have supervisory authority 
over all staff acting at the direction of the chief compliance officer.
    (c) Qualifications of chief compliance officer. (1) The individual 
designated to serve as chief compliance officer shall have the 
background and skills appropriate for fulfilling the responsibilities of 
the position.
    (2) No individual that would be disqualified from serving on a 
security-based swap execution facility's governing board or committees 
pursuant to the criteria set forth in Sec.  242.819(i) may serve as a 
chief compliance officer.
    (3) In determining whether the background and skills of a potential 
chief compliance officer are appropriate for fulfilling the 
responsibilities of the role of the chief compliance officer, a 
security-based swap execution facility has the discretion to base its 
determination on the totality of the qualifications of the potential 
chief compliance officer, including, but not limited to, compliance 
experience, related career experience, training, potential conflicts of 
interest, and any other relevant factors to the position.
    (d) Appointment and removal of chief compliance officer. (1) Only 
the governing board or the senior officer may appoint or remove the 
chief compliance officer.
    (2) The security-based swap execution facility shall notify the 
Commission within two business days of the appointment or removal, 
whether interim or permanent, of a chief compliance officer.
    (e) Compensation of the chief compliance officer. The governing 
board or the

[[Page 136]]

senior officer shall approve the compensation of the chief compliance 
officer.
    (f) Annual meeting with the chief compliance officer. The chief 
compliance officer shall meet with the governing board or senior officer 
of the security-based swap execution facility at least annually.
    (g) Information requested of the chief compliance officer. The chief 
compliance officer shall provide any information regarding the 
regulatory program of the security-based swap execution facility as 
requested by the governing board or the senior officer.
    (h) Duties of chief compliance officer. The duties of the chief 
compliance officer shall include, but are not limited to, the following:
    (1) Overseeing and reviewing compliance of the security-based swap 
execution facility with section 3D of the Act and the Commission rules 
thereunder;
    (2) Taking reasonable steps, in consultation with the governing 
board or the senior officer of the security-based swap execution 
facility, to resolve any material conflicts of interest that may arise, 
including, but not limited to:
    (i) Conflicts between business considerations and compliance 
requirements;
    (ii) Conflicts between business considerations and the requirement 
that the security-based swap execution facility provide fair, open, and 
impartial access as set forth in Sec.  242.819(c); and
    (iii) Conflicts between a security-based swap execution facility's 
management and members of the governing board;
    (3) Establishing and administering written policies and procedures 
reasonably designed to prevent violations of the Act and the rules of 
the Commission;
    (4) Taking reasonable steps to ensure compliance with the Act and 
the rules of the Commission;
    (5) Establishing procedures reasonably designed to handle, respond, 
remediate, retest, and resolve noncompliance issues identified by the 
chief compliance officer through any means, including any compliance 
office review, look-back, internal or external audit finding, self-
reported error, or validated complaint;
    (6) Establishing and administering a compliance manual designed to 
promote compliance with the applicable laws, rules, and regulations and 
a written code of ethics for the security-based swap execution facility 
designed to prevent ethical violations and to promote honesty and 
ethical conduct by personnel of the security-based swap execution 
facility;
    (7) Supervising the regulatory program of the security-based swap 
execution facility with respect to trade practice surveillance; market 
surveillance; real-time market monitoring; compliance with audit trail 
requirements; enforcement and disciplinary proceedings; audits, 
examinations, and other regulatory responsibilities (including taking 
reasonable steps to ensure compliance with, if applicable, financial 
integrity, financial reporting, sales practice, recordkeeping, and other 
requirements); and
    (8) Supervising the effectiveness and sufficiency of any regulatory 
services provided to the security-based swap execution facility by a 
regulatory service provider in accordance with Sec.  242.819(e).
    (i) Preparation of annual compliance report. The chief compliance 
officer shall, not less than annually, prepare and sign an annual 
compliance report that covers the prior fiscal year. The report shall, 
at a minimum, contain:
    (1) A description and self-assessment of the effectiveness of the 
written policies and procedures of the security-based swap execution 
facility, including the code of ethics and conflict of interest 
policies, to reasonably ensure compliance with the Act and applicable 
Commission rules;
    (2) Any material changes made to compliance policies and procedures 
during the coverage period for the report and any areas of improvement 
or recommended changes to the compliance program;
    (3) A description of the financial, managerial, and operational 
resources set aside for compliance with the Act and applicable 
Commission rules;
    (4) Any material non-compliance matters identified and an 
explanation of the corresponding action taken to resolve such non-
compliance matters; and

[[Page 137]]

    (5) A certification by the chief compliance officer that, to the 
best of their knowledge and reasonable belief, and under penalty of law, 
the annual compliance report is accurate and complete in all material 
respects.
    (j) Submission of annual compliance report and related matters--(1) 
Furnishing the annual compliance report prior to submission to the 
Commission. Prior to submission to the Commission, the chief compliance 
officer shall provide the annual compliance report for review to the 
governing board or, in the absence of a governing board, to the senior 
officer. Members of the governing board and the senior officer shall not 
require the chief compliance officer to make any changes to the report.
    (2) Submission of annual compliance report to the Commission. The 
annual compliance report shall be submitted electronically to the 
Commission using the EDGAR system as an Interactive Data File in 
accordance with Sec.  232.405 of this chapter not later than 90 calendar 
days after the end of the security-based swap execution facility's 
fiscal year. The security-based swap execution facility shall 
concurrently file the annual compliance report with the fourth-quarter 
financial report pursuant to Sec.  242.829(g).
    (3) Amendments to annual compliance report. (i) Promptly upon 
discovery of any material error or omission made in a previously filed 
annual compliance report, the chief compliance officer shall file an 
amendment with the Commission to correct the material error or omission. 
The chief compliance officer shall submit the amended annual compliance 
report to the governing board, or in the absence of a governing board, 
to the senior officer, pursuant to paragraph (j)(1) of this section.
    (ii) An amendment shall contain the certification required under 
paragraph (i)(5) of this section.
    (4) Request for extension. A security-based swap execution facility 
may request an extension of time to file its annual compliance report 
from the Commission. Reasonable and valid requests for extensions of the 
filing deadline may be granted at the discretion of the Commission.
    (k) Recordkeeping. A security-based swap execution facility shall 
maintain all records demonstrating compliance with the duties of the 
chief compliance officer and the preparation and submission of annual 
compliance reports consistent with Sec.  242.826 (Core Principle 9).



Sec.  242.832  Application of the trade execution requirement to 
cross-border security-based swap transactions.

    (a) The trade execution requirement set forth in section 3C(h) of 
the Act shall not apply in connection with a security-based swap unless 
at least one counterparty to the security-based swap is a ``covered 
person'' as defined in paragraph (b) of this section.
    (b) A ``covered person'' means, with respect to a particular 
security-based swap, any person that is:
    (1) A U.S. person;
    (2) A non-U.S. person whose performance under a security-based swap 
is guaranteed by a U.S. person; or
    (3) A non-U.S. person who, in connection with its security-based 
swap dealing activity, uses U.S. personnel located in a U.S. branch or 
office, or personnel of an agent of such non-U.S. person located in a 
U.S. branch or office, to arrange, negotiate, or execute a transaction.



Sec.  242.833  Cross-border exemptions.

    (a) Exemptions for foreign trading venues for security-based swaps. 
An application for an order for exemptive relief under section 36(a)(1) 
of the Act (15 U.S.C. 78mm(a)(1)) relating to the registration status 
under the Act of a foreign trading venue for security-based swaps that 
has one or more members who are covered persons, as defined in Sec.  
242.832, with respect to security-based swaps transacted on that venue 
may state that the application also is submitted pursuant to this 
paragraph (a). In such case, the Commission will consider the submission 
as an application to exempt the foreign trading venue, with respect to 
its providing a market place for security-based swaps, from:
    (1) The definition of ``exchange'' in section 3(a)(1) of the Act (15 
U.S.C. 78c(a)(1));
    (2) The definition of ``security-based swap execution facility'' in 
section 3(a)(77) of the Act (15 U.S.C. 78c(a)(77));

[[Page 138]]

    (3) The definition of ``broker'' in section 3(a)(4) of the Act (15 
U.S.C. 78c(a)(4)); and
    (4) Section 3D(a)(1) of the Act (15 U.S.C. 78c-4(a)(1)).
    (b) Exemptions relating to the trade execution requirement. (1) An 
application for an order for exemptive relief under section 36(a)(1) of 
the Act (15 U.S.C. 78mm(a)(1)) relating to the application of the trade 
execution requirement in section 3C(h) of the Act (15 U.S.C. 78c-3(h)) 
to security-based swaps executed on a foreign trading venue, may state 
that the application also is submitted pursuant to this paragraph (b).
    (2) When considering an application under section 36 of the Act (15 
U.S.C. 78mm) and this paragraph (b), the Commission may consider:
    (i) The extent to which the security-based swaps traded in the 
foreign jurisdiction covered by the request are subject to a trade 
execution requirement comparable to that in section 3C(h) of the Act (15 
U.S.C. 78c-3(h)) and the Commission's rules thereunder;
    (ii) The extent to which trading venues in the foreign jurisdiction 
covered by the request are subject to regulation and supervision 
comparable to that under the Act, including section 3D of the Act (15 
U.S.C. 78c-4), and the Commission's rules thereunder;
    (iii) Whether the foreign trading venue or venues where covered 
persons, as defined in Sec.  242.832, intend to trade security-based 
swaps have received an exemption order contemplated by paragraph (a) of 
this section; and
    (iv) Any other factor that the Commission believes is relevant for 
assessing whether the exemption is in the public interest and consistent 
with the protection of investors.



Sec.  242.834  Mitigation of conflicts of interest of security-based
swap execution facilities and certain exchanges.

    (a) Definitions. For purposes of this section:
    Family relationship of a person means the person's spouse, former 
spouse, parent, stepparent, child, stepchild, sibling, stepbrother, 
stepsister, grandparent, grandchild, uncle, aunt, nephew, niece, or in-
law.
    Major disciplinary committee means a committee of persons who are 
authorized by a security-based swap execution facility to conduct 
disciplinary hearings, to settle disciplinary charges, to impose 
disciplinary sanctions, or to hear appeals thereof in cases involving 
any violation of the rules of the security-based swap execution facility 
except those which:
    (i) Are related to decorum or attire, financial requirements, or 
reporting or recordkeeping; and
    (ii) Do not involve fraud, deceit, or conversion.
    Member's affiliated firm is a firm in which the member is a 
principal or an employee.
    Named party in interest means a person or entity that is identified 
by name as a subject of any matter being considered by a governing 
board, disciplinary committee, or oversight panel.
    Significant action includes any of the following types of actions or 
rule changes by a security-based swap execution facility or SBS exchange 
that can be implemented without the Commission's prior approval:
    (i) Any actions or rule changes which address an emergency; and
    (ii) Any changes in margin levels that are designed to respond to 
extraordinary market conditions such as an actual or attempted corner, 
squeeze, congestion, or undue concentration of positions, or that 
otherwise are likely to have a substantial effect on prices in any 
contract traded or cleared at such security-based swap execution 
facility or SBS exchange; but does not include any rule not submitted 
for prior Commission approval because such rule is unrelated to the 
terms and conditions of any security-based swap traded at such security-
based swap execution facility or SBS exchange.
    (b) Ownership and voting limitations. Each security-based swap 
execution facility and SBS exchange shall not permit any of its members, 
either alone or together with any officer, principal, or employee of the 
member, to:
    (1) Own, directly or indirectly, 20 percent or more of any class of 
voting securities or of other voting interest in the security-based swap 
execution facility or SBS exchange; or

[[Page 139]]

    (2) Directly or indirectly vote, cause the voting of, or give any 
consent or proxy with respect to the voting of, any interest that 
exceeds 20 percent of the voting power of any class of securities or of 
other ownership interest in the security-based swap execution facility 
or SBS exchange.
    (3) The ownership and voting limitations in paragraphs (b)(1) and 
(2) of this section shall not apply to an SBSEF that has, pursuant to 
Sec.  242.819(e), entered into an agreement with a registered futures 
association or a national securities association for the provision of 
regulatory services that encompass, at a minimum, real-time market 
monitoring under Sec.  242.819(d)(5) and investigations and 
investigation reports under Sec.  242.819(d)(6).
    (c) Enforcement of limitations. The rules of each security-based 
swap execution facility and SBS exchange must be reasonably designed, 
and have an effective mechanism, to:
    (1) Deny effect to the portion of any voting interest held by a 
member in excess of the limitations in paragraph (b) of this section;
    (2) Compel a member who possesses a voting interest in excess of the 
limitations in paragraph (b) of this section to divest enough of that 
voting interest to come within those limitations; and
    (3) Obtain information relating to its ownership and voting 
interests owned or controlled, directly or indirectly, by its members.
    (d) Disciplinary committees and hearing panels. Each security-based 
swap execution facility and SBS exchange shall ensure that its 
disciplinary processes preclude any member, or group or class of its 
members, from dominating or exercising disproportionate influence on the 
disciplinary process. Each major disciplinary committee or hearing panel 
thereof shall include sufficient different groups or classes of its 
members so as to ensure fairness and to prevent special treatment or 
preference for any person or member in the conduct of the 
responsibilities of the committee or panel.
    (e) Governing board composition. Each security-based swap execution 
facility and SBS exchange shall ensure that:
    (1) Twenty percent or more of the persons who are eligible to vote 
routinely on matters being considered by the governing board (excluding 
those members who are eligible to vote only in the case of a tie vote by 
the governing board) are:
    (i) Knowledgeable of security-based swap trading or financial 
regulation, or otherwise capable of contributing to governing board 
deliberations;
    (ii) Not members of the security-based swap execution facility or 
SBS exchange;
    (iii) Not salaried employees of the security-based swap execution 
facility or SBS exchange;
    (iv) Not primarily performing services for the security-based swap 
execution facility or SBS exchange in a capacity other than as a member 
of the governing board; and
    (v) Not officers, principals, or employees of a firm which holds a 
membership at the security-based swap execution facility or SBS 
exchange, either in its own name or through an employee on behalf of the 
firm; and
    (2) The membership of the governing board includes a diversity of 
groups or classes of its members. The security-based swap execution 
facility or SBS exchange must be able to demonstrate that the board 
membership fairly represents the diversity of interests at such 
security-based swap execution facility or SBS exchange and is otherwise 
consistent with the composition requirements of this section.
    (f) Providing information about the board to the Commission. Each 
security-based swap execution facility and SBS exchange shall submit to 
the Commission, within 30 days after each governing board election, a 
list of the governing board's members, the groups or classes of its 
members that they represent, and how the composition of the governing 
board otherwise meets the requirements of this section.
    (g) Voting by interested members of governing boards and various 
committees of security-based swap execution facilities and SBS 
exchanges--(1) Rules required. Each security-based swap execution 
facility and SBS exchange shall maintain in effect rules to address the 
avoidance of conflicts of interest in the execution of its regulatory 
functions. Such rules must provide for the following:

[[Page 140]]

    (i) Relationship with named party in interest--(A) Nature of 
relationship. A member of a governing board, disciplinary committee, or 
oversight panel of a security-based swap execution facility or SBS 
exchange must abstain from such body's deliberations and voting on any 
matter involving a named party in interest where such member:
    (1) Is a named party in interest;
    (2) Is an employer, employee, or fellow employee of a named party in 
interest;
    (3) Has any other significant, ongoing business relationship with a 
named party in interest, not including relationships limited to 
executing security-based swaps opposite of each other or to clearing 
security-based swaps through the same clearing member; or
    (4) Has a family relationship with a named party in interest.
    (B) Disclosure of relationship. Prior to the consideration of any 
matter involving a named party in interest, each member of a governing 
board, disciplinary committee, or oversight panel of a security-based 
swap execution facility or SBS exchange must disclose to the appropriate 
staff of the security-based swap execution facility or SBS exchange 
whether they have one of the relationships listed in paragraph 
(g)(1)(i)(A) of this section with a named party in interest.
    (C) Procedure for determination. Each security-based swap execution 
facility and SBS exchange must establish procedures for determining 
whether any member of its governing board, disciplinary committees, or 
oversight committees is subject to a conflicts restriction in any matter 
involving a named party in interest. Taking into consideration the 
exigency of the committee action, such determinations should be based 
upon:
    (1) Information provided by the member pursuant to paragraph 
(g)(1)(i)(B) of this section; and
    (2) Any other source of information that is held by and reasonably 
available to the security-based swap execution facility or SBS exchange.
    (ii) Financial interest in a significant action--(A) Nature of 
interest. A member of the governing board, disciplinary committee, or 
oversight panel of a security-based swap execution facility or SBS 
exchange must abstain from such body's deliberations and voting on any 
significant action if the member knowingly has a direct and substantial 
financial interest in the result of the vote based upon either exchange 
or non-exchange positions that could reasonably be expected to be 
affected by the action.
    (B) Disclosure of interest. Prior to the consideration of any 
significant action, each member of a governing board, disciplinary 
committee, or oversight panel of a security-based swap execution 
facility or SBS exchange must disclose to the appropriate staff of the 
security-based swap execution facility or SBS exchange the position 
information referred to in paragraph (g)(1)(ii)(C) of this section that 
is known to them. This requirement does not apply to members who choose 
to abstain from deliberations and voting on the subject significant 
action.
    (C) Procedure for determination. Each security-based swap execution 
facility and SBS exchange must establish procedures for determining 
whether any member of its governing board, disciplinary committees, or 
oversight committees is subject to a conflicts restriction under this 
section in any significant action. Such determination must include a 
review of any positions, whether maintained at that security-based swap 
execution facility, SBS exchange, or elsewhere, held in the member's 
personal accounts or the proprietary accounts of the member's affiliated 
firm that the security-based swap execution facility or SBS exchange 
reasonably expects could be affected by the significant action.
    (D) Bases for determination. Taking into consideration the exigency 
of the significant action, such determinations should be based upon:
    (1) Information provided by the member with respect to positions 
pursuant to paragraph (f)(2)(ii)(B) of this section; and
    (2) Any other source of information that is held by and reasonably 
available to the security-based swap execution facility or SBS exchange.
    (iii) Participation in deliberations. (A) Under the rules required 
by this section, a governing board, disciplinary

[[Page 141]]

committee, or oversight panel of a security-based swap execution 
facility or SBS exchange may permit a member to participate in 
deliberations prior to a vote on a significant action for which they 
otherwise would be required to abstain, pursuant to paragraph (g)(1)(ii) 
of this section, if such participation would be consistent with the 
public interest and the member recuses from voting on such action.
    (B) In making a determination as to whether to permit a member to 
participate in deliberations on a significant action for which they 
otherwise would be required to abstain, the deliberating body shall 
consider the following factors:
    (1) Whether the member's participation in deliberations is necessary 
for the deliberating body to achieve a quorum in the matter; and
    (2) Whether the member has unique or special expertise, knowledge, 
or experience in the matter under consideration.
    (C) Prior to any determination pursuant to paragraph (g)(1)(iii)(A) 
of this section, the deliberating body must fully consider the position 
information which is the basis for the member's direct and substantial 
financial interest in the result of a vote on a significant action 
pursuant to paragraph (g)(1)(ii) of this section.
    (iv) Documentation of determination. The governing boards, 
disciplinary committees, and oversight panels of each security-based 
swap execution facility and SBS exchange must reflect in their minutes 
or otherwise document that the conflicts determination procedures 
required by this section have been followed. Such records also must 
include:
    (A) The names of all members who attended the meeting in person or 
who otherwise were present by electronic means;
    (B) The name of any members who voluntarily recused themselves or 
were required to abstain from deliberations and/or voting on a matter 
and the reason for the recusal or abstention, if stated; and
    (C) Information on the position information that was reviewed for 
each member.
    (h) Rules required. (1) A security-based swap execution facility 
shall maintain in effect rules to comply with this section that have 
been submitted to the Commission pursuant to Sec.  242.806 or Sec.  
242.807.
    (2) An SBS exchange shall maintain in effect rules to comply with 
this section that have been submitted to the Commission pursuant to 
Sec.  240.19b-4 of this chapter.



Sec.  242.835  Notice to Commission by security-based swap execution
facility of final disciplinary action or denial or limitation of access.

    (a) If a security-based swap execution facility issues a final 
disciplinary action against a member, or takes final action with respect 
to a denial or conditioning membership, or takes final action with 
respect to a denial or limitation of access of a person to any services 
offered by the security-based swap execution facility, the security-
based swap execution facility shall file a notice of such action with 
the Commission within 30 days and serve a copy on the affected person.
    (b) For purposes of paragraph (a) of this section:
    (1) A disciplinary action shall not be considered ``final'' unless:
    (i) The affected person has exhausted their administrative remedies 
at the security-based swap execution facility; and
    (ii) The disciplinary action is not a summary action permitted under 
Sec.  242.819(g)(13)(ii).
    (2) A disposition of a matter with respect to a denial or 
conditioning of membership, or a denial or limitation of access shall 
not be considered ``final'' unless such person has exhausted their 
administrative remedies at the security-based swap execution facility 
with respect to such matter.
    (c) A notice required by paragraph (a) of this section shall provide 
the following information:
    (1) The name of the member and its last known address, as reflected 
in the security-based swap execution facility's records;
    (2) The name of the person, committee, or other organizational unit 
of

[[Page 142]]

the security-based swap execution facility that initiated the 
disciplinary action or access restriction;
    (3) In the case of a final disciplinary action:
    (i) A description of the acts or practices, or omissions to act, 
upon which the sanction is based, including, as appropriate, the 
specific rules that the security-based swap execution facility has found 
to have been violated;
    (ii) A statement describing the respondent's answer to the charges; 
and
    (iii) A statement of the sanction imposed and the reasons therefor;
    (4) In the case of a final action with respect to a denial or 
conditioning of membership, or a denial or limitation of access:
    (i) The financial or operating difficulty of the member or 
prospective member (as the case may be) upon which the security-based 
swap execution facility determined that the member or prospective member 
could not be permitted to do, or continue to do, business with safety to 
investors, creditors, other members, or the security-based swap 
execution facility;
    (ii) The pertinent failure to meet qualification requirements or 
other prerequisites for membership or access and the basis upon which 
the security-based swap execution facility determined that the person 
concerned could not be permitted to have membership or access with 
safety to investors, creditors, other members, or the security-based 
swap execution facility; or
    (iii) The default of any delivery of funds or securities to a 
clearing agency by the member;
    (5) The effective date of the final disciplinary action, or final 
action with respect to a denial or conditioning of membership, or a 
denial or limitation of access; and
    (6) Any other information that the security-based swap execution 
facility may deem relevant.

   Regulation SBSR--Regulatory Reporting and Public Dissemination of 
                     Security-Based Swap Information

    Source: 80 FR 14728, Mar. 19, 2015, unless otherwise noted.



Sec.  242.900  Definitions.

    Terms used in Sec. Sec.  242.900 through 242.909 that appear in 
Section 3 of the Exchange Act (15 U.S.C. 78c) have the same meaning as 
in Section 3 of the Exchange Act and the rules or regulations 
thereunder. In addition, for purposes of Regulation SBSR (Sec. Sec.  
242.900 through 242.909), the following definitions shall apply:
    (a) Affiliate means any person that, directly or indirectly, 
controls, is controlled by, or is under common control with, a person.
    (b) Asset class means those security-based swaps in a particular 
broad category, including, but not limited to, credit derivatives and 
equity derivatives.
    (c) [Reserved].
    (d) Branch ID means the UIC assigned to a branch or other 
unincorporated office of a participant.
    (e) Broker ID means the UIC assigned to a person acting as a broker 
for a participant.
    (f) Business day means a day, based on U.S. Eastern Time, other than 
a Saturday, Sunday, or a U.S. federal holiday.
    (g) Clearing transaction means a security-based swap that has a 
registered clearing agency as a direct counterparty.
    (h) Control means, for purposes of Sec. Sec.  242.900 through 
242.909, the possession, direct or indirect, of the power to direct or 
cause the direction of the management and policies of a person, whether 
through the ownership of voting securities, by contract, or otherwise. A 
person is presumed to control another person if the person:
    (1) Is a director, general partner or officer exercising executive 
responsibility (or having similar status or functions);
    (2) Directly or indirectly has the right to vote 25 percent or more 
of a class of voting securities or has the power to sell or direct the 
sale of 25 percent or more of a class of voting securities; or
    (3) In the case of a partnership, has the right to receive, upon 
dissolution, or has contributed, 25 percent or more of the capital.

[[Page 143]]

    (i) Counterparty means a person that is a direct counterparty or 
indirect counterparty of a security-based swap.
    (j) Counterparty ID means the UIC assigned to a counterparty to a 
security-based swap.
    (k) Direct counterparty means a person that is a primary obligor on 
a security-based swap.
    (l) Direct electronic access has the same meaning as in Sec.  
240.13n-4(a)(5) of this chapter.
    (m) Exchange Act means the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.), as amended.
    (n) Execution agent ID means the UIC assigned to any person other 
than a broker or trader that facilitates the execution of a security-
based swap on behalf of a direct counterparty.
    (o) Foreign branch has the same meaning as in Sec.  240.3a71-3(a)(1) 
of this chapter.
    (p) Indirect counterparty means a guarantor of a direct 
counterparty's performance of any obligation under a security-based swap 
such that the direct counterparty on the other side can exercise rights 
of recourse against the indirect counterparty in connection with the 
security-based swap; for these purposes a direct counterparty has rights 
of recourse against a guarantor on the other side if the direct 
counterparty has a conditional or unconditional legally enforceable 
right, in whole or in part, to receive payments from, or otherwise 
collect from, the guarantor in connection with the security-based swap.
    (q) Life cycle event means, with respect to a security-based swap, 
any event that would result in a change in the information reported to a 
registered security-based swap data repository under Sec.  242.901(c), 
(d), or (i), including: An assignment or novation of the security-based 
swap; a partial or full termination of the security-based swap; a change 
in the cash flows originally reported; for a security-based swap that is 
not a clearing transaction, any change to the title or date of any 
master agreement, collateral agreement, margin agreement, or any other 
agreement incorporated by reference into the security-based swap 
contract; or a corporate action affecting a security or securities on 
which the security-based swap is based (e.g., a merger, dividend, stock 
split, or bankruptcy). Notwithstanding the above, a life cycle event 
shall not include the scheduled expiration of the security-based swap, a 
previously described and anticipated interest rate adjustment (such as a 
quarterly interest rate adjustment), or other event that does not result 
in any change to the contractual terms of the security-based swap.
    (r) Non-mandatory report means any information provided to a 
registered security-based swap data repository by or on behalf of a 
counterparty other than as required by Sec. Sec.  242.900 through 
242.909.
    (s) Non-U.S. person means a person that is not a U.S. person.
    (t) Parent means a legal person that controls a participant.
    (u) Participant, with respect to a registered security-based swap 
data repository, means:
    (1) A counterparty, that meets the criteria of Sec.  242.908(b), of 
a security-based swap that is reported to that registered security-based 
swap data repository to satisfy an obligation under Sec.  242.901(a);
    (2) A platform that reports a security-based swap to that registered 
security-based swap data repository to satisfy an obligation under Sec.  
242.901(a);
    (3) A registered clearing agency that is required to report to that 
registered security-based swap data repository whether or not it has 
accepted a security-based swap for clearing pursuant to Sec.  
242.901(e)(1)(ii); or
    (4) A registered broker-dealer (including a registered security-
based swap execution facility) that is required to report a security-
based swap to that registered security-based swap data repository by 
Sec.  242.901(a).
    (v) Platform means a national securities exchange or security-based 
swap execution facility that is registered or exempt from registration.
    (w) Platform ID means the UIC assigned to a platform on which a 
security-based swap is executed.
    (x) Post-trade processor means any person that provides affirmation, 
confirmation, matching, reporting, or clearing services for a security-
based swap transaction.

[[Page 144]]

    (y) Pre-enactment security-based swap means any security-based swap 
executed before July 21, 2010 (the date of enactment of the Dodd-Frank 
Act (Pub. L. 111-203, H.R. 4173)), the terms of which had not expired as 
of that date.
    (z) Price means the price of a security-based swap transaction, 
expressed in terms of the commercial conventions used in that asset 
class.
    (aa) Product means a group of security-based swap contracts each 
having the same material economic terms except those relating to price 
and size.
    (bb) Product ID means the UIC assigned to a product.
    (cc) Publicly disseminate means to make available through the 
Internet or other electronic data feed that is widely accessible and in 
machine-readable electronic format.
    (dd) [Reserved].
    (ee) Registered clearing agency means a person that is registered 
with the Commission as a clearing agency pursuant to section 17A of the 
Exchange Act (15 U.S.C. 78q-1) and any rules or regulations thereunder.
    (ff) Registered security-based swap data repository means a person 
that is registered with the Commission as a security-based swap data 
repository pursuant to section 13(n) of the Exchange Act (15 U.S.C. 
78m(n)) and any rules or regulations thereunder.
    (gg) Reporting side means the side of a security-based swap 
identified by Sec.  242.901(a)(2).
    (hh) Side means a direct counterparty and any guarantor of that 
direct counterparty's performance who meets the definition of indirect 
counterparty in connection with the security-based swap.
    (ii) Time of execution means the point at which the counterparties 
to a security-based swap become irrevocably bound under applicable law.
    (jj) Trader ID means the UIC assigned to a natural person who 
executes one or more security-based swaps on behalf of a direct 
counterparty.
    (kk) Trading desk means, with respect to a counterparty, the 
smallest discrete unit of organization of the participant that purchases 
or sells security-based swaps for the account of the participant or an 
affiliate thereof.
    (ll) Trading desk ID means the UIC assigned to the trading desk of a 
participant.
    (mm) Transaction ID means the UIC assigned to a specific security-
based swap transaction.
    (nn) Transitional security-based swap means a security-based swap 
executed on or after July 21, 2010, and before the first date on which 
trade-by-trade reporting of security-based swaps in that asset class to 
a registered security-based swap data repository is required pursuant to 
Sec. Sec.  242.900 through 242.909.
    (oo) Ultimate parent means a legal person that controls a 
participant and that itself has no parent.
    (pp) Ultimate parent ID means the UIC assigned to an ultimate parent 
of a participant.
    (qq) Unique Identification Code or UIC means a unique identification 
code assigned to a person, unit of a person, product, or transaction.
    (rr) United States has the same meaning as in Sec.  240.3a71-3(a)(5) 
of this chapter.
    (ss) U.S. person has the same meaning as in Sec.  240.3a71-3(a)(4) 
of this chapter.
    (tt) Widely accessible, as used in paragraph (cc) of this section, 
means widely available to users of the information on a non-fee basis.

[80 FR 14728, Mar. 19, 2015, as amended at 81 FR 53653, Aug. 12, 2016]



Sec.  242.901  Reporting obligations.

    (a) Assigning reporting duties. A security-based swap, including a 
security-based swap that results from the allocation, termination, 
novation, or assignment of another security-based swap, shall be 
reported as follows:
    (1) Platform-executed security-based swaps that will be submitted to 
clearing. If a security-based swap is executed on a platform and will be 
submitted to clearing, the platform on which the transaction was 
executed shall report to a registered security-based swap data 
repository the counterparty ID or the execution agent ID of each direct 
counterparty, as applicable, and the information set forth in paragraph 
(c) of this section (except that, with respect to paragraph (c)(5) of 
this section, the

[[Page 145]]

platform need indicate only if both direct counterparties are registered 
security-based swap dealers) and paragraphs (d)(9) and (10) of this 
section.
    (2) All other security-based swaps. For all security-based swaps 
other than platform-executed security-based swaps that will be submitted 
to clearing, the reporting side shall provide the information required 
by Sec. Sec.  242.900 through 242.909 to a registered security-based 
swap data repository. The reporting side shall be determined as follows:
    (i) Clearing transactions. For a clearing transaction, the reporting 
side is the registered clearing agency that is a counterparty to the 
transaction.
    (ii) Security-based swaps other than clearing transactions. (A) If 
both sides of the security-based swap include a registered security-
based swap dealer, the sides shall select the reporting side.
    (B) If only one side of the security-based swap includes a 
registered security-based swap dealer, that side shall be the reporting 
side.
    (C) If both sides of the security-based swap include a registered 
major security-based swap participant, the sides shall select the 
reporting side.
    (D) If one side of the security-based swap includes a registered 
major security-based swap participant and the other side includes 
neither a registered security-based swap dealer nor a registered major 
security-based swap participant, the side including the registered major 
security-based swap participant shall be the reporting side.
    (E) If neither side of the security-based swap includes a registered 
security-based swap dealer or registered major security-based swap 
participant:
    (1) If both sides include a U.S. person, the sides shall select the 
reporting side.
    (2) If one side includes a non-U.S. person that falls within Sec.  
242.908(b)(5) or a U.S. person and the other side includes a non-U.S. 
person that falls within Sec.  242.908(b)(5), the sides shall select the 
reporting side.
    (3) If one side includes only non-U.S. persons that do not fall 
within Sec.  242.908(b)(5) and the other side includes a non-U.S. person 
that falls within Sec.  242.908(b)(5) or a U.S. person, the side 
including a non-U.S. person that falls within Sec.  242.908(b)(5) or a 
U.S. person shall be the reporting side.
    (4) If neither side includes a U.S. person and neither side includes 
a non-U.S. person that falls within Sec.  242.908(b)(5) but the 
security-based swap is effected by or through a registered broker-dealer 
(including a registered security-based swap execution facility), the 
registered broker-dealer (including a registered security-based swap 
execution facility) shall report the counterparty ID or the execution 
agent ID of each direct counterparty, as applicable, and the information 
set forth in paragraph (c) of this section (except that, with respect to 
paragraph (c)(5) of this section, the registered broker-dealer 
(including a registered security-based swap execution facility) need 
indicate only if both direct counterparties are registered security-
based swap dealers) and paragraphs (d)(9) and (10) of this section.
    (3) Notification to registered clearing agency. A person who, under 
paragraph (a)(1) or (a)(2)(ii) of this section, has a duty to report a 
security-based swap that has been submitted to clearing at a registered 
clearing agency shall promptly provide that registered clearing agency 
with the transaction ID of the submitted security-based swap and the 
identity of the registered security-based swap data repository to which 
the transaction will be reported or has been reported.
    (b) Alternate recipient of security-based swap information. If there 
is no registered security-based swap data repository that will accept 
the report required by Sec.  242.901(a), the person required to make 
such report shall instead provide the required information to the 
Commission.
    (c) Primary trade information. The reporting side shall report the 
following information within the timeframe specified in paragraph (j) of 
this section:
    (1) The product ID, if available. If the security-based swap has no 
product ID, or if the product ID does not include the following 
information, the reporting side shall report:
    (i) Information that identifies the security-based swap, including 
the asset class of the security-based swap and the specific underlying 
reference

[[Page 146]]

asset(s), reference issuer(s), or reference index;
    (ii) The effective date;
    (iii) The scheduled termination date;
    (iv) The terms of any standardized fixed or floating rate payments, 
and the frequency of any such payments; and
    (v) If the security-based swap is customized to the extent that the 
information provided in paragraphs (c)(1)(i) through (iv) of this 
section does not provide all of the material information necessary to 
identify such customized security-based swap or does not contain the 
data elements necessary to calculate the price, a flag to that effect;
    (2) The date and time, to the second, of execution, expressed using 
Coordinated Universal Time (UTC);
    (3) The price, including the currency in which the price is 
expressed and the amount(s) and currenc(ies) of any up-front payments;
    (4) The notional amount(s) and the currenc(ies) in which the 
notional amount(s) is expressed;
    (5) If both sides of the security-based swap include a registered 
security-based swap dealer, an indication to that effect;
    (6) Whether the direct counterparties intend that the security-based 
swap will be submitted to clearing; and
    (7) If applicable, any flags pertaining to the transaction that are 
specified in the policies and procedures of the registered security-
based swap data repository to which the transaction will be reported.
    (d) Secondary trade information. In addition to the information 
required under paragraph (c) of this section, for each security-based 
swap for which it is the reporting side, the reporting side shall report 
the following information within the timeframe specified in paragraph 
(j) of this section:
    (1) The counterparty ID or the execution agent ID of each 
counterparty, as applicable;
    (2) As applicable, the branch ID, broker ID, execution agent ID, 
trader ID, and trading desk ID of the direct counterparty on the 
reporting side;
    (3) To the extent not provided pursuant to paragraph (c)(1) of this 
section, the terms of any fixed or floating rate payments, or otherwise 
customized or non-standard payment streams, including the frequency and 
contingencies of any such payments;
    (4) For a security-based swap that is not a clearing transaction and 
that will not be allocated after execution, the title and date of any 
master agreement, collateral agreement, margin agreement, or any other 
agreement incorporated by reference into the security-based swap 
contract;
    (5) To the extent not provided pursuant to paragraph (c) of this 
section or other provisions of this paragraph (d), any additional data 
elements included in the agreement between the counterparties that are 
necessary for a person to determine the market value of the transaction;
    (6) If applicable, and to the extent not provided pursuant to 
paragraph (c) of this section, the name of the clearing agency to which 
the security-based swap will be submitted for clearing;
    (7) If the direct counterparties do not intend to submit the 
security-based swap to clearing, whether they have invoked the exception 
in Section 3C(g) of the Exchange Act (15 U.S.C. 78c-3(g));
    (8) To the extent not provided pursuant to the other provisions of 
this paragraph (d), if the direct counterparties do not submit the 
security-based swap to clearing, a description of the settlement terms, 
including whether the security-based swap is cash-settled or physically 
settled, and the method for determining the settlement value;
    (9) The platform ID, if applicable, or if a registered broker-dealer 
(including a registered security-based swap execution facility) is 
required to report the security-based swap by Sec.  
242.901(a)(2)(ii)(E)(4), the broker ID of that registered broker-dealer 
(including a registered security-based swap execution facility); and
    (10) If the security-based swap arises from the allocation, 
termination, novation, or assignment of one or more existing security-
based swaps, the transaction ID of the allocated, terminated, assigned, 
or novated security-based swap(s), except in the case of a clearing 
transaction that results from the netting or compression of other 
clearing transactions.

[[Page 147]]

    (e) Reporting of life cycle events. (1)(i) Generally. A life cycle 
event, and any adjustment due to a life cycle event, that results in a 
change to information previously reported pursuant to paragraph (c), 
(d), or (i) of this section shall be reported by the reporting side, 
except that the reporting side shall not report whether or not a 
security-based swap has been accepted for clearing.
    (ii) Acceptance for clearing. A registered clearing agency shall 
report whether or not it has accepted a security-based swap for 
clearing.
    (2) All reports of life cycle events and adjustments due to life 
cycle events shall, within the timeframe specified in paragraph (j) of 
this section, be reported to the entity to which the original security-
based swap transaction will be reported or has been reported and shall 
include the transaction ID of the original transaction.
    (f) Time stamping incoming information. A registered security-based 
swap data repository shall time stamp, to the second, its receipt of any 
information submitted to it pursuant to paragraph (c), (d), (e), or (i) 
of this section.
    (g) Assigning transaction ID. A registered security-based swap data 
repository shall assign a transaction ID to each security-based swap, or 
establish or endorse a methodology for transaction IDs to be assigned by 
third parties.
    (h) Format of reported information. A person having a duty to report 
shall electronically transmit the information required under this 
section in a format required by the registered security-based swap data 
repository to which it reports.
    (i) Reporting of pre-enactment and transitional security-based 
swaps. With respect to any pre-enactment security-based swap or 
transitional security-based swap in a particular asset class, and to the 
extent that information about such transaction is available, the 
reporting side shall report all of the information required by 
paragraphs (c) and (d) of this section to a registered security-based 
swap data repository that accepts security-based swaps in that asset 
class and indicate whether the security-based swap was open as of the 
date of such report.
    (j) Interim timeframe for reporting. The reporting timeframe for 
paragraphs (c) and (d) of this section shall be 24 hours after the time 
of execution (or acceptance for clearing in the case of a security-based 
swap that is subject to regulatory reporting and public dissemination 
solely by operation of Sec.  242.908(a)(1)(ii)), or, if 24 hours after 
the time of execution or acceptance, as applicable, would fall on a day 
that is not a business day, by the same time on the next day that is a 
business day. The reporting timeframe for paragraph (e) of this section 
shall be 24 hours after the occurrence of the life cycle event or the 
adjustment due to the life cycle event.

Appendix to 17 CFR 242.901 Reports Regarding the Establishment of Block 
  Thresholds and Reporting Delays for Regulatory Reporting of Security-
                       Based Swap Transaction Data

    This appendix sets forth guidelines applicable to reports that the 
Commission has directed its staff to make in connection with the 
determination of block thresholds and reporting delays for security-
based swap transaction data. The Commission intends to use these reports 
to inform its specification of the criteria for determining what 
constitutes a large notional security-based swap transaction (block 
trade) for particular markets and contracts; and the appropriate time 
delay for reporting large notional security-based swap transactions 
(block trades) to the public in order to implement regulatory 
requirements under Section 13 of the Act (15 U.S.C. 78m). In producing 
these reports, the staff shall consider security-based swap data 
collected by the Commission pursuant to other Title VII rules, as well 
as any other applicable information as the staff may determine to be 
appropriate for its analysis.
    (a) Report topics. As appropriate, based on the availability of data 
and information, the reports should address the following topics for 
each asset class:
    (1) Price impact. In connection with the Commission's obligation to 
specify criteria for determining what constitutes a block trade and the 
appropriate reporting delay for block trades, the report generally 
should assess the effect of notional amount and observed reporting delay 
on price impact of trades in the security-based swap market.
    (2) Hedging. In connection with the Commission's obligation to 
specify criteria for determining what constitutes a block trade and the 
appropriate reporting delay for block trades, the report generally 
should consider potential relationships between observed reporting 
delays and the incidence and cost of

[[Page 148]]

hedging large trades in the security-based swap market, and whether 
these relationships differ for interdealer trades and dealer to customer 
trades.
    (3) Price efficiency. In connection with the Commission's obligation 
to specify criteria for determining what constitutes a block trade and 
the appropriate reporting delay for block trades, the report generally 
should assess the relationship between reporting delays and the speed 
with which transaction information is impounded into market prices, 
estimating this relationship for trades of different notional amounts.
    (4) Other topics. Any other analysis of security-based swap data and 
information, such as security-based swap market liquidity and price 
volatility, that the Commission or the staff deem relevant to the 
specification of:
    (i) The criteria for determining what constitutes a large notional 
security-based swap transaction (block trade) for particular markets and 
contracts; and
    (ii) The appropriate time delay for reporting large notional 
security-based swap transactions (block trades).
    (b) Timing of reports. Each report shall be complete no later than 
two years following the initiation of public dissemination of security-
based swap transaction data by the first registered SDR in that asset 
class.
    (c) Public comment on the report. Following completion of the 
report, the report shall be published in the Federal Register for public 
comment.

[80 FR 14728, Mar. 19, 2015, as amended at 81 FR 53653, Aug. 12, 2016]



Sec.  242.902  Public dissemination of transaction reports.

    (a) General. Except as provided in paragraph (c) of this section, a 
registered security-based swap data repository shall publicly 
disseminate a transaction report of a security-based swap, or a life 
cycle event or adjustment due to a life cycle event, immediately upon 
receipt of information about the security-based swap, or upon re-opening 
following a period when the registered security-based swap data 
repository was closed. The transaction report shall consist of all the 
information reported pursuant to Sec.  242.901(c), plus any condition 
flags contemplated by the registered security-based swap data 
repository's policies and procedures that are required by Sec.  242.907.
    (b) [Reserved].
    (c) Non-disseminated information. A registered security-based swap 
data repository shall not disseminate:
    (1) The identity of any counterparty to a security-based swap;
    (2) With respect to a security-based swap that is not cleared at a 
registered clearing agency and that is reported to the registered 
security-based swap data repository, any information disclosing the 
business transactions and market positions of any person;
    (3) Any information regarding a security-based swap reported 
pursuant to Sec.  242.901(i);
    (4) Any non-mandatory report;
    (5) Any information regarding a security-based swap that is required 
to be reported pursuant to Sec. Sec.  242.901 and 242.908(a)(1) but is 
not required to be publicly disseminated pursuant to Sec.  
242.908(a)(2);
    (6) Any information regarding a clearing transaction that arises 
from the acceptance of a security-based swap for clearing by a 
registered clearing agency or that results from netting other clearing 
transactions;
    (7) Any information regarding the allocation of a security-based 
swap; or
    (8) Any information regarding a security-based swap that has been 
rejected from clearing or rejected by a prime broker if the original 
transaction report has not yet been publicly disseminated.
    (d) Temporary restriction on other market data sources. No person 
shall make available to one or more persons (other than a counterparty 
or a post-trade processor) transaction information relating to a 
security-based swap before the primary trade information about the 
security-based swap is sent to a registered security-based swap data 
repository.

[80 FR 14728, Mar. 19, 2015, as amended at 81 FR 53654, Aug. 12, 2016]



Sec.  242.903  Coded information.

    (a) If an internationally recognized standards-setting system that 
imposes fees and usage restrictions on persons that obtain UICs for 
their own usage that are fair and reasonable and not unreasonably 
discriminatory and that meets the criteria of paragraph (b) of this 
section is recognized by the Commission and has assigned a UIC to a 
person, unit of a person, or product (or

[[Page 149]]

has endorsed a methodology for assigning transaction IDs), the 
registered security-based swap data repository shall employ that UIC (or 
methodology for assigning transaction IDs). If no such system has been 
recognized by the Commission, or a recognized system has not assigned a 
UIC to a particular person, unit of a person, or product (or has not 
endorsed a methodology for assigning transaction IDs), the registered 
security-based swap data repository shall assign a UIC to that person, 
unit of person, or product using its own methodology (or endorse a 
methodology for assigning transaction IDs). If the Commission has 
recognized such a system that assigns UICs to persons, each participant 
of a registered security-based swap data repository shall obtain a UIC 
from or through that system for identifying itself, and each participant 
that acts as a guarantor of a direct counterparty's performance of any 
obligation under a security-based swap that is subject to Sec.  
242.908(a) shall, if the direct counterparty has not already done so, 
obtain a UIC for identifying the direct counterparty from or through 
that system, if that system permits third-party registration without a 
requirement to obtain prior permission of the direct counterparty.
    (b) A registered security-based swap data repository may permit 
information to be reported pursuant to Sec.  242.901, and may publicly 
disseminate that information pursuant to Sec.  242.902, using codes in 
place of certain data elements, provided that the information necessary 
to interpret such codes is widely available to users of the information 
on a non-fee basis.



Sec.  242.904  Operating hours of registered security-based swap data
repositories.

    A registered security-based swap data repository shall have systems 
in place to continuously receive and disseminate information regarding 
security-based swaps pursuant to Sec. Sec.  242.900 through 242.909, 
subject to the following exceptions:
    (a) A registered security-based swap data repository may establish 
normal closing hours during periods when, in its estimation, the U.S. 
market and major foreign markets are inactive. A registered security-
based swap data repository shall provide reasonable advance notice to 
participants and to the public of its normal closing hours.
    (b) A registered security-based swap data repository may declare, on 
an ad hoc basis, special closing hours to perform system maintenance 
that cannot wait until normal closing hours. A registered security-based 
swap data repository shall, to the extent reasonably possible under the 
circumstances, avoid scheduling special closing hours during periods 
when, in its estimation, the U.S. market and major foreign markets are 
most active; and provide reasonable advance notice of its special 
closing hours to participants and to the public.
    (c) During normal closing hours, and to the extent reasonably 
practicable during special closing hours, a registered security-based 
swap data repository shall have the capability to receive and hold in 
queue information regarding security-based swaps that has been reported 
pursuant to Sec. Sec.  242.900 through 242.909.
    (d) When a registered security-based swap data repository re-opens 
following normal closing hours or special closing hours, it shall 
disseminate transaction reports of security-based swaps held in queue, 
in accordance with the requirements of Sec.  242.902.
    (e) If a registered security-based swap data repository could not 
receive and hold in queue transaction information that was required to 
be reported pursuant to Sec. Sec.  242.900 through 242.909, it must 
immediately upon re-opening send a message to all participants that it 
has resumed normal operations. Thereafter, any participant that had an 
obligation to report information to the registered security-based swap 
data repository pursuant to Sec. Sec.  242.900 through 242.909, but 
could not do so because of the registered security-based swap data 
repository's inability to receive and hold in queue data, must promptly 
report the information to the registered security-based swap data 
repository.



Sec.  242.905  Correction of errors in security-based swap information.

    (a) Duty to correct. Any counterparty or other person having a duty 
to report a security-based swap that discovers an

[[Page 150]]

error in information previously reported pursuant to Sec. Sec.  242.900 
through 242.909 shall correct such error in accordance with the 
following procedures:
    (1) If a person that was not the reporting side for a security-based 
swap transaction discovers an error in the information reported with 
respect to such security-based swap, that person shall promptly notify 
the person having the duty to report the security-based swap of the 
error; and
    (2) If the person having the duty to report a security-based swap 
transaction discovers an error in the information reported with respect 
to a security-based swap, or receives notification from a counterparty 
of an error, such person shall promptly submit to the entity to which 
the security-based swap was originally reported an amended report 
pertaining to the original transaction report. If the person having the 
duty to report reported the initial transaction to a registered 
security-based swap data repository, such person shall submit an amended 
report to the registered security-based swap data repository in a manner 
consistent with the policies and procedures contemplated by Sec.  
242.907(a)(3).
    (b) Duty of security-based swap data repository to correct. A 
registered security-based swap data repository shall:
    (1) Upon discovery of an error or receipt of a notice of an error, 
verify the accuracy of the terms of the security-based swap and, 
following such verification, promptly correct the erroneous information 
regarding such security-based swap contained in its system; and
    (2) If such erroneous information relates to a security-based swap 
that the registered security-based swap data repository previously 
disseminated and falls into any of the categories of information 
enumerated in Sec.  242.901(c), publicly disseminate a corrected 
transaction report of the security-based swap promptly following 
verification of the trade by the counterparties to the security-based 
swap, with an indication that the report relates to a previously 
disseminated transaction.

[80 FR 14728, Mar. 19, 2015, as amended at 81 FR 53654, Aug. 12, 2016]



Sec.  242.906  Other duties of participants.

    (a) Identifying missing UIC information. A registered security-based 
swap data repository shall identify any security-based swap reported to 
it for which the registered security-based swap data repository does not 
have the counterparty ID and (if applicable) the broker ID, branch ID, 
execution agent ID, trading desk ID, and trader ID of each direct 
counterparty. Once a day, the registered security-based swap data 
repository shall send a report to each participant of the registered 
security-based swap data repository or, if applicable, an execution 
agent, identifying, for each security-based swap to which that 
participant is a counterparty, the security-based swap(s) for which the 
registered security-based swap data repository lacks counterparty ID and 
(if applicable) broker ID, branch ID, execution agent ID, trading desk 
ID, and trader ID. A participant of a registered security-based swap 
data repository that receives such a report shall provide the missing 
information with respect to its side of each security-based swap 
referenced in the report to the registered security-based swap data 
repository within 24 hours.
    (b) Duty to provide ultimate parent and affiliate information. Each 
participant of a registered security-based swap data repository that is 
not a platform, a registered clearing agency, an externally managed 
investment vehicle, or a registered broker-dealer (including a 
registered security-based swap execution facility) that becomes a 
participant solely as a result of making a report to satisfy an 
obligation under Sec.  242.901(a)(2)(ii)(E)(4) shall provide to the 
registered security-based swap data repository information sufficient to 
identify its ultimate parent(s) and any affiliate(s) of the participant 
that also are participants of the registered security-based swap data 
repository, using ultimate parent IDs and counterparty IDs. Any such 
participant shall promptly notify the registered security-based swap 
data repository of any changes to that information.
    (c) Policies and procedures to support reporting compliance. Each 
participant of a registered security-based swap data repository that is 
a registered security-based swap dealer, registered

[[Page 151]]

major security-based swap participant, registered clearing agency, 
platform, or registered broker-dealer (including a registered security-
based swap execution facility) that becomes a participant solely as a 
result of making a report to satisfy an obligation under Sec.  
242.901(a)(2)(ii)(E)(4) shall establish, maintain, and enforce written 
policies and procedures that are reasonably designed to ensure that it 
complies with any obligations to report information to a registered 
security-based swap data repository in a manner consistent with 
Sec. Sec.  242.900 through 242.909. Each such participant shall review 
and update its policies and procedures at least annually.

[81 FR 53654, Aug. 12, 2016]



Sec.  242.907  Policies and procedures of registered security-based 
swap data repositories.

    (a) General policies and procedures. With respect to the receipt, 
reporting, and dissemination of data pursuant to Sec. Sec.  242.900 
through 242.909, a registered security-based swap data repository shall 
establish and maintain written policies and procedures:
    (1) That enumerate the specific data elements of a security-based 
swap that must be reported, which shall include, at a minimum, the data 
elements specified in Sec.  242.901(c) and (d);
    (2) That specify one or more acceptable data formats (each of which 
must be an open-source structured data format that is widely used by 
participants), connectivity requirements, and other protocols for 
submitting information;
    (3) For specifying procedures for reporting life cycle events and 
corrections to previously submitted information, making corresponding 
updates or corrections to transaction records, and applying an 
appropriate flag to the transaction report to indicate that the report 
is an error correction required to be disseminated by Sec.  
242.905(b)(2), or is a life cycle event, or any adjustment due to a life 
cycle event, required to be disseminated by Sec.  242.902(a);
    (4) For:
    (i) Identifying characteristic(s) of a security-based swap, or 
circumstances associated with the execution or reporting of the 
security-based swap, that could, in the fair and reasonable estimation 
of the registered security-based swap data repository, cause a person 
without knowledge of these characteristic(s) or circumstance(s), to 
receive a distorted view of the market;
    (ii) Establishing flags to denote such characteristic(s) or 
circumstance(s);
    (iii) Directing participants that report security-based swaps to 
apply such flags, as appropriate, in their reports to the registered 
security-based swap data repository; and
    (iv) Applying such flags:
    (A) To disseminated reports to help to prevent a distorted view of 
the market; or
    (B) In the case of a transaction referenced in Sec.  242.902(c), to 
suppress the report from public dissemination entirely, as appropriate;
    (5) For assigning UICs in a manner consistent with Sec.  242.903; 
and
    (6) For periodically obtaining from each participant other than a 
platform, registered clearing agency, externally managed investment 
vehicle, or registered broker-dealer (including a registered security-
based swap execution facility) that becomes a participant solely as a 
result of making a report to satisfy an obligation under Sec.  
242.901(a)(2)(ii)(E)(4) information that identifies the participant's 
ultimate parent(s) and any participant(s) with which the participant is 
affiliated, using ultimate parent IDs and counterparty IDs.
    (b) [Reserved].
    (c) Public availability of policies and procedures. A registered 
security-based swap data repository shall make the policies and 
procedures required by Sec. Sec.  242.900 through 242.909 publicly 
available on its Web site.
    (d) Updating of policies and procedures. A registered security-based 
swap data repository shall review, and update as necessary, the policies 
and procedures required by Sec. Sec.  242.900 through 242.909 at least 
annually. Such policies and procedures shall indicate the date on which 
they were last reviewed.
    (e) A registered security-based swap data repository shall provide 
to the Commission, upon request, information or reports related to the 
timeliness, accuracy, and completeness of data reported to it pursuant 
to Sec. Sec.  242.900

[[Page 152]]

through 242.909 and the registered security-based swap data repository's 
policies and procedures thereunder.

[80 FR 14728, Mar. 19, 2015, as amended at 81 FR 53655, Aug. 12, 2016]



Sec.  242.908  Cross-border matters.

    (a) Application of Regulation SBSR to cross-border transactions. (1) 
A security-based swap shall be subject to regulatory reporting and 
public dissemination if:
    (i) There is a direct or indirect counterparty that is a U.S. person 
on either or both sides of the transaction;
    (ii) The security-based swap is accepted for clearing by a clearing 
agency having its principal place of business in the United States;
    (iii) The security-based swap is executed on a platform having its 
principal place of business in the United States;
    (iv) The security-based swap is effected by or through a registered 
broker-dealer (including a registered security-based swap execution 
facility); or
    (v) The transaction is connected with a non-U.S. person's security-
based swap dealing activity and is arranged, negotiated, or executed by 
personnel of such non-U.S. person located in a U.S. branch or office, or 
by personnel of an agent of such non-U.S. person located in a U.S. 
branch or office.
    (2) A security-based swap that is not included within paragraph 
(a)(1) of this section shall be subject to regulatory reporting but not 
public dissemination if there is a direct or indirect counterparty on 
either or both sides of the transaction that is a registered security-
based swap dealer or a registered major security-based swap participant.
    (b) Limitation on obligations. Notwithstanding any other provision 
of Sec. Sec.  242.900 through 242.909, a person shall not incur any 
obligation under Sec. Sec.  242.900 through 242.909 unless it is:
    (1) A U.S. person;
    (2) A registered security-based swap dealer or registered major 
security-based swap participant;
    (3) A platform;
    (4) A registered clearing agency; or
    (5) A non-U.S. person that, in connection with such person's 
security-based swap dealing activity, arranged, negotiated, or executed 
the security-based swap using its personnel located in a U.S. branch or 
office, or using personnel of an agent located in a U.S. branch or 
office.
    (c) Substituted compliance--(1) General. Compliance with the 
regulatory reporting and public dissemination requirements in sections 
13(m) and 13A of the Act (15 U.S.C. 78m(m) and 78m-1), and the rules and 
regulations thereunder, may be satisfied by compliance with the rules of 
a foreign jurisdiction that is the subject of a Commission order 
described in paragraph (c)(2) of this section, provided that at least 
one of the direct counterparties to the security-based swap is either a 
non-U.S. person or a foreign branch.
    (2) Procedure. (i) The Commission may, conditionally or 
unconditionally, by order, make a substituted compliance determination 
regarding regulatory reporting and public dissemination of security-
based swaps with respect to a foreign jurisdiction if that 
jurisdiction's requirements for the regulatory reporting and public 
dissemination of security-based swaps are comparable to otherwise 
applicable requirements. The Commission may, conditionally or 
unconditionally, by order, make a substituted compliance determination 
regarding regulatory reporting of security-based swaps that are subject 
to Sec.  242.908(a)(2) with respect to a foreign jurisdiction if that 
jurisdiction's requirements for the regulatory reporting of security-
based swaps are comparable to otherwise applicable requirements.
    (ii) A party that potentially would comply with requirements under 
Sec. Sec.  242.900 through 242.909 pursuant to a substituted compliance 
order or any foreign financial regulatory authority or authorities 
supervising such a person's security-based swap activities may file an 
application, pursuant to the procedures set forth in Sec.  240.0-13 of 
this chapter, requesting that the Commission make a substituted 
compliance determination regarding regulatory reporting and public 
dissemination with respect to a foreign jurisdiction the rules of which 
also would require reporting and public dissemination of those security-
based swaps.

[[Page 153]]

    (iii) In making such a substituted compliance determination, the 
Commission shall take into account such factors as the Commission 
determines are appropriate, such as the scope and objectives of the 
relevant foreign regulatory requirements, as well as the effectiveness 
of the supervisory compliance program administered, and the enforcement 
authority exercised, by the foreign financial regulatory authority to 
support oversight of its regulatory reporting and public dissemination 
system for security-based swaps. The Commission shall not make such a 
substituted compliance determination unless it finds that:
    (A) The data elements that are required to be reported pursuant to 
the rules of the foreign jurisdiction are comparable to those required 
to be reported pursuant to Sec.  242.901;
    (B) The rules of the foreign jurisdiction require the security-based 
swap to be reported and publicly disseminated in a manner and a 
timeframe comparable to those required by Sec. Sec.  242.900 through 
242.909 (or, in the case of transactions that are subject to Sec.  
242.908(a)(2) but not to Sec.  242.908(a)(1), the rules of the foreign 
jurisdiction require the security-based swap to be reported in a manner 
and a timeframe comparable to those required by Sec. Sec.  242.900 
through 242.909);
    (C) The Commission has direct electronic access to the security-
based swap data held by a trade repository or foreign regulatory 
authority to which security-based swaps are reported pursuant to the 
rules of that foreign jurisdiction; and
    (D) Any trade repository or foreign regulatory authority in the 
foreign jurisdiction that receives and maintains required transaction 
reports of security-based swaps pursuant to the laws of that foreign 
jurisdiction is subject to requirements regarding data collection and 
maintenance; systems capacity, integrity, resiliency, availability, and 
security; and recordkeeping that are comparable to the requirements 
imposed on security-based swap data repositories by the Commission's 
rules and regulations.
    (iv) Before issuing a substituted compliance order pursuant to this 
section, the Commission shall have entered into memoranda of 
understanding and/or other arrangements with the relevant foreign 
financial regulatory authority or authorities under such foreign 
financial regulatory system addressing supervisory and enforcement 
cooperation and other matters arising under the substituted compliance 
determination.
    (v) The Commission may, on its own initiative, modify or withdraw 
such order at any time, after appropriate notice and opportunity for 
comment.

[80 FR 14728, Mar. 19, 2015, as amended at 81 FR 53655, Aug. 12, 2016]



Sec.  242.909  Registration of security-based swap data repository as 
a securities information processor.

    A registered security-based swap data repository shall also register 
with the Commission as a securities information processor on Form SDR 
(Sec.  249.1500 of this chapter).



             Regulation SCI_Systems Compliance and Integrity

    Source: 79 FR 72436, Dec. 5, 2014, unless otherwise noted.



Sec.  242.1000  Definitions.

    For purposes of Regulation SCI (Sec. Sec.  242.1000 through 
242.1007), the following definitions shall apply:
    Critical SCI systems means any SCI systems of, or operated by or on 
behalf of, an SCI entity that:
    (1) Directly support functionality relating to:
    (i) Clearance and settlement systems of clearing agencies;
    (ii) Openings, reopenings, and closings on the primary listing 
market;
    (iii) Trading halts;
    (iv) Initial public offerings;
    (v) The provision of market data by a plan processor; or
    (vi) Exclusively-listed securities; or
    (2) Provide functionality to the securities markets for which the 
availability of alternatives is significantly limited or nonexistent and 
without which there would be a material impact on fair and orderly 
markets.
    Electronic signature has the meaning set forth in Sec.  240.19b-4(j) 
of this chapter.
    Exempt clearing agency subject to ARP means an entity that has 
received from the Commission an exemption from

[[Page 154]]

registration as a clearing agency under Section 17A of the Act, and 
whose exemption contains conditions that relate to the Commission's 
Automation Review Policies (ARP), or any Commission regulation that 
supersedes or replaces such policies.
    Indirect SCI systems means any systems of, or operated by or on 
behalf of, an SCI entity that, if breached, would be reasonably likely 
to pose a security threat to SCI systems.
    Major SCI event means an SCI event that has had, or the SCI entity 
reasonably estimates would have:
    (1) Any impact on a critical SCI system; or
    (2) A significant impact on the SCI entity's operations or on market 
participants.
    Plan processor has the meaning set forth in Sec.  242.600(b)(67).
    Responsible SCI personnel means, for a particular SCI system or 
indirect SCI system impacted by an SCI event, such senior manager(s) of 
the SCI entity having responsibility for such system, and their 
designee(s).
    SCI alternative trading system or SCI ATS means an alternative 
trading system, as defined in Sec.  242.300(a), which during at least 
four of the preceding six calendar months:
    (1) Had with respect to NMS stocks:
    (i) Five percent (5%) or more in any single NMS stock, and one-
quarter percent (0.25%) or more in all NMS stocks, of the average daily 
dollar volume reported by applicable transaction reporting plans; or
    (ii) One percent (1%) or more in all NMS stocks of the average daily 
dollar volume reported by applicable transaction reporting plans; or
    (2) Had with respect to equity securities that are not NMS stocks 
and for which transactions are reported to a self-regulatory 
organization, five percent (5%) or more of the average daily dollar 
volume as calculated by the self-regulatory organization to which such 
transactions are reported;
    (3) Provided, however, that such SCI ATS shall not be required to 
comply with the requirements of Regulation SCI until six months after 
satisfying any of paragraphs (1) or (2) of this definition, as 
applicable, for the first time.
    SCI competing consolidator means:
    (1) Any competing consolidator, as defined in Sec.  242.600, which, 
during at least four of the preceding six calendar months, accounted for 
five percent (5%) or more of consolidated market data gross revenue paid 
to the effective national market system plan or plans required under 
Sec.  242.603(b), for NMS stocks:
    (i) Listed on the New York Stock Exchange LLC;
    (ii) Listed on The Nasdaq Stock Market LLC; or
    (iii) Listed on exchanges other than the New York Stock Exchange LLC 
or The Nasdaq Stock Market LLC, as reported by such plan or plans 
pursuant to the terms thereof.
    (2) Provided, however, that such SCI competing consolidator shall 
not be required to comply with the requirements of this section and 
Sec. Sec.  242.1001 through 242.1007 (Regulation SCI) until six months 
after satisfying any of paragraph (1) of this definition, as applicable, 
for the first time; and
    (3) Provided, however, that such SCI competing consolidator shall 
not be required to comply with the requirements of Regulation SCI prior 
to one year after the compliance date for Sec.  242.614(d)(3).
    SCI entity means an SCI self-regulatory organization, SCI 
alternative trading system, plan processor, exempt clearing agency 
subject to ARP, or SCI competing consolidator.
    SCI event means an event at an SCI entity that constitutes:
    (1) A systems disruption;
    (2) A systems compliance issue; or
    (3) A systems intrusion.
    SCI review means a review, following established procedures and 
standards, that is performed by objective personnel having appropriate 
experience to conduct reviews of SCI systems and indirect SCI systems, 
and which review contains:
    (1) A risk assessment with respect to such systems of an SCI entity; 
and
    (2) An assessment of internal control design and effectiveness of 
its SCI systems and indirect SCI systems to include logical and physical 
security controls, development processes, and information technology 
governance, consistent with industry standards.

[[Page 155]]

    SCI self-regulatory organization or SCI SRO means any national 
securities exchange, registered securities association, or registered 
clearing agency, or the Municipal Securities Rulemaking Board; provided 
however, that for purposes of this section, the term SCI self-regulatory 
organization shall not include an exchange that is notice registered 
with the Commission pursuant to 15 U.S.C. 78f(g) or a limited purpose 
national securities association registered with the Commission pursuant 
to 15 U.S.C. 78o-3(k).
    SCI systems means all computer, network, electronic, technical, 
automated, or similar systems of, or operated by or on behalf of, an SCI 
entity that, with respect to securities, directly support trading, 
clearance and settlement, order routing, market data, market regulation, 
or market surveillance.
    Senior management means, for purposes of Rule 1003(b), an SCI 
entity's Chief Executive Officer, Chief Technology Officer, Chief 
Information Officer, General Counsel, and Chief Compliance Officer, or 
the equivalent of such employees or officers of an SCI entity.
    Systems compliance issue means an event at an SCI entity that has 
caused any SCI system of such entity to operate in a manner that does 
not comply with the Act and the rules and regulations thereunder or the 
entity's rules or governing documents, as applicable.
    Systems disruption means an event in an SCI entity's SCI systems 
that disrupts, or significantly degrades, the normal operation of an SCI 
system.
    Systems intrusion means any unauthorized entry into the SCI systems 
or indirect SCI systems of an SCI entity.

[79 FR 72436, Dec. 5, 2014, as amended at 80 FR 81454, Dec. 30, 2015; 83 
FR 58429, Nov. 19, 2018; 86 FR 18814, Apr. 9, 2021]



Sec.  242.1001  Obligations related to policies and procedures of
SCI entities.

    (a) Capacity, integrity, resiliency, availability, and security. (1) 
Each SCI entity shall establish, maintain, and enforce written policies 
and procedures reasonably designed to ensure that its SCI systems and, 
for purposes of security standards, indirect SCI systems, have levels of 
capacity, integrity, resiliency, availability, and security, adequate to 
maintain the SCI entity's operational capability and promote the 
maintenance of fair and orderly markets.
    (2) Policies and procedures required by paragraph (a)(1) of this 
section shall include, at a minimum:
    (i) The establishment of reasonable current and future technological 
infrastructure capacity planning estimates;
    (ii) Periodic capacity stress tests of such systems to determine 
their ability to process transactions in an accurate, timely, and 
efficient manner;
    (iii) A program to review and keep current systems development and 
testing methodology for such systems;
    (iv) Regular reviews and testing, as applicable, of such systems, 
including backup systems, to identify vulnerabilities pertaining to 
internal and external threats, physical hazards, and natural or manmade 
disasters;
    (v) Business continuity and disaster recovery plans that include 
maintaining backup and recovery capabilities sufficiently resilient and 
geographically diverse and that are reasonably designed to achieve next 
business day resumption of trading and two-hour resumption of critical 
SCI systems following a wide-scale disruption;
    (vi) Standards that result in such systems being designed, 
developed, tested, maintained, operated, and surveilled in a manner that 
facilitates the successful collection, processing, and dissemination of 
market data; and
    (vii) Monitoring of such systems to identify potential SCI events.
    (3) Each SCI entity shall periodically review the effectiveness of 
the policies and procedures required by this paragraph (a), and take 
prompt action to remedy deficiencies in such policies and procedures.
    (4) For purposes of this paragraph (a), such policies and procedures 
shall be deemed to be reasonably designed if they are consistent with 
current SCI industry standards, which shall be comprised of information 
technology practices that are widely available to information technology 
professionals in the financial sector and issued by an authoritative 
body that is a U.S. governmental entity or agency, association of U.S. 
governmental entities or agencies, or widely recognized organization. 
Compliance with such current

[[Page 156]]

SCI industry standards, however, shall not be the exclusive means to 
comply with the requirements of this paragraph (a).
    (b) Systems compliance. (1) Each SCI entity shall establish, 
maintain, and enforce written policies and procedures reasonably 
designed to ensure that its SCI systems operate in a manner that 
complies with the Act and the rules and regulations thereunder and the 
entity's rules and governing documents, as applicable.
    (2) Policies and procedures required by paragraph (b)(1) of this 
section shall include, at a minimum:
    (i) Testing of all SCI systems and any changes to SCI systems prior 
to implementation;
    (ii) A system of internal controls over changes to SCI systems;
    (iii) A plan for assessments of the functionality of SCI systems 
designed to detect systems compliance issues, including by responsible 
SCI personnel and by personnel familiar with applicable provisions of 
the Act and the rules and regulations thereunder and the SCI entity's 
rules and governing documents; and
    (iv) A plan of coordination and communication between regulatory and 
other personnel of the SCI entity, including by responsible SCI 
personnel, regarding SCI systems design, changes, testing, and controls 
designed to detect and prevent systems compliance issues.
    (3) Each SCI entity shall periodically review the effectiveness of 
the policies and procedures required by this paragraph (b), and take 
prompt action to remedy deficiencies in such policies and procedures.
    (4) Safe harbor from liability for individuals. Personnel of an SCI 
entity shall be deemed not to have aided, abetted, counseled, commanded, 
caused, induced, or procured the violation by an SCI entity of this 
paragraph (b) if the person:
    (i) Has reasonably discharged the duties and obligations incumbent 
upon such person by the SCI entity's policies and procedures; and
    (ii) Was without reasonable cause to believe that the policies and 
procedures relating to an SCI system for which such person was 
responsible, or had supervisory responsibility, were not established, 
maintained, or enforced in accordance with this paragraph (b) in any 
material respect.
    (c) Responsible SCI personnel. (1) Each SCI entity shall establish, 
maintain, and enforce reasonably designed written policies and 
procedures that include the criteria for identifying responsible SCI 
personnel, the designation and documentation of responsible SCI 
personnel, and escalation procedures to quickly inform responsible SCI 
personnel of potential SCI events.
    (2) Each SCI entity shall periodically review the effectiveness of 
the policies and procedures required by paragraph (c)(1) of this 
section, and take prompt action to remedy deficiencies in such policies 
and procedures.



Sec.  242.1002  Obligations related to SCI events.

    (a) Corrective action. Upon any responsible SCI personnel having a 
reasonable basis to conclude that an SCI event has occurred, each SCI 
entity shall begin to take appropriate corrective action which shall 
include, at a minimum, mitigating potential harm to investors and market 
integrity resulting from the SCI event and devoting adequate resources 
to remedy the SCI event as soon as reasonably practicable.
    (b) Commission notification and recordkeeping of SCI events. Each 
SCI entity shall:
    (1) Upon any responsible SCI personnel having a reasonable basis to 
conclude that an SCI event has occurred, notify the Commission of such 
SCI event immediately;
    (2) Within 24 hours of any responsible SCI personnel having a 
reasonable basis to conclude that the SCI event has occurred, submit a 
written notification pertaining to such SCI event to the Commission, 
which shall be made on a good faith, best efforts basis and include:
    (i) A description of the SCI event, including the system(s) 
affected; and
    (ii) To the extent available as of the time of the notification: The 
SCI entity's current assessment of the types and number of market 
participants potentially affected by the SCI event; the potential impact 
of the SCI event on the market; a description of the steps the SCI 
entity has taken, is taking, or

[[Page 157]]

plans to take, with respect to the SCI event; the time the SCI event was 
resolved or timeframe within which the SCI event is expected to be 
resolved; and any other pertinent information known by the SCI entity 
about the SCI event;
    (3) Until such time as the SCI event is resolved and the SCI 
entity's investigation of the SCI event is closed, provide updates 
pertaining to such SCI event to the Commission on a regular basis, or at 
such frequency as reasonably requested by a representative of the 
Commission, to correct any materially incorrect information previously 
provided, or when new material information is discovered, including but 
not limited to, any of the information listed in paragraph (b)(2)(ii) of 
this section;
    (4)(i)(A) If an SCI event is resolved and the SCI entity's 
investigation of the SCI event is closed within 30 calendar days of the 
occurrence of the SCI event, then within five business days after the 
resolution of the SCI event and closure of the investigation regarding 
the SCI event, submit a final written notification pertaining to such 
SCI event to the Commission containing the information required in 
paragraph (b)(4)(ii) of this section.
    (B)(1) If an SCI event is not resolved or the SCI entity's 
investigation of the SCI event is not closed within 30 calendar days of 
the occurrence of the SCI event, then submit an interim written 
notification pertaining to such SCI event to the Commission within 30 
calendar days after the occurrence of the SCI event containing the 
information required in paragraph (b)(4)(ii) of this section, to the 
extent known at the time.
    (2) Within five business days after the resolution of such SCI event 
and closure of the investigation regarding such SCI event, submit a 
final written notification pertaining to such SCI event to the 
Commission containing the information required in paragraph (b)(4)(ii) 
of this section.
    (ii) Written notifications required by paragraph (b)(4)(i) of this 
section shall include:
    (A) A detailed description of: The SCI entity's assessment of the 
types and number of market participants affected by the SCI event; the 
SCI entity's assessment of the impact of the SCI event on the market; 
the steps the SCI entity has taken, is taking, or plans to take, with 
respect to the SCI event; the time the SCI event was resolved; the SCI 
entity's rule(s) and/or governing document(s), as applicable, that 
relate to the SCI event; and any other pertinent information known by 
the SCI entity about the SCI event;
    (B) A copy of any information disseminated pursuant to paragraph (c) 
of this section by the SCI entity to date regarding the SCI event to any 
of its members or participants; and
    (C) An analysis of parties that may have experienced a loss, whether 
monetary or otherwise, due to the SCI event, the number of such parties, 
and an estimate of the aggregate amount of such loss.
    (5) The requirements of paragraphs (b)(1) through (4) of this 
section shall not apply to any SCI event that has had, or the SCI entity 
reasonably estimates would have, no or a de minimis impact on the SCI 
entity's operations or on market participants. For such events, each SCI 
entity shall:
    (i) Make, keep, and preserve records relating to all such SCI 
events; and
    (ii) Submit to the Commission a report, within 30 calendar days 
after the end of each calendar quarter, containing a summary description 
of such systems disruptions and systems intrusions, including the SCI 
systems and, for systems intrusions, indirect SCI systems, affected by 
such systems disruptions and systems intrusions during the applicable 
calendar quarter.
    (c) Dissemination of SCI events. (1) Each SCI entity shall:
    (i) Promptly after any responsible SCI personnel has a reasonable 
basis to conclude that an SCI event that is a systems disruption or 
systems compliance issue has occurred, disseminate the following 
information about such SCI event:
    (A) The system(s) affected by the SCI event; and
    (B) A summary description of the SCI event; and
    (ii) When known, promptly further disseminate the following 
information about such SCI event:

[[Page 158]]

    (A) A detailed description of the SCI event;
    (B) The SCI entity's current assessment of the types and number of 
market participants potentially affected by the SCI event; and
    (C) A description of the progress of its corrective action for the 
SCI event and when the SCI event has been or is expected to be resolved; 
and
    (iii) Until resolved, provide regular updates of any information 
required to be disseminated under paragraphs (c)(1)(i) and (ii) of this 
section.
    (2) Each SCI entity shall, promptly after any responsible SCI 
personnel has a reasonable basis to conclude that a SCI event that is a 
systems intrusion has occurred, disseminate a summary description of the 
systems intrusion, including a description of the corrective action 
taken by the SCI entity and when the systems intrusion has been or is 
expected to be resolved, unless the SCI entity determines that 
dissemination of such information would likely compromise the security 
of the SCI entity's SCI systems or indirect SCI systems, or an 
investigation of the systems intrusion, and documents the reasons for 
such determination.
    (3) The information required to be disseminated under paragraphs 
(c)(1) and (2) of this section promptly after any responsible SCI 
personnel has a reasonable basis to conclude that an SCI event has 
occurred, shall be promptly disseminated by the SCI entity to those 
members or participants of the SCI entity that any responsible SCI 
personnel has reasonably estimated may have been affected by the SCI 
event, and promptly disseminated to any additional members or 
participants that any responsible SCI personnel subsequently reasonably 
estimates may have been affected by the SCI event; provided, however, 
that for major SCI events, the information required to be disseminated 
under paragraphs (c)(1) and (2) of this section shall be promptly 
disseminated by the SCI entity to all of its members or participants.
    (4) The requirements of paragraphs (c)(1) through (3) of this 
section shall not apply to:
    (i) SCI events to the extent they relate to market regulation or 
market surveillance systems; or
    (ii) Any SCI event that has had, or the SCI entity reasonably 
estimates would have, no or a de minimis impact on the SCI entity's 
operations or on market participants.



Sec.  242.1003  Obligations related to systems changes; SCI review.

    (a) Systems changes. Each SCI entity shall:
    (1) Within 30 calendar days after the end of each calendar quarter, 
submit to the Commission a report describing completed, ongoing, and 
planned material changes to its SCI systems and the security of indirect 
SCI systems, during the prior, current, and subsequent calendar 
quarters, including the dates or expected dates of commencement and 
completion. An SCI entity shall establish reasonable written criteria 
for identifying a change to its SCI systems and the security of indirect 
SCI systems as material and report such changes in accordance with such 
criteria.
    (2) Promptly submit a supplemental report notifying the Commission 
of a material error in or material omission from a report previously 
submitted under this paragraph (a).
    (b) SCI review. Each SCI entity shall:
    (1) Conduct an SCI review of the SCI entity's compliance with 
Regulation SCI not less than once each calendar year; provided, however, 
that:
    (i) Penetration test reviews of the network, firewalls, and 
production systems shall be conducted at a frequency of not less than 
once every three years; and
    (ii) Assessments of SCI systems directly supporting market 
regulation or market surveillance shall be conducted at a frequency 
based upon the risk assessment conducted as part of the SCI review, but 
in no case less than once every three years; and
    (2) Submit a report of the SCI review required by paragraph (b)(1) 
of this section to senior management of the SCI entity for review no 
more than 30 calendar days after completion of such SCI review; and
    (3) Submit to the Commission, and to the board of directors of the 
SCI entity

[[Page 159]]

or the equivalent of such board, a report of the SCI review required by 
paragraph (b)(1) of this section, together with any response by senior 
management, within 60 calendar days after its submission to senior 
management of the SCI entity.



Sec.  242.1004  SCI entity business continuity and disaster recovery
plans testing requirements for members or participants.

    With respect to an SCI entity's business continuity and disaster 
recovery plans, including its backup systems, each SCI entity shall:
    (a) Establish standards for the designation of those members or 
participants that the SCI entity reasonably determines are, taken as a 
whole, the minimum necessary for the maintenance of fair and orderly 
markets in the event of the activation of such plans;
    (b) Designate members or participants pursuant to the standards 
established in paragraph (a) of this section and require participation 
by such designated members or participants in scheduled functional and 
performance testing of the operation of such plans, in the manner and 
frequency specified by the SCI entity, provided that such frequency 
shall not be less than once every 12 months; and
    (c) Coordinate the testing of such plans on an industry- or sector-
wide basis with other SCI entities.



Sec.  242.1005  Recordkeeping requirements related to compliance with
Regulation SCI.

    (a) An SCI SRO shall make, keep, and preserve all documents relating 
to its compliance with Regulation SCI as prescribed in Sec.  240.17a-1 
of this chapter.
    (b) An SCI entity that is not an SCI SRO shall:
    (1) Make, keep, and preserve at least one copy of all documents, 
including correspondence, memoranda, papers, books, notices, accounts, 
and other such records, relating to its compliance with Regulation SCI, 
including, but not limited to, records relating to any changes to its 
SCI systems and indirect SCI systems;
    (2) Keep all such documents for a period of not less than five 
years, the first two years in a place that is readily accessible to the 
Commission or its representatives for inspection and examination; and
    (3) Upon request of any representative of the Commission, promptly 
furnish to the possession of such representative copies of any documents 
required to be kept and preserved by it pursuant to paragraphs (b)(1) 
and (2) of this section.
    (c) Upon or immediately prior to ceasing to do business or ceasing 
to be registered under the Securities Exchange Act of 1934, an SCI 
entity shall take all necessary action to ensure that the records 
required to be made, kept, and preserved by this section shall be 
accessible to the Commission and its representatives in the manner 
required by this section and for the remainder of the period required by 
this section.



Sec.  242.1006  Electronic filing and submission.

    (a) Except with respect to notifications to the Commission made 
pursuant to Sec.  242.1002(b)(1) or updates to the Commission made 
pursuant to paragraph Sec.  242.1002(b)(3), any notification, review, 
description, analysis, or report to the Commission required to be 
submitted under Regulation SCI shall be filed electronically on Form SCI 
(Sec.  249.1900 of this chapter), include all information as prescribed 
in Form SCI and the instructions thereto, and contain an electronic 
signature; and
    (b) The signatory to an electronically filed Form SCI shall manually 
sign a signature page or document, in the manner prescribed by Form SCI, 
authenticating, acknowledging, or otherwise adopting his or her 
signature that appears in typed form within the electronic filing. Such 
document shall be executed before or at the time Form SCI is 
electronically filed and shall be retained by the SCI entity in 
accordance with Sec.  242.1005.



Sec.  242.1007  Requirements for service bureaus.

    If records required to be filed or kept by an SCI entity under 
Regulation SCI are prepared or maintained by a service bureau or other 
recordkeeping service on behalf of the SCI entity, the SCI entity shall 
ensure that the records are

[[Page 160]]

available for review by the Commission and its representatives by 
submitting a written undertaking, in a form acceptable to the 
Commission, by such service bureau or other recordkeeping service, 
signed by a duly authorized person at such service bureau or other 
recordkeeping service. Such a written undertaking shall include an 
agreement by the service bureau to permit the Commission and its 
representatives to examine such records at any time or from time to time 
during business hours, and to promptly furnish to the Commission and its 
representatives true, correct, and current electronic files in a form 
acceptable to the Commission or its representatives or hard copies of 
any or all or any part of such records, upon request, periodically, or 
continuously and, in any case, within the same time periods as would 
apply to the SCI entity for such records. The preparation or maintenance 
of records by a service bureau or other recordkeeping service shall not 
relieve an SCI entity from its obligation to prepare, maintain, and 
provide the Commission and its representatives access to such records.



PART 243_REGULATION FD--Table of Contents



Sec.
243.100 General rule regarding selective disclosure.
243.101 Definitions.
243.102 No effect on antifraud liability.
243.103 No effect on Exchange Act reporting status.

    Authority: 15 U.S.C. 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and 80a-29, 
unless otherwise noted.

    Source: 65 FR 51738, Aug. 24, 2000, unless otherwise noted.



Sec.  243.100  General rule regarding selective disclosure.

    (a) Whenever an issuer, or any person acting on its behalf, 
discloses any material nonpublic information regarding that issuer or 
its securities to any person described in paragraph (b)(1) of this 
section, the issuer shall make public disclosure of that information as 
provided in Sec.  243.101(e):
    (1) Simultaneously, in the case of an intentional disclosure; and
    (2) Promptly, in the case of a non-intentional disclosure.
    (b)(1) Except as provided in paragraph (b)(2) of this section, 
paragraph (a) of this section shall apply to a disclosure made to any 
person outside the issuer:
    (i) Who is a broker or dealer, or a person associated with a broker 
or dealer, as those terms are defined in Section 3(a) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a));
    (ii) Who is an investment adviser, as that term is defined in 
Section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(11)); an institutional investment manager, as that term is 
defined in Section 13(f)(6) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m(f)(6)), that filed a report on Form 13F (17 CFR 249.325) with 
the Commission for the most recent quarter ended prior to the date of 
the disclosure; or a person associated with either of the foregoing. For 
purposes of this paragraph, a ``person associated with an investment 
adviser or institutional investment manager'' has the meaning set forth 
in Section 202(a)(17) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(17)), assuming for these purposes that an institutional 
investment manager is an investment adviser;
    (iii) Who is an investment company, as defined in Section 3 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3), or who would be an 
investment company but for Section 3(c)(1) (15 U.S.C. 80a-3(c)(1)) or 
Section 3(c)(7) (15 U.S.C. 80a-3(c)(7)) thereof, or an affiliated person 
of either of the foregoing. For purposes of this paragraph, ``affiliated 
person'' means only those persons described in Section 2(a)(3)(C), (D), 
(E), and (F) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(3)(C), (D), (E), and (F)), assuming for these purposes that a 
person who would be an investment company but for Section 3(c)(1) (15 
U.S.C. 80a-3(c)(1)) or Section 3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the 
Investment Company Act of 1940 is an investment company; or
    (iv) Who is a holder of the issuer's securities, under circumstances 
in which it is reasonably foreseeable that the person will purchase or 
sell the issuer's

[[Page 161]]

securities on the basis of the information.
    (2) Paragraph (a) of this section shall not apply to a disclosure 
made:
    (i) To a person who owes a duty of trust or confidence to the issuer 
(such as an attorney, investment banker, or accountant);
    (ii) To a person who expressly agrees to maintain the disclosed 
information in confidence;
    (iii) In connection with a securities offering registered under the 
Securities Act, other than an offering of the type described in any of 
Rule 415(a)(1)(i) through (vi) under the Securities Act (Sec.  
230.415(a)(1)(i) through (vi) of this chapter) (except an offering of 
the type described in Rule 415(a)(1)(i) under the Securities Act (Sec.  
230.415(a)(1)(i) of this chapter) also involving a registered offering, 
whether or not underwritten, for capital formation purposes for the 
account of the issuer (unless the issuer's offering is being registered 
for the purpose of evading the requirements of this section)), if the 
disclosure is by any of the following means:
    (A) A registration statement filed under the Securities Act, 
including a prospectus contained therein;
    (B) A free writing prospectus used after filing of the registration 
statement for the offering or a communication falling within the 
exception to the definition of prospectus contained in clause (a) of 
section 2(a)(10) of the Securities Act;
    (C) Any other Section 10(b) prospectus;
    (D) A notice permitted by Rule 135 under the Securities Act (Sec.  
230.135 of this chapter);
    (E) A communication permitted by Rule 134 under the Securities Act 
(Sec.  230.134 of this chapter); or
    (F) An oral communication made in connection with the registered 
securities offering after filing of the registration statement for the 
offering under the Securities Act.

[65 FR 51738, Aug. 24, 2000, as amended at 70 FR 44829, Aug. 3, 2005; 74 
FR 63865, Dec. 4, 2009; 75 FR 61051, Oct. 4, 2010; 76 FR 71877, Nov. 21, 
2011]



Sec.  243.101  Definitions.

    This section defines certain terms as used in Regulation FD 
(Sec. Sec.  243.100-243.103).
    (a) Intentional. A selective disclosure of material nonpublic 
information is ``intentional'' when the person making the disclosure 
either knows, or is reckless in not knowing, that the information he or 
she is communicating is both material and nonpublic.
    (b) Issuer. An ``issuer'' subject to this regulation is one that has 
a class of securities registered under Section 12 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78l), or is required to file reports 
under Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(d)), including any closed-end investment company (as defined in 
Section 5(a)(2) of the Investment Company Act of 1940) (15 U.S.C. 80a-
5(a)(2)), but not including any other investment company or any foreign 
government or foreign private issuer, as those terms are defined in Rule 
405 under the Securities Act (Sec.  230.405 of this chapter).
    (c) Person acting on behalf of an issuer. ``Person acting on behalf 
of an issuer'' means any senior official of the issuer (or, in the case 
of a closed-end investment company, a senior official of the issuer's 
investment adviser), or any other officer, employee, or agent of an 
issuer who regularly communicates with any person described in Sec.  
243.100(b)(1)(i), (ii), or (iii), or with holders of the issuer's 
securities. An officer, director, employee, or agent of an issuer who 
discloses material nonpublic information in breach of a duty of trust or 
confidence to the issuer shall not be considered to be acting on behalf 
of the issuer.
    (d) Promptly. ``Promptly'' means as soon as reasonably practicable 
(but in no event after the later of 24 hours or the commencement of the 
next day's trading on the New York Stock Exchange) after a senior 
official of the issuer (or, in the case of a closed-end investment 
company, a senior official of the issuer's investment adviser) learns 
that there has been a non-intentional disclosure by the issuer or person 
acting on behalf of the issuer of information that the senior official 
knows, or is reckless in not knowing, is both material and nonpublic.

[[Page 162]]

    (e) Public disclosure. (1) Except as provided in paragraph (e)(2) of 
this section, an issuer shall make the ``public disclosure'' of 
information required by Sec.  243.100(a) by furnishing to or filing with 
the Commission a Form 8-K (17 CFR 249.308) disclosing that information.
    (2) An issuer shall be exempt from the requirement to furnish or 
file a Form 8-K if it instead disseminates the information through 
another method (or combination of methods) of disclosure that is 
reasonably designed to provide broad, non-exclusionary distribution of 
the information to the public.
    (f) Senior official. ``Senior official'' means any director, 
executive officer (as defined in Sec.  240.3b-7 of this chapter), 
investor relations or public relations officer, or other person with 
similar functions.
    (g) Securities offering. For purposes of Sec.  243.100(b)(2)(iv):
    (1) Underwritten offerings. A securities offering that is 
underwritten commences when the issuer reaches an understanding with the 
broker-dealer that is to act as managing underwriter and continues until 
the later of the end of the period during which a dealer must deliver a 
prospectus or the sale of the securities (unless the offering is sooner 
terminated);
    (2) Non-underwritten offerings. A securities offering that is not 
underwritten:
    (i) If covered by Rule 415(a)(1)(x) (Sec.  230.415(a)(1)(x) of this 
chapter), commences when the issuer makes its first bona fide offer in a 
takedown of securities and continues until the later of the end of the 
period during which each dealer must deliver a prospectus or the sale of 
the securities in that takedown (unless the takedown is sooner 
terminated);
    (ii) If a business combination as defined in Rule 165(f)(1) (Sec.  
230.165(f)(1) of this chapter), commences when the first public 
announcement of the transaction is made and continues until the 
completion of the vote or the expiration of the tender offer, as 
applicable (unless the transaction is sooner terminated);
    (iii) If an offering other than those specified in paragraphs (a) 
and (b) of this section, commences when the issuer files a registration 
statement and continues until the later of the end of the period during 
which each dealer must deliver a prospectus or the sale of the 
securities (unless the offering is sooner terminated).



Sec.  243.102  No effect on antifraud liability.

    No failure to make a public disclosure required solely by Sec.  
243.100 shall be deemed to be a violation of Rule 10b-5 (17 CFR 240.10b-
5) under the Securities Exchange Act.



Sec.  243.103  No effect on Exchange Act reporting status.

    A failure to make a public disclosure required solely by Sec.  
243.100 shall not affect whether:
    (a) For purposes of Forms S-3 (17 CFR 239.13), S-8 (17 CFR 239.16b) 
and SF-3 (17 CFR 239.45) under the Securities Act of 1933 (15 U.S.C. 77a 
et seq.), or Form N-2 (17 CFR 239.14 and 274.11a-1) under the Securities 
Act of 1933 (15 U.S.C. 77a et seq.) and the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.), an issuer is deemed to have filed all 
the material required to be filed pursuant to Section 13 or 15(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) or where 
applicable, has made those filings in a timely manner; or
    (b) There is adequate current public information about the issuer 
for purposes of Sec.  230.144(c) of this chapter (Rule 144(c)).

[65 FR 51738, Aug. 24, 2000, as amended at 79 FR 57344, Sept. 24, 2014; 
85 FR 33360, June 1, 2020]



PART 244_REGULATION G--Table of Contents



Sec.
244.100 General rules regarding disclosure of non-GAAP financial 
          measures.
244.101 Definitions.
244.102 No effect on antifraud liability.

    Authority: 15 U.S.C. 7261, 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and 
80a-29

    Source: 68 FR 4832, Jan. 30, 2003, unless otherwise noted.



Sec.  244.100  General rules regarding disclosure of non-GAAP financial
measures.

    (a) Whenever a registrant, or person acting on its behalf, publicly 
discloses

[[Page 163]]

material information that includes a non-GAAP financial measure, the 
registrant must accompany that non-GAAP financial measure with:
    (1) A presentation of the most directly comparable financial measure 
calculated and presented in accordance with Generally Accepted 
Accounting Principles (GAAP); and
    (2) A reconciliation (by schedule or other clearly understandable 
method), which shall be quantitative for historical non-GAAP measures 
presented, and quantitative, to the extent available without 
unreasonable efforts, for forward-looking information, of the 
differences between the non-GAAP financial measure disclosed or released 
with the most comparable financial measure or measures calculated and 
presented in accordance with GAAP identified in paragraph (a)(1) of this 
section.
    (b) A registrant, or a person acting on its behalf, shall not make 
public a non-GAAP financial measure that, taken together with the 
information accompanying that measure and any other accompanying 
discussion of that measure, contains an untrue statement of a material 
fact or omits to state a material fact necessary in order to make the 
presentation of the non-GAAP financial measure, in light of the 
circumstances under which it is presented, not misleading.
    (c) This section shall not apply to a disclosure of a non-GAAP 
financial measure that is made by or on behalf of a registrant that is a 
foreign private issuer if the following conditions are satisfied:
    (1) The securities of the registrant are listed or quoted on a 
securities exchange or inter-dealer quotation system outside the United 
States;
    (2) The non-GAAP financial measure is not derived from or based on a 
measure calculated and presented in accordance with generally accepted 
accounting principles in the United States; and
    (3) The disclosure is made by or on behalf of the registrant outside 
the United States, or is included in a written communication that is 
released by or on behalf of the registrant outside the United States.
    (d) This section shall not apply to a non-GAAP financial measure 
included in disclosure relating to a proposed business combination, the 
entity resulting therefrom or an entity that is a party thereto, if the 
disclosure is contained in a communication that is subject to Sec.  
230.425 of this chapter, Sec.  240.14a-12 or Sec.  240.14d-2(b)(2) of 
this chapter or Sec.  229.1015 of this chapter.

    Notes to Sec.  244.100: 1. If a non-GAAP financial measure is made 
public orally, telephonically, by Web cast, by broadcast, or by similar 
means, the requirements of paragraphs (a)(1)(i) and (a)(1)(ii) of this 
section will be satisfied if:
    (i) The required information in those paragraphs is provided on the 
registrant's Web site at the time the non-GAAP financial measure is made 
public; and
    (ii) The location of the web site is made public in the same 
presentation in which the non-GAAP financial measure is made public.
    2. The provisions of paragraph (c) of this section shall apply 
notwithstanding the existence of one or more of the following 
circumstances:
    (i) A written communication is released in the United States as well 
as outside the United States, so long as the communication is released 
in the United States contemporaneously with or after the release outside 
the United States and is not otherwise targeted at persons located in 
the United States;
    (ii) Foreign journalists, U.S. journalists or other third parties 
have access to the information;
    (iii) The information appears on one or more web sites maintained by 
the registrant, so long as the web sites, taken together, are not 
available exclusively to, or targeted at, persons located in the United 
States; or
    (iv) Following the disclosure or release of the information outside 
the United States, the information is included in a submission by the 
registrant to the Commission made under cover of a Form 6-K.



Sec.  244.101  Definitions.

    This section defines certain terms as used in Regulation G 
(Sec. Sec.  244.100 through 244.102).
    (a)(1) Non-GAAP financial measure. A non-GAAP financial measure is a 
numerical measure of a registrant's historical or future financial 
performance, financial position or cash flows that:
    (i) Excludes amounts, or is subject to adjustments that have the 
effect of excluding amounts, that are included in the most directly 
comparable measure calculated and presented in accordance with GAAP in 
the statement of income, balance sheet or statement of

[[Page 164]]

cash flows (or equivalent statements) of the issuer; or
    (ii) Includes amounts, or is subject to adjustments that have the 
effect of including amounts, that are excluded from the most directly 
comparable measure so calculated and presented.
    (2) A non-GAAP financial measure does not include operating and 
other financial measures and ratios or statistical measures calculated 
using exclusively one or both of:
    (i) Financial measures calculated in accordance with GAAP; and
    (ii) Operating measures or other measures that are not non-GAAP 
financial measures.
    (3) A non-GAAP financial measure does not include financial measures 
required to be disclosed by GAAP, Commission rules, or a system of 
regulation of a government or governmental authority or self-regulatory 
organization that is applicable to the registrant.
    (b) GAAP. GAAP refers to generally accepted accounting principles in 
the United States, except that:
    (1) In the case of foreign private issuers whose primary financial 
statements are prepared in accordance with non-U.S. generally accepted 
accounting principles, GAAP refers to the principles under which those 
primary financial statements are prepared; and
    (2) In the case of foreign private issuers that include a non-GAAP 
financial measure derived from a measure calculated in accordance with 
U.S. generally accepted accounting principles, GAAP refers to U.S. 
generally accepted accounting principles for purposes of the application 
of the requirements of Regulation G to the disclosure of that measure.
    (c) Registrant. A registrant subject to this regulation is one that 
has a class of securities registered under Section 12 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78l), or is required to file reports 
under Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(d)), excluding any investment company registered under Section 8 of 
the Investment Company Act of 1940 (15 U.S.C. 80a-8).
    (d) United States. United States means the United States of America, 
its territories and possessions, any State of the United States, and the 
District of Columbia.



Sec.  244.102  No effect on antifraud liability.

    Neither the requirements of this Regulation G (17 CFR 244.100 
through 244.102) nor a person's compliance or non-compliance with the 
requirements of this Regulation shall in itself affect any person's 
liability under Section 10(b) (15 U.S.C. 78j(b)) of the Securities 
Exchange Act of 1934 or Sec.  240.10b-5 of this chapter.



PART 245_REGULATION BLACKOUT TRADING RESTRICTION--Table of Contents



[Regulation BTR--Blackout Trading Restriction]

Sec.
245.100 Definitions.
245.101 Prohibition of insider trading during pension fund blackout 
          periods.
245.102 Exceptions to definition of blackout period.
245.103 Issuer right of recovery; right of action by equity security 
          owner.
245.104 Notice.

    Authority: 15 U.S.C. 78w(a), unless otherwise noted.
    Sections 245.100-245.104 are also issued under secs. 3(a) and 
306(a), Pub. L. 107-204, 116 Stat. 745.

    Source: 68 FR 4355, Jan. 28, 2003, unless otherwise noted.



Sec.  245.100  Definitions.

    As used in Regulation BTR (Sec. Sec.  245.100 through 245.104), 
unless the context otherwise requires:
    (a) The term acquired in connection with service or employment as a 
director or executive officer, when applied to a director or executive 
officer, means that he or she acquired, directly or indirectly, an 
equity security:
    (1) At a time when he or she was a director or executive officer, 
under a compensatory plan, contract, authorization or arrangement, 
including, but not limited to, an option, warrants or rights plan, a 
pension, retirement or deferred compensation plan or a bonus, incentive 
or profit-sharing plan (whether or not set forth in any formal plan 
document), including a compensatory plan, contract, authorization or

[[Page 165]]

arrangement with a parent, subsidiary or affiliate;
    (2) At a time when he or she was a director or executive officer, as 
a result of any transaction or business relationship described in 
paragraph (a) of Item 404 of Regulation S-K (Sec.  229.404 of this 
chapter) or, in the case of a foreign private issuer, Item 7.B of Form 
20-F (Sec.  249.220f of this chapter) (but without application of the 
disclosure thresholds of such provisions), to the extent that he or she 
has a pecuniary interest (as defined in paragraph (l) of this section) 
in the equity securities;
    (3) At a time when he or she was a director or executive officer, as 
directors' qualifying shares or other securities that he or she must 
hold to satisfy minimum ownership requirements or guidelines for 
directors or executive officers;
    (4) Prior to becoming, or while, a director or executive officer 
where the equity security was acquired as a direct or indirect 
inducement to service or employment as a director or executive officer; 
or
    (5) Prior to becoming, or while, a director or executive officer 
where the equity security was received as a result of a business 
combination in respect of an equity security of an entity involved in 
the business combination that he or she had acquired in connection with 
service or employment as a director or executive officer of such entity.
    (b) Except as provided in Sec.  245.102, the term blackout period:
    (1) With respect to the equity securities of any issuer (other than 
a foreign private issuer), means any period of more than three 
consecutive business days during which the ability to purchase, sell or 
otherwise acquire or transfer an interest in any equity security of such 
issuer held in an individual account plan is temporarily suspended by 
the issuer or by a fiduciary of the plan with respect to not fewer than 
50% of the participants or beneficiaries located in the United States 
and its territories and possessions under all individual account plans 
(as defined in paragraph (j) of this section) maintained by the issuer 
that permit participants or beneficiaries to acquire or hold equity 
securities of the issuer;
    (2) With respect to the equity securities of any foreign private 
issuer (as defined in Sec.  240.3b-4(c) of this chapter), means any 
period of more than three consecutive business days during which both:
    (i) The conditions of paragraph (b)(1) of this section are met; and
    (ii)(A) The number of participants and beneficiaries located in the 
United States and its territories and possessions subject to the 
temporary suspension exceeds 15% of the total number of employees of the 
issuer and its consolidated subsidiaries; or
    (B) More than 50,000 participants and beneficiaries located in the 
United States and its territories and possessions are subject to the 
temporary suspension.
    (3) In determining the individual account plans (as defined in 
paragraph (j) of this section) maintained by an issuer for purposes of 
this paragraph (b):
    (i) The rules under section 414(b), (c), (m) and (o) of the Internal 
Revenue Code (26 U.S.C. 414(b), (c), (m) and (o)) are to be applied; and
    (ii) An individual account plan that is maintained outside of the 
United States primarily for the benefit of persons substantially all of 
whom are nonresident aliens (within the meaning of section 104(b)(4) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1003(b)(4))) is not to be considered.
    (4) In determining the number of participants and beneficiaries in 
an individual account plan (as defined in paragraph (j) of this section) 
maintained by an issuer:
    (i) The determination may be made as of any date within the 12-month 
period preceding the beginning date of the temporary suspension in 
question; provided that if there has been a significant change in the 
number of participants or beneficiaries in an individual account plan 
since the date selected, the determination for such plan must be made as 
of the most recent practicable date that reflects such change; and
    (ii) The determination may be made without regard to overlapping 
plan participation.

[[Page 166]]

    (c)(1) The term director has, except as provided in paragraph (c)(2) 
of this section, the meaning set forth in section 3(a)(7) of the 
Exchange Act (15 U.S.C. 78c(a)(7)).
    (2) In the case of a foreign private issuer (as defined in Sec.  
240.3b-4(c) of this chapter), the term director means an individual 
within the definition set forth in section 3(a)(7) of the Exchange Act 
who is a management employee of the issuer.
    (d) The term derivative security has the meaning set forth in Sec.  
240.16a-1(c) of this chapter.
    (e) The term equity security has the meaning set forth in section 
3(a)(11) of the Exchange Act (15 U.S.C. 78c(a)(11)) and Sec.  240.3a11-1 
of this chapter.
    (f) The term equity security of the issuer means any equity security 
or derivative security relating to an issuer, whether or not issued by 
that issuer.
    (g) The term Exchange Act means the Securities Exchange Act of 1934 
(15 U.S.C. 78a et seq.).
    (h)(1) The term executive officer has, except as provided in 
paragraph (h)(2) of this section, the meaning set forth in Sec.  
240.16a-1(f) of this chapter.
    (2) In the case of a foreign private issuer (as defined in Sec.  
240.3b-4(c) of this chapter), the term executive officer means the 
principal executive officer or officers, the principal financial officer 
or officers and the principal accounting officer or officers of the 
issuer.
    (i) The term exempt security has the meaning set forth in section 
3(a)(12) of the Exchange Act (15 U.S.C. 78c(a)(12)).
    (j) The term individual account plan means a pension plan which 
provides for an individual account for each participant and for benefits 
based solely upon the amount contributed to the participant's account, 
and any income, expenses, gains and losses, and any forfeitures of 
accounts of other participants which may be allocated to such 
participant's account, except that such term does not include a one-
participant retirement plan (within the meaning of section 101(i)(8)(B) 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1021(i)(8)(B))), nor does it include a pension plan in which 
participation is limited to directors of the issuer.
    (k) The term issuer means an issuer (as defined in section 3(a)(8) 
of the Exchange Act (15 U.S.C. 78c(a)(8))), the securities of which are 
registered under section 12 of the Exchange Act (15 U.S.C. 78l) or that 
is required to file reports under section 15(d) of the Exchange Act (15 
U.S.C. 78o(d)) or that files or has filed a registration statement that 
has not yet become effective under the Securities Act of 1933 (15 U.S.C. 
77a et seq.) and that it has not withdrawn.
    (l) The term pecuniary interest has the meaning set forth in Sec.  
240.16a-1(a)(2)(i) of this chapter and the term indirect pecuniary 
interest has the meaning set forth in Sec.  240.16a-1(a)(2)(ii) of this 
chapter. Section 240.16a-1(a)(2)(iii) of this chapter also shall apply 
to determine pecuniary interest for purposes of this regulation.

[68 FR 4355, Jan. 28, 2003, as amended at 71 FR 53263, Sept. 8, 2006]



Sec.  245.101  Prohibition of insider trading during pension fund 
blackout periods.

    (a) Except to the extent otherwise provided in paragraph (c) of this 
section, it is unlawful under section 306(a)(1) of the Sarbanes-Oxley 
Act of 2002 (15 U.S.C. 7244(a)(1)) for any director or executive officer 
of an issuer of any equity security (other than an exempt security), 
directly or indirectly, to purchase, sell or otherwise acquire or 
transfer any equity security of the issuer (other than an exempt 
security) during any blackout period with respect to such equity 
security, if such director or executive officer acquires or previously 
acquired such equity security in connection with his or her service or 
employment as a director or executive officer.
    (b) For purposes of section 306(a)(1) of the Sarbanes-Oxley Act of 
2002, any sale or other transfer of an equity security of the issuer 
during a blackout period will be treated as a transaction involving an 
equity security ``acquired in connection with service or employment as a 
director or executive officer'' (as defined in Sec.  245.100(a)) to the 
extent that the director or executive officer has a pecuniary interest 
(as defined in

[[Page 167]]

Sec.  245.100(l)) in such equity security, unless the director or 
executive officer establishes by specific identification of securities 
that the transaction did not involve an equity security ``acquired in 
connection with service or employment as a director or executive 
officer.'' To establish that the equity security was not so acquired, a 
director or executive officer must identify the source of the equity 
securities and demonstrate that he or she has utilized the same specific 
identification for any purpose related to the transaction (such as tax 
reporting and any applicable disclosure and reporting requirements).
    (c) The following transactions are exempt from section 306(a)(1) of 
the Sarbanes-Oxley Act of 2002:
    (1) Any acquisition of equity securities resulting from the 
reinvestment of dividends in, or interest on, equity securities of the 
same issuer if the acquisition is made pursuant to a plan providing for 
the regular reinvestment of dividends or interest and the plan provides 
for broad-based participation, does not discriminate in favor of 
employees of the issuer and operates on substantially the same terms for 
all plan participants;
    (2) Any purchase or sale of equity securities of the issuer pursuant 
to a contract, instruction or written plan entered into by the director 
or executive officer that satisfies the affirmative defense conditions 
of Sec.  240.10b5-1(c) of this chapter; provided that the director or 
executive officer did not enter into or modify the contract, instruction 
or written plan during the blackout period (as defined in Sec.  
245.100(b)) in question, or while aware of the actual or approximate 
beginning or ending dates of that blackout period (whether or not the 
director or executive officer received notice of the blackout period as 
required by Section 306(a)(6) of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7244(a)(6)));
    (3) Any purchase or sale of equity securities, other than a 
Discretionary Transaction (as defined in Sec.  240.16b-3(b)(1) of this 
chapter), pursuant to a Qualified Plan (as defined in Sec.  240.16b-
3(b)(4) of this chapter), an Excess Benefit Plan (as defined in Sec.  
240.16b-3(b)(2) of this chapter) or a Stock Purchase Plan (as defined in 
Sec.  240.16b-3(b)(5) of this chapter) (or, in the case of a foreign 
private issuer, pursuant to an employee benefit plan that either (i) has 
been approved by the taxing authority of a foreign jurisdiction, or (ii) 
is eligible for preferential treatment under the tax laws of a foreign 
jurisdiction because the plan provides for broad-based employee 
participation); provided that a Discretionary Transaction that meets the 
conditions of paragraph (c)(2) of this section also shall be exempt;
    (4) Any grant or award of an option, stock appreciation right or 
other equity compensation pursuant to a plan that, by its terms:
    (i) Permits directors or executive officers to receive grants or 
awards; and
    (ii) Either:
    (A) States the amount and price of securities to be awarded to 
designated directors and executive officers or categories of directors 
and executive officers (though not necessarily to others who may 
participate in the plan) and specifies the timing of awards to directors 
and executive officers; or
    (B) Sets forth a formula that determines the amount, price and 
timing, using objective criteria (such as earnings of the issuer, value 
of the securities, years of service, job classification, and 
compensation levels);
    (5) Any exercise, conversion or termination of a derivative security 
that the director or executive officer did not write or acquire during 
the blackout period (as defined in Sec.  245.100(b)) in question, or 
while aware of the actual or approximate beginning or ending dates of 
that blackout period (whether or not the director or executive officer 
received notice of the blackout period as required by Section 306(a)(6) 
of the Sarbanes-Oxley Act of 2002); and either:
    (i) The derivative security, by its terms, may be exercised, 
converted or terminated only on a fixed date, with no discretionary 
provision for earlier exercise, conversion or termination; or
    (ii) The derivative security is exercised, converted or terminated 
by a counterparty and the director or executive officer does not 
exercise any influence on the counterparty with respect to whether or 
when to exercise, convert or terminate the derivative security;

[[Page 168]]

    (6) Any acquisition or disposition of equity securities involving a 
bona fide gift or a transfer by will or the laws of descent and 
distribution;
    (7) Any acquisition or disposition of equity securities pursuant to 
a domestic relations order, as defined in the Internal Revenue Code or 
Title I of the Employment Retirement Income Security Act of 1974, or the 
rules thereunder;
    (8) Any sale or other disposition of equity securities compelled by 
the laws or other requirements of an applicable jurisdiction;
    (9) Any acquisition or disposition of equity securities in 
connection with a merger, acquisition, divestiture or similar 
transaction occurring by operation of law;
    (10) The increase or decrease in the number of equity securities 
held as a result of a stock split or stock dividend applying equally to 
all securities of that class, including a stock dividend in which equity 
securities of a different issuer are distributed; and the acquisition of 
rights, such as shareholder or pre-emptive rights, pursuant to a pro 
rata grant to all holders of the same class of equity securities; and
    (11) Any acquisition or disposition of an asset-backed security, as 
defined in Sec.  229.1101 of this chapter.

[70 FR 1623, Jan. 7, 2005]



Sec.  245.102  Exceptions to definition of blackout period.

    The term ``blackout period,'' as defined in Sec.  245.100(b), does 
not include:
    (a) A regularly scheduled period in which participants and 
beneficiaries may not purchase, sell or otherwise acquire or transfer an 
interest in any equity security of an issuer, if a description of such 
period, including its frequency and duration and the plan transactions 
to be suspended or otherwise affected, is:
    (1) Incorporated into the individual account plan or included in the 
documents or instruments under which the plan operates; and
    (2) Disclosed to an employee before he or she formally enrolls, or 
within 30 days following formal enrollment, as a participant under the 
individual account plan or within 30 days after the adoption of an 
amendment to the plan. For purposes of this paragraph (a)(2), the 
disclosure may be provided in any graphic form that is reasonably 
accessible to the employee; or
    (b) Any trading suspension described in Sec.  245.100(b) that is 
imposed in connection with a corporate merger, acquisition, divestiture 
or similar transaction involving the plan or plan sponsor, the principal 
purpose of which is to permit persons affiliated with the acquired or 
divested entity to become participants or beneficiaries, or to cease to 
be participants or beneficiaries, in an individual account plan; 
provided that the persons who become participants or beneficiaries in an 
individual account plan are not able to participate in the same class of 
equity securities after the merger, acquisition, divestiture or similar 
transaction as before the transaction.



Sec.  245.103  Issuer right of recovery; right of action by equity
security owner.

    (a) Recovery of profits. Section 306(a)(2) of the Sarbanes-Oxley Act 
of 2002 (15 U.S.C. 7244(a)(2)) provides that any profit realized by a 
director or executive officer from any purchase, sale or other 
acquisition or transfer of any equity security of an issuer in violation 
of section 306(a)(1) of that Act (15 U.S.C. 7244(a)(1)) will inure to 
and be recoverable by the issuer, regardless of any intention on the 
part of the director or executive officer in entering into the 
transaction.
    (b) Actions to recover profit. Section 306(a)(2) of the Sarbanes-
Oxley Act of 2002 provides that an action to recover profit may be 
instituted at law or in equity in any court of competent jurisdiction by 
the issuer, or by the owner of any equity security of the issuer in the 
name and on behalf of the issuer if the issuer fails or refuses to bring 
such action within 60 days after the date of request, or fails 
diligently to prosecute the action thereafter, except that no such suit 
may be brought more than two years after the date on which such profit 
was realized.
    (c) Measurement of profit. (1) In determining the profit recoverable 
in an action undertaken pursuant to section 306(a)(2) of the Sarbanes-
Oxley Act of 2002 from a transaction that involves a

[[Page 169]]

purchase, sale or other acquisition or transfer (other than a grant, 
exercise, conversion or termination of a derivative security) in 
violation of section 306(a)(1) of that Act of an equity security of an 
issuer that is registered pursuant to section 12(b) or 12(g) of the 
Exchange Act (15 U.S.C. 78l(b) or (g)) and listed on a national 
securities exchange or listed in an automated inter-dealer quotation 
system of a national securities association, profit (including any loss 
avoided) may be measured by comparing the difference between the amount 
paid or received for the equity security on the date of the transaction 
during the blackout period and the average market price of the equity 
security calculated over the first three trading days after the ending 
date of the blackout period.
    (2) In determining the profit recoverable in an action undertaken 
pursuant to section 306(a)(2) of the Sarbanes-Oxley Act of 2002 from a 
transaction that is not described in paragraph (c)(1) of this section, 
profit (including any loss avoided) may be measured in a manner that is 
consistent with the objective of identifying the amount of any gain 
realized or loss avoided by a director or executive officer as a result 
of a transaction taking place in violation of section 306(a)(1) of that 
Act during the blackout period as opposed to taking place outside of 
such blackout period.
    (3) The terms of this section do not limit in any respect the 
authority of the Commission to seek or determine remedies as the result 
of a transaction taking place in violation of section 306(a)(1) of the 
Sarbanes-Oxley Act.



Sec.  245.104  Notice.

    (a) In any case in which a director or executive officer is subject 
to section 306(a)(1) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7244(a)(1)) in connection with a blackout period (as defined in Sec.  
245.100(b)) with respect to any equity security, the issuer of the 
equity security must timely notify each director or officer and the 
Commission of the blackout period.
    (b) For purposes of this section:
    (1) The notice must include:
    (i) The reason or reasons for the blackout period;
    (ii) A description of the plan transactions to be suspended during, 
or otherwise affected by, the blackout period;
    (iii) A description of the class of equity securities subject to the 
blackout period;
    (iv) The length of the blackout period by reference to:
    (A) The actual or expected beginning date and ending date of the 
blackout period; or
    (B) The calendar week during which the blackout period is expected 
to begin and the calendar week during which the blackout period is 
expected to end, provided that the notice to directors and executive 
officers describes how, during such week or weeks, a director or 
executive officer may obtain, without charge, information as to whether 
the blackout period has begun or ended; and provided further that the 
notice to the Commission describes how, during the blackout period and 
for a period of two years after the ending date of the blackout period, 
a security holder or other interested person may obtain, without charge, 
the actual beginning and ending dates of the blackout period.
    (C) For purposes of this paragraph (b)(1)(iv), a calendar week means 
a seven-day period beginning on Sunday and ending on Saturday; and
    (v) The name, address and telephone number of the person designated 
by the issuer to respond to inquiries about the blackout period, or, in 
the absence of such a designation, the issuer's human resources director 
or person performing equivalent functions.
    (2) (i) Notice to an affected director or executive officer will be 
considered timely if the notice described in paragraph (b)(1) of this 
section is provided (in graphic form that is reasonably accessible to 
the recipient):
    (A) No later than five business days after the issuer receives the 
notice required by section 101(i)(2)(E) of the Employment Retirement 
Income Security Act of 1974 (29 U.S.C. 1021(i)(2)(E)); or
    (B) If no such notice is received by the issuer, a date that is at 
least 15 calendar days before the actual or expected beginning date of 
the blackout period.

[[Page 170]]

    (ii) Notwithstanding paragraph (b)(2)(i) of this section, the 
requirement to give advance notice will not apply in any case in which 
the inability to provide advance notice of the blackout period is due to 
events that were unforeseeable to, or circumstances that were beyond the 
reasonable control of, the issuer, and the issuer reasonably so 
determines in writing. Determinations described in the preceding 
sentence must be dated and signed by an authorized representative of the 
issuer. In any case in which this exception to the advance notice 
requirement applies, the issuer must provide the notice described in 
paragraph (b)(1) of this section, as well as a copy of the written 
determination, to all affected directors and executive officers as soon 
as reasonably practicable.
    (iii) If there is a subsequent change in the beginning or ending 
dates of the blackout period as provided in the notice to directors and 
executive officers under paragraph (b)(2)(i) of this section, an issuer 
must provide directors and executive officers with an updated notice 
explaining the reasons for the change in the date or dates and 
identifying all material changes in the information contained in the 
prior notice. The updated notice is required to be provided as soon as 
reasonably practicable, unless such notice in advance of the termination 
of a blackout period is impracticable.
    (3) Notice to the Commission will be considered timely if:
    (i) The issuer, except as provided in paragraph (b)(3)(ii) of this 
section, files a current report on Form 8-K (Sec.  249.308 of this 
chapter) within the time prescribed for filing the report under the 
instructions for the form; or
    (ii) In the case of a foreign private issuer (as defined in Sec.  
240.3b-4(c) of this chapter), the issuer includes the information set 
forth in paragraph (b)(1) of this section in the first annual report on 
Form 20-F (Sec.  249.220f of this chapter) or 40-F (Sec.  249.240f of 
this chapter) required to be filed after the receipt of the notice of a 
blackout period required by 29 CFR 2520.101-3(c) within the time 
prescribed for filing the report under the instructions for the form or 
in an earlier filed report on Form 6-K (Sec.  249.306).
    (iii) If there is a subsequent change in the beginning or ending 
dates of the blackout period as provided in the notice to the Commission 
under paragraph (b)(3)(i) of this section, an issuer must file a current 
report on Form 8-K containing the updated beginning or ending dates of 
the blackout period, explaining the reasons for the change in the date 
or dates and identifying all material changes in the information 
contained in the prior report. The updated notice is required to be 
provided as soon as reasonably practicable.



PART 246_CREDIT RISK RETENTION--Table of Contents



           Subpart A_Authority, Purpose, Scope and Definitions

Sec.
246.1 [Reserved]
246.2 Definitions.

                     Subpart B_Credit Risk Retention

246.3 Base risk retention requirement.
246.4 Standard risk retention.
246.5 Revolving pool securitizations.
246.6 Eligible ABCP conduits.
246.7 Commercial mortgage-backed securities.
246.8 Federal National Mortgage Association and Federal Home Loan 
          Mortgage Corporation ABS.
246.9 Open market CLOs.
246.10 Qualified tender option bonds.

                  Subpart C_Transfer of Risk Retention

246.11 Allocation of risk retention to an originator.
246.12 Hedging, transfer and financing prohibitions.

                   Subpart D_Exceptions and Exemptions

246.13 Exemption for qualified residential mortgages.
246.14 Definitions applicable to qualifying commercial loans, commercial 
          real estate loans, and automobile loans.
246.15 Qualifying commercial loans, commercial real estate loans, and 
          automobile loans.
246.16 Underwriting standards for qualifying commercial loans.
246.17 Underwriting standards for qualifying CRE loans.
246.18 Underwriting standards for qualifying automobile loans.
246.19 General exemptions.

[[Page 171]]

246.20 Safe harbor for certain foreign-related transactions.
246.21 Additional exemptions.
246.22 Periodic review of the QRM definition, exempted three-to-four 
          unit residential mortgage loans, and community-focused 
          residential mortgage exemption.

    Authority: 15 U.S.C. 77g, 77j, 77s, 77z-3, 78c, 78m, 78o, 78o-11, 
78w, 78mm.

    Source: 79 FR 77740, Dec. 24, 2014, unless otherwise noted.



           Subpart A_Authority, Purpose, Scope and Definitions



Sec.  246.1  Purpose, scope, and authority.

    (a) Authority and purpose. This part (Regulation RR) is issued by 
the Securities and Exchange Commission (``Commission'') jointly with the 
Board of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, the Office of the Comptroller of the Currency, 
and, in the case of the securitization of any residential mortgage 
asset, together with the Secretary of Housing and Urban Development and 
the Federal Housing Finance Agency, pursuant to Section 15G of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-11). The Commission also 
is issuing this part pursuant to its authority under Sections 7, 10, 
19(a), and 28 of the Securities Act and Sections 3, 13, 15, 23, and 36 
of the Exchange Act. This part requires securitizers to retain an 
economic interest in a portion of the credit risk for any asset that the 
securitizer, through the issuance of an asset-backed security, 
transfers, sells, or conveys to a third party. This part specifies the 
permissible types, forms, and amounts of credit risk retention, and 
establishes certain exemptions for securitizations collateralized by 
assets that meet specified underwriting standards or otherwise qualify 
for an exemption.
    (b) The authority of the Commission under this part shall be in 
addition to the authority of the Commission to otherwise enforce the 
federal securities laws, including, without limitation, the antifraud 
provisions of the securities laws.

[79 FR 77766, Dec. 24, 2014]



Sec.  246.2  Definitions.

    For purposes of this part, the following definitions apply:
    ABS interest means:
    (1) Any type of interest or obligation issued by an issuing entity, 
whether or not in certificated form, including a security, obligation, 
beneficial interest or residual interest (other than an uncertificated 
regular interest in a REMIC that is held by another REMIC, where both 
REMICs are part of the same structure and a single REMIC in that 
structure issues ABS interests to investors, or a non-economic residual 
interest issued by a REMIC), payments on which are primarily dependent 
on the cash flows of the collateral owned or held by the issuing entity; 
and
    (2) Does not include common or preferred stock, limited liability 
interests, partnership interests, trust certificates, or similar 
interests that:
    (i) Are issued primarily to evidence ownership of the issuing 
entity; and
    (ii) The payments, if any, on which are not primarily dependent on 
the cash flows of the collateral held by the issuing entity; and
    (3) Does not include the right to receive payments for services 
provided by the holder of such right, including servicing, trustee 
services and custodial services.
    Affiliate of, or a person affiliated with, a specified person means 
a person that directly, or indirectly through one or more 
intermediaries, controls, or is controlled by, or is under common 
control with, the person specified.
    Appropriate Federal banking agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
    Asset means a self-liquidating financial asset (including but not 
limited to a loan, lease, mortgage, or receivable).
    Asset-backed security has the same meaning as in section 3(a)(79) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(79)).
    Collateral means, with respect to any issuance of ABS interests, the 
assets that provide the cash flow and the servicing assets that support 
such cash flow for the ABS interests irrespective of the legal structure 
of issuance, including security interests in assets or other property of 
the issuing entity,

[[Page 172]]

fractional undivided property interests in the assets or other property 
of the issuing entity, or any other property interest in or rights to 
cash flow from such assets and related servicing assets. Assets or other 
property collateralize an issuance of ABS interests if the assets or 
property serve as collateral for such issuance.
    Commercial real estate loan has the same meaning as in Sec.  246.14.
    Commission means the Securities and Exchange Commission.
    Control including the terms ``controlling,'' ``controlled by'' and 
``under common control with'':
    (1) Means the possession, direct or indirect, of the power to direct 
or cause the direction of the management and policies of a person, 
whether through the ownership of voting securities, by contract, or 
otherwise.
    (2) Without limiting the foregoing, a person shall be considered to 
control another person if the first person:
    (i) Owns, controls or holds with power to vote 25 percent or more of 
any class of voting securities of the other person; or
    (ii) Controls in any manner the election of a majority of the 
directors, trustees or persons performing similar functions of the other 
person.
    Credit risk means:
    (1) The risk of loss that could result from the failure of the 
borrower in the case of a securitized asset, or the issuing entity in 
the case of an ABS interest in the issuing entity, to make required 
payments of principal or interest on the asset or ABS interest on a 
timely basis;
    (2) The risk of loss that could result from bankruptcy, insolvency, 
or a similar proceeding with respect to the borrower or issuing entity, 
as appropriate; or
    (3) The effect that significant changes in the underlying credit 
quality of the asset or ABS interest may have on the market value of the 
asset or ABS interest.
    Creditor has the same meaning as in 15 U.S.C. 1602(g).
    Depositor means:
    (1) The person that receives or purchases and transfers or sells the 
securitized assets to the issuing entity;
    (2) The sponsor, in the case of a securitization transaction where 
there is not an intermediate transfer of the assets from the sponsor to 
the issuing entity; or
    (3) The person that receives or purchases and transfers or sells the 
securitized assets to the issuing entity in the case of a securitization 
transaction where the person transferring or selling the securitized 
assets directly to the issuing entity is itself a trust.
    Eligible horizontal residual interest means, with respect to any 
securitization transaction, an ABS interest in the issuing entity:
    (1) That is an interest in a single class or multiple classes in the 
issuing entity, provided that each interest meets, individually or in 
the aggregate, all of the requirements of this definition;
    (2) With respect to which, on any payment date or allocation date on 
which the issuing entity has insufficient funds to satisfy its 
obligation to pay all contractual interest or principal due, any 
resulting shortfall will reduce amounts payable to the eligible 
horizontal residual interest prior to any reduction in the amounts 
payable to any other ABS interest, whether through loss allocation, 
operation of the priority of payments, or any other governing 
contractual provision (until the amount of such ABS interest is reduced 
to zero); and
    (3) That, with the exception of any non-economic REMIC residual 
interest, has the most subordinated claim to payments of both principal 
and interest by the issuing entity.
    Eligible horizontal cash reserve account means an account meeting 
the requirements of Sec.  246.4(b).
    Eligible vertical interest means, with respect to any securitization 
transaction, a single vertical security or an interest in each class of 
ABS interests in the issuing entity issued as part of the securitization 
transaction that constitutes the same proportion of each such class.
    Federal banking agencies means the Office of the Comptroller of the 
Currency, the Board of Governors of the Federal Reserve System, and the 
Federal Deposit Insurance Corporation.

[[Page 173]]

    GAAP means generally accepted accounting principles as used in the 
United States.
    Issuing entity means, with respect to a securitization transaction, 
the trust or other entity:
    (1) That owns or holds the pool of assets to be securitized; and
    (2) In whose name the asset-backed securities are issued.
    Majority-owned affiliate of a person means an entity (other than the 
issuing entity) that, directly or indirectly, majority controls, is 
majority controlled by or is under common majority control with, such 
person. For purposes of this definition, majority control means 
ownership of more than 50 percent of the equity of an entity, or 
ownership of any other controlling financial interest in the entity, as 
determined under GAAP.
    Originator means a person who:
    (1) Through an extension of credit or otherwise, creates an asset 
that collateralizes an asset-backed security; and
    (2) Sells the asset directly or indirectly to a securitizer or 
issuing entity.
    REMIC has the same meaning as in 26 U.S.C. 860D.
    Residential mortgage means:
    (1) A transaction that is a covered transaction as defined in Sec.  
1026.43(b) of Regulation Z (12 CFR 1026.43(b)(1));
    (2) Any transaction that is exempt from the definition of ``covered 
transaction'' under Sec.  1026.43(a) of Regulation Z (12 CFR 
1026.43(a)); and
    (3) Any other loan secured by a residential structure that contains 
one to four units, whether or not that structure is attached to real 
property, including an individual condominium or cooperative unit and, 
if used as a residence, a mobile home or trailer.
    Retaining sponsor means, with respect to a securitization 
transaction, the sponsor that has retained or caused to be retained an 
economic interest in the credit risk of the securitized assets pursuant 
to subpart B of this part.
    Securitization transaction means a transaction involving the offer 
and sale of asset-backed securities by an issuing entity.
    Securitized asset means an asset that:
    (1) Is transferred, sold, or conveyed to an issuing entity; and
    (2) Collateralizes the ABS interests issued by the issuing entity.
    Securitizer means, with respect to a securitization transaction, 
either:
    (1) The depositor of the asset-backed securities (if the depositor 
is not the sponsor); or
    (2) The sponsor of the asset-backed securities.
    Servicer means any person responsible for the management or 
collection of the securitized assets or making allocations or 
distributions to holders of the ABS interests, but does not include a 
trustee for the issuing entity or the asset-backed securities that makes 
allocations or distributions to holders of the ABS interests if the 
trustee receives such allocations or distributions from a servicer and 
the trustee does not otherwise perform the functions of a servicer.
    Servicing assets means rights or other assets designed to assure the 
servicing or timely distribution of proceeds to ABS interest holders and 
rights or other assets that are related or incidental to purchasing or 
otherwise acquiring and holding the issuing entity's securitized assets. 
Servicing assets include amounts received by the issuing entity as 
proceeds of securitized assets, including proceeds of rights or other 
assets, whether as remittances by obligors or as other recoveries.
    Single vertical security means, with respect to any securitization 
transaction, an ABS interest entitling the sponsor to a specified 
percentage of the amounts paid on each class of ABS interests in the 
issuing entity (other than such single vertical security).
    Sponsor means a person who organizes and initiates a securitization 
transaction by selling or transferring assets, either directly or 
indirectly, including through an affiliate, to the issuing entity.
    State has the same meaning as in Section 3(a)(16) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(16)).
    United States or U.S. means the United States of America, including 
its territories and possessions, any State of the United States, and the 
District of Columbia.

[[Page 174]]

    Wholly-owned affiliate means a person (other than an issuing entity) 
that, directly or indirectly, wholly controls, is wholly controlled by, 
or is wholly under common control with, another person. For purposes of 
this definition, ``wholly controls'' means ownership of 100 percent of 
the equity of an entity.



                     Subpart B_Credit Risk Retention



Sec.  246.3  Base risk retention requirement.

    (a) Base risk retention requirement. Except as otherwise provided in 
this part, the sponsor of a securitization transaction (or majority-
owned affiliate of the sponsor) shall retain an economic interest in the 
credit risk of the securitized assets in accordance with any one of 
Sec. Sec.  246.4 through 246.10. Credit risk in securitized assets 
required to be retained and held by any person for purposes of 
compliance with this part, whether a sponsor, an originator, an 
originator-seller, or a third-party purchaser, except as otherwise 
provided in this part, may be acquired and held by any of such person's 
majority-owned affiliates (other than an issuing entity).
    (b) Multiple sponsors. If there is more than one sponsor of a 
securitization transaction, it shall be the responsibility of each 
sponsor to ensure that at least one of the sponsors of the 
securitization transaction (or at least one of their majority-owned or 
wholly-owned affiliates, as applicable) retains an economic interest in 
the credit risk of the securitized assets in accordance with any one of 
Sec. Sec.  246.4, 246.5, 246.8, 246.9, or 246.10.



Sec.  246.4  Standard risk retention.

    (a) General requirement. Except as provided in Sec. Sec.  246.5 
through 246.10, the sponsor of a securitization transaction must retain 
an eligible vertical interest or eligible horizontal residual interest, 
or any combination thereof, in accordance with the requirements of this 
section.
    (1) If the sponsor retains only an eligible vertical interest as its 
required risk retention, the sponsor must retain an eligible vertical 
interest in a percentage of not less than 5 percent.
    (2) If the sponsor retains only an eligible horizontal residual 
interest as its required risk retention, the amount of the interest must 
equal at least 5 percent of the fair value of all ABS interests in the 
issuing entity issued as a part of the securitization transaction, 
determined using a fair value measurement framework under GAAP.
    (3) If the sponsor retains both an eligible vertical interest and an 
eligible horizontal residual interest as its required risk retention, 
the percentage of the fair value of the eligible horizontal residual 
interest and the percentage of the eligible vertical interest must equal 
at least five.
    (4) The percentage of the eligible vertical interest, eligible 
horizontal residual interest, or combination thereof retained by the 
sponsor must be determined as of the closing date of the securitization 
transaction.
    (b) Option to hold base amount in eligible horizontal cash reserve 
account. In lieu of retaining all or any part of an eligible horizontal 
residual interest under paragraph (a) of this section, the sponsor may, 
at closing of the securitization transaction, cause to be established 
and funded, in cash, an eligible horizontal cash reserve account in the 
amount equal to the fair value of such eligible horizontal residual 
interest or part thereof, provided that the account meets all of the 
following conditions:
    (1) The account is held by the trustee (or person performing similar 
functions) in the name and for the benefit of the issuing entity;
    (2) Amounts in the account are invested only in cash and cash 
equivalents; and
    (3) Until all ABS interests in the issuing entity are paid in full, 
or the issuing entity is dissolved:
    (i) Amounts in the account shall be released only to:
    (A) Satisfy payments on ABS interests in the issuing entity on any 
payment date on which the issuing entity has insufficient funds from any 
source to satisfy an amount due on any ABS interest; or
    (B) Pay critical expenses of the trust unrelated to credit risk on 
any payment date on which the issuing entity

[[Page 175]]

has insufficient funds from any source to pay such expenses and:
    (1) Such expenses, in the absence of available funds in the eligible 
horizontal cash reserve account, would be paid prior to any payments to 
holders of ABS interests; and
    (2) Such payments are made to parties that are not affiliated with 
the sponsor; and
    (ii) Interest (or other earnings) on investments made in accordance 
with paragraph (b)(2) of this section may be released once received by 
the account.
    (c) Disclosures. A sponsor relying on this section shall provide, or 
cause to be provided, to potential investors, under the caption ``Credit 
Risk Retention'', a reasonable period of time prior to the sale of the 
asset-backed securities in the securitization transaction the following 
disclosures in written form and within the time frames set forth in this 
paragraph (c):
    (1) Horizontal interest. With respect to any eligible horizontal 
residual interest held under paragraph (a) of this section, a sponsor 
must disclose:
    (i) A reasonable period of time prior to the sale of an asset-backed 
security issued in the same offering of ABS interests,
    (A) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS interests are issued, as applicable)) of the eligible horizontal 
residual interest that the sponsor expects to retain at the closing of 
the securitization transaction. If the specific prices, sizes, or rates 
of interest of each tranche of the securitization are not available, the 
sponsor must disclose a range of fair values (expressed as a percentage 
of the fair value of all of the ABS interests issued in the 
securitization transaction and dollar amount (or corresponding amount in 
the foreign currency in which the ABS interests are issued, as 
applicable)) of the eligible horizontal residual interest that the 
sponsor expects to retain at the close of the securitization transaction 
based on a range of bona fide estimates or specified prices, sizes, or 
rates of interest of each tranche of the securitization. A sponsor 
disclosing a range of fair values based on a range of bona fide 
estimates or specified prices, sizes or rates of interest of each 
tranche of the securitization must also disclose the method by which it 
determined any range of prices, tranche sizes, or rates of interest.
    (B) A description of the material terms of the eligible horizontal 
residual interest to be retained by the sponsor;
    (C) A description of the valuation methodology used to calculate the 
fair values or range of fair values of all classes of ABS interests, 
including any portion of the eligible horizontal residual interest 
retained by the sponsor;
    (D) All key inputs and assumptions or a comprehensive description of 
such key inputs and assumptions that were used in measuring the 
estimated total fair value or range of fair values of all classes of ABS 
interests, including the eligible horizontal residual interest to be 
retained by the sponsor.
    (E) To the extent applicable to the valuation methodology used, the 
disclosure required in paragraph (c)(1)(i)(D) of this section shall 
include, but should not be limited to, quantitative information about 
each of the following:
    (1) Discount rates;
    (2) Loss given default (recovery);
    (3) Prepayment rates;
    (4) Default rates;
    (5) Lag time between default and recovery; and
    (6) The basis of forward interest rates used.
    (F) The disclosure required in paragraphs (c)(1)(i)(C) and (D) of 
this section shall include, at a minimum, descriptions of all inputs and 
assumptions that either could have a material impact on the fair value 
calculation or would be material to a prospective investor's ability to 
evaluate the sponsor's fair value calculations. To the extent the 
disclosure required in this paragraph (c)(1) includes a description of a 
curve or curves, the description shall include a description of the 
methodology that was used to derive each curve and a description of any 
aspects or features of each curve that could materially impact the fair 
value calculation or the ability of a prospective

[[Page 176]]

investor to evaluate the sponsor's fair value calculation. To the extent 
a sponsor uses information about the securitized assets in its 
calculation of fair value, such information shall not be as of a date 
more than 60 days prior to the date of first use with investors; 
provided that for a subsequent issuance of ABS interests by the same 
issuing entity with the same sponsor for which the securitization 
transaction distributes amounts to investors on a quarterly or less 
frequent basis, such information shall not be as of a date more than 135 
days prior to the date of first use with investors; provided further, 
that the balance or value (in accordance with the transaction documents) 
of the securitized assets may be increased or decreased to reflect 
anticipated additions or removals of assets the sponsor makes or expects 
to make between the cut-off date or similar date for establishing the 
composition of the asset pool collateralizing such asset-backed security 
and the closing date of the securitization.
    (G) A summary description of the reference data set or other 
historical information used to develop the key inputs and assumptions 
referenced in paragraph (c)(1)(i)(D) of this section, including loss 
given default and default rates;
    (ii) A reasonable time after the closing of the securitization 
transaction:
    (A) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS are issued, as applicable)) of the eligible horizontal residual 
interest the sponsor retained at the closing of the securitization 
transaction, based on actual sale prices and finalized tranche sizes;
    (B) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS are issued, as applicable)) of the eligible horizontal residual 
interest that the sponsor is required to retain under this section; and
    (C) To the extent the valuation methodology or any of the key inputs 
and assumptions that were used in calculating the fair value or range of 
fair values disclosed prior to sale and required under paragraph 
(c)(1)(i) of this section materially differs from the methodology or key 
inputs and assumptions used to calculate the fair value at the time of 
closing, descriptions of those material differences.
    (iii) If the sponsor retains risk through the funding of an eligible 
horizontal cash reserve account:
    (A) The amount to be placed (or that is placed) by the sponsor in 
the eligible horizontal cash reserve account at closing, and the fair 
value (expressed as a percentage of the fair value of all of the ABS 
interests issued in the securitization transaction and dollar amount (or 
corresponding amount in the foreign currency in which the ABS interests 
are issued, as applicable)) of the eligible horizontal residual interest 
that the sponsor is required to fund through the eligible horizontal 
cash reserve account in order for such account, together with other 
retained interests, to satisfy the sponsor's risk retention requirement;
    (B) A description of the material terms of the eligible horizontal 
cash reserve account; and
    (C) The disclosures required in paragraphs (c)(1)(i) and (ii) of 
this section.
    (2) Vertical interest. With respect to any eligible vertical 
interest retained under paragraph (a) of this section, the sponsor must 
disclose:
    (i) A reasonable period of time prior to the sale of an asset-backed 
security issued in the same offering of ABS interests,
    (A) The form of the eligible vertical interest;
    (B) The percentage that the sponsor is required to retain as a 
vertical interest under this section; and
    (C) A description of the material terms of the vertical interest and 
the amount that the sponsor expects to retain at the closing of the 
securitization transaction.
    (ii) A reasonable time after the closing of the securitization 
transaction, the amount of the vertical interest the sponsor retained at 
closing, if that amount is materially different from

[[Page 177]]

the amount disclosed under paragraph (c)(2)(i) of this section.
    (d) Record maintenance. A sponsor must retain the certifications and 
disclosures required in paragraphs (a) and (c) of this section in its 
records and must provide the disclosure upon request to the Commission 
and its appropriate Federal banking agency, if any, until three years 
after all ABS interests are no longer outstanding.



Sec.  246.5  Revolving pool securitizations.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    Revolving pool securitization means an issuing entity that is 
established to issue on multiple issuance dates more than one series, 
class, subclass, or tranche of asset-backed securities that are 
collateralized by a common pool of securitized assets that will change 
in composition over time, and that does not monetize excess interest and 
fees from its securitized assets.
    Seller's interest means an ABS interest or ABS interests:
    (1) Collateralized by the securitized assets and servicing assets 
owned or held by the issuing entity, other than the following that are 
not considered a component of seller's interest:
    (i) Servicing assets that have been allocated as collateral only for 
a specific series in connection with administering the revolving pool 
securitization, such as a principal accumulation or interest reserve 
account; and
    (ii) Assets that are not eligible under the terms of the 
securitization transaction to be included when determining whether the 
revolving pool securitization holds aggregate securitized assets in 
specified proportions to aggregate outstanding investor ABS interests 
issued; and
    (2) That is pari passu with each series of investor ABS interests 
issued, or partially or fully subordinated to one or more series in 
identical or varying amounts, with respect to the allocation of all 
distributions and losses with respect to the securitized assets prior to 
early amortization of the revolving securitization (as specified in the 
securitization transaction documents); and
    (3) That adjusts for fluctuations in the outstanding principal 
balance of the securitized assets in the pool.
    (b) General requirement. A sponsor satisfies the risk retention 
requirements of Sec.  246.3 with respect to a securitization transaction 
for which the issuing entity is a revolving pool securitization if the 
sponsor maintains a seller's interest of not less than 5 percent of the 
aggregate unpaid principal balance of all outstanding investor ABS 
interests in the issuing entity.
    (c) Measuring the seller's interest. In measuring the seller's 
interest for purposes of meeting the requirements of paragraph (b) of 
this section:
    (1) The unpaid principal balance of the securitized assets for the 
numerator of the 5 percent ratio shall not include assets of the types 
excluded from the definition of seller's interest in paragraph (a) of 
this section;
    (2) The aggregate unpaid principal balance of outstanding investor 
ABS interests in the denominator of the 5 percent ratio may be reduced 
by the amount of funds held in a segregated principal accumulation 
account for the repayment of outstanding investor ABS interests, if:
    (i) The terms of the securitization transaction documents prevent 
funds in the principal accumulation account from being applied for any 
purpose other than the repayment of the unpaid principal of outstanding 
investor ABS interests; and
    (ii) Funds in that account are invested only in the types of assets 
in which funds held in an eligible horizontal cash reserve account 
pursuant to Sec.  246.4 are permitted to be invested;
    (3) If the terms of the securitization transaction documents set 
minimum required seller's interest as a proportion of the unpaid 
principal balance of outstanding investor ABS interests for one or more 
series issued, rather than as a proportion of the aggregate outstanding 
investor ABS interests in all outstanding series combined, the 
percentage of the seller's interest for each such series must, when 
combined with the percentage of any minimum seller's interest set by 
reference to the aggregate outstanding investor ABS interests, equal at 
least 5 percent;

[[Page 178]]

    (4) The 5 percent test must be determined and satisfied at the 
closing of each issuance of ABS interests to investors by the issuing 
entity, and
    (i) At least monthly at a seller's interest measurement date 
specified under the securitization transaction documents, until no ABS 
interest in the issuing entity is held by any person not a wholly-owned 
affiliate of the sponsor; or
    (ii) If the revolving pool securitization fails to meet the 5 
percent test as of any date described in paragraph (c)(4)(i) of this 
section, and the securitization transaction documents specify a cure 
period, the 5 percent test must be determined and satisfied within the 
earlier of the cure period, or one month after the date described in 
paragraph (c)(4)(i).
    (d) Measuring outstanding investor ABS interests. In measuring the 
amount of outstanding investor ABS interests for purposes of this 
section, ABS interests held for the life of such ABS interests by the 
sponsor or its wholly-owned affiliates may be excluded.
    (e) Holding and retention of the seller's interest; legacy trusts. 
(1) Notwithstanding Sec.  246.12(a), the seller's interest, and any 
offsetting horizontal retention interest retained pursuant to paragraph 
(g) of this section, must be retained by the sponsor or by one or more 
wholly-owned affiliates of the sponsor, including one or more depositors 
of the revolving pool securitization.
    (2) If one revolving pool securitization issues collateral 
certificates representing a beneficial interest in all or a portion of 
the securitized assets held by that securitization to another revolving 
pool securitization, which in turn issues ABS interests for which the 
collateral certificates are all or a portion of the securitized assets, 
a sponsor may satisfy the requirements of paragraphs (b) and (c) of this 
section by retaining the seller's interest for the assets represented by 
the collateral certificates through either of the revolving pool 
securitizations, so long as both revolving pool securitizations are 
retained at the direction of the same sponsor or its wholly-owned 
affiliates.
    (3) If the sponsor retains the seller's interest associated with the 
collateral certificates at the level of the revolving pool 
securitization that issues those collateral certificates, the proportion 
of the seller's interest required by paragraph (b) of this section 
retained at that level must equal the proportion that the principal 
balance of the securitized assets represented by the collateral 
certificates bears to the principal balance of the securitized assets in 
the revolving pool securitization that issues the ABS interests, as of 
each measurement date required by paragraph (c) of this section.
    (f) Offset for pool-level excess funding account. The 5 percent 
seller's interest required on each measurement date by paragraph (c) of 
this section may be reduced on a dollar-for-dollar basis by the balance, 
as of such date, of an excess funding account in the form of a 
segregated account that:
    (1) Is funded in the event of a failure to meet the minimum seller's 
interest requirements or other requirement to maintain a minimum balance 
of securitized assets under the securitization transaction documents by 
distributions otherwise payable to the holder of the seller's interest;
    (2) Is invested only in the types of assets in which funds held in a 
horizontal cash reserve account pursuant to Sec.  246.4 are permitted to 
be invested; and
    (3) In the event of an early amortization, makes payments of amounts 
held in the account to holders of investor ABS interests in the same 
manner as payments to holders of investor ABS interests of amounts 
received on securitized assets.
    (g) Combined seller's interests and horizontal interest retention. 
The 5 percent seller's interest required on each measurement date by 
paragraph (c) of this section may be reduced to a percentage lower than 
5 percent to the extent that, for all series of investor ABS interests 
issued after the applicable effective date of this Sec.  246.5, the 
sponsor, or notwithstanding Sec.  246.12(a) a wholly-owned affiliate of 
the sponsor, retains, at a minimum, a corresponding percentage of the 
fair value of ABS interests issued in each series, in the form of one or 
more of the horizontal residual interests meeting the requirements of 
paragraphs (h) or (i).

[[Page 179]]

    (h) Residual ABS interests in excess interest and fees. The sponsor 
may take the offset described in paragraph (g) of this section for a 
residual ABS interest in excess interest and fees, whether certificated 
or uncertificated, in a single or multiple classes, subclasses, or 
tranches, that meets, individually or in the aggregate, the requirements 
of this paragraph (h);
    (1) Each series of the revolving pool securitization distinguishes 
between the series' share of the interest and fee cash flows and the 
series' share of the principal repayment cash flows from the securitized 
assets collateralizing the revolving pool securitization, which may 
according to the terms of the securitization transaction documents, 
include not only the series' ratable share of such cash flows but also 
excess cash flows available from other series;
    (2) The residual ABS interest's claim to any part of the series' 
share of the interest and fee cash flows for any interest payment period 
is subordinated to all accrued and payable interest due on the payment 
date to more senior ABS interests in the series for that period, and 
further reduced by the series' share of losses, including defaults on 
principal of the securitized assets collateralizing the revolving pool 
securitization (whether incurred in that period or carried over from 
prior periods) to the extent that such payments would have been included 
in amounts payable to more senior interests in the series;
    (3) The revolving pool securitization continues to revolve, with one 
or more series, classes, subclasses, or tranches of asset-backed 
securities that are collateralized by a common pool of assets that 
change in composition over time; and
    (4) For purposes of taking the offset described in paragraph (g) of 
this section, the sponsor determines the fair value of the residual ABS 
interest in excess interest and fees, and the fair value of the series 
of outstanding investor ABS interests to which it is subordinated and 
supports using the fair value measurement framework under GAAP, as of:
    (i) The closing of the securitization transaction issuing the 
supported ABS interests; and
    (ii) The seller's interest measurement dates described in paragraph 
(c)(4) of this section, except that for these periodic determinations 
the sponsor must update the fair value of the residual ABS interest in 
excess interest and fees for the numerator of the percentage ratio, but 
may at the sponsor's option continue to use the fair values determined 
in (h)(4)(i) for the outstanding investor ABS interests in the 
denominator.
    (i) Offsetting eligible horizontal residual interest. The sponsor 
may take the offset described in paragraph (g) of this section for ABS 
interests that would meet the definition of eligible horizontal residual 
interests in Sec.  246.2 but for the sponsor's simultaneous holding of 
subordinated seller's interests, residual ABS interests in excess 
interests and fees, or a combination of the two, if:
    (1) The sponsor complies with all requirements of paragraphs (b) 
through (e) of this section for its holdings of subordinated seller's 
interest, and paragraph (h) for its holdings of residual ABS interests 
in excess interests and fees, as applicable;
    (2) For purposes of taking the offset described in paragraph (g) of 
this section, the sponsor determines the fair value of the eligible 
horizontal residual interest as a percentage of the fair value of the 
outstanding investor ABS interests in the series supported by the 
eligible horizontal residual interest, determined using the fair value 
measurement framework under GAAP:
    (i) As of the closing of the securitization transaction issuing the 
supported ABS interests; and
    (ii) Without including in the numerator of the percentage ratio any 
fair value based on:
    (A) The subordinated seller's interest or residual ABS interest in 
excess interest and fees;
    (B) the interest payable to the sponsor on the eligible horizontal 
residual interest, if the sponsor is including the value of residual ABS 
interest in excess interest and fees pursuant to paragraph (h) of this 
section in taking the offset in paragraph (g) of this section; and,

[[Page 180]]

    (C) the principal payable to the sponsor on the eligible horizontal 
residual interest, if the sponsor is including the value of the seller's 
interest pursuant to paragraphs (b) through (f) of this section and 
distributions on that seller's interest are available to reduce charge-
offs that would otherwise be allocated to reduce principal payable to 
the offset eligible horizontal residual interest.
    (j) Specified dates. A sponsor using data about the revolving pool 
securitization's collateral, or ABS interests previously issued, to 
determine the closing-date percentage of a seller's interest, residual 
ABS interest in excess interest and fees, or eligible horizontal 
residual interest pursuant to this Sec.  246.5 may use such data 
prepared as of specified dates if:
    (1) The sponsor describes the specified dates in the disclosures 
required by paragraph (k) of this section; and
    (2) The dates are no more than 60 days prior to the date of first 
use with investors of disclosures required for the interest by paragraph 
(k) of this section, or for revolving pool securitizations that make 
distributions to investors on a quarterly or less frequent basis, no 
more than 135 days prior to the date of first use with investors of such 
disclosures.
    (k) Disclosure and record maintenance. (1) Disclosure. A sponsor 
relying on this section shall provide, or cause to be provided, to 
potential investors, under the caption ``Credit Risk Retention'' the 
following disclosure in written form and within the time frames set 
forth in this paragraph (k):
    (i) A reasonable period of time prior to the sale of an asset-backed 
security, a description of the material terms of the seller's interest, 
and the percentage of the seller's interest that the sponsor expects to 
retain at the closing of the securitization transaction, measured in 
accordance with the requirements of this Sec.  246.5, as a percentage of 
the aggregate unpaid principal balance of all outstanding investor ABS 
interests issued, or as a percentage of the aggregate unpaid principal 
balance of outstanding investor ABS interests for one or more series 
issued, as required by the terms of the securitization transaction;
    (ii) A reasonable time after the closing of the securitization 
transaction, the amount of seller's interest the sponsor retained at 
closing, if that amount is materially different from the amount 
disclosed under paragraph (k)(1)(i) of this section; and
    (iii) A description of the material terms of any horizontal residual 
interests offsetting the seller's interest in accordance with paragraphs 
(g), (h), and (i) of this section; and
    (iv) Disclosure of the fair value of those horizontal residual 
interests retained by the sponsor for the series being offered to 
investors and described in the disclosures, as a percentage of the fair 
value of the outstanding investor ABS interests issued, described in the 
same manner and within the same timeframes required for disclosure of 
the fair values of eligible horizontal residual interests specified in 
Sec.  246.4(c).
    (2) Adjusted data. Disclosures required by this paragraph (k) to be 
made a reasonable period of time prior to the sale of an asset-backed 
security of the amount of seller's interest, residual ABS interest in 
excess interest and fees, or eligible horizontal residual interest may 
include adjustments to the amount of securitized assets for additions or 
removals the sponsor expects to make before the closing date and 
adjustments to the amount of outstanding investor ABS interests for 
expected increases and decreases of those interests under the control of 
the sponsor.
    (3) Record maintenance. A sponsor must retain the disclosures 
required in paragraph (k)(1) of this section in its records and must 
provide the disclosure upon request to the Commission and its 
appropriate Federal banking agency, if any, until three years after all 
ABS interests are no longer outstanding.
    (l) Early amortization of all outstanding series. A sponsor that 
organizes a revolving pool securitization that relies on this Sec.  
246.5 to satisfy the risk retention requirements of Sec.  246.3, does 
not violate the requirements of this part if its seller's interest falls 
below the level required by Sec.  246. 5 after the revolving pool 
securitization commences early amortization, pursuant to the terms of 
the securitization

[[Page 181]]

transaction documents, of all series of outstanding investor ABS 
interests, if:
    (1) The sponsor was in full compliance with the requirements of this 
section on all measurement dates specified in paragraph (c) of this 
section prior to the commencement of early amortization;
    (2) The terms of the seller's interest continue to make it pari 
passu with or subordinate in identical or varying amounts to each series 
of outstanding investor ABS interests issued with respect to the 
allocation of all distributions and losses with respect to the 
securitized assets;
    (3) The terms of any horizontal interest relied upon by the sponsor 
pursuant to paragraph (g) to offset the minimum seller's interest amount 
continue to require the interests to absorb losses in accordance with 
the terms of paragraph (h) or (i) of this section, as applicable; and
    (4) The revolving pool securitization issues no additional ABS 
interests after early amortization is initiated to any person not a 
wholly-owned affiliate of the sponsor, either at the time of issuance or 
during the amortization period.



Sec.  246.6  Eligible ABCP conduits.

    (a) Definitions. For purposes of this section, the following 
additional definitions apply:
    100 percent liquidity coverage means an amount equal to the 
outstanding balance of all ABCP issued by the conduit plus any accrued 
and unpaid interest without regard to the performance of the ABS 
interests held by the ABCP conduit and without regard to any credit 
enhancement.
    ABCP means asset-backed commercial paper that has a maturity at the 
time of issuance not exceeding 397 days, exclusive of days of grace, or 
any renewal thereof the maturity of which is likewise limited.
    ABCP conduit means an issuing entity with respect to ABCP.
    Eligible ABCP conduit means an ABCP conduit, provided that:
    (1) The ABCP conduit is bankruptcy remote or otherwise isolated for 
insolvency purposes from the sponsor of the ABCP conduit and from any 
intermediate SPV;
    (2) The ABS interests acquired by the ABCP conduit are:
    (i) ABS interests collateralized solely by assets originated by an 
originator-seller and by servicing assets;
    (ii) Special units of beneficial interest (or similar ABS interests) 
in a trust or special purpose vehicle that retains legal title to leased 
property underlying leases originated by an originator-seller that were 
transferred to an intermediate SPV in connection with a securitization 
collateralized solely by such leases and by servicing assets;
    (iii) ABS interests in a revolving pool securitization 
collateralized solely by assets originated by an originator-seller and 
by servicing assets; or
    (iv) ABS interests described in paragraph (2)(i), (ii), or (iii) of 
this definition that are collateralized, in whole or in part, by assets 
acquired by an originator-seller in a business combination that 
qualifies for business combination accounting under GAAP, and, if 
collateralized in part, the remainder of such assets are assets 
described in paragraph (2)(i), (ii), or (iii) of this definition; and
    (v) Acquired by the ABCP conduit in an initial issuance by or on 
behalf of an intermediate SPV:
    (A) Directly from the intermediate SPV,
    (B) From an underwriter of the ABS interests issued by the 
intermediate SPV, or
    (C) From another person who acquired the ABS interests directly from 
the intermediate SPV;
    (3) The ABCP conduit is collateralized solely by ABS interests 
acquired from intermediate SPVs as described in paragraph (2) of this 
definition and servicing assets; and
    (4) A regulated liquidity provider has entered into a legally 
binding commitment to provide 100 percent liquidity coverage (in the 
form of a lending facility, an asset purchase agreement, a repurchase 
agreement, or other similar arrangement) to all the ABCP issued by the 
ABCP conduit by lending to, purchasing ABCP issued by, or purchasing 
assets from, the ABCP conduit in the event that funds are required to 
repay maturing ABCP issued by the ABCP conduit. With respect to the 100 
percent liquidity coverage, in the event

[[Page 182]]

that the ABCP conduit is unable for any reason to repay maturing ABCP 
issued by the issuing entity, the liquidity provider shall be obligated 
to pay an amount equal to any shortfall, and the total amount that may 
be due pursuant to the 100 percent liquidity coverage shall be equal to 
100 percent of the amount of the ABCP outstanding at any time plus 
accrued and unpaid interest (amounts due pursuant to the required 
liquidity coverage may not be subject to credit performance of the ABS 
interests held by the ABCP conduit or reduced by the amount of credit 
support provided to the ABCP conduit and liquidity support that only 
funds performing loans or receivables or performing ABS interests does 
not meet the requirements of this section).
    Intermediate SPV means a special purpose vehicle that:
    (1) (i) Is a direct or indirect wholly-owned affiliate of the 
originator-seller; or
    (ii) Has nominal equity owned by a trust or corporate service 
provider that specializes in providing independent ownership of special 
purpose vehicles, and such trust or corporate service provider is not 
affiliated with any other transaction parties;
    (2) Is bankruptcy remote or otherwise isolated for insolvency 
purposes from the eligible ABCP conduit and from each originator-seller 
and each majority-owned affiliate in each case that, directly or 
indirectly, sells or transfers assets to such intermediate SPV;
    (3) Acquires assets from the originator-seller that are originated 
by the originator-seller or acquired by the originator-seller in the 
acquisition of a business that qualifies for business combination 
accounting under GAAP or acquires ABS interests issued by another 
intermediate SPV of the originator-seller that are collateralized solely 
by such assets; and
    (4) Issues ABS interests collateralized solely by such assets, as 
applicable.
    Originator-seller means an entity that originates assets and sells 
or transfers those assets, directly or through a majority-owned 
affiliate, to an intermediate SPV, and includes (except for the purposes 
of identifying the sponsorship and affiliation of an intermediate SPV 
pursuant to this Sec.  246.6) any affiliate of the originator-seller 
that, directly or indirectly, majority controls, is majority controlled 
by or is under common majority control with, the originator-seller. For 
purposes of this definition, majority control means ownership of more 
than 50 percent of the equity of an entity, or ownership of any other 
controlling financial interest in the entity, as determined under GAAP.
    Regulated liquidity provider means:
    (1) A depository institution (as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813));
    (2) A bank holding company (as defined in 12 U.S.C. 1841), or a 
subsidiary thereof;
    (3) A savings and loan holding company (as defined in 12 U.S.C. 
1467a), provided all or substantially all of the holding company's 
activities are permissible for a financial holding company under 12 
U.S.C. 1843(k), or a subsidiary thereof; or
    (4) A foreign bank whose home country supervisor (as defined in 
Sec.  211.21 of the Federal Reserve Board's Regulation K (12 CFR 
211.21)) has adopted capital standards consistent with the Capital 
Accord of the Basel Committee on Banking Supervision, as amended, and 
that is subject to such standards, or a subsidiary thereof.
    (b) In general. An ABCP conduit sponsor satisfies the risk retention 
requirement of Sec.  246.3 with respect to the issuance of ABCP by an 
eligible ABCP conduit in a securitization transaction if, for each ABS 
interest the ABCP conduit acquires from an intermediate SPV:
    (1) An originator-seller of the intermediate SPV retains an economic 
interest in the credit risk of the assets collateralizing the ABS 
interest acquired by the eligible ABCP conduit in the amount and manner 
required under Sec.  246.4 or Sec.  246.5; and
    (2) The ABCP conduit sponsor:
    (i) Approves each originator-seller permitted to sell or transfer 
assets, directly or indirectly, to an intermediate SPV from which an 
eligible ABCP conduit acquires ABS interests;

[[Page 183]]

    (ii) Approves each intermediate SPV from which an eligible ABCP 
conduit is permitted to acquire ABS interests;
    (iii) Establishes criteria governing the ABS interests, and the 
securitized assets underlying the ABS interests, acquired by the ABCP 
conduit;
    (iv) Administers the ABCP conduit by monitoring the ABS interests 
acquired by the ABCP conduit and the assets supporting those ABS 
interests, arranging for debt placement, compiling monthly reports, and 
ensuring compliance with the ABCP conduit documents and with the ABCP 
conduit's credit and investment policy; and
    (v) Maintains and adheres to policies and procedures for ensuring 
that the requirements in this paragraph (b) of this section have been 
met.
    (c) Originator-seller compliance with risk retention. The use of the 
risk retention option provided in this section by an ABCP conduit 
sponsor does not relieve the originator-seller that sponsors ABS 
interests acquired by an eligible ABCP conduit from such originator-
seller's obligation to comply with its own risk retention obligations 
under this part.
    (d) Disclosures--(1) Periodic disclosures to investors. An ABCP 
conduit sponsor relying upon this section shall provide, or cause to be 
provided, to each purchaser of ABCP, before or contemporaneously with 
the first sale of ABCP to such purchaser and at least monthly 
thereafter, to each holder of commercial paper issued by the ABCP 
conduit, in writing, each of the following items of information, which 
shall be as of a date not more than 60 days prior to date of first use 
with investors:
    (i) The name and form of organization of the regulated liquidity 
provider that provides liquidity coverage to the eligible ABCP conduit, 
including a description of the material terms of such liquidity 
coverage, and notice of any failure to fund.
    (ii) With respect to each ABS interest held by the ABCP conduit:
    (A) The asset class or brief description of the underlying 
securitized assets;
    (B) The standard industrial category code (SIC Code) for the 
originator-seller that will retain (or has retained) pursuant to this 
section an interest in the securitization transaction; and
    (C) A description of the percentage amount of risk retention 
pursuant to the rule by the originator-seller, and whether it is in the 
form of an eligible horizontal residual interest, vertical interest, or 
revolving pool securitization seller's interest, as applicable.
    (2) Disclosures to regulators regarding originator-sellers. An ABCP 
conduit sponsor relying upon this section shall provide, or cause to be 
provided, upon request, to the Commission and its appropriate Federal 
banking agency, if any, in writing, all of the information required to 
be provided to investors in paragraph (d)(1) of this section, and the 
name and form of organization of each originator-seller that will retain 
(or has retained) pursuant to this section an interest in the 
securitization transaction.
    (e) Sale or transfer of ABS interests between eligible ABCP 
conduits. At any time, an eligible ABCP conduit that acquired an ABS 
interest in accordance with the requirements set forth in this section 
may transfer, and another eligible ABCP conduit may acquire, such ABS 
interest, if the following conditions are satisfied:
    (1) The sponsors of both eligible ABCP conduits are in compliance 
with this section; and
    (2) The same regulated liquidity provider has entered into one or 
more legally binding commitments to provide 100 percent liquidity 
coverage to all the ABCP issued by both eligible ABCP conduits.
    (f) Duty to comply. (1) The ABCP conduit sponsor shall be 
responsible for compliance with this section.
    (2) An ABCP conduit sponsor relying on this section:
    (i) Shall maintain and adhere to policies and procedures that are 
reasonably designed to monitor compliance by each originator-seller 
which is satisfying a risk retention obligation in respect of ABS 
interests acquired by an eligible ABCP conduit with the requirements of 
paragraph (b)(1) of this section; and
    (ii) In the event that the ABCP conduit sponsor determines that an 
originator-seller no longer complies with

[[Page 184]]

the requirements of paragraph (b)(1) of this section, shall:
    (A) Promptly notify the holders of the ABCP, and upon request, the 
Commission and its appropriate Federal banking agency, if any, in 
writing of:
    (1) The name and form of organization of any originator-seller that 
fails to retain risk in accordance with paragraph (b)(1) of this section 
and the amount of ABS interests issued by an intermediate SPV of such 
originator-seller and held by the ABCP conduit;
    (2) The name and form of organization of any originator-seller that 
hedges, directly or indirectly through an intermediate SPV, its risk 
retention in violation of paragraph (b)(1) of this section and the 
amount of ABS interests issued by an intermediate SPV of such 
originator-seller and held by the ABCP conduit; and
    (3) Any remedial actions taken by the ABCP conduit sponsor or other 
party with respect to such ABS interests; and
    (B) Take other appropriate steps pursuant to the requirements of 
paragraphs (b)(2)(iv) and (v) of this section which may include, as 
appropriate, curing any breach of the requirements in this section, or 
removing from the eligible ABCP conduit any ABS interest that does not 
comply with the requirements in this section.



Sec.  246.7  Commercial mortgage-backed securities.

    (a) Definitions. For purposes of this section, the following 
definition shall apply:
    Special servicer means, with respect to any securitization of 
commercial real estate loans, any servicer that, upon the occurrence of 
one or more specified conditions in the servicing agreement, has the 
right to service one or more assets in the transaction.
    (b) Third-party purchaser. A sponsor may satisfy some or all of its 
risk retention requirements under Sec.  246.3 with respect to a 
securitization transaction if a third party (or any majority-owned 
affiliate thereof) purchases and holds for its own account an eligible 
horizontal residual interest in the issuing entity in the same form, 
amount, and manner as would be held by the sponsor under Sec.  246.4 and 
all of the following conditions are met:
    (1) Number of third-party purchasers. At any time, there are no more 
than two third-party purchasers of an eligible horizontal residual 
interest. If there are two third-party purchasers, each third-party 
purchaser's interest must be pari passu with the other third-party 
purchaser's interest.
    (2) Composition of collateral. The securitization transaction is 
collateralized solely by commercial real estate loans and servicing 
assets.
    (3) Source of funds. (i) Each third-party purchaser pays for the 
eligible horizontal residual interest in cash at the closing of the 
securitization transaction.
    (ii) No third-party purchaser obtains financing, directly or 
indirectly, for the purchase of such interest from any other person that 
is a party to, or an affiliate of a party to, the securitization 
transaction (including, but not limited to, the sponsor, depositor, or 
servicer other than a special servicer affiliated with the third-party 
purchaser), other than a person that is a party to the transaction 
solely by reason of being an investor.
    (4) Third-party review. Each third-party purchaser conducts an 
independent review of the credit risk of each securitized asset prior to 
the sale of the asset-backed securities in the securitization 
transaction that includes, at a minimum, a review of the underwriting 
standards, collateral, and expected cash flows of each commercial real 
estate loan that is collateral for the asset-backed securities.
    (5) Affiliation and control rights. (i) Except as provided in 
paragraph (b)(5)(ii) of this section, no third-party purchaser is 
affiliated with any party to the securitization transaction (including, 
but not limited to, the sponsor, depositor, or servicer) other than 
investors in the securitization transaction.
    (ii) Notwithstanding paragraph (b)(5)(i) of this section, a third-
party purchaser may be affiliated with:
    (A) The special servicer for the securitization transaction; or
    (B) One or more originators of the securitized assets, as long as 
the assets originated by the affiliated originator or originators 
collectively comprise

[[Page 185]]

less than 10 percent of the unpaid principal balance of the securitized 
assets included in the securitization transaction at the cut-off date or 
similar date for establishing the composition of the securitized assets 
collateralizing the asset-backed securities issued pursuant to the 
securitization transaction.
    (6) Operating Advisor. The underlying securitization transaction 
documents shall provide for the following:
    (i) The appointment of an operating advisor (the Operating Advisor) 
that:
    (A) Is not affiliated with other parties to the securitization 
transaction;
    (B) Does not directly or indirectly have any financial interest in 
the securitization transaction other than in fees from its role as 
Operating Advisor; and
    (C) Is required to act in the best interest of, and for the benefit 
of, investors as a collective whole;
    (ii) Standards with respect to the Operating Advisor's experience, 
expertise and financial strength to fulfill its duties and 
responsibilities under the applicable transaction documents over the 
life of the securitization transaction;
    (iii) The terms of the Operating Advisor's compensation with respect 
to the securitization transaction;
    (iv) When the eligible horizontal residual interest has been reduced 
by principal payments, realized losses, and appraisal reduction amounts 
(which reduction amounts are determined in accordance with the 
applicable transaction documents) to a principal balance of 25 percent 
or less of its initial principal balance, the special servicer for the 
securitized assets must consult with the Operating Advisor in connection 
with, and prior to, any material decision in connection with its 
servicing of the securitized assets, including, without limitation:
    (A) Any material modification of, or waiver with respect to, any 
provision of a loan agreement (including a mortgage, deed of trust, or 
other security agreement);
    (B) Foreclosure upon or comparable conversion of the ownership of a 
property; or
    (C) Any acquisition of a property.
    (v) The Operating Advisor shall have adequate and timely access to 
information and reports necessary to fulfill its duties under the 
transaction documents, including all reports made available to holders 
of ABS interests and third-party purchasers, and shall be responsible 
for:
    (A) Reviewing the actions of the special servicer;
    (B) Reviewing all reports provided by the special servicer to the 
issuing entity or any holder of ABS interests;
    (C) Reviewing for accuracy and consistency with the transaction 
documents calculations made by the special servicer; and
    (D) Issuing a report to investors (including any third-party 
purchasers) and the issuing entity on a periodic basis concerning:
    (1) Whether the Operating Advisor believes, in its sole discretion 
exercised in good faith, that the special servicer is operating in 
compliance with any standard required of the special servicer in the 
applicable transaction documents; and
    (2) Which, if any, standards the Operating Advisor believes, in its 
sole discretion exercised in good faith, the special servicer has failed 
to comply.
    (vi)(A) The Operating Advisor shall have the authority to recommend 
that the special servicer be replaced by a successor special servicer if 
the Operating Advisor determines, in its sole discretion exercised in 
good faith, that:
    (1) The special servicer has failed to comply with a standard 
required of the special servicer in the applicable transaction 
documents; and
    (2) Such replacement would be in the best interest of the investors 
as a collective whole; and
    (B) If a recommendation described in paragraph (b)(6)(vi)(A) of this 
section is made, the special servicer shall be replaced upon the 
affirmative vote of a majority of the outstanding principal balance of 
all ABS interests voting on the matter, with a minimum of a quorum of 
ABS interests voting on the matter. For purposes of such vote, the 
applicable transaction documents shall specify the quorum and may not 
specify a quorum of more than the holders of 20 percent of the 
outstanding principal balance of all ABS interests in the issuing 
entity, with such quorum including at least three ABS interest

[[Page 186]]

holders that are not affiliated with each other.
    (7) Disclosures. The sponsor provides, or causes to be provided, to 
potential investors a reasonable period of time prior to the sale of the 
asset-backed securities as part of the securitization transaction and, 
upon request, to the Commission and its appropriate Federal banking 
agency, if any, the following disclosure in written form under the 
caption ``Credit Risk Retention'':
    (i) The name and form of organization of each initial third-party 
purchaser that acquired an eligible horizontal residual interest at the 
closing of a securitization transaction;
    (ii) A description of each initial third-party purchaser's 
experience in investing in commercial mortgage-backed securities;
    (iii) Any other information regarding each initial third-party 
purchaser or each initial third-party purchaser's retention of the 
eligible horizontal residual interest that is material to investors in 
light of the circumstances of the particular securitization transaction;
    (iv) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS interests are issued, as applicable)) of the eligible horizontal 
residual interest that will be retained (or was retained) by each 
initial third-party purchaser, as well as the amount of the purchase 
price paid by each initial third-party purchaser for such interest;
    (v) The fair value (expressed as a percentage of the fair value of 
all of the ABS interests issued in the securitization transaction and 
dollar amount (or corresponding amount in the foreign currency in which 
the ABS interests are issued, as applicable)) of the eligible horizontal 
residual interest in the securitization transaction that the sponsor 
would have retained pursuant to Sec.  246.4 if the sponsor had relied on 
retaining an eligible horizontal residual interest in that section to 
meet the requirements of Sec.  246.3 with respect to the transaction;
    (vi) A description of the material terms of the eligible horizontal 
residual interest retained by each initial third-party purchaser, 
including the same information as is required to be disclosed by 
sponsors retaining horizontal interests pursuant to Sec.  246.4;
    (vii) The material terms of the applicable transaction documents 
with respect to the Operating Advisor, including without limitation:
    (A) The name and form of organization of the Operating Advisor;
    (B) A description of any material conflict of interest or material 
potential conflict of interest between the Operating Advisor and any 
other party to the transaction;
    (C) The standards required by paragraph (b)(6)(ii) of this section 
and a description of how the Operating Advisor satisfies each of the 
standards; and
    (D) The terms of the Operating Advisor's compensation under 
paragraph (b)(6)(iii) of this section; and
    (viii) The representations and warranties concerning the securitized 
assets, a schedule of any securitized assets that are determined not to 
comply with such representations and warranties, and what factors were 
used to make the determination that such securitized assets should be 
included in the pool notwithstanding that the securitized assets did not 
comply with such representations and warranties, such as compensating 
factors or a determination that the exceptions were not material.
    (8) Hedging, transfer and pledging--(i) General rule. Except as set 
forth in paragraph (b)(8)(ii) of this section, each third-party 
purchaser and its affiliates must comply with the hedging and other 
restrictions in Sec.  246.12 as if it were the retaining sponsor with 
respect to the securitization transaction and had acquired the eligible 
horizontal residual interest pursuant to Sec.  246.4; provided that, the 
hedging and other restrictions in Sec.  246.12 shall not apply on or 
after the date that each CRE loan (as defined in Sec.  246.14) that 
serves as collateral for outstanding ABS interests has been defeased. 
For purposes of this section, a loan is deemed to be defeased if:

[[Page 187]]

    (A) cash or cash equivalents of the types permitted for an eligible 
horizontal cash reserve account pursuant to Sec.  246.4 whose maturity 
corresponds to the remaining debt service obligations, have been pledged 
to the issuing entity as collateral for the loan and are in such amounts 
and payable at such times as necessary to timely generate cash 
sufficient to make all remaining debt service payments due on such loan; 
and
    (B) the issuing entity has an obligation to release its lien on the 
loan.
    (ii) Exceptions--(A) Transfer by initial third-party purchaser or 
sponsor. An initial third-party purchaser that acquired an eligible 
horizontal residual interest at the closing of a securitization 
transaction in accordance with this section, or a sponsor that acquired 
an eligible horizontal residual interest at the closing of a 
securitization transaction in accordance with this section, may, on or 
after the date that is five years after the date of the closing of the 
securitization transaction, transfer that interest to a subsequent 
third-party purchaser that complies with paragraph (b)(8)(ii)(C) of this 
section. The initial third-party purchaser shall provide the sponsor 
with complete identifying information for the subsequent third-party 
purchaser.
    (B) Transfer by subsequent third-party purchaser. At any time, a 
subsequent third-party purchaser that acquired an eligible horizontal 
residual interest pursuant to this section may transfer its interest to 
a different third-party purchaser that complies with paragraph 
(b)(8)(ii)(C) of this section. The transferring third-party purchaser 
shall provide the sponsor with complete identifying information for the 
acquiring third-party purchaser.
    (C) Requirements applicable to subsequent third-party purchasers. A 
subsequent third-party purchaser is subject to all of the requirements 
of paragraphs (b)(1), (b)(3) through (5), and (b)(8) of this section 
applicable to third-party purchasers, provided that obligations under 
paragraphs (b)(1), (b)(3) through (5), and (b)(8) of this section that 
apply to initial third-party purchasers at or before the time of closing 
of the securitization transaction shall apply to successor third-party 
purchasers at or before the time of the transfer of the eligible 
horizontal residual interest to the successor third-party purchaser.
    (c) Duty to comply. (1) The retaining sponsor shall be responsible 
for compliance with this section by itself and for compliance by each 
initial or subsequent third-party purchaser that acquired an eligible 
horizontal residual interest in the securitization transaction.
    (2) A sponsor relying on this section:
    (i) Shall maintain and adhere to policies and procedures to monitor 
each third-party purchaser's compliance with the requirements of 
paragraphs (b)(1), (b)(3) through (5), and (b)(8) of this section; and
    (ii) In the event that the sponsor determines that a third-party 
purchaser no longer complies with one or more of the requirements of 
paragraphs (b)(1), (b)(3) through (5), or (b)(8) of this section, shall 
promptly notify, or cause to be notified, the holders of the ABS 
interests issued in the securitization transaction of such noncompliance 
by such third-party purchaser.



Sec.  246.8  Federal National Mortgage Association and Federal Home
Loan Mortgage Corporation ABS.

    (a) In general. A sponsor satisfies its risk retention requirement 
under this part if the sponsor fully guarantees the timely payment of 
principal and interest on all ABS interests issued by the issuing entity 
in the securitization transaction and is:
    (1) The Federal National Mortgage Association or the Federal Home 
Loan Mortgage Corporation operating under the conservatorship or 
receivership of the Federal Housing Finance Agency pursuant to section 
1367 of the Federal Housing Enterprises Financial Safety and Soundness 
Act of 1992 (12 U.S.C. 4617) with capital support from the United 
States; or
    (2) Any limited-life regulated entity succeeding to the charter of 
either the Federal National Mortgage Association or the Federal Home 
Loan Mortgage Corporation pursuant to section 1367(i) of the Federal 
Housing Enterprises Financial Safety and Soundness Act of 1992 (12 
U.S.C. 4617(i)), provided that

[[Page 188]]

the entity is operating with capital support from the United States.
    (b) Certain provisions not applicable. The provisions of Sec.  
246.12(b), (c), and (d) shall not apply to a sponsor described in 
paragraph (a)(1) or (2) of this section, its affiliates, or the issuing 
entity with respect to a securitization transaction for which the 
sponsor has retained credit risk in accordance with the requirements of 
this section.
    (c) Disclosure. A sponsor relying on this section shall provide to 
investors, in written form under the caption ``Credit Risk Retention'' 
and, upon request, to the Federal Housing Finance Agency and the 
Commission, a description of the manner in which it has met the credit 
risk retention requirements of this part.



Sec.  246.9  Open market CLOs.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    CLO means a special purpose entity that:
    (i) Issues debt and equity interests, and
    (ii) Whose assets consist primarily of loans that are securitized 
assets and servicing assets.
    CLO-eligible loan tranche means a term loan of a syndicated facility 
that meets the criteria set forth in paragraph (c) of this section.
    CLO manager means an entity that manages a CLO, which entity is 
registered as an investment adviser under the Investment Advisers Act of 
1940, as amended (15 U.S.C. 80b-1 et seq.), or is an affiliate of such a 
registered investment adviser and itself is managed by such registered 
investment adviser.
    Commercial borrower means an obligor under a corporate credit 
obligation (including a loan).
    Initial loan syndication transaction means a transaction in which a 
loan is syndicated to a group of lenders.
    Lead arranger means, with respect to a CLO-eligible loan tranche, an 
institution that:
    (i) Is active in the origination, structuring and syndication of 
commercial loan transactions (as defined in Sec.  246.14) and has played 
a primary role in the structuring, underwriting and distribution on the 
primary market of the CLO-eligible loan tranche.
    (ii) Has taken an allocation of the funded portion of the syndicated 
credit facility under the terms of the transaction that includes the 
CLO-eligible loan tranche of at least 20 percent of the aggregate 
principal balance at origination, and no other member (or members 
affiliated with each other) of the syndication group that funded at 
origination has taken a greater allocation; and
    (iii) Is identified in the applicable agreement governing the CLO-
eligible loan tranche; represents therein to the holders of the CLO-
eligible loan tranche and to any holders of participation interests in 
such CLO-eligible loan tranche that such lead arranger satisfies the 
requirements of paragraph (i) of this definition and, at the time of 
initial funding of the CLO-eligible tranche, will satisfy the 
requirements of paragraph (ii) of this definition; further represents 
therein (solely for the purpose of assisting such holders to determine 
the eligibility of such CLO-eligible loan tranche to be held by an open 
market CLO) that in the reasonable judgment of such lead arranger, the 
terms of such CLO-eligible loan tranche are consistent with the 
requirements of paragraphs (c)(2) and (3) of this section; and covenants 
therein to such holders that such lead arranger will fulfill the 
requirements of paragraph (c)(1) of this section.
    Open market CLO means a CLO:
    (i) Whose assets consist of senior, secured syndicated loans 
acquired by such CLO directly from the sellers thereof in open market 
transactions and of servicing assets,
    (ii) That is managed by a CLO manager, and
    (iii) That holds less than 50 percent of its assets, by aggregate 
outstanding principal amount, in loans syndicated by lead arrangers that 
are affiliates of the CLO or the CLO manager or originated by 
originators that are affiliates of the CLO or the CLO manager.
    Open market transaction means:
    (i) Either an initial loan syndication transaction or a secondary 
market transaction in which a seller offers senior, secured syndicated 
loans to prospective purchasers in the loan market

[[Page 189]]

on market terms on an arm's length basis, which prospective purchasers 
include, but are not limited to, entities that are not affiliated with 
the seller, or
    (ii) A reverse inquiry from a prospective purchaser of a senior, 
secured syndicated loan through a dealer in the loan market to purchase 
a senior, secured syndicated loan to be sourced by the dealer in the 
loan market.
    Secondary market transaction means a purchase of a senior, secured 
syndicated loan not in connection with an initial loan syndication 
transaction but in the secondary market.
    Senior, secured syndicated loan means a loan made to a commercial 
borrower that:
    (i) Is not subordinate in right of payment to any other obligation 
for borrowed money of the commercial borrower,
    (ii) Is secured by a valid first priority security interest or lien 
in or on specified collateral securing the commercial borrower's 
obligations under the loan, and
    (iii) The value of the collateral subject to such first priority 
security interest or lien, together with other attributes of the obligor 
(including, without limitation, its general financial condition, ability 
to generate cash flow available for debt service and other demands for 
that cash flow), is adequate (in the commercially reasonable judgment of 
the CLO manager exercised at the time of investment) to repay the loan 
and to repay all other indebtedness of equal seniority secured by such 
first priority security interest or lien in or on the same collateral, 
and the CLO manager certifies, on or prior to each date that it acquires 
a loan constituting part of a new CLO-eligible tranche, that it has 
policies and procedures to evaluate the likelihood of repayment of loans 
acquired by the CLO and it has followed such policies and procedures in 
evaluating each CLO-eligible loan tranche.
    (b) In general. A sponsor satisfies the risk retention requirements 
of Sec.  246.3 with respect to an open market CLO transaction if:
    (1) The open market CLO does not acquire or hold any assets other 
than CLO-eligible loan tranches that meet the requirements of paragraph 
(c) of this section and servicing assets;
    (2) The governing documents of such open market CLO require that, at 
all times, the assets of the open market CLO consist of senior, secured 
syndicated loans that are CLO-eligible loan tranches and servicing 
assets;
    (3) The open market CLO does not invest in ABS interests or in 
credit derivatives other than hedging transactions that are servicing 
assets to hedge risks of the open market CLO;
    (4) All purchases of CLO-eligible loan tranches and other assets by 
the open market CLO issuing entity or through a warehouse facility used 
to accumulate the loans prior to the issuance of the CLO's ABS interests 
are made in open market transactions on an arms-length basis;
    (5) The CLO manager of the open market CLO is not entitled to 
receive any management fee or gain on sale at the time the open market 
CLO issues its ABS interests.
    (c) CLO-eligible loan tranche. To qualify as a CLO-eligible loan 
tranche, a term loan of a syndicated credit facility to a commercial 
borrower must have the following features:
    (1) A minimum of 5 percent of the face amount of the CLO-eligible 
loan tranche is retained by the lead arranger thereof until the earliest 
of the repayment, maturity, involuntary and unscheduled acceleration, 
payment default, or bankruptcy default of such CLO-eligible loan 
tranche, provided that such lead arranger complies with limitations on 
hedging, transferring and pledging in Sec.  246.12 with respect to the 
interest retained by the lead arranger.
    (2) Lender voting rights within the credit agreement and any 
intercreditor or other applicable agreements governing such CLO-eligible 
loan tranche are defined so as to give holders of the CLO-eligible loan 
tranche consent rights with respect to, at minimum, any material waivers 
and amendments of such applicable documents, including but not limited 
to, adverse changes to the calculation or payments of amounts due to the 
holders of the CLO-eligible tranche, alterations to pro rata

[[Page 190]]

provisions, changes to voting provisions, and waivers of conditions 
precedent; and
    (3) The pro rata provisions, voting provisions, and similar 
provisions applicable to the security associated with such CLO-eligible 
loan tranches under the CLO credit agreement and any intercreditor or 
other applicable agreements governing such CLO-eligible loan tranches 
are not materially less advantageous to the holder(s) of such CLO-
eligible tranche than the terms of other tranches of comparable 
seniority in the broader syndicated credit facility.
    (d) Disclosures. A sponsor relying on this section shall provide, or 
cause to be provided, to potential investors a reasonable period of time 
prior to the sale of the asset-backed securities in the securitization 
transaction and at least annually with respect to the information 
required by paragraph (d)(1) of this section and, upon request, to the 
Commission and its appropriate Federal banking agency, if any, the 
following disclosure in written form under the caption ``Credit Risk 
Retention'':
    (1) Open market CLOs. A complete list of every asset held by an open 
market CLO (or before the CLO's closing, in a warehouse facility in 
anticipation of transfer into the CLO at closing), including the 
following information:
    (i) The full legal name, Standard Industrial Classification (SIC) 
category code, and legal entity identifier (LEI) issued by a utility 
endorsed or otherwise governed by the Global LEI Regulatory Oversight 
Committee or the Global LEI Foundation (if an LEI has been obtained by 
the obligor) of the obligor of the loan or asset;
    (ii) The full name of the specific loan tranche held by the CLO;
    (iii) The face amount of the entire loan tranche held by the CLO, 
and the face amount of the portion thereof held by the CLO;
    (iv) The price at which the loan tranche was acquired by the CLO; 
and
    (v) For each loan tranche, the full legal name of the lead arranger 
subject to the sales and hedging restrictions of Sec.  246.12; and
    (2) CLO manager. The full legal name and form of organization of the 
CLO manager.



Sec.  246.10  Qualified tender option bonds.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    Municipal security or municipal securities shall have the same 
meaning as the term ``municipal securities'' in Section 3(a)(29) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(29)) and any rules 
promulgated pursuant to such section.
    Qualified tender option bond entity means an issuing entity with 
respect to tender option bonds for which each of the following applies:
    (i) Such entity is collateralized solely by servicing assets and by 
municipal securities that have the same municipal issuer and the same 
underlying obligor or source of payment (determined without regard to 
any third-party credit enhancement), and such municipal securities are 
not subject to substitution.
    (ii) Such entity issues no securities other than:
    (A) A single class of tender option bonds with a preferred variable 
return payable out of capital that meets the requirements of paragraph 
(b) of this section, and
    (B) One or more residual equity interests that, in the aggregate, 
are entitled to all remaining income of the issuing entity.
    (C) The types of securities referred to in paragraphs (ii)(A) and 
(B) of this definition must constitute asset-backed securities.
    (iii) The municipal securities held as assets by such entity are 
issued in compliance with Section 103 of the Internal Revenue Code of 
1986, as amended (the ``IRS Code'', 26 U.S.C. 103), such that the 
interest payments made on those securities are excludable from the gross 
income of the owners under Section 103 of the IRS Code.
    (iv) The terms of all of the securities issued by the entity are 
structured so that all holders of such securities who are eligible to 
exclude interest received on such securities will be able to exclude 
that interest from gross income pursuant to Section 103 of the IRS Code

[[Page 191]]

or as ``exempt-interest dividends'' pursuant to Section 852(b)(5) of the 
IRS Code (26 U.S.C. 852(b)(5)) in the case of regulated investment 
companies under the Investment Company Act of 1940, as amended.
    (v) Such entity has a legally binding commitment from a regulated 
liquidity provider as defined in Sec.  246.6(a), to provide a 100 
percent guarantee or liquidity coverage with respect to all of the 
issuing entity's outstanding tender option bonds.
    (vi) Such entity qualifies for monthly closing elections pursuant to 
IRS Revenue Procedure 2003-84, as amended or supplemented from time to 
time.
    Tender option bond means a security which has features which entitle 
the holders to tender such bonds to the issuing entity for purchase at 
any time upon no more than 397 days' notice, for a purchase price equal 
to the approximate amortized cost of the security, plus accrued 
interest, if any, at the time of tender.
    (b) Risk retention options. Notwithstanding anything in this 
section, the sponsor with respect to an issuance of tender option bonds 
may retain an eligible vertical interest or eligible horizontal residual 
interest, or any combination thereof, in accordance with the 
requirements of Sec.  246.4. In order to satisfy its risk retention 
requirements under this section, the sponsor with respect to an issuance 
of tender option bonds by a qualified tender option bond entity may 
retain:
    (1) An eligible vertical interest or an eligible horizontal residual 
interest, or any combination thereof, in accordance with the 
requirements of Sec.  246.4; or
    (2) An interest that meets the requirements set forth in paragraph 
(c) of this section; or
    (3) A municipal security that meets the requirements set forth in 
paragraph (d) of this section; or
    (4) Any combination of interests and securities described in 
paragraphs (b)(1) through (b)(3) of this section such that the sum of 
the percentages held in each form equals at least five.
    (c) Tender option termination event. The sponsor with respect to an 
issuance of tender option bonds by a qualified tender option bond entity 
may retain an interest that upon issuance meets the requirements of an 
eligible horizontal residual interest but that upon the occurrence of a 
``tender option termination event'' as defined in Section 4.01(5) of IRS 
Revenue Procedure 2003-84, as amended or supplemented from time to time 
will meet the requirements of an eligible vertical interest.
    (d) Retention of a municipal security outside of the qualified 
tender option bond entity. The sponsor with respect to an issuance of 
tender option bonds by a qualified tender option bond entity may satisfy 
its risk retention requirements under this Section by holding municipal 
securities from the same issuance of municipal securities deposited in 
the qualified tender option bond entity, the face value of which 
retained municipal securities is equal to 5 percent of the face value of 
the municipal securities deposited in the qualified tender option bond 
entity.
    (e) Disclosures. The sponsor shall provide, or cause to be provided, 
to potential investors a reasonable period of time prior to the sale of 
the asset-backed securities as part of the securitization transaction 
and, upon request, to the Commission and its appropriate Federal banking 
agency, if any, the following disclosure in written form under the 
caption ``Credit Risk Retention'':
    (1) The name and form of organization of the qualified tender option 
bond entity;
    (2) A description of the form and subordination features of such 
retained interest in accordance with the disclosure obligations in Sec.  
246.4(c);
    (3) To the extent any portion of the retained interest is claimed by 
the sponsor as an eligible horizontal residual interest (including any 
interest held in compliance with Sec.  246.10(c)), the fair value of 
that interest (expressed as a percentage of the fair value of all of the 
ABS interests issued in the securitization transaction and as a dollar 
amount);
    (4) To the extent any portion of the retained interest is claimed by 
the sponsor as an eligible vertical interest (including any interest 
held in compliance with Sec.  246.10(c)), the percentage of ABS 
interests issued represented by the eligible vertical interest; and

[[Page 192]]

    (5) To the extent any portion of the retained interest claimed by 
the sponsor is a municipal security held outside of the qualified tender 
option bond entity, the name and form of organization of the qualified 
tender option bond entity, the identity of the issuer of the municipal 
securities, the face value of the municipal securities deposited into 
the qualified tender option bond entity, and the face value of the 
municipal securities retained by the sponsor or its majority-owned 
affiliates and subject to the transfer and hedging prohibition.
    (f) Prohibitions on Hedging and Transfer. The prohibitions on 
transfer and hedging set forth in Sec.  246.12, apply to any interests 
or municipal securities retained by the sponsor with respect to an 
issuance of tender option bonds by a qualified tender option bond entity 
pursuant to of this section.



                  Subpart C_Transfer of Risk Retention



Sec.  246.11  Allocation of risk retention to an originator.

    (a) In general. A sponsor choosing to retain an eligible vertical 
interest or an eligible horizontal residual interest (including an 
eligible horizontal cash reserve account), or combination thereof under 
Sec.  246.4, with respect to a securitization transaction may offset the 
amount of its risk retention requirements under Sec.  246.4 by the 
amount of the eligible interests, respectively, acquired by an 
originator of one or more of the securitized assets if:
    (1) At the closing of the securitization transaction:
    (i) The originator acquires the eligible interest from the sponsor 
and retains such interest in the same manner and proportion (as between 
horizontal and vertical interests) as the sponsor under Sec.  246.4, as 
such interest was held prior to the acquisition by the originator;
    (ii) The ratio of the percentage of eligible interests acquired and 
retained by the originator to the percentage of eligible interests 
otherwise required to be retained by the sponsor pursuant to Sec.  
246.4, does not exceed the ratio of:
    (A) The unpaid principal balance of all the securitized assets 
originated by the originator; to
    (B) The unpaid principal balance of all the securitized assets in 
the securitization transaction;
    (iii) The originator acquires and retains at least 20 percent of the 
aggregate risk retention amount otherwise required to be retained by the 
sponsor pursuant to Sec.  246.4; and
    (iv) The originator purchases the eligible interests from the 
sponsor at a price that is equal, on a dollar-for-dollar basis, to the 
amount by which the sponsor's required risk retention is reduced in 
accordance with this section, by payment to the sponsor in the form of:
    (A) Cash; or
    (B) A reduction in the price received by the originator from the 
sponsor or depositor for the assets sold by the originator to the 
sponsor or depositor for inclusion in the pool of securitized assets.
    (2) Disclosures. In addition to the disclosures required pursuant to 
Sec.  246.4(c), the sponsor provides, or causes to be provided, to 
potential investors a reasonable period of time prior to the sale of the 
asset-backed securities as part of the securitization transaction and, 
upon request, to the Commission and its appropriate Federal banking 
agency, if any, in written form under the caption ``Credit Risk 
Retention'', the name and form of organization of any originator that 
will acquire and retain (or has acquired and retained) an interest in 
the transaction pursuant to this section, including a description of the 
form and amount (expressed as a percentage and dollar amount (or 
corresponding amount in the foreign currency in which the ABS interests 
are issued, as applicable)) and nature (e.g., senior or subordinated) of 
the interest, as well as the method of payment for such interest under 
paragraph (a)(1)(iv) of this section.
    (3) Hedging, transferring and pledging. The originator and each of 
its affiliates complies with the hedging and other restrictions in Sec.  
246.12 with respect to the interests retained by the originator pursuant 
to this section as if it were the retaining sponsor and was required

[[Page 193]]

to retain the interest under subpart B of this part.
    (b) Duty to comply. (1) The retaining sponsor shall be responsible 
for compliance with this section.
    (2) A retaining sponsor relying on this section:
    (i) Shall maintain and adhere to policies and procedures that are 
reasonably designed to monitor the compliance by each originator that is 
allocated a portion of the sponsor's risk retention obligations with the 
requirements in paragraphs (a)(1) and (3) of this section; and
    (ii) In the event the sponsor determines that any such originator no 
longer complies with any of the requirements in paragraphs (a)(1) and 
(3) of this section, shall promptly notify, or cause to be notified, the 
holders of the ABS interests issued in the securitization transaction of 
such noncompliance by such originator.



Sec.  246.12  Hedging, transfer and financing prohibitions.

    (a) Transfer. Except as permitted by Sec.  246.7(b)(8), and subject 
to Sec.  246.5, a retaining sponsor may not sell or otherwise transfer 
any interest or assets that the sponsor is required to retain pursuant 
to subpart B of this part to any person other than an entity that is and 
remains a majority-owned affiliate of the sponsor and each such 
majority-owned affiliate shall be subject to the same restrictions.
    (b) Prohibited hedging by sponsor and affiliates. A retaining 
sponsor and its affiliates may not purchase or sell a security, or other 
financial instrument, or enter into an agreement, derivative or other 
position, with any other person if:
    (1) Payments on the security or other financial instrument or under 
the agreement, derivative, or position are materially related to the 
credit risk of one or more particular ABS interests that the retaining 
sponsor (or any of its majority-owned affiliates) is required to retain 
with respect to a securitization transaction pursuant to subpart B of 
this part or one or more of the particular securitized assets that 
collateralize the asset-backed securities issued in the securitization 
transaction; and
    (2) The security, instrument, agreement, derivative, or position in 
any way reduces or limits the financial exposure of the sponsor (or any 
of its majority-owned affiliates) to the credit risk of one or more of 
the particular ABS interests that the retaining sponsor (or any of its 
majority-owned affiliates) is required to retain with respect to a 
securitization transaction pursuant to subpart B of this part or one or 
more of the particular securitized assets that collateralize the asset-
backed securities issued in the securitization transaction.
    (c) Prohibited hedging by issuing entity. The issuing entity in a 
securitization transaction may not purchase or sell a security or other 
financial instrument, or enter into an agreement, derivative or 
position, with any other person if:
    (1) Payments on the security or other financial instrument or under 
the agreement, derivative or position are materially related to the 
credit risk of one or more particular ABS interests that the retaining 
sponsor for the transaction (or any of its majority-owned affiliates) is 
required to retain with respect to the securitization transaction 
pursuant to subpart B of this part; and
    (2) The security, instrument, agreement, derivative, or position in 
any way reduces or limits the financial exposure of the retaining 
sponsor (or any of its majority-owned affiliates) to the credit risk of 
one or more of the particular ABS interests that the sponsor (or any of 
its majority-owned affiliates) is required to retain pursuant to subpart 
B of this part.
    (d) Permitted hedging activities. The following activities shall not 
be considered prohibited hedging activities under paragraph (b) or (c) 
of this section:
    (1) Hedging the interest rate risk (which does not include the 
specific interest rate risk, known as spread risk, associated with the 
ABS interest that is otherwise considered part of the credit risk) or 
foreign exchange risk arising from one or more of the particular ABS 
interests required to be retained by the sponsor (or any of its 
majority-owned affiliates) under subpart B of this part or one or more 
of the

[[Page 194]]

particular securitized assets that underlie the asset-backed securities 
issued in the securitization transaction; or
    (2) Purchasing or selling a security or other financial instrument 
or entering into an agreement, derivative, or other position with any 
third party where payments on the security or other financial instrument 
or under the agreement, derivative, or position are based, directly or 
indirectly, on an index of instruments that includes asset-backed 
securities if:
    (i) Any class of ABS interests in the issuing entity that were 
issued in connection with the securitization transaction and that are 
included in the index represents no more than 10 percent of the dollar-
weighted average (or corresponding weighted average in the currency in 
which the ABS interests are issued, as applicable) of all instruments 
included in the index; and
    (ii) All classes of ABS interests in all issuing entities that were 
issued in connection with any securitization transaction in which the 
sponsor (or any of its majority-owned affiliates) is required to retain 
an interest pursuant to subpart B of this part and that are included in 
the index represent, in the aggregate, no more than 20 percent of the 
dollar-weighted average (or corresponding weighted average in the 
currency in which the ABS interests are issued, as applicable) of all 
instruments included in the index.
    (e) Prohibited non-recourse financing. Neither a retaining sponsor 
nor any of its affiliates may pledge as collateral for any obligation 
(including a loan, repurchase agreement, or other financing transaction) 
any ABS interest that the sponsor is required to retain with respect to 
a securitization transaction pursuant to subpart B of this part unless 
such obligation is with full recourse to the sponsor or affiliate, 
respectively.
    (f) Duration of the hedging and transfer restrictions--(1) General 
rule. Except as provided in paragraph (f)(2) of this section, the 
prohibitions on sale and hedging pursuant to paragraphs (a) and (b) of 
this section shall expire on or after the date that is the latest of:
    (i) The date on which the total unpaid principal balance (if 
applicable) of the securitized assets that collateralize the 
securitization transaction has been reduced to 33 percent of the total 
unpaid principal balance of the securitized assets as of the cut-off 
date or similar date for establishing the composition of the securitized 
assets collateralizing the asset-backed securities issued pursuant to 
the securitization transaction;
    (ii) The date on which the total unpaid principal obligations under 
the ABS interests issued in the securitization transaction has been 
reduced to 33 percent of the total unpaid principal obligations of the 
ABS interests at closing of the securitization transaction; or
    (iii) Two years after the date of the closing of the securitization 
transaction.
    (2) Securitizations of residential mortgages. (i) If all of the 
assets that collateralize a securitization transaction subject to risk 
retention under this part are residential mortgages, the prohibitions on 
sale and hedging pursuant to paragraphs (a) and (b) of this section 
shall expire on or after the date that is the later of:
    (A) Five years after the date of the closing of the securitization 
transaction; or
    (B) The date on which the total unpaid principal balance of the 
residential mortgages that collateralize the securitization transaction 
has been reduced to 25 percent of the total unpaid principal balance of 
such residential mortgages at the cut-off date or similar date for 
establishing the composition of the securitized assets collateralizing 
the asset-backed securities issued pursuant to the securitization 
transaction.
    (ii) Notwithstanding paragraph (f)(2)(i) of this section, the 
prohibitions on sale and hedging pursuant to paragraphs (a) and (b) of 
this section shall expire with respect to the sponsor of a 
securitization transaction described in paragraph (f)(2)(i) of this 
section on or after the date that is seven years after the date of the 
closing of the securitization transaction.
    (3) Conservatorship or receivership of sponsor. A conservator or 
receiver of the sponsor (or any other person holding risk retention 
pursuant to this

[[Page 195]]

part) of a securitization transaction is permitted to sell or hedge any 
economic interest in the securitization transaction if the conservator 
or receiver has been appointed pursuant to any provision of federal or 
State law (or regulation promulgated thereunder) that provides for the 
appointment of the Federal Deposit Insurance Corporation, or an agency 
or instrumentality of the United States or of a State as conservator or 
receiver, including without limitation any of the following authorities:
    (i) 12 U.S.C. 1811;
    (ii) 12 U.S.C. 1787;
    (iii) 12 U.S.C. 4617; or
    (iv) 12 U.S.C. 5382.
    (4) Revolving pool securitizations. The provisions of paragraphs 
(f)(1) and (2) are not available to sponsors of revolving pool 
securitizations with respect to the forms of risk retention specified in 
Sec.  246.5.



                   Subpart D_Exceptions and Exemptions



Sec.  246.13  Exemption for qualified residential mortgages.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    Currently performing means the borrower in the mortgage transaction 
is not currently thirty (30) days or more past due, in whole or in part, 
on the mortgage transaction.
    Qualified residential mortgage means a ``qualified mortgage'' as 
defined in section 129C of the Truth in Lending Act (15 U.S.C.1639c) and 
regulations issued thereunder, as amended from time to time.
    (b) Exemption. A sponsor shall be exempt from the risk retention 
requirements in subpart B of this part with respect to any 
securitization transaction, if:
    (1) All of the assets that collateralize the asset-backed securities 
are qualified residential mortgages or servicing assets;
    (2) None of the assets that collateralize the asset-backed 
securities are asset-backed securities;
    (3) As of the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, each 
qualified residential mortgage collateralizing the asset-backed 
securities is currently performing; and
    (4)(i) The depositor with respect to the securitization transaction 
certifies that it has evaluated the effectiveness of its internal 
supervisory controls with respect to the process for ensuring that all 
assets that collateralize the asset-backed security are qualified 
residential mortgages or servicing assets and has concluded that its 
internal supervisory controls are effective; and
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls must be performed, for each issuance of an asset-
backed security in reliance on this section, as of a date within 60 days 
of the cut-off date or similar date for establishing the composition of 
the asset pool collateralizing such asset-backed security; and
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (b)(4)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to the 
Commission and its appropriate Federal banking agency, if any.
    (c) Repurchase of loans subsequently determined to be non-qualified 
after closing. A sponsor that has relied on the exemption provided in 
paragraph (b) of this section with respect to a securitization 
transaction shall not lose such exemption with respect to such 
transaction if, after closing of the securitization transaction, it is 
determined that one or more of the residential mortgage loans 
collateralizing the asset-backed securities does not meet all of the 
criteria to be a qualified residential mortgage provided that:
    (1) The depositor complied with the certification requirement set 
forth in paragraph (b)(4) of this section;
    (2) The sponsor repurchases the loan(s) from the issuing entity at a 
price at least equal to the remaining aggregate unpaid principal balance 
and accrued interest on the loan(s) no later than 90 days after the 
determination

[[Page 196]]

that the loans do not satisfy the requirements to be a qualified 
residential mortgage; and
    (3) The sponsor promptly notifies, or causes to be notified, the 
holders of the asset-backed securities issued in the securitization 
transaction of any loan(s) included in such securitization transaction 
that is (or are) required to be repurchased by the sponsor pursuant to 
paragraph (c)(2) of this section, including the amount of such 
repurchased loan(s) and the cause for such repurchase.



Sec.  246.14  Definitions applicable to qualifying commercial loans,
qualifying commercial real estate loans, and qualifying automobile
loans.

    The following definitions apply for purposes of Sec. Sec.  246.15 
through 246.18:
    Appraisal Standards Board means the board of the Appraisal 
Foundation that develops, interprets, and amends the Uniform Standards 
of Professional Appraisal Practice (USPAP), establishing generally 
accepted standards for the appraisal profession.
    Automobile loan:
    (1) Means any loan to an individual to finance the purchase of, and 
that is secured by a first lien on, a passenger car or other passenger 
vehicle, such as a minivan, van, sport-utility vehicle, pickup truck, or 
similar light truck for personal, family, or household use; and
    (2) Does not include any:
    (i) Loan to finance fleet sales;
    (ii) Personal cash loan secured by a previously purchased 
automobile;
    (iii) Loan to finance the purchase of a commercial vehicle or farm 
equipment that is not used for personal, family, or household purposes;
    (iv) Lease financing;
    (v) Loan to finance the purchase of a vehicle with a salvage title; 
or
    (vi) Loan to finance the purchase of a vehicle intended to be used 
for scrap or parts.
    Combined loan-to-value (CLTV) ratio means, at the time of 
origination, the sum of the principal balance of a first-lien mortgage 
loan on the property, plus the principal balance of any junior-lien 
mortgage loan that, to the creditor's knowledge, would exist at the 
closing of the transaction and that is secured by the same property, 
divided by:
    (1) For acquisition funding, the lesser of the purchase price or the 
estimated market value of the real property based on an appraisal that 
meets the requirements set forth in Sec.  246.17(a)(2)(ii); or
    (2) For refinancing, the estimated market value of the real property 
based on an appraisal that meets the requirements set forth in Sec.  
246.17(a)(2)(ii).
    Commercial loan means a secured or unsecured loan to a company or an 
individual for business purposes, other than any:
    (1) Loan to purchase or refinance a one-to-four family residential 
property;
    (2) Commercial real estate loan.
    Commercial real estate (CRE) loan means:
    (1) A loan secured by a property with five or more single family 
units, or by nonfarm nonresidential real property, the primary source 
(50 percent or more) of repayment for which is expected to be:
    (i) The proceeds of the sale, refinancing, or permanent financing of 
the property; or
    (ii) Rental income associated with the property;
    (2) Loans secured by improved land if the obligor owns the fee 
interest in the land and the land is leased to a third party who owns 
all improvements on the land, and the improvements are nonresidential or 
residential with five or more single family units; and
    (3) Does not include:
    (i) A land development and construction loan (including 1- to 4-
family residential or commercial construction loans);
    (ii) Any other land loan; or
    (iii) An unsecured loan to a developer.
    Debt service coverage (DSC) ratio means:
    (1) For qualifying leased CRE loans, qualifying multi-family loans, 
and other CRE loans:
    (i) The annual NOI less the annual replacement reserve of the CRE 
property at the time of origination of the CRE loan(s) divided by
    (ii) The sum of the borrower's annual payments for principal and 
interest

[[Page 197]]

(calculated at the fully-indexed rate) on any debt obligation.
    (2) For commercial loans:
    (i) The borrower's EBITDA as of the most recently completed fiscal 
year divided by
    (ii) The sum of the borrower's annual payments for principal and 
interest on all debt obligations.
    Debt to income (DTI) ratio means the borrower's total debt, 
including the monthly amount due on the automobile loan, divided by the 
borrower's monthly income.
    Earnings before interest, taxes, depreciation, and amortization 
(EBITDA) means the annual income of a business before expenses for 
interest, taxes, depreciation and amortization are deducted, as 
determined in accordance with GAAP.
    Environmental risk assessment means a process for determining 
whether a property is contaminated or exposed to any condition or 
substance that could result in contamination that has an adverse effect 
on the market value of the property or the realization of the collateral 
value.
    First lien means a lien or encumbrance on property that has priority 
over all other liens or encumbrances on the property.
    Junior lien means a lien or encumbrance on property that is lower in 
priority relative to other liens or encumbrances on the property.
    Leverage ratio means the borrower's total debt divided by the 
borrower's EBITDA.
    Loan-to-value (LTV) ratio means, at the time of origination, the 
principal balance of a first-lien mortgage loan on the property divided 
by:
    (1) For acquisition funding, the lesser of the purchase price or the 
estimated market value of the real property based on an appraisal that 
meets the requirements set forth in Sec.  246.17(a)(2)(ii); or
    (2) For refinancing, the estimated market value of the real property 
based on an appraisal that meets the requirements set forth in Sec.  
246.17(a)(2)(ii).
    Model year means the year determined by the manufacturer and 
reflected on the vehicle's Motor Vehicle Title as part of the vehicle 
description.
    Net operating income (NOI) refers to the income a CRE property 
generates for the owner after all expenses have been deducted for 
federal income tax purposes, except for depreciation, debt service 
expenses, and federal and state income taxes, and excluding any unusual 
and nonrecurring items of income.
    Operating affiliate means an affiliate of a borrower that is a 
lessor or similar party with respect to the commercial real estate 
securing the loan.
    Payments-in-kind means payments of accrued interest that are not 
paid in cash when due, and instead are paid by increasing the principal 
balance of the loan or by providing equity in the borrowing company.
    Purchase money security interest means a security interest in 
property that secures the obligation of the obligor incurred as all or 
part of the price of the property.
    Purchase price means the amount paid by the borrower for the vehicle 
net of any incentive payments or manufacturer cash rebates.
    Qualified tenant means:
    (1) A tenant with a lease who has satisfied all obligations with 
respect to the property in a timely manner; or
    (2) A tenant who originally had a lease that subsequently expired 
and currently is leasing the property on a month-to-month basis, has 
occupied the property for at least three years prior to the date of 
origination, and has satisfied all obligations with respect to the 
property in a timely manner.
    Qualifying leased CRE loan means a CRE loan secured by commercial 
nonfarm real property, other than a multi-family property or a hotel, 
inn, or similar property:
    (1) That is occupied by one or more qualified tenants pursuant to a 
lease agreement with a term of no less than one (1) month; and
    (2) Where no more than 20 percent of the aggregate gross revenue of 
the property is payable from one or more tenants who:
    (i) Are subject to a lease that will terminate within six months 
following the date of origination; or
    (ii) Are not qualified tenants.

[[Page 198]]

    Qualifying multi-family loan means a CRE loan secured by any 
residential property (excluding a hotel, motel, inn, hospital, nursing 
home, or other similar facility where dwellings are not leased to 
residents):
    (1) That consists of five or more dwelling units (including 
apartment buildings, condominiums, cooperatives and other similar 
structures) primarily for residential use; and
    (2) Where at least 75 percent of the NOI is derived from residential 
rents and tenant amenities (including income from parking garages, 
health or swim clubs, and dry cleaning), and not from other commercial 
uses.
    Rental income means:
    (1) Income derived from a lease or other occupancy agreement between 
the borrower or an operating affiliate of the borrower and a party which 
is not an affiliate of the borrower for the use of real property or 
improvements serving as collateral for the applicable loan; and
    (2) Other income derived from hotel, motel, dormitory, nursing home, 
assisted living, mini-storage warehouse or similar properties that are 
used primarily by parties that are not affiliates or employees of the 
borrower or its affiliates.
    Replacement reserve means the monthly capital replacement or 
maintenance amount based on the property type, age, construction and 
condition of the property that is adequate to maintain the physical 
condition and NOI of the property.
    Salvage title means a form of vehicle title branding, which notes 
that the vehicle has been severely damaged and/or deemed a total loss 
and uneconomical to repair by an insurance company that paid a claim on 
the vehicle.
    Total debt, with respect to a borrower, means:
    (1) In the case of an automobile loan, the sum of:
    (i) All monthly housing payments (rent- or mortgage-related, 
including property taxes, insurance and home owners association fees); 
and
    (ii) Any of the following that is dependent upon the borrower's 
income for payment:
    (A) Monthly payments on other debt and lease obligations, such as 
credit card loans or installment loans, including the monthly amount due 
on the automobile loan;
    (B) Estimated monthly amortizing payments for any term debt, debts 
with other than monthly payments and debts not in repayment (such as 
deferred student loans, interest-only loans); and
    (C) Any required monthly alimony, child support or court-ordered 
payments; and
    (2) In the case of a commercial loan, the outstanding balance of all 
long-term debt (obligations that have a remaining maturity of more than 
one year) and the current portion of all debt that matures in one year 
or less.
    Total liabilities ratio means the borrower's total liabilities 
divided by the sum of the borrower's total liabilities and equity, less 
the borrower's intangible assets, with each component determined in 
accordance with GAAP.
    Trade-in allowance means the amount a vehicle purchaser is given as 
a credit at the purchase of a vehicle for the fair exchange of the 
borrower's existing vehicle to compensate the dealer for some portion of 
the vehicle purchase price, not to exceed the highest trade-in value of 
the existing vehicle, as determined by a nationally recognized 
automobile pricing agency and based on the manufacturer, year, model, 
features, mileage, and condition of the vehicle, less the payoff balance 
of any outstanding debt collateralized by the existing vehicle.
    Uniform Standards of Professional Appraisal Practice (USPAP) means 
generally accepted standards for professional appraisal practice issued 
by the Appraisal Standards Board of the Appraisal Foundation.



Sec.  246.15  Qualifying commercial loans, commercial real estate loans,
and automobile loans.

    (a) General exception for qualifying assets. Commercial loans, 
commercial real estate loans, and automobile loans that are securitized 
through a securitization transaction shall be subject to a 0 percent 
risk retention requirement under subpart B, provided that the following 
conditions are met:

[[Page 199]]

    (1) The assets meet the underwriting standards set forth in 
Sec. Sec.  246.16 (qualifying commercial loans), 246.17 (qualifying CRE 
loans), or 246.18 (qualifying automobile loans) of this part, as 
applicable;
    (2) The securitization transaction is collateralized solely by loans 
of the same asset class and by servicing assets;
    (3) The securitization transaction does not permit reinvestment 
periods; and
    (4) The sponsor provides, or causes to be provided, to potential 
investors a reasonable period of time prior to the sale of asset-backed 
securities of the issuing entity, and, upon request, to the Commission, 
and to its appropriate Federal banking agency, if any, in written form 
under the caption ``Credit Risk Retention'', a description of the manner 
in which the sponsor determined the aggregate risk retention requirement 
for the securitization transaction after including qualifying commercial 
loans, qualifying CRE loans, or qualifying automobile loans with 0 
percent risk retention.
    (b) Risk retention requirement. For any securitization transaction 
described in paragraph (a) of this section, the percentage of risk 
retention required under Sec.  246.3(a) is reduced by the percentage 
evidenced by the ratio of the unpaid principal balance of the qualifying 
commercial loans, qualifying CRE loans, or qualifying automobile loans 
(as applicable) to the total unpaid principal balance of commercial 
loans, CRE loans, or automobile loans (as applicable) that are included 
in the pool of assets collateralizing the asset-backed securities issued 
pursuant to the securitization transaction (the qualifying asset ratio); 
provided that:
    (1) The qualifying asset ratio is measured as of the cut-off date or 
similar date for establishing the composition of the securitized assets 
collateralizing the asset-backed securities issued pursuant to the 
securitization transaction;
    (2) If the qualifying asset ratio would exceed 50 percent, the 
qualifying asset ratio shall be deemed to be 50 percent; and
    (3) The disclosure required by paragraph (a)(4) of this section also 
includes descriptions of the qualifying commercial loans, qualifying CRE 
loans, and qualifying automobile loans (qualifying assets) and 
descriptions of the assets that are not qualifying assets, and the 
material differences between the group of qualifying assets and the 
group of assets that are not qualifying assets with respect to the 
composition of each group's loan balances, loan terms, interest rates, 
borrower credit information, and characteristics of any loan collateral.
    (c) Exception for securitizations of qualifying assets only. 
Notwithstanding other provisions of this section, the risk retention 
requirements of subpart B of this part shall not apply to securitization 
transactions where the transaction is collateralized solely by servicing 
assets and either qualifying commercial loans, qualifying CRE loans, or 
qualifying automobile loans.
    (d) Record maintenance. A sponsor must retain the disclosures 
required in paragraphs (a) and (b) of this section and the 
certifications required in Sec. Sec.  246.16(a)(8), 246.17(a)(10), and 
246.18(a)(8), as applicable, in its records until three years after all 
ABS interests issued in the securitization are no longer outstanding. 
The sponsor must provide the disclosures and certifications upon request 
to the Commission and the sponsor's appropriate Federal banking agency, 
if any.



Sec.  246.16  Underwriting standards for qualifying commercial loans.

    (a) Underwriting, product and other standards. (1) Prior to 
origination of the commercial loan, the originator:
    (i) Verified and documented the financial condition of the borrower:
    (A) As of the end of the borrower's two most recently completed 
fiscal years; and
    (B) During the period, if any, since the end of its most recently 
completed fiscal year;
    (ii) Conducted an analysis of the borrower's ability to service its 
overall debt obligations during the next two years, based on reasonable 
projections;
    (iii) Determined that, based on the previous two years' actual 
performance, the borrower had:
    (A) A total liabilities ratio of 50 percent or less;
    (B) A leverage ratio of 3.0 or less; and

[[Page 200]]

    (C) A DSC ratio of 1.5 or greater;
    (iv) Determined that, based on the two years of projections, which 
include the new debt obligation, following the closing date of the loan, 
the borrower will have:
    (A) A total liabilities ratio of 50 percent or less;
    (B) A leverage ratio of 3.0 or less; and
    (C) A DSC ratio of 1.5 or greater.
    (2) Prior to, upon or promptly following the inception of the loan, 
the originator:
    (i) If the loan is originated on a secured basis, obtains a 
perfected security interest (by filing, title notation or otherwise) or, 
in the case of real property, a recorded lien, on all of the property 
pledged to collateralize the loan; and
    (ii) If the loan documents indicate the purpose of the loan is to 
finance the purchase of tangible or intangible property, or to refinance 
such a loan, obtains a first lien on the property.
    (3) The loan documentation for the commercial loan includes 
covenants that:
    (i) Require the borrower to provide to the servicer of the 
commercial loan the borrower's financial statements and supporting 
schedules on an ongoing basis, but not less frequently than quarterly;
    (ii) Prohibit the borrower from retaining or entering into a debt 
arrangement that permits payments-in-kind;
    (iii) Impose limits on:
    (A) The creation or existence of any other security interest or lien 
with respect to any of the borrower's property that serves as collateral 
for the loan;
    (B) The transfer of any of the borrower's assets that serve as 
collateral for the loan; and
    (C) Any change to the name, location or organizational structure of 
the borrower, or any other party that pledges collateral for the loan;
    (iv) Require the borrower and any other party that pledges 
collateral for the loan to:
    (A) Maintain insurance that protects against loss on the collateral 
for the commercial loan at least up to the amount of the loan, and that 
names the originator or any subsequent holder of the loan as an 
additional insured or loss payee;
    (B) Pay taxes, charges, fees, and claims, where non-payment might 
give rise to a lien on any collateral;
    (C) Take any action required to perfect or protect the security 
interest and first lien (as applicable) of the originator or any 
subsequent holder of the loan in any collateral for the commercial loan 
or the priority thereof, and to defend any collateral against claims 
adverse to the lender's interest;
    (D) Permit the originator or any subsequent holder of the loan, and 
the servicer of the loan, to inspect any collateral for the commercial 
loan and the books and records of the borrower; and
    (E) Maintain the physical condition of any collateral for the 
commercial loan.
    (4) Loan payments required under the loan agreement are:
    (i) Based on level monthly payments of principal and interest (at 
the fully indexed rate) that fully amortize the debt over a term that 
does not exceed five years from the date of origination; and
    (ii) To be made no less frequently than quarterly over a term that 
does not exceed five years.
    (5) The primary source of repayment for the loan is revenue from the 
business operations of the borrower.
    (6) The loan was funded within the six (6) months prior to the cut-
off date or similar date for establishing the composition of the 
securitized assets collateralizing the asset-backed securities issued 
pursuant to the securitization transaction.
    (7) At the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, all 
payments due on the loan are contractually current.
    (8)(i) The depositor of the asset-backed security certifies that it 
has evaluated the effectiveness of its internal supervisory controls 
with respect to the process for ensuring that all qualifying commercial 
loans that collateralize the asset-backed security and that reduce the 
sponsor's risk retention requirement under Sec.  246.15 meet all of the 
requirements set forth in paragraphs (a)(1) through (7) of this

[[Page 201]]

section and has concluded that its internal supervisory controls are 
effective;
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls referenced in paragraph (a)(8)(i) of this section 
shall be performed, for each issuance of an asset-backed security, as of 
a date within 60 days of the cut-off date or similar date for 
establishing the composition of the asset pool collateralizing such 
asset-backed security; and
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (a)(8)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to its 
appropriate Federal banking agency, if any.
    (b) Cure or buy-back requirement. If a sponsor has relied on the 
exception provided in Sec.  246.15 with respect to a qualifying 
commercial loan and it is subsequently determined that the loan did not 
meet all of the requirements set forth in paragraphs (a)(1) through (7) 
of this section, the sponsor shall not lose the benefit of the exception 
with respect to the commercial loan if the depositor complied with the 
certification requirement set forth in paragraph (a)(8) of this section 
and:
    (1) The failure of the loan to meet any of the requirements set 
forth in paragraphs (a)(1) through (7) of this section is not material; 
or
    (2) No later than 90 days after the determination that the loan does 
not meet one or more of the requirements of paragraphs (a)(1) through 
(7) of this section, the sponsor:
    (i) Effectuates cure, establishing conformity of the loan to the 
unmet requirements as of the date of cure; or
    (ii) Repurchases the loan(s) from the issuing entity at a price at 
least equal to the remaining principal balance and accrued interest on 
the loan(s) as of the date of repurchase.
    (3) If the sponsor cures or repurchases pursuant to paragraph (b)(2) 
of this section, the sponsor must promptly notify, or cause to be 
notified, the holders of the asset-backed securities issued in the 
securitization transaction of any loan(s) included in such 
securitization transaction that is required to be cured or repurchased 
by the sponsor pursuant to paragraph (b)(2) of this section, including 
the principal amount of such loan(s) and the cause for such cure or 
repurchase.



Sec.  246.17  Underwriting standards for qualifying CRE loans.

    (a) Underwriting, product and other standards. (1) The CRE loan must 
be secured by the following:
    (i) An enforceable first lien, documented and recorded appropriately 
pursuant to applicable law, on the commercial real estate and 
improvements;
    (ii)(A) An assignment of:
    (1) Leases and rents and other occupancy agreements related to the 
commercial real estate or improvements or the operation thereof for 
which the borrower or an operating affiliate is a lessor or similar 
party and all payments under such leases and occupancy agreements; and
    (2) All franchise, license and concession agreements related to the 
commercial real estate or improvements or the operation thereof for 
which the borrower or an operating affiliate is a lessor, licensor, 
concession granter or similar party and all payments under such other 
agreements, whether the assignments described in this paragraph 
(a)(1)(ii)(A)(2) are absolute or are stated to be made to the extent 
permitted by the agreements governing the applicable franchise, license 
or concession agreements;
    (B) An assignment of all other payments due to the borrower or due 
to any operating affiliate in connection with the operation of the 
property described in paragraph (a)(1)(i) of this section; and
    (C) The right to enforce the agreements described in paragraph 
(a)(1)(ii)(A) of this section and the agreements under which payments 
under paragraph (a)(1)(ii)(B) of this section are due against, and 
collect amounts due from, each lessee, occupant or other obligor whose 
payments were assigned pursuant to paragraphs (a)(1)(ii)(A) or (B) of 
this section upon a breach by the borrower of any of the terms of, or 
the occurrence of any

[[Page 202]]

other event of default (however denominated) under, the loan documents 
relating to such CRE loan; and
    (iii) A security interest:
    (A) In all interests of the borrower and any applicable operating 
affiliate in all tangible and intangible personal property of any kind, 
in or used in the operation of or in connection with, pertaining to, 
arising from, or constituting, any of the collateral described in 
paragraphs (a)(1)(i) or (ii) of this section; and
    (B) In the form of a perfected security interest if the security 
interest in such property can be perfected by the filing of a financing 
statement, fixture filing, or similar document pursuant to the law 
governing the perfection of such security interest;
    (2) Prior to origination of the CRE loan, the originator:
    (i) Verified and documented the current financial condition of the 
borrower and each operating affiliate;
    (ii) Obtained a written appraisal of the real property securing the 
loan that:
    (A) Had an effective date not more than six months prior to the 
origination date of the loan by a competent and appropriately State-
certified or State-licensed appraiser;
    (B) Conforms to generally accepted appraisal standards as evidenced 
by the USPAP and the appraisal requirements \1\ of the Federal banking 
agencies; and
---------------------------------------------------------------------------

    \1\ 12 CFR part 34, subpart C (OCC); 12 CFR part 208, subpart E, and 
12 CFR part 225, subpart G (Board); and 12 CFR part 323 (FDIC).
---------------------------------------------------------------------------

    (C) Provides an ``as is'' opinion of the market value of the real 
property, which includes an income approach; \2\
---------------------------------------------------------------------------

    \2\ See USPAP, Standard 1.
---------------------------------------------------------------------------

    (iii) Qualified the borrower for the CRE loan based on a monthly 
payment amount derived from level monthly payments consisting of both 
principal and interest (at the fully-indexed rate) over the term of the 
loan, not exceeding 25 years, or 30 years for a qualifying multi-family 
property;
    (iv) Conducted an environmental risk assessment to gain 
environmental information about the property securing the loan and took 
appropriate steps to mitigate any environmental liability determined to 
exist based on this assessment;
    (v) Conducted an analysis of the borrower's ability to service its 
overall debt obligations during the next two years, based on reasonable 
projections (including operating income projections for the property);
    (vi)(A) Determined that based on the two years' actual performance 
immediately preceding the origination of the loan, the borrower would 
have had:
    (1) A DSC ratio of 1.5 or greater, if the loan is a qualifying 
leased CRE loan, net of any income derived from a tenant(s) who is not a 
qualified tenant(s);
    (2) A DSC ratio of 1.25 or greater, if the loan is a qualifying 
multi-family property loan; or
    (3) A DSC ratio of 1.7 or greater, if the loan is any other type of 
CRE loan;
    (B) If the borrower did not own the property for any part of the 
last two years prior to origination, the calculation of the DSC ratio, 
for purposes of paragraph (a)(2)(vi)(A) of this section, shall include 
the property's operating income for any portion of the two-year period 
during which the borrower did not own the property;
    (vii) Determined that, based on two years of projections, which 
include the new debt obligation, following the origination date of the 
loan, the borrower will have:
    (A) A DSC ratio of 1.5 or greater, if the loan is a qualifying 
leased CRE loan, net of any income derived from a tenant(s) who is not a 
qualified tenant(s);
    (B) A DSC ratio of 1.25 or greater, if the loan is a qualifying 
multi-family property loan; or
    (C) A DSC ratio of 1.7 or greater, if the loan is any other type of 
CRE loan.
    (3) The loan documentation for the CRE loan includes covenants that:
    (i) Require the borrower to provide the borrower's financial 
statements and supporting schedules to the servicer on an ongoing basis, 
but not less frequently than quarterly, including information on 
existing, maturing and new leasing or rent-roll activity for the 
property securing the loan, as appropriate; and
    (ii) Impose prohibitions on:

[[Page 203]]

    (A) The creation or existence of any other security interest with 
respect to the collateral for the CRE loan described in paragraphs 
(a)(1)(i) and (a)(1)(ii)(A) of this section, except as provided in 
paragraph (a)(4) of this section;
    (B) The transfer of any collateral for the CRE loan described in 
paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section or of any other 
collateral consisting of fixtures, furniture, furnishings, machinery or 
equipment other than any such fixture, furniture, furnishings, machinery 
or equipment that is obsolete or surplus; and
    (C) Any change to the name, location or organizational structure of 
any borrower, operating affiliate or other pledgor unless such borrower, 
operating affiliate or other pledgor shall have given the holder of the 
loan at least 30 days advance notice and, pursuant to applicable law 
governing perfection and priority, the holder of the loan is able to 
take all steps necessary to continue its perfection and priority during 
such 30-day period.
    (iii) Require each borrower and each operating affiliate to:
    (A) Maintain insurance that protects against loss on collateral for 
the CRE loan described in paragraph (a)(1)(i) of this section for an 
amount no less than the replacement cost of the property improvements, 
and names the originator or any subsequent holder of the loan as an 
additional insured or lender loss payee;
    (B) Pay taxes, charges, fees, and claims, where non-payment might 
give rise to a lien on collateral for the CRE loan described in 
paragraphs (a)(1)(i) and (ii) of this section;
    (C) Take any action required to:
    (1) Protect the security interest and the enforceability and 
priority thereof in the collateral described in paragraphs (a)(1)(i) and 
(a)(1)(ii)(A) of this section and defend such collateral against claims 
adverse to the originator's or any subsequent holder's interest; and
    (2) Perfect the security interest of the originator or any 
subsequent holder of the loan in any other collateral for the CRE loan 
to the extent that such security interest is required by this section to 
be perfected;
    (D) Permit the originator or any subsequent holder of the loan, and 
the servicer, to inspect any collateral for the CRE loan and the books 
and records of the borrower or other party relating to any collateral 
for the CRE loan;
    (E) Maintain the physical condition of collateral for the CRE loan 
described in paragraph (a)(1)(i) of this section;
    (F) Comply with all environmental, zoning, building code, licensing 
and other laws, regulations, agreements, covenants, use restrictions, 
and proffers applicable to collateral for the CRE loan described in 
paragraph (a)(1)(i) of this section;
    (G) Comply with leases, franchise agreements, condominium 
declarations, and other documents and agreements relating to the 
operation of collateral for the CRE loan described in paragraph 
(a)(1)(i) of this section, and to not modify any material terms and 
conditions of such agreements over the term of the loan without the 
consent of the originator or any subsequent holder of the loan, or the 
servicer; and
    (H) Not materially alter collateral for the CRE loan described in 
paragraph (a)(1)(i) of this section without the consent of the 
originator or any subsequent holder of the loan, or the servicer.
    (4) The loan documentation for the CRE loan prohibits the borrower 
and each operating affiliate from obtaining a loan secured by a junior 
lien on collateral for the CRE loan described in paragraph (a)(1)(i) or 
(a)(1)(ii)(A) of this section, unless:
    (i) The sum of the principal amount of such junior lien loan, plus 
the principal amount of all other loans secured by collateral described 
in paragraph (a)(1)(i) or (a)(1)(ii)(A) of this section, does not exceed 
the applicable CLTV ratio in paragraph (a)(5) of this section, based on 
the appraisal at origination of such junior lien loan; or
    (ii) Such loan is a purchase money obligation that financed the 
acquisition of machinery or equipment and the borrower or operating 
affiliate (as applicable) pledges such machinery and equipment as 
additional collateral for the CRE loan.
    (5) At origination, the applicable loan-to-value ratios for the loan 
are:

[[Page 204]]

    (i) LTV less than or equal to 65 percent and CLTV less than or equal 
to 70 percent; or
    (ii) LTV less than or equal to 60 percent and CLTV less than or 
equal to 65 percent, if an appraisal used to meet the requirements set 
forth in paragraph (a)(2)(ii) of this section used a direct 
capitalization rate, and that rate is less than or equal to the sum of:
    (A) The 10-year swap rate, as reported in the Federal Reserve's H.15 
Report (or any successor report) as of the date concurrent with the 
effective date of such appraisal; and
    (B) 300 basis points.
    (iii) If the appraisal required under paragraph (a)(2)(ii) of this 
section included a direct capitalization method using an overall 
capitalization rate, that rate must be disclosed to potential investors 
in the securitization.
    (6) All loan payments required to be made under the loan agreement 
are:
    (i) Based on level monthly payments of principal and interest (at 
the fully indexed rate) to fully amortize the debt over a term that does 
not exceed 25 years, or 30 years for a qualifying multifamily loan; and
    (ii) To be made no less frequently than monthly over a term of at 
least ten years.
    (7) Under the terms of the loan agreement:
    (i) Any maturity of the note occurs no earlier than ten years 
following the date of origination;
    (ii) The borrower is not permitted to defer repayment of principal 
or payment of interest; and
    (iii) The interest rate on the loan is:
    (A) A fixed interest rate;
    (B) An adjustable interest rate and the borrower, prior to or 
concurrently with origination of the CRE loan, obtained a derivative 
that effectively results in a fixed interest rate; or
    (C) An adjustable interest rate and the borrower, prior to or 
concurrently with origination of the CRE loan, obtained a derivative 
that established a cap on the interest rate for the term of the loan, 
and the loan meets the underwriting criteria in paragraphs (a)(2)(vi) 
and (vii) of this section using the maximum interest rate allowable 
under the interest rate cap.
    (8) The originator does not establish an interest reserve at 
origination to fund all or part of a payment on the loan.
    (9) At the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, all 
payments due on the loan are contractually current.
    (10)(i) The depositor of the asset-backed security certifies that it 
has evaluated the effectiveness of its internal supervisory controls 
with respect to the process for ensuring that all qualifying CRE loans 
that collateralize the asset-backed security and that reduce the 
sponsor's risk retention requirement under Sec.  246.15 meet all of the 
requirements set forth in paragraphs (a)(1) through (9) of this section 
and has concluded that its internal supervisory controls are effective;
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls referenced in paragraph (a)(10)(i) of this section 
shall be performed, for each issuance of an asset-backed security, as of 
a date within 60 days of the cut-off date or similar date for 
establishing the composition of the asset pool collateralizing such 
asset-backed security;
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (a)(10)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to its 
appropriate Federal banking agency, if any; and
    (11) Within two weeks of the closing of the CRE loan by its 
originator or, if sooner, prior to the transfer of such CRE loan to the 
issuing entity, the originator shall have obtained a UCC lien search 
from the jurisdiction of organization of the borrower and each operating 
affiliate, that does not report, as of the time that the security 
interest of the originator in the property described in paragraph 
(a)(1)(iii) of this section was perfected, other higher priority liens 
of record on any property described in paragraph (a)(1)(iii) of this 
section, other than purchase money security interests.

[[Page 205]]

    (b) Cure or buy-back requirement. If a sponsor has relied on the 
exception provided in Sec.  246.15 with respect to a qualifying CRE loan 
and it is subsequently determined that the CRE loan did not meet all of 
the requirements set forth in paragraphs (a)(1) through (9) and (a)(11) 
of this section, the sponsor shall not lose the benefit of the exception 
with respect to the CRE loan if the depositor complied with the 
certification requirement set forth in paragraph (a)(10) of this 
section, and:
    (1) The failure of the loan to meet any of the requirements set 
forth in paragraphs (a)(1) through (9) and (a)(11) of this section is 
not material; or;
    (2) No later than 90 days after the determination that the loan does 
not meet one or more of the requirements of paragraphs (a)(1) through 
(9) or (a)(11) of this section, the sponsor:
    (i) Effectuates cure, restoring conformity of the loan to the unmet 
requirements as of the date of cure; or
    (ii) Repurchases the loan(s) from the issuing entity at a price at 
least equal to the remaining principal balance and accrued interest on 
the loan(s) as of the date of repurchase.
    (3) If the sponsor cures or repurchases pursuant to paragraph (b)(2) 
of this section, the sponsor must promptly notify, or cause to be 
notified, the holders of the asset-backed securities issued in the 
securitization transaction of any loan(s) included in such 
securitization transaction that is required to be cured or repurchased 
by the sponsor pursuant to paragraph (b)(2) of this section, including 
the principal amount of such repurchased loan(s) and the cause for such 
cure or repurchase.



Sec.  246.18  Underwriting standards for qualifying automobile loans.

    (a) Underwriting, product and other standards. (1) Prior to 
origination of the automobile loan, the originator:
    (i) Verified and documented that within 30 days of the date of 
origination:
    (A) The borrower was not currently 30 days or more past due, in 
whole or in part, on any debt obligation;
    (B) Within the previous 24 months, the borrower has not been 60 days 
or more past due, in whole or in part, on any debt obligation;
    (C) Within the previous 36 months, the borrower has not:
    (1) Been a debtor in a proceeding commenced under Chapter 7 
(Liquidation), Chapter 11 (Reorganization), Chapter 12 (Family Farmer or 
Family Fisherman plan), or Chapter 13 (Individual Debt Adjustment) of 
the U.S. Bankruptcy Code; or
    (2) Been the subject of any federal or State judicial judgment for 
the collection of any unpaid debt;
    (D) Within the previous 36 months, no one-to-four family property 
owned by the borrower has been the subject of any foreclosure, deed in 
lieu of foreclosure, or short sale; or
    (E) Within the previous 36 months, the borrower has not had any 
personal property repossessed;
    (ii) Determined and documented that the borrower has at least 24 
months of credit history; and
    (iii) Determined and documented that, upon the origination of the 
loan, the borrower's DTI ratio is less than or equal to 36 percent.
    (A) For the purpose of making the determination under paragraph 
(a)(1)(iii) of this section, the originator must:
    (1) Verify and document all income of the borrower that the 
originator includes in the borrower's effective monthly income (using 
payroll stubs, tax returns, profit and loss statements, or other similar 
documentation); and
    (2) On or after the date of the borrower's written application and 
prior to origination, obtain a credit report regarding the borrower from 
a consumer reporting agency that compiles and maintain files on 
consumers on a nationwide basis (within the meaning of 15 U.S.C. 
1681a(p)) and verify that all outstanding debts reported in the 
borrower's credit report are incorporated into the calculation of the 
borrower's DTI ratio under paragraph (a)(1)(iii) of this section;
    (2) An originator will be deemed to have met the requirements of 
paragraph (a)(1)(i) of this section if:
    (i) The originator, no more than 30 days before the closing of the 
loan, obtains a credit report regarding the borrower from a consumer 
reporting agency that compiles and maintains files on

[[Page 206]]

consumers on a nationwide basis (within the meaning of 15 U.S.C. 
1681a(p));
    (ii) Based on the information in such credit report, the borrower 
meets all of the requirements of paragraph (a)(1)(i) of this section, 
and no information in a credit report subsequently obtained by the 
originator before the closing of the loan contains contrary information; 
and
    (iii) The originator obtains electronic or hard copies of the credit 
report.
    (3) At closing of the automobile loan, the borrower makes a down 
payment from the borrower's personal funds and trade-in allowance, if 
any, that is at least equal to the sum of:
    (i) The full cost of the vehicle title, tax, and registration fees;
    (ii) Any dealer-imposed fees;
    (iii) The full cost of any additional warranties, insurance or other 
products purchased in connection with the purchase of the vehicle; and
    (iv) 10 percent of the vehicle purchase price.
    (4) The originator records a first lien securing the loan on the 
purchased vehicle in accordance with State law.
    (5) The terms of the loan agreement provide a maturity date for the 
loan that does not exceed the lesser of:
    (i) Six years from the date of origination; or
    (ii) 10 years minus the difference between the current model year 
and the vehicle's model year.
    (6) The terms of the loan agreement:
    (i) Specify a fixed rate of interest for the life of the loan;
    (ii) Provide for a level monthly payment amount that fully amortizes 
the amount financed over the loan term;
    (iii) Do not permit the borrower to defer repayment of principal or 
payment of interest; and
    (iv) Require the borrower to make the first payment on the 
automobile loan within 45 days of the loan's contract date.
    (7) At the cut-off date or similar date for establishing the 
composition of the securitized assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction, all 
payments due on the loan are contractually current; and
    (8)(i) The depositor of the asset-backed security certifies that it 
has evaluated the effectiveness of its internal supervisory controls 
with respect to the process for ensuring that all qualifying automobile 
loans that collateralize the asset-backed security and that reduce the 
sponsor's risk retention requirement under Sec.  246.15 meet all of the 
requirements set forth in paragraphs (a)(1) through (7) of this section 
and has concluded that its internal supervisory controls are effective;
    (ii) The evaluation of the effectiveness of the depositor's internal 
supervisory controls referenced in paragraph (a)(8)(i) of this section 
shall be performed, for each issuance of an asset-backed security, as of 
a date within 60 days of the cut-off date or similar date for 
establishing the composition of the asset pool collateralizing such 
asset-backed security; and
    (iii) The sponsor provides, or causes to be provided, a copy of the 
certification described in paragraph (a)(8)(i) of this section to 
potential investors a reasonable period of time prior to the sale of 
asset-backed securities in the issuing entity, and, upon request, to its 
appropriate Federal banking agency, if any.
    (b) Cure or buy-back requirement. If a sponsor has relied on the 
exception provided in Sec.  246.15 with respect to a qualifying 
automobile loan and it is subsequently determined that the loan did not 
meet all of the requirements set forth in paragraphs (a)(1) through (7) 
of this section, the sponsor shall not lose the benefit of the exception 
with respect to the automobile loan if the depositor complied with the 
certification requirement set forth in paragraph (a)(8) of this section, 
and:
    (1) The failure of the loan to meet any of the requirements set 
forth in paragraphs (a)(1) through (7) of this section is not material; 
or
    (2) No later than ninety (90) days after the determination that the 
loan does not meet one or more of the requirements of paragraphs (a)(1) 
through (7) of this section, the sponsor:
    (i) Effectuates cure, establishing conformity of the loan to the 
unmet requirements as of the date of cure; or
    (ii) Repurchases the loan(s) from the issuing entity at a price at 
least equal to the remaining principal balance and

[[Page 207]]

accrued interest on the loan(s) as of the date of repurchase.
    (3) If the sponsor cures or repurchases pursuant to paragraph (b)(2) 
of this section, the sponsor must promptly notify, or cause to be 
notified, the holders of the asset-backed securities issued in the 
securitization transaction of any loan(s) included in such 
securitization transaction that is required to be cured or repurchased 
by the sponsor pursuant to paragraph (b)(2) of this section, including 
the principal amount of such loan(s) and the cause for such cure or 
repurchase.



Sec.  246.19  General exemptions.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    Community-focused residential mortgage means a residential mortgage 
exempt from the definition of ``covered transaction'' under Sec.  
1026.43(a)(3)(iv) and (v) of the CFPB's Regulation Z (12 CFR 
1026.43(a)).
    First pay class means a class of ABS interests for which all 
interests in the class are entitled to the same priority of payment and 
that, at the time of closing of the transaction, is entitled to 
repayments of principal and payments of interest prior to or pro-rata 
with all other classes of securities collateralized by the same pool of 
first-lien residential mortgages, until such class has no principal or 
notional balance remaining.
    Inverse floater means an ABS interest issued as part of a 
securitization transaction for which interest or other income is payable 
to the holder based on a rate or formula that varies inversely to a 
reference rate of interest.
    Qualifying three-to-four unit residential mortgage loan means a 
mortgage loan that is:
    (i) Secured by a dwelling (as defined in 12 CFR 1026.2(a)(19)) that 
is owner occupied and contains three-to-four housing units;
    (ii) Is deemed to be for business purposes for purposes of 
Regulation Z under 12 CFR part 1026, Supplement I, paragraph 3(a)(5)(i); 
and
    (iii) Otherwise meets all of the requirements to qualify as a 
qualified mortgage under Sec.  1026.43(e) and (f) of Regulation Z (12 
CFR 1026.43(e) and (f)) as if the loan were a covered transaction under 
that section.
    (b) This part shall not apply to:
    (1) U.S. Government-backed securitizations. Any securitization 
transaction that:
    (i) Is collateralized solely by residential, multifamily, or health 
care facility mortgage loan assets that are insured or guaranteed (in 
whole or in part) as to the payment of principal and interest by the 
United States or an agency of the United States, and servicing assets; 
or
    (ii) Involves the issuance of asset-backed securities that:
    (A) Are insured or guaranteed as to the payment of principal and 
interest by the United States or an agency of the United States; and
    (B) Are collateralized solely by residential, multifamily, or health 
care facility mortgage loan assets or interests in such assets, and 
servicing assets.
    (2) Certain agricultural loan securitizations. Any securitization 
transaction that is collateralized solely by loans or other assets made, 
insured, guaranteed, or purchased by any institution that is subject to 
the supervision of the Farm Credit Administration, including the Federal 
Agricultural Mortgage Corporation, and servicing assets;
    (3) State and municipal securitizations. Any asset-backed security 
that is a security issued or guaranteed by any State, or by any 
political subdivision of a State, or by any public instrumentality of a 
State that is exempt from the registration requirements of the 
Securities Act of 1933 by reason of section 3(a)(2) of that Act (15 
U.S.C. 77c(a)(2)); and
    (4) Qualified scholarship funding bonds. Any asset-backed security 
that meets the definition of a qualified scholarship funding bond, as 
set forth in section 150(d)(2) of the Internal Revenue Code of 1986 (26 
U.S.C. 150(d)(2)).
    (5) Pass-through resecuritizations. Any securitization transaction 
that:
    (i) Is collateralized solely by servicing assets, and by asset-
backed securities:
    (A) For which credit risk was retained as required under subpart B 
of this part; or

[[Page 208]]

    (B) That were exempted from the credit risk retention requirements 
of this part pursuant to subpart D of this part;
    (ii) Is structured so that it involves the issuance of only a single 
class of ABS interests; and
    (iii) Provides for the pass-through of all principal and interest 
payments received on the underlying asset-backed securities (net of 
expenses of the issuing entity) to the holders of such class.
    (6) First-pay-class securitizations. Any securitization transaction 
that:
    (i) Is collateralized solely by servicing assets, and by first-pay 
classes of asset-backed securities collateralized by first-lien 
residential mortgages on properties located in any state:
    (A) For which credit risk was retained as required under subpart B 
of this part; or
    (B) That were exempted from the credit risk retention requirements 
of this part pursuant to subpart D of this part;
    (ii) Does not provide for any ABS interest issued in the 
securitization transaction to share in realized principal losses other 
than pro rata with all other ABS interests issued in the securitization 
transaction based on the current unpaid principal balance of such ABS 
interests at the time the loss is realized;
    (iii) Is structured to reallocate prepayment risk;
    (iv) Does not reallocate credit risk (other than as a consequence of 
reallocation of prepayment risk); and
    (v) Does not include any inverse floater or similarly structured ABS 
interest.
    (7) Seasoned loans. (i) Any securitization transaction that is 
collateralized solely by servicing assets, and by seasoned loans that 
meet the following requirements:
    (A) The loans have not been modified since origination; and
    (B) None of the loans have been delinquent for 30 days or more.
    (ii) For purposes of this paragraph, a seasoned loan means:
    (A) With respect to asset-backed securities collateralized by 
residential mortgages, a loan that has been outstanding and performing 
for the longer of:
    (1) A period of five years; or
    (2) Until the outstanding principal balance of the loan has been 
reduced to 25 percent of the original principal balance.
    (3) Notwithstanding paragraphs (b)(7)(ii)(A)(1) and (2) of this 
section, any residential mortgage loan that has been outstanding and 
performing for a period of at least seven years shall be deemed a 
seasoned loan.
    (B) With respect to all other classes of asset-backed securities, a 
loan that has been outstanding and performing for the longer of:
    (1) A period of at least two years; or
    (2) Until the outstanding principal balance of the loan has been 
reduced to 33 percent of the original principal balance.
    (8) Certain public utility securitizations. (i) Any securitization 
transaction where the asset-back securities issued in the transaction 
are secured by the intangible property right to collect charges for the 
recovery of specified costs and such other assets, if any, of an issuing 
entity that is wholly owned, directly or indirectly, by an investor 
owned utility company that is subject to the regulatory authority of a 
State public utility commission or other appropriate State agency.
    (ii) For purposes of this paragraph:
    (A) Specified cost means any cost identified by a State legislature 
as appropriate for recovery through securitization pursuant to specified 
cost recovery legislation; and
    (B) Specified cost recovery legislation means legislation enacted by 
a State that:
    (1) Authorizes the investor owned utility company to apply for, and 
authorizes the public utility commission or other appropriate State 
agency to issue, a financing order determining the amount of specified 
costs the utility will be allowed to recover;
    (2) Provides that pursuant to a financing order, the utility 
acquires an intangible property right to charge, collect, and receive 
amounts necessary to provide for the full recovery of the specified 
costs determined to be recoverable, and assures that the charges are 
non-bypassable and will be paid by

[[Page 209]]

customers within the utility's historic service territory who receive 
utility goods or services through the utility's transmission and 
distribution system, even if those customers elect to purchase these 
goods or services from a third party; and
    (3) Guarantees that neither the State nor any of its agencies has 
the authority to rescind or amend the financing order, to revise the 
amount of specified costs, or in any way to reduce or impair the value 
of the intangible property right, except as may be contemplated by 
periodic adjustments authorized by the specified cost recovery 
legislation.
    (c) Exemption for securitizations of assets issued, insured or 
guaranteed by the United States. This part shall not apply to any 
securitization transaction if the asset-backed securities issued in the 
transaction are:
    (1) Collateralized solely by obligations issued by the United States 
or an agency of the United States and servicing assets;
    (2) Collateralized solely by assets that are fully insured or 
guaranteed as to the payment of principal and interest by the United 
States or an agency of the United States (other than those referred to 
in paragraph (b)(1)(i) of this section) and servicing assets; or
    (3) Fully guaranteed as to the timely payment of principal and 
interest by the United States or any agency of the United States;
    (d) Federal Deposit Insurance Corporation securitizations. This part 
shall not apply to any securitization transaction that is sponsored by 
the Federal Deposit Insurance Corporation acting as conservator or 
receiver under any provision of the Federal Deposit Insurance Act or of 
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act.
    (e) Reduced requirement for certain student loan securitizations. 
The 5 percent risk retention requirement set forth in Sec.  246.4 shall 
be modified as follows:
    (1) With respect to a securitization transaction that is 
collateralized solely by student loans made under the Federal Family 
Education Loan Program (``FFELP loans'') that are guaranteed as to 100 
percent of defaulted principal and accrued interest, and servicing 
assets, the risk retention requirement shall be 0 percent;
    (2) With respect to a securitization transaction that is 
collateralized solely by FFELP loans that are guaranteed as to at least 
98 percent but less than 100 percent of defaulted principal and accrued 
interest, and servicing assets, the risk retention requirement shall be 
2 percent; and
    (3) With respect to any other securitization transaction that is 
collateralized solely by FFELP loans, and servicing assets, the risk 
retention requirement shall be 3 percent.
    (f) Community-focused lending securitizations. (1) This part shall 
not apply to any securitization transaction if the asset-backed 
securities issued in the transaction are collateralized solely by 
community-focused residential mortgages and servicing assets.
    (2) For any securitization transaction that includes both community-
focused residential mortgages and residential mortgages that are not 
exempt from risk retention under this part, the percent of risk 
retention required under Sec.  246.4(a) is reduced by the ratio of the 
unpaid principal balance of the community-focused residential mortgages 
to the total unpaid principal balance of residential mortgages that are 
included in the pool of assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction (the 
community-focused residential mortgage asset ratio); provided that:
    (i) The community-focused residential mortgage asset ratio is 
measured as of the cut-off date or similar date for establishing the 
composition of the pool assets collateralizing the asset-backed 
securities issued pursuant to the securitization transaction; and
    (ii) If the community-focused residential mortgage asset ratio would 
exceed 50 percent, the community-focused residential mortgage asset 
ratio shall be deemed to be 50 percent.
    (g) Exemptions for securitizations of certain three-to-four unit 
mortgage loans. A sponsor shall be exempt from the risk retention 
requirements in subpart B of this part with respect to any 
securitization transaction if:
    (1)(i) The asset-backed securities issued in the transaction are 
collateralized solely by qualifying

[[Page 210]]

three-to-four unit residential mortgage loans and servicing assets; or
    (ii) The asset-backed securities issued in the transaction are 
collateralized solely by qualifying three-to-four unit residential 
mortgage loans, qualified residential mortgages as defined in Sec.  
246.13, and servicing assets.
    (2) The depositor with respect to the securitization provides the 
certifications set forth in Sec.  246.13(b)(4) with respect to the 
process for ensuring that all assets that collateralize the asset-backed 
securities issued in the transaction are qualifying three-to-four unit 
residential mortgage loans, qualified residential mortgages, or 
servicing assets; and
    (3) The sponsor of the securitization complies with the repurchase 
requirements in Sec.  246.13(c) with respect to a loan if, after 
closing, it is determined that the loan does not meet all of the 
criteria to be either a qualified residential mortgage or a qualifying 
three-to-four unit residential mortgage loan, as appropriate.
    (h) Rule of construction. Securitization transactions involving the 
issuance of asset-backed securities that are either issued, insured, or 
guaranteed by, or are collateralized by obligations issued by, or loans 
that are issued, insured, or guaranteed by, the Federal National 
Mortgage Association, the Federal Home Loan Mortgage Corporation, or a 
Federal home loan bank shall not on that basis qualify for exemption 
under this part.



Sec.  246.20  Safe harbor for certain foreign-related transactions.

    (a) Definitions. For purposes of this section, the following 
definition shall apply:
    U.S. person means:
    (i) Any of the following:
    (A) Any natural person resident in the United States;
    (B) Any partnership, corporation, limited liability company, or 
other organization or entity organized or incorporated under the laws of 
any State or of the United States;
    (C) Any estate of which any executor or administrator is a U.S. 
person (as defined under any other clause of this definition);
    (D) Any trust of which any trustee is a U.S. person (as defined 
under any other clause of this definition);
    (E) Any agency or branch of a foreign entity located in the United 
States;
    (F) Any non-discretionary account or similar account (other than an 
estate or trust) held by a dealer or other fiduciary for the benefit or 
account of a U.S. person (as defined under any other clause of this 
definition);
    (G) Any discretionary account or similar account (other than an 
estate or trust) held by a dealer or other fiduciary organized, 
incorporated, or (if an individual) resident in the United States; and
    (H) Any partnership, corporation, limited liability company, or 
other organization or entity if:
    (1) Organized or incorporated under the laws of any foreign 
jurisdiction; and
    (2) Formed by a U.S. person (as defined under any other clause of 
this definition) principally for the purpose of investing in securities 
not registered under the Act; and
    (ii) ``U.S. person(s)'' does not include:
    (A) Any discretionary account or similar account (other than an 
estate or trust) held for the benefit or account of a person not 
constituting a U.S. person (as defined in paragraph (i) of this section) 
by a dealer or other professional fiduciary organized, incorporated, or 
(if an individual) resident in the United States;
    (B) Any estate of which any professional fiduciary acting as 
executor or administrator is a U.S. person (as defined in paragraph (i) 
of this section) if:
    (1) An executor or administrator of the estate who is not a U.S. 
person (as defined in paragraph (i) of this section) has sole or shared 
investment discretion with respect to the assets of the estate; and
    (2) The estate is governed by foreign law;
    (C) Any trust of which any professional fiduciary acting as trustee 
is a U.S. person (as defined in paragraph (i) of this section), if a 
trustee who is not a U.S. person (as defined in paragraph (i) of this 
section) has sole or shared investment discretion with respect to the 
trust assets, and no beneficiary of the

[[Page 211]]

trust (and no settlor if the trust is revocable) is a U.S. person (as 
defined in paragraph (i) of this section);
    (D) An employee benefit plan established and administered in 
accordance with the law of a country other than the United States and 
customary practices and documentation of such country;
    (E) Any agency or branch of a U.S. person (as defined in paragraph 
(i) of this section) located outside the United States if:
    (1) The agency or branch operates for valid business reasons; and
    (2) The agency or branch is engaged in the business of insurance or 
banking and is subject to substantive insurance or banking regulation, 
respectively, in the jurisdiction where located;
    (F) The International Monetary Fund, the International Bank for 
Reconstruction and Development, the Inter-American Development Bank, the 
Asian Development Bank, the African Development Bank, the United 
Nations, and their agencies, affiliates and pension plans, and any other 
similar international organizations, their agencies, affiliates and 
pension plans.
    (b) In general. This part shall not apply to a securitization 
transaction if all the following conditions are met:
    (1) The securitization transaction is not required to be and is not 
registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.);
    (2) No more than 10 percent of the dollar value (or equivalent 
amount in the currency in which the ABS interests are issued, as 
applicable) of all classes of ABS interests in the securitization 
transaction are sold or transferred to U.S. persons or for the account 
or benefit of U.S. persons;
    (3) Neither the sponsor of the securitization transaction nor the 
issuing entity is:
    (i) Chartered, incorporated, or organized under the laws of the 
United States or any State;
    (ii) An unincorporated branch or office (wherever located) of an 
entity chartered, incorporated, or organized under the laws of the 
United States or any State; or
    (iii) An unincorporated branch or office located in the United 
States or any State of an entity that is chartered, incorporated, or 
organized under the laws of a jurisdiction other than the United States 
or any State; and
    (4) If the sponsor or issuing entity is chartered, incorporated, or 
organized under the laws of a jurisdiction other than the United States 
or any State, no more than 25 percent (as determined based on unpaid 
principal balance) of the assets that collateralize the ABS interests 
sold in the securitization transaction were acquired by the sponsor or 
issuing entity, directly or indirectly, from:
    (i) A majority-owned affiliate of the sponsor or issuing entity that 
is chartered, incorporated, or organized under the laws of the United 
States or any State; or
    (ii) An unincorporated branch or office of the sponsor or issuing 
entity that is located in the United States or any State.
    (c) Evasions prohibited. In view of the objective of these rules and 
the policies underlying Section 15G of the Exchange Act, the safe harbor 
described in paragraph (b) of this section is not available with respect 
to any transaction or series of transactions that, although in technical 
compliance with paragraphs (a) and (b) of this section, is part of a 
plan or scheme to evade the requirements of section 15G and this part. 
In such cases, compliance with section 15G and this part is required.



Sec.  246.21  Additional exemptions.

    (a) Securitization transactions. The federal agencies with 
rulewriting authority under section 15G(b) of the Exchange Act (15 
U.S.C. 78o-11(b)) with respect to the type of assets involved may 
jointly provide a total or partial exemption of any securitization 
transaction as such agencies determine may be appropriate in the public 
interest and for the protection of investors.
    (b) Exceptions, exemptions, and adjustments. The Federal banking 
agencies and the Commission, in consultation with the Federal Housing 
Finance Agency and the Department of Housing and Urban Development, may 
jointly adopt or issue exemptions, exceptions or adjustments to the 
requirements of this part, including exemptions, exceptions or 
adjustments for classes of institutions or assets in accordance with

[[Page 212]]

section 15G(e) of the Exchange Act (15 U.S.C. 78o-11(e)).



Sec.  246.22  Periodic review of the QRM definition, exempted three-to-four unit residential mortgage loans, and community-focused residential mortgage 
          exemption

    (a) The Federal banking agencies and the Commission, in consultation 
with the Federal Housing Finance Agency and the Department of Housing 
and Urban Development, shall commence a review of the definition of 
qualified residential mortgage in Sec.  246.13, a review of the 
community-focused residential mortgage exemption in Sec.  246.19(f), and 
a review of the exemption for qualifying three-to-four unit residential 
mortgage loans in Sec.  246.19(g):
    (1) No later than four years after the effective date of the rule 
(as it relates to securitizers and originators of asset-backed 
securities collateralized by residential mortgages), five years 
following the completion of such initial review, and every five years 
thereafter; and
    (2) At any time, upon the request of any Federal banking agency, the 
Commission, the Federal Housing Finance Agency or the Department of 
Housing and Urban Development, specifying the reason for such request, 
including as a result of any amendment to the definition of qualified 
mortgage or changes in the residential housing market.
    (b) The Federal banking agencies, the Commission, the Federal 
Housing Finance Agency and the Department of Housing and Urban 
Development shall publish in the Federal Register notice of the 
commencement of a review and, in the case of a review commenced under 
paragraph (a)(2) of this section, the reason an agency is requesting 
such review. After completion of any review, but no later than six 
months after the publication of the notice announcing the review, unless 
extended by the agencies, the agencies shall jointly publish a notice 
disclosing the determination of their review. If the agencies determine 
to amend the definition of qualified residential mortgage, the agencies 
shall complete any required rulemaking within 12 months of publication 
in the Federal Register of such notice disclosing the determination of 
their review, unless extended by the agencies.



PART 247_REGULATION R_EXEMPTIONS AND DEFINITIONS RELATED TO 
THE EXCEPTIONS FOR BANKS FROM THE DEFINITION OF BROKER--Table of Contents



Sec.
247.100 Definition.
247.700 Defined terms relating to the networking exception from the 
          definition of ``broker.''
247.701 Exemption from the definition of ``broker'' for certain 
          institutional referrals.
247.721 Defined terms relating to the trust and fiduciary activities 
          exception from the definition of ``broker.''
247.722 Exemption allowing banks to calculate trust and fiduciary 
          compensation on a bank-wide basis.
247.723 Exemptions for special accounts, transferred accounts, foreign 
          branches, and a de minimis number of accounts.
247.740 Defined terms relating to the sweep accounts exception from the 
          definition of ``broker.''
247.741 Exemption for banks effecting transactions in money market 
          funds.
247.760 Exemption from definition of ``broker'' for banks accepting 
          orders to effect transactions in securities from or on behalf 
          of custody accounts.
247.771 Exemption from the definition of ``broker'' for banks effecting 
          transactions in securities issued pursuant to Regulation S.
247.772 Exemption from the definition of ``broker'' for banks engaging 
          in securities lending transactions.
247.775 Exemption from the definition of ``broker'' for banks effecting 
          certain excepted or exempted transactions in investment 
          company securities.
247.776 Exemption from the definition of ``broker'' for banks effecting 
          certain excepted or exempted transactions in a company's 
          securities for its employee benefit plans.
247.780 Exemption for banks from liability under section 29 of the 
          Securities Exchange Act of 1934.
247.781 Exemption from the definition of ``broker'' for banks for a 
          limited period of time.

    Authority: 15 U.S.C. 78c, 78o, 78q, 78w, and 78mm.

    Source: 72 FR 56554, Oct. 3, 2007, unless otherwise noted.

[[Page 213]]



Sec.  247.100  Definition.

    For purposes of this part the following definition shall apply: Act 
means the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).



Sec.  247.700  Defined terms relating to the networking exception from
the definition of ``broker.''

    When used with respect to the Third Party Brokerage Arrangements 
(``Networking'') Exception from the definition of the term ``broker'' in 
section 3(a)(4)(B)(i) of the Act (15 U.S.C. 78c(a)(4)(B)(i)) in the 
context of transactions with a customer, the following terms shall have 
the meaning provided:
    (a) Contingent on whether the referral results in a transaction 
means dependent on whether the referral results in a purchase or sale of 
a security; whether an account is opened with a broker or dealer; 
whether the referral results in a transaction involving a particular 
type of security; or whether it results in multiple securities 
transactions; provided, however, that a referral fee may be contingent 
on whether a customer:
    (1) Contacts or keeps an appointment with a broker or dealer as a 
result of the referral; or
    (2) Meets any objective, base-line qualification criteria 
established by the bank or broker or dealer for customer referrals, 
including such criteria as minimum assets, net worth, income, or 
marginal federal or state income tax rate, or any requirement for 
citizenship or residency that the broker or dealer, or the bank, may 
have established generally for referrals for securities brokerage 
accounts.
    (b)(1) Incentive compensation means compensation that is intended to 
encourage a bank employee to refer customers to a broker or dealer or 
give a bank employee an interest in the success of a securities 
transaction at a broker or dealer. The term does not include 
compensation paid by a bank under a bonus or similar plan that is:
    (i) Paid on a discretionary basis; and
    (ii) Based on multiple factors or variables and:
    (A) Those factors or variables include multiple significant factors 
or variables that are not related to securities transactions at the 
broker or dealer;
    (B) A referral made by the employee is not a factor or variable in 
determining the employee's compensation under the plan; and
    (C) The employee's compensation under the plan is not determined by 
reference to referrals made by any other person.
    (2) Nothing in this paragraph (b) shall be construed to prevent a 
bank from compensating an officer, director or employee under a bonus or 
similar plan on the basis of any measure of the overall profitability or 
revenue of:
    (i) The bank, either on a stand-alone or consolidated basis;
    (ii) Any affiliate of the bank (other than a broker or dealer), or 
any operating unit of the bank or an affiliate (other than a broker or 
dealer), if the affiliate or operating unit does not over time 
predominately engage in the business of making referrals to a broker or 
dealer; or
    (iii) A broker or dealer if:
    (A) Such measure of overall profitability or revenue is only one of 
multiple factors or variables used to determine the compensation of the 
officer, director or employee;
    (B) The factors or variables used to determine the compensation of 
the officer, director or employee include multiple significant factors 
or variables that are not related to the profitability or revenue of the 
broker or dealer;
    (C) A referral made by the employee is not a factor or variable in 
determining the employee's compensation under the plan; and
    (D) The employee's compensation under the plan is not determined by 
reference to referrals made by any other person.
    (c) Nominal one-time cash fee of a fixed dollar amount means a cash 
payment for a referral, to a bank employee who was personally involved 
in referring the customer to the broker or dealer, in an amount that 
meets any of the following standards:
    (1) The payment does not exceed:
    (i) Twice the average of the minimum and maximum hourly wage 
established by the bank for the current or prior year for the job family 
that includes the employee; or

[[Page 214]]

    (ii) 1/1000th of the average of the minimum and maximum annual base 
salary established by the bank for the current or prior year for the job 
family that includes the employee; or
    (2) The payment does not exceed twice the employee's actual base 
hourly wage or 1/1000th of the employee's actual annual base salary; or
    (3) The payment does not exceed twenty-five dollars ($25), as 
adjusted in accordance with paragraph (f) of this section.
    (d) Job family means a group of jobs or positions involving similar 
responsibilities, or requiring similar skills, education or training, 
that a bank, or a separate unit, branch or department of a bank, has 
established and uses in the ordinary course of its business to 
distinguish among its employees for purposes of hiring, promotion, and 
compensation.
    (e) Referral means the action taken by one or more bank employees to 
direct a customer of the bank to a broker or dealer for the purchase or 
sale of securities for the customer's account.
    (f) Inflation adjustment--(1) In general. On April 1, 2012, and on 
the 1st day of each subsequent 5-year period, the dollar amount referred 
to in paragraph (c)(3) of this section shall be adjusted by:
    (i) Dividing the annual value of the Employment Cost Index For Wages 
and Salaries, Private Industry Workers (or any successor index thereto), 
as published by the Bureau of Labor Statistics, for the calendar year 
preceding the calendar year in which the adjustment is being made by the 
annual value of such index (or successor) for the calendar year ending 
December 31, 2006; and
    (ii) Multiplying the dollar amount by the quotient obtained in 
paragraph (f)(1)(i) of this section.
    (2) Rounding. If the adjusted dollar amount determined under 
paragraph (f)(1) of this section for any period is not a multiple of $1, 
the amount so determined shall be rounded to the nearest multiple of $1.



Sec.  247.701  Exemption from the definition of ``broker'' for certain
institutional referrals.

    (a) General. A bank that meets the requirements for the exception 
from the definition of ``broker'' under section 3(a)(4)(B)(i) of the Act 
(15 U.S.C. 78c(a)(4)(B)(i)), other than section 3(a)(4)(B)(i)(VI) of the 
Act (15 U.S.C. 78c(a)(4)(B)(i)(VI)), is exempt from the conditions of 
section 3(a)(4)(B)(i)(VI) of the Act solely to the extent that a bank 
employee receives a referral fee for referring a high net worth customer 
or institutional customer to a broker or dealer with which the bank has 
a contractual or other written arrangement of the type specified in 
section 3(a)(4)(B)(i) of the Act, if:
    (1) Bank employee. (i) The bank employee is:
    (A) Not registered or approved, or otherwise required to be 
registered or approved, in accordance with the qualification standards 
established by the rules of any self-regulatory organization;
    (B) Predominantly engaged in banking activities other than making 
referrals to a broker or dealer; and
    (C) Not subject to statutory disqualification, as that term is 
defined in section 3(a)(39) of the Act (15 U.S.C. 78c(a)(39)), except 
subparagraph (E) of that section; and
    (ii) The high net worth customer or institutional customer is 
encountered by the bank employee in the ordinary course of the 
employee's assigned duties for the bank.
    (2) Bank determinations and obligations--(i) Disclosures. The bank 
provides the high net worth customer or institutional customer the 
information set forth in paragraph (b) of this section
    (A) In writing prior to or at the time of the referral; or
    (B) Orally prior to or at the time of the referral and
    (1) The bank provides such information to the customer in writing 
within 3 business days of the date on which the bank employee refers the 
customer to the broker or dealer; or
    (2) The written agreement between the bank and the broker or dealer 
provides for the broker or dealer to provide such information to the 
customer

[[Page 215]]

in writing in accordance with paragraph (a)(3)(i) of this section.
    (ii) Customer qualification. (A) In the case of a customer that is a 
not a natural person, the bank has a reasonable basis to believe that 
the customer is an institutional customer before the referral fee is 
paid to the bank employee.
    (B) In the case of a customer that is a natural person, the bank has 
a reasonable basis to believe that the customer is a high net worth 
customer prior to or at the time of the referral.
    (iii) Employee qualification information. Before a referral fee is 
paid to a bank employee under this section, the bank provides the broker 
or dealer the name of the employee and such other identifying 
information that may be necessary for the broker or dealer to determine 
whether the bank employee is registered or approved, or otherwise 
required to be registered or approved, in accordance with the 
qualification standards established by the rules of any self-regulatory 
organization or is subject to statutory disqualification, as that term 
is defined in section 3(a)(39) of the Act (15 U.S.C. 78c(a)(39)), except 
subparagraph (E) of that section.
    (iv) Good faith compliance and corrections. A bank that acts in good 
faith and that has reasonable policies and procedures in place to comply 
with the requirements of this section shall not be considered a 
``broker'' under section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)) solely 
because the bank fails to comply with the provisions of this paragraph 
(a)(2) with respect to a particular customer if the bank:
    (A) Takes reasonable and prompt steps to remedy the error (such as, 
for example, by promptly making the required determination or promptly 
providing the broker or dealer the required information); and
    (B) Makes reasonable efforts to reclaim the portion of the referral 
fee paid to the bank employee for the referral that does not, following 
any required remedial action, meet the requirements of this section and 
that exceeds the amount otherwise permitted under section 
3(a)(4)(B)(i)(VI) of the Act (15 U.S.C. 78c(a)(4)(B)(i)(VI)) and Sec.  
247.700.
    (3) Provisions of written agreement. The written agreement between 
the bank and the broker or dealer shall require that:
    (i) Broker-dealer written disclosures. If, pursuant to paragraph 
(a)(2)(i)(B)(2) of this section, the broker or dealer is to provide the 
customer in writing the disclosures set forth in paragraph (b) of this 
section, the broker or dealer provides such information to the customer 
in writing:
    (A) Prior to or at the time the customer begins the process of 
opening an account at the broker or dealer, if the customer does not 
have an account with the broker or dealer; or
    (B) Prior to the time the customer places an order for a securities 
transaction with the broker or dealer as a result of the referral, if 
the customer already has an account at the broker or dealer.
    (ii) Customer and employee qualifications. Before the referral fee 
is paid to the bank employee:
    (A) The broker or dealer determine that the bank employee is not 
subject to statutory disqualification, as that term is defined in 
section 3(a)(39) of the Act (15 U.S.C. 78c(a)(39)), except subparagraph 
(E) of that section; and
    (B) The broker or dealer has a reasonable basis to believe that the 
customer is a high net worth customer or an institutional customer.
    (iii) Suitability or sophistication determination by broker or 
dealer--(A) Contingent referral fees. In any case in which payment of 
the referral fee is contingent on completion of a securities transaction 
at the broker or dealer, the broker or dealer, before such securities 
transaction is conducted, perform a suitability analysis of the 
securities transaction in accordance with the rules of the broker or 
dealer's applicable self-regulatory organization as if the broker or 
dealer had recommended the securities transaction.
    (B) Non-contingent referral fees. In any case in which payment of 
the referral fee is not contingent on the completion of a securities 
transaction at the broker or dealer, the broker or dealer, before the 
referral fee is paid, either:
    (1) Determine that the customer:

[[Page 216]]

    (i) Has the capability to evaluate investment risk and make 
independent decisions; and
    (ii) Is exercising independent judgment based on the customer's own 
independent assessment of the opportunities and risks presented by a 
potential investment, market factors and other investment 
considerations; or
    (2) Perform a suitability analysis of all securities transactions 
requested by the customer contemporaneously with the referral in 
accordance with the rules of the broker or dealer's applicable self-
regulatory organization as if the broker or dealer had recommended the 
securities transaction.
    (iv) Notice to the customer. The broker or dealer inform the 
customer if the broker or dealer determines that the customer or the 
securities transaction(s) to be conducted by the customer does not meet 
the applicable standard set forth in paragraph (a)(3)(iii) of this 
section.
    (v) Notice to the bank. The broker or dealer promptly inform the 
bank if the broker or dealer determines that:
    (A) The customer is not a high net worth customer or institutional 
customer, as applicable; or
    (B) The bank employee is subject to statutory disqualification, as 
that term is defined in section 3(a)(39) of the Act (15 U.S.C. 
78c(a)(39)), except subparagraph (E) of that section.
    (b) Required disclosures. The disclosures provided to the high net 
worth customer or institutional customer pursuant to paragraphs 
(a)(2)(i) or (a)(3)(i) of this section shall clearly and conspicuously 
disclose:
    (1) The name of the broker or dealer; and
    (2) That the bank employee participates in an incentive compensation 
program under which the bank employee may receive a fee of more than a 
nominal amount for referring the customer to the broker or dealer and 
payment of this fee may be contingent on whether the referral results in 
a transaction with the broker or dealer.
    (c) Receipt of other compensation. Nothing in this section prevents 
or prohibits a bank from paying or a bank employee from receiving any 
type of compensation that would not be considered incentive compensation 
under Sec.  247.700(b)(1) or that is described in Sec.  247.700(b)(2).
    (d) Definitions. When used in this section:
    (1) High net worth customer--(i) General. High net worth customer 
means:
    (A) Any natural person who, either individually or jointly with his 
or her spouse, has at least $5 million in net worth excluding the 
primary residence and associated liabilities of the person and, if 
applicable, his or her spouse; and
    (B) Any revocable, inter vivos or living trust the settlor of which 
is a natural person who, either individually or jointly with his or her 
spouse, meets the net worth standard set forth in paragraph (d)(1)(i)(A) 
of this section.
    (ii) Individual and spousal assets. In determining whether any 
person is a high net worth customer, there may be included in the assets 
of such person
    (A) Any assets held individually;
    (B) If the person is acting jointly with his or her spouse, any 
assets of the person's spouse (whether or not such assets are held 
jointly); and
    (C) If the person is not acting jointly with his or her spouse, 
fifty percent of any assets held jointly with such person's spouse and 
any assets in which such person shares with such person's spouse a 
community property or similar shared ownership interest.
    (2) Institutional customer means any corporation, partnership, 
limited liability company, trust or other non-natural person that has, 
or is controlled by a non-natural person that has, at least:
    (i) $10 million in investments; or
    (ii) $20 million in revenues; or
    (iii) $15 million in revenues if the bank employee refers the 
customer to the broker or dealer for investment banking services.
    (3) Investment banking services includes, without limitation, acting 
as an underwriter in an offering for an issuer; acting as a financial 
adviser in a merger, acquisition, tender offer or similar transaction; 
providing venture capital, equity lines of credit, private investment-
private equity transactions or similar investments; serving as placement 
agent for an issuer; and engaging in similar activities.

[[Page 217]]

    (4) Referral fee means a fee (paid in one or more installments) for 
the referral of a customer to a broker or dealer that is:
    (i) A predetermined dollar amount, or a dollar amount determined in 
accordance with a predetermined formula (such as a fixed percentage of 
the dollar amount of total assets placed in an account with the broker 
or dealer), that does not vary based on:
    (A) The revenue generated by or the profitability of securities 
transactions conducted by the customer with the broker or dealer; or
    (B) The quantity, price, or identity of securities transactions 
conducted over time by the customer with the broker or dealer; or
    (C) The number of customer referrals made; or
    (ii) A dollar amount based on a fixed percentage of the revenues 
received by the broker or dealer for investment banking services 
provided to the customer.
    (e) Inflation adjustments--(1) In general. On April 1, 2012, and on 
the 1st day of each subsequent 5-year period, each dollar amount in 
paragraphs (d)(1) and (d)(2) of this section shall be adjusted by:
    (i) Dividing the annual value of the Personal Consumption 
Expenditures Chain-Type Price Index (or any successor index thereto), as 
published by the Department of Commerce, for the calendar year preceding 
the calendar year in which the adjustment is being made by the annual 
value of such index (or successor) for the calendar year ending December 
31, 2006; and
    (ii) Multiplying the dollar amount by the quotient obtained in 
paragraph (e)(1)(i) of this section.
    (2) Rounding. If the adjusted dollar amount determined under 
paragraph (e)(1) of this section for any period is not a multiple of 
$100,000, the amount so determined shall be rounded to the nearest 
multiple of $100,000.

[72 FR 56554, Oct. 3, 2007, as amended at 73 FR 20780, Apr. 17, 2008]



Sec.  247.721  Defined terms relating to the trust and fiduciary 
activities exception from the definition of ``broker.''

    (a) Defined terms for chiefly compensated test. For purposes of this 
part and section 3(a)(4)(B)(ii) of the Act (15 U.S.C. 78c(a)(4)(B)(ii)), 
the following terms shall have the meaning provided:
    (1) Chiefly compensated--account-by-account test. Chiefly 
compensated shall mean the relationship-total compensation percentage 
for each trust or fiduciary account of the bank is greater than 50 
percent.
    (2) The relationship-total compensation percentage for a trust or 
fiduciary account shall be the mean of the yearly compensation 
percentage for the account for the immediately preceding year and the 
yearly compensation percentage for the account for the year immediately 
preceding that year.
    (3) The yearly compensation percentage for a trust or fiduciary 
account shall be
    (i) Equal to the relationship compensation attributable to the trust 
or fiduciary account during the year divided by the total compensation 
attributable to the trust or fiduciary account during that year, with 
the quotient expressed as a percentage; and
    (ii) Calculated within 60 days of the end of the year.
    (4) Relationship compensation means any compensation a bank receives 
attributable to a trust or fiduciary account that consists of:
    (i) An administration fee, including, without limitation, a fee 
paid--
    (A) For personal services, tax preparation, or real estate 
settlement services;
    (B) For disbursing funds from, or for recording receipt of payments 
to, a trust or fiduciary account;
    (C) In connection with securities lending or borrowing transactions;
    (D) For custody services; or
    (E) In connection with an investment in shares of an investment 
company for personal service, the maintenance of shareholder accounts or 
any service described in paragraph (a)(4)(iii)(C) of this section;
    (ii) An annual fee (payable on a monthly, quarterly or other basis), 
including, without limitation, a fee paid for assessing investment 
performance or for reviewing compliance with applicable investment 
guidelines or restrictions;
    (iii) A fee based on a percentage of assets under management, 
including, without limitation, a fee paid

[[Page 218]]

    (A) Pursuant to a plan under Sec.  270.12b-1;
    (B) In connection with an investment in shares of an investment 
company for personal service or the maintenance of shareholder accounts;
    (C) Based on a percentage of assets under management for any of the 
following services--
    (1) Providing transfer agent or sub-transfer agent services for 
beneficial owners of investment company shares;
    (2) Aggregating and processing purchase and redemption orders for 
investment company shares;
    (3) Providing beneficial owners with account statements showing 
their purchases, sales, and positions in the investment company;
    (4) Processing dividend payments for the investment company;
    (5) Providing sub-accounting services to the investment company for 
shares held beneficially;
    (6) Forwarding communications from the investment company to the 
beneficial owners, including proxies, shareholder reports, dividend and 
tax notices, and updated prospectuses; or
    (7) Receiving, tabulating, and transmitting proxies executed by 
beneficial owners of investment company shares;
    (D) Based on the financial performance of the assets in an account; 
or
    (E) For the types of services described in paragraph (a)(4)(i)(C) or 
(D) of this section if paid based on a percentage of assets under 
management;
    (iv) A flat or capped per order processing fee, paid by or on behalf 
of a customer or beneficiary, that is equal to not more than the cost 
incurred by the bank in connection with executing securities 
transactions for trust or fiduciary accounts; or
    (v) Any combination of such fees.
    (5) Trust or fiduciary account means an account for which the bank 
acts in a trustee or fiduciary capacity as defined in section 3(a)(4)(D) 
of the Act (15 U.S.C. 78c(a)(4)(D)).
    (6) Year means a calendar year, or fiscal year consistently used by 
the bank for recordkeeping and reporting purposes.
    (b) Revenues derived from transactions conducted under other 
exceptions or exemptions. For purposes of calculating the yearly 
compensation percentage for a trust or fiduciary account, a bank may at 
its election exclude the compensation associated with any securities 
transaction conducted in accordance with the exceptions in section 
3(a)(4)(B)(i) or sections 3(a)(4)(B)(iii)-(xi) of the Act (15 U.S.C. 
78c(a)(4)(B)(i) or 78c(a)(4)(B)(iii)-(xi)) and the rules issued 
thereunder, including any exemption related to such exceptions jointly 
adopted by the Commission and the Board, provided that if the bank 
elects to exclude such compensation, the bank must exclude the 
compensation from both the relationship compensation (if applicable) and 
total compensation for the account.
    (c) Advertising restrictions--(1) In general. A bank complies with 
the advertising restriction in section 3(a)(4)(B)(ii)(II) of the Act (15 
U.S.C. 78c(a)(4)(B)(ii)(II)) if advertisements by or on behalf of the 
bank do not advertise--
    (i) That the bank provides securities brokerage services for trust 
or fiduciary accounts except as part of advertising the bank's broader 
trust or fiduciary services; and
    (ii) The securities brokerage services provided by the bank to trust 
or fiduciary accounts more prominently than the other aspects of the 
trust or fiduciary services provided to such accounts.
    (2) Advertisement. For purposes of this section, the term 
advertisement has the same meaning as in Sec.  247.760(h)(2).

[72 FR 56554, Oct. 3, 2007, as amended at 73 FR 20780, Apr. 17, 2008]



Sec.  247.722  Exemption allowing banks to calculate trust and 
fiduciary compensation on a bank-wide basis.

    (a) General. A bank is exempt from meeting the ``chiefly 
compensated'' condition in section 3(a)(4)(B)(ii)(I) of the Act (15 
U.S.C. 78c(a)(4)(B)(ii)(I)) to the extent that it effects transactions 
in securities for any account in a trustee or fiduciary capacity within 
the scope of section 3(a)(4)(D) of the Act (15 U.S.C. 78c(a)(4)(D)) if:
    (1) The bank meets the other conditions for the exception from the 
definition of the term ``broker'' under sections 3(a)(4)(B)(ii) and 
3(a)(4)(C) of the Act (15 U.S.C. 78c(a)(4)(B)(ii) and 15

[[Page 219]]

U.S.C. 78c(a)(4)(C)), including the advertising restrictions in section 
3(a)(4)(B)(ii)(II) of the Act (15 U.S.C. 78c(a)(4)(B)(ii)(II) as 
implemented by Sec.  247.721(c); and
    (2) The aggregate relationship-total compensation percentage for the 
bank's trust and fiduciary business is at least 70 percent.
    (b) Aggregate relationship-total compensation percentage. For 
purposes of this section, the aggregate relationship-total compensation 
percentage for a bank's trust and fiduciary business shall be the mean 
of the bank's yearly bank-wide compensation percentage for the 
immediately preceding year and the bank's yearly bank-wide compensation 
percentage for the year immediately preceding that year.
    (c) Yearly bank-wide compensation percentage. For purposes of this 
section, a bank's yearly bank-wide compensation percentage for a year 
shall be
    (1) Equal to the relationship compensation attributable to the 
bank's trust and fiduciary business as a whole during the year divided 
by the total compensation attributable to the bank's trust and fiduciary 
business as a whole during that year, with the quotient expressed as a 
percentage; and
    (2) Calculated within 60 days of the end of the year.
    (d) Revenues derived from transactions conducted under other 
exceptions or exemptions. For purposes of calculating the yearly 
compensation percentage for a trust or fiduciary account, a bank may at 
its election exclude the compensation associated with any securities 
transaction conducted in accordance with the exceptions in section 
3(a)(4)(B)(i) or sections 3(a)(4)(B)(iii)-(xi) of the Act (15 U.S.C. 
78c(a)(4)(B)(i) or 78c(a)(4)(B)(iii)-(xi)) and the rules issued 
thereunder, including any exemption related to such sections jointly 
adopted by the Commission and the Board, provided that if the bank 
elects to exclude such compensation, the bank must exclude the 
compensation from both the relationship compensation (if applicable) and 
total compensation of the bank.



Sec.  247.723  Exemptions for special accounts, transferred accounts,
foreign branches and a de minimis number of accounts.

    (a) Short-term accounts. A bank may, in determining its compliance 
with the chiefly compensated test in Sec.  247.721(a)(1) or Sec.  
247.722(a)(2), exclude any trust or fiduciary account that had been open 
for a period of less than 3 months during the relevant year.
    (b) Accounts acquired as part of a business combination or asset 
acquisition. For purposes of determining compliance with the chiefly 
compensated test in Sec.  247.721(a)(1) or Sec.  247.722(a)(2), any 
trust or fiduciary account that a bank acquired from another person as 
part of a merger, consolidation, acquisition, purchase of assets or 
similar transaction may be excluded by the bank for 12 months after the 
date the bank acquired the account from the other person.
    (c) Non-shell foreign branches--(1) Exemption. For purposes of 
determining compliance with the chiefly compensated test in Sec.  
247.722(a)(2), a bank may exclude the trust or fiduciary accounts held 
at a non-shell foreign branch of the bank if the bank has reasonable 
cause to believe that trust or fiduciary accounts of the foreign branch 
held by or for the benefit of a U.S. person as defined in 17 CFR 
230.902(k) constitute less than 10 percent of the total number of trust 
or fiduciary accounts of the foreign branch.
    (2) Rules of construction. Solely for purposes of this paragraph 
(c), a bank will be deemed to have reasonable cause to believe that a 
trust or fiduciary account of a foreign branch of the bank is not held 
by or for the benefit of a U.S. person if
    (i) The principal mailing address maintained and used by the foreign 
branch for the accountholder(s) and beneficiary(ies) of the account is 
not in the United States; or
    (ii) The records of the foreign branch indicate that the 
accountholder(s) and beneficiary(ies) of the account is not a U.S. 
person as defined in 17 CFR 230.902(k).
    (3) Non-shell foreign branch. Solely for purposes of this paragraph 
(c), a non-shell foreign branch of a bank means a branch of the bank

[[Page 220]]

    (i) That is located outside the United States and provides banking 
services to residents of the foreign jurisdiction in which the branch is 
located; and
    (ii) For which the decisions relating to day-to-day operations and 
business of the branch are made at that branch and are not made by an 
office of the bank located in the United States.
    (d) Accounts transferred to a broker or dealer or other unaffiliated 
entity. Notwithstanding section 3(a)(4)(B)(ii)(I) of the Act (15 U.S.C. 
78c(a)(4)(B)(ii)(I)) and Sec.  247.721(a)(1) of this part, a bank 
operating under Sec.  247.721(a)(1) shall not be considered a broker for 
purposes of section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)) solely 
because a trust or fiduciary account does not meet the chiefly 
compensated standard in Sec.  247.721(a)(1) if, within 3 months of the 
end of the year in which the account fails to meet such standard, the 
bank transfers the account or the securities held by or on behalf of the 
account to a broker or dealer registered under section 15 of the Act (15 
U.S.C. 78o) or another entity that is not an affiliate of the bank and 
is not required to be registered as a broker or dealer.
    (e) De minimis exclusion. A bank may, in determining its compliance 
with the chiefly compensated test in Sec.  247.721(a)(1), exclude a 
trust or fiduciary account if:
    (1) The bank maintains records demonstrating that the securities 
transactions conducted by or on behalf of the account were undertaken by 
the bank in the exercise of its trust or fiduciary responsibilities with 
respect to the account;
    (2) The total number of accounts excluded by the bank under this 
paragraph (d) does not exceed the lesser of--
    (i) 1 percent of the total number of trust or fiduciary accounts 
held by the bank, provided that if the number so obtained is less than 1 
the amount shall be rounded up to 1; or
    (ii) 500; and
    (3) The bank did not rely on this paragraph (e) with respect to such 
account during the immediately preceding year.

[72 FR 56554, Oct. 3, 2007, as amended at 73 FR 20780, Apr. 17, 2008]



Sec.  247.740  Defined terms relating to the sweep accounts exception
from the definition of ``broker.''

    For purposes of section 3(a)(4)(B)(v) of the Act (15 U.S.C. 
78c(a)(4)(B)(v)), the following terms shall have the meaning provided:
    (a) Deferred sales load has the same meaning as in 17 CFR 270.6c-10.
    (b) Money market fund means an open-end company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) that is 
regulated as a money market fund pursuant to 17 CFR 270.2a-7.
    (c)(1) No-load, in the context of an investment company or the 
securities issued by an investment company, means, for securities of the 
class or series in which a bank effects transactions, that:
    (i) That class or series is not subject to a sales load or a 
deferred sales load; and
    (ii) Total charges against net assets of that class or series of the 
investment company's securities for sales or sales promotion expenses, 
for personal service, or for the maintenance of shareholder accounts do 
not exceed 0.25 of 1% of average net assets annually.
    (2) For purposes of this definition, charges for the following will 
not be considered charges against net assets of a class or series of an 
investment company's securities for sales or sales promotion expenses, 
for personal service, or for the maintenance of shareholder accounts:
    (i) Providing transfer agent or sub-transfer agent services for 
beneficial owners of investment company shares;
    (ii) Aggregating and processing purchase and redemption orders for 
investment company shares;
    (iii) Providing beneficial owners with account statements showing 
their purchases, sales, and positions in the investment company;
    (iv) Processing dividend payments for the investment company;
    (v) Providing sub-accounting services to the investment company for 
shares held beneficially;
    (vi) Forwarding communications from the investment company to the 
beneficial owners, including proxies, shareholder reports, dividend and 
tax notices, and updated prospectuses; or

[[Page 221]]

    (vii) Receiving, tabulating, and transmitting proxies executed by 
beneficial owners of investment company shares.
    (d) Open-end company has the same meaning as in section 5(a)(1) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-5(a)(1)).
    (e) Sales load has the same meaning as in section 2(a)(35) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(35)).



Sec.  247.741  Exemption for banks effecting transactions in money
market funds.

    (a) A bank is exempt from the definition of the term ``broker'' 
under section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)) to the extent 
that it effects transactions on behalf of a customer in securities 
issued by a money market fund, provided that:
    (1) The bank either
    (i) Provides the customer, directly or indirectly, any other product 
or service, the provision of which would not, in and of itself, require 
the bank to register as a broker or dealer under section 15(a) of the 
Act (15 U.S.C. 78o(a)); or
    (ii) Effects the transactions on behalf of another bank as part of a 
program for the investment or reinvestment of deposit funds of, or 
collected by, the other bank; and
    (2)(i) The class or series of securities is no-load; or
    (ii) If the class or series of securities is not no-load
    (A) The bank or, if applicable, the other bank described in 
paragraph (a)(1)(B) of this section provides the customer, not later 
than at the time the customer authorizes the securities transactions, a 
prospectus for the securities; and
    (B) The bank and, if applicable, the other bank described in 
paragraph (a)(1)(B) of this section do not characterize or refer to the 
class or series of securities as no-load.
    (b) Definitions. For purposes of this section:
    (1) Money market fund has the same meaning as in Sec.  247.740(b).
    (2) No-load has the same meaning as in Sec.  247.740(c).

[72 FR 56554, Oct. 3, 2007, as amended at 73 FR 20780, Apr. 17, 2008]



Sec.  247.760  Exemption from definition of ``broker'' for banks 
accepting orders to effect transactions in securities from or on 
behalf of custody accounts.

    (a) Employee benefit plan accounts and individual retirement 
accounts or similar accounts. A bank is exempt from the definition of 
the term ``broker'' under section 3(a)(4) of the Act (15 U.S.C. 
78c(a)(4)) to the extent that, as part of its customary banking 
activities, the bank accepts orders to effect transactions in securities 
for an employee benefit plan account or an individual retirement account 
or similar account for which the bank acts as a custodian if:
    (1) Employee compensation restriction and additional conditions. The 
bank complies with the employee compensation restrictions in paragraph 
(c) of this section and the other conditions in paragraph (d) of this 
section;
    (2) Advertisements. Advertisements by or on behalf of the bank do 
not:
    (i) Advertise that the bank accepts orders for securities 
transactions for employee benefit plan accounts or individual retirement 
accounts or similar accounts, except as part of advertising the other 
custodial or safekeeping services the bank provides to these accounts; 
or
    (ii) Advertise that such accounts are securities brokerage accounts 
or that the bank's safekeeping and custody services substitute for a 
securities brokerage account; and
    (3) Advertisements and sales literature for individual retirement or 
similar accounts. Advertisements and sales literature issued by or on 
behalf of the bank do not describe the securities order-taking services 
provided by the bank to individual retirement accounts or similar 
accounts more prominently than the other aspects of the custody or 
safekeeping services provided by the bank to these accounts.
    (b) Accommodation trades for other custodial accounts. A bank is 
exempt from the definition of the term ``broker'' under section 3(a)(4) 
of the Act (15

[[Page 222]]

U.S.C. 78c(a)(4)) to the extent that, as part of its customary banking 
activities, the bank accepts orders to effect transactions in securities 
for an account for which the bank acts as custodian other than an 
employee benefit plan account or an individual retirement account or 
similar account if:
    (1) Accommodation. The bank accepts orders to effect transactions in 
securities for the account only as an accommodation to the customer;
    (2) Employee compensation restriction and additional conditions. The 
bank complies with the employee compensation restrictions in paragraph 
(c) of this section and the other conditions in paragraph (d) of this 
section;
    (3) Bank fees. Any fee charged or received by the bank for effecting 
a securities transaction for the account does not vary based on:
    (i) Whether the bank accepted the order for the transaction; or
    (ii) The quantity or price of the securities to be bought or sold;
    (4) Advertisements. Advertisements by or on behalf of the bank do 
not state that the bank accepts orders for securities transactions for 
the account;
    (5) Sales literature. Sales literature issued by or on behalf of the 
bank:
    (i) Does not state that the bank accepts orders for securities 
transactions for the account except as part of describing the other 
custodial or safekeeping services the bank provides to the account; and
    (ii) Does not describe the securities order-taking services provided 
to the account more prominently than the other aspects of the custody or 
safekeeping services provided by the bank to the account; and
    (6) Investment advice and recommendations. The bank does not provide 
investment advice or research concerning securities to the account, make 
recommendations to the account concerning securities or otherwise 
solicit securities transactions from the account; provided, however, 
that nothing in this paragraph (b)(6) shall prevent a bank from:
    (i) Publishing, using or disseminating advertisements and sales 
literature in accordance with paragraphs (b)(4) and (b)(5) of this 
section; and
    (ii) Responding to customer inquiries regarding the bank's 
safekeeping and custody services by providing:
    (A) Advertisements or sales literature consistent with the 
provisions of paragraphs (b)(4) and (b)(5) of this section describing 
the safekeeping, custody and related services that the bank offers;
    (B) A prospectus prepared by a registered investment company, or 
sales literature prepared by a registered investment company or by the 
broker or dealer that is the principal underwriter of the registered 
investment company pertaining to the registered investment company's 
products;
    (C) Information based on the materials described in paragraphs 
(b)(6)(ii)(A) and (B) of this section; or
    (iii) Responding to inquiries regarding the bank's safekeeping, 
custody or other services, such as inquiries concerning the customer's 
account or the availability of sweep or other services, so long as the 
bank does not provide investment advice or research concerning 
securities to the account or make a recommendation to the account 
concerning securities.
    (c) Employee compensation restriction. A bank may accept orders 
pursuant to this section for a securities transaction for an account 
described in paragraph (a) or (b) of this section only if no bank 
employee receives compensation, including a fee paid pursuant to a plan 
under 17 CFR 270.12b-1, from the bank, the executing broker or dealer, 
or any other person that is based on whether a securities transaction is 
executed for the account or that is based on the quantity, price, or 
identity of securities purchased or sold by such account, provided that 
nothing in this paragraph shall prohibit a bank employee from receiving 
compensation that would not be considered incentive compensation under 
Sec.  247.700(b)(1) as if a referral had been made by the bank employee, 
or any compensation described in Sec.  247.700(b)(2).
    (d) Other conditions. A bank may accept orders for a securities 
transaction for an account for which the bank acts as a custodian under 
this section only if the bank:
    (1) Does not act in a trustee or fiduciary capacity (as defined in 
section

[[Page 223]]

3(a)(4)(D) of the Act (15 U.S.C. 78c(a)(4)(D)) with respect to the 
account, other than as a directed trustee;
    (2) Complies with section 3(a)(4)(C) of the Act (15 U.S.C. 
78c(a)(4)(C)) in handling any order for a securities transaction for the 
account; and
    (3) Complies with section 3(a)(4)(B)(viii)(II) of the Act (15 U.S.C. 
78c(a)(4)(B)(viii)(II)) regarding carrying broker activities.
    (e) Non-fiduciary administrators and recordkeepers. A bank that acts 
as a non-fiduciary and non-custodial administrator or recordkeeper for 
an employee benefit plan account for which another bank acts as 
custodian may rely on the exemption provided in this section if:
    (1) Both the custodian bank and the administrator or recordkeeper 
bank comply with paragraphs (a), (c) and (d) of this section; and
    (2) The administrator or recordkeeper bank does not execute a cross-
trade with or for the employee benefit plan account or net orders for 
securities for the employee benefit plan account, other than:
    (i) Crossing or netting orders for shares of open-end investment 
companies not traded on an exchange, or
    (ii) Crossing orders between or netting orders for accounts of the 
custodian bank that contracted with the administrator or recordkeeper 
bank for services.
    (f) Subcustodians. A bank that acts as a subcustodian for an account 
for which another bank acts as custodian may rely on the exemptions 
provided in this section if:
    (1) For employee benefit plan accounts and individual retirement 
accounts or similar accounts, both the custodian bank and the 
subcustodian bank meet the requirements of paragraphs (a), (c) and (d) 
of this section;
    (2) For other custodial accounts, both the custodian bank and the 
subcustodian bank meet the requirements of paragraphs (b), (c) and (d) 
of this section; and
    (3) The subcustodian bank does not execute a cross-trade with or for 
the account or net orders for securities for the account, other than:
    (i) Crossing or netting orders for shares of open-end investment 
companies not traded on an exchange, or
    (ii) Crossing orders between or netting orders for accounts of the 
custodian bank.
    (g) Evasions. In considering whether a bank meets the terms of this 
section, both the form and substance of the relevant account(s), 
transaction(s) and activities (including advertising activities) of the 
bank will be considered in order to prevent evasions of the requirements 
of this section.
    (h) Definitions. When used in this section:
    (1) Account for which the bank acts as a custodian means an account 
that is:
    (i) An employee benefit plan account for which the bank acts as a 
custodian;
    (ii) An individual retirement account or similar account for which 
the bank acts as a custodian;
    (iii) An account established by a written agreement between the bank 
and the customer that sets forth the terms that will govern the fees 
payable to, and rights and obligations of, the bank regarding the 
safekeeping or custody of securities; or
    (iv) An account for which the bank acts as a directed trustee.
    (2) Advertisement means any material that is published or used in 
any electronic or other public media, including any Web site, newspaper, 
magazine or other periodical, radio, television, telephone or tape 
recording, videotape display, signs or billboards, motion pictures, or 
telephone directories (other than routine listings).
    (3) Directed trustee means a trustee that does not exercise 
investment discretion with respect to the account.
    (4) Employee benefit plan account means a pension plan, retirement 
plan, profit sharing plan, bonus plan, thrift savings plan, incentive 
plan, or other similar plan, including, without limitation, an employer-
sponsored plan qualified under section 401(a) of the Internal Revenue 
Code (26 U.S.C. 401(a)), a governmental or other plan described in 
section 457 of the Internal Revenue Code (26 U.S.C. 457), a tax-deferred 
plan described in section 403(b) of the Internal Revenue Code (26 U.S.C. 
403(b)), a

[[Page 224]]

church plan, governmental, multiemployer or other plan described in 
section 414(d), (e) or (f) of the Internal Revenue Code (26 U.S.C. 
414(d), (e) or (f)), an incentive stock option plan described in section 
422 of the Internal Revenue Code (26 U.S.C. 422); a Voluntary Employee 
Beneficiary Association Plan described in section 501(c)(9) of the 
Internal Revenue Code (26 U.S.C. 501(c)(9)), a non-qualified deferred 
compensation plan (including a rabbi or secular trust), a supplemental 
or mirror plan, and a supplemental unemployment benefit plan.
    (5) Individual retirement account or similar account means an 
individual retirement account as defined in section 408 of the Internal 
Revenue Code (26 U.S.C. 408), Roth IRA as defined in section 408A of the 
Internal Revenue Code (26 U.S.C. 408A), health savings account as 
defined in section 223(d) of the Internal Revenue Code (26 U.S.C. 
223(d)), Archer medical savings account as defined in section 220(d) of 
the Internal Revenue Code (26 U.S.C. 220(d)), Coverdell education 
savings account as defined in section 530 of the Internal Revenue Code 
(26 U.S.C. 530), or other similar account.
    (6) Sales literature means any written or electronic communication, 
other than an advertisement, that is generally distributed or made 
generally available to customers of the bank or the public, including 
circulars, form letters, brochures, telemarketing scripts, seminar 
texts, published articles, and press releases concerning the bank's 
products or services.
    (7) Principal underwriter has the same meaning as in section 
2(a)(29) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(29)).



Sec.  247.771  Exemption from the definition of ``broker'' for banks
effecting transactions in securities issued pursuant to Regulation S.

    (a) A bank is exempt from the definition of the term ``broker'' 
under section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)), to the extent 
that, as agent, the bank:
    (1) Effects a sale in compliance with the requirements of 17 CFR 
230.903 of an eligible security to a purchaser who is not in the United 
States;
    (2) Effects, by or on behalf of a person who is not a U.S. person 
under 17 CFR 230.902(k), a resale of an eligible security after its 
initial sale with a reasonable belief that the eligible security was 
initially sold outside of the United States within the meaning of and in 
compliance with the requirements of 17 CFR 230.903 to a purchaser who is 
not in the United States or a registered broker or dealer, provided that 
if the resale is made prior to the expiration of any applicable 
distribution compliance period specified in 17 CFR 230.903(b)(2) or 
(b)(3), the resale is made in compliance with the requirements of 17 CFR 
230.904; or
    (3) Effects, by or on behalf of a registered broker or dealer, a 
resale of an eligible security after its initial sale with a reasonable 
belief that the eligible security was initially sold outside of the 
United States within the meaning of and in compliance with the 
requirements of 17 CFR 230.903 to a purchaser who is not in the United 
States, provided that if the resale is made prior to the expiration of 
any applicable distribution compliance period specified in 17 CFR 
230.903(b)(2) or (b)(3), the resale is made in compliance with the 
requirements of 17 CFR 230.904.
    (b) Definitions. For purposes of this section:
    (1) Distributor has the same meaning as in 17 CFR 230.902(d).
    (2) Eligible security means a security that:
    (i) Is not being sold from the inventory of the bank or an affiliate 
of the bank; and
    (ii) Is not being underwritten by the bank or an affiliate of the 
bank on a firm-commitment basis, unless the bank acquired the security 
from an unaffiliated distributor that did not purchase the security from 
the bank or an affiliate of the bank.
    (3) Purchaser means a person who purchases an eligible security and 
who is not a U.S. person under 17 CFR 230.902(k).

[[Page 225]]



Sec.  247.772  Exemption from the definition of ``broker'' for banks
engaging in securities lending transactions.

    (a) A bank is exempt from the definition of the term ``broker'' 
under section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)), to the extent 
that, as an agent, it engages in or effects securities lending 
transactions, and any securities lending services in connection with 
such transactions, with or on behalf of a person the bank reasonably 
believes to be:
    (1) A qualified investor as defined in section 3(a)(54)(A) of the 
Act (15 U.S.C. 78c(a)(54)(A)); or
    (2) Any employee benefit plan that owns and invests on a 
discretionary basis, not less than $ 25,000,000 in investments.
    (b) Securities lending transaction means a transaction in which the 
owner of a security lends the security temporarily to another party 
pursuant to a written securities lending agreement under which the 
lender retains the economic interests of an owner of such securities, 
and has the right to terminate the transaction and to recall the loaned 
securities on terms agreed by the parties.
    (c) Securities lending services means:
    (1) Selecting and negotiating with a borrower and executing, or 
directing the execution of the loan with the borrower;
    (2) Receiving, delivering, or directing the receipt or delivery of 
loaned securities;
    (3) Receiving, delivering, or directing the receipt or delivery of 
collateral;
    (4) Providing mark-to-market, corporate action, recordkeeping or 
other services incidental to the administration of the securities 
lending transaction;
    (5) Investing, or directing the investment of, cash collateral; or
    (6) Indemnifying the lender of securities with respect to various 
matters.



Sec.  247.775  Exemption from the definition of ``broker'' for banks
effecting certain excepted or exempted transactions in investment 
company securities.

    (a) A bank that meets the conditions for an exception or exemption 
from the definition of the term ``broker'' except for the condition in 
section 3(a)(4)(C)(i) of the Act (15 U.S.C. 78c(a)(4)(C)(i)), is exempt 
from such condition to the extent that it effects a transaction in a 
covered security, if:
    (1) Any such security is neither traded on a national securities 
exchange nor through the facilities of a national securities association 
or an interdealer quotation system;
    (2) The security is distributed by a registered broker or dealer, or 
the sales charge is no more than the amount permissible for a security 
sold by a registered broker or dealer pursuant to any applicable rules 
adopted pursuant to section 22(b)(1) of the Investment Company Act of 
1940 (15 U.S.C. 80a-22(b)(1)) by a securities association registered 
under section 15A of the Act (15 U.S.C. 78o-3); and
    (3) Any such transaction is effected:
    (i) Through the National Securities Clearing Corporation; or
    (ii) Directly with a transfer agent or with an insurance company or 
separate account that is excluded from the definition of transfer agent 
in Section 3(a)(25) of the Act.
    (b) Definitions. For purposes of this section:
    (1) Covered security means:
    (i) Any security issued by an open-end company, as defined by 
section 5(a)(1) of the Investment Company Act (15 U.S.C. 80a-5(a)(1)), 
that is registered under that Act; and
    (ii) Any variable insurance contract funded by a separate account, 
as defined by section 2(a)(37) of the Investment Company Act (15 U.S.C. 
80a-2(a)(37)), that is registered under that Act.
    (2) Interdealer quotation system has the same meaning as in 17 CFR 
240.15c2-11.
    (3) Insurance company has the same meaning as in 15 U.S.C. 
77b(a)(13).

[72 FR 56554, Oct. 3, 2007, as amended at 73 FR 20780, Apr. 17, 2008]



Sec.  247.776  Exemption from the definition of ``broker'' for banks
effecting certain excepted or exempted transactions in a company's 
securities for its employee benefit plans.

    (a) A bank that meets the conditions for an exception or exemption 
from the definition of the term ``broker'' except for the condition in 
section 3(a)(4)(C)(i)

[[Page 226]]

of the Act (15 U.S.C. 78c(a)(4)(C)(i)), is exempt from such condition to 
the extent that it effects a transaction in the securities of a company 
directly with a transfer agent acting for the company that issued the 
security, if:
    (1) No commission is charged with respect to the transaction;
    (2) The transaction is conducted by the bank solely for the benefit 
of an employee benefit plan account;
    (3) Any such security is obtained directly from:
    (i) The company; or
    (ii) An employee benefit plan of the company; and
    (4) Any such security is transferred only to:
    (i) The company; or
    (ii) An employee benefit plan of the company.
    (b) For purposes of this section, the term employee benefit plan 
account has the same meaning as in Sec.  247.760(h)(4).



Sec.  247.780  Exemption for banks from liability under section 29 
of the Securities Exchange Act of 1934.

    (a) No contract entered into before March 31, 2009, shall be void or 
considered voidable by reason of section 29(b) of the Act (15 U.S.C. 
78cc(b)) because any bank that is a party to the contract violated the 
registration requirements of section 15(a) of the Act (15 U.S.C. 
78o(a)), any other applicable provision of the Act, or the rules and 
regulations thereunder based solely on the bank's status as a broker 
when the contract was created.
    (b) No contract shall be void or considered voidable by reason of 
section 29(b) of the Act (15 U.S.C. 78cc(b)) because any bank that is a 
party to the contract violated the registration requirements of section 
15(a) of the Act (15 U.S.C. 78o(a)) or the rules and regulations 
thereunder based solely on the bank's status as a broker when the 
contract was created, if:
    (1) At the time the contract was created, the bank acted in good 
faith and had reasonable policies and procedures in place to comply with 
section 3(a)(4)(B) of the Act (15 U.S.C. 78c(a)(4)(B)) and the rules and 
regulations thereunder; and
    (2) At the time the contract was created, any violation of the 
registration requirements of section 15(a) of the Act by the bank did 
not result in any significant harm or financial loss or cost to the 
person seeking to void the contract.



Sec.  247.781  Exemption from the definition of ``broker'' for banks
for a limited period of time.

    A bank is exempt from the definition of the term ``broker'' under 
section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)) until the first day of 
its first fiscal year commencing after September 30, 2008.



PART 248_REGULATIONS S	P, S	AM, AND S	ID--Table of Contents



Subpart A_Regulation S-P: Privacy of Consumer Financial Information and 
                    Safeguarding Personal Information

Sec.
248.1 Purpose and scope.
248.2 Model privacy form: rule of construction.
248.3 Definitions.

                       Privacy and Opt Out Notices

248.4 Initial privacy notice to consumers required.
248.5 Annual privacy notice to customers required.
248.6 Information to be included in privacy notices.
248.7 Form of opt out notice to consumers; opt out methods.
248.8 Revised privacy notices.
248.9 Delivering privacy and opt out notices.

                          Limits on Disclosures

248.10 Limits on disclosure of nonpublic personal information to 
          nonaffiliated third parties.
248.11 Limits on redisclosure and reuse of information.
248.12 Limits on sharing account number information for marketing 
          purposes.

                               Exceptions

248.13 Exception to opt out requirements for service providers and joint 
          marketing.
248.14 Exceptions to notice and opt out requirements for processing and 
          servicing transactions.
248.15 Other exceptions to notice and opt out requirements.

                 Relation to Other Laws; Effective Date

248.16 Protection of Fair Credit Reporting Act.

[[Page 227]]

248.17 Relation to State laws.
248.18 Effective date; transition rule.
248.19-248.29 [Reserved]
248.30 Procedures to safeguard customer records and information.
248.31-248.100 [Reserved]

Appendix A to Subpart A of Part 248--Forms

      Subpart B_Regulation S-AM: Limitations on Affiliate Marketing

248.101 Purpose and scope.
248.102 Examples.
248.103-248.119 [Reserved]
248.120 Definitions.
248.121 Affiliate marketing opt out and exceptions.
248.122 Scope and duration of opt out.
248.123 Contents of opt out notice; consolidated and equivalent notices.
248.124 Reasonable opportunity to opt out.
248.125 Reasonable and simple methods of opting out.
248.126 Delivery of opt out notices.
248.127 Renewal of opt out elections.
248.128 Effective date, compliance date, and prospective application.

Appendix to Subpart B of Part 248--Model Forms

           Subpart C_Regulation S	ID: Identity Theft Red Flags

248.201 Duties regarding the detection, prevention, and mitigation of 
          identity theft.
248.202 Duties of card issuers regarding changes of address.

Appendix A to Subpart C of Part 248--Interagency Guidelines on Identity 
          Theft Detection, Prevention, and Mitigation

    Authority: 15 U.S.C. 78q, 78q-1, 78o-4, 78o-5, 78w, 78mm, 80a-30, 
80a-37, 80b-4, 80b-11, 1681m(e), 1681s(b), 1681s-3 and note, 
1681w(a)(1), 6801-6809, and 6825; Pub. L. 111-203, secs. 1088(a)(8), 
(a)(10), and sec. 1088(b), 124 Stat. 1376 (2010).

    Source: 65 FR 40362, June 29, 2000, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 248 appear at 74 FR 
40431, Aug. 11, 2009.



Subpart A_Regulation S-P: Privacy of Consumer Financial Information and 
                    Safeguarding Personal Information



Sec.  248.1  Purpose and scope.

    (a) Purpose. This subpart governs the treatment of nonpublic 
personal information about consumers by the financial institutions 
listed in paragraph (b) of this section. This subpart:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution may 
disclose nonpublic personal information about consumers to nonaffiliated 
third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated third 
parties by ``opting out'' of that disclosure, subject to the exceptions 
in Sec. Sec.  248.13, 248.14, and 248.15.
    (b) Scope. Except with respect to Sec.  248.30(b), this subpart 
applies only to nonpublic personal information about individuals who 
obtain financial products or services primarily for personal, family, or 
household purposes from the institutions listed below. This subpart does 
not apply to information about companies or about individuals who obtain 
financial products or services primarily for business, commercial, or 
agricultural purposes. This part applies to brokers, dealers, and 
investment companies, as well as to investment advisers that are 
registered with the Commission. It also applies to foreign (non-
resident) brokers, dealers, investment companies and investment advisers 
that are registered with the Commission. These entities are referred to 
in this subpart as ``you.'' This subpart does not apply to foreign (non-
resident) brokers, dealers, investment companies and investment advisers 
that are not registered with the Commission. Nothing in this subpart 
modifies, limits, or supersedes the standards governing individually 
identifiable health information promulgated by the Secretary of Health 
and Human Services under the authority of sections 262 and 264 of the 
Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 
1320d-1320d-8).

[65 FR 40362, June 29, 2000, as amended at 69 FR 71329, Dec. 8, 2004]



Sec.  248.2  Model privacy form: rule of construction.

    (a) Model privacy form. Use of the model privacy form in appendix A 
to subpart A of this part, consistent with

[[Page 228]]

the instructions in appendix A to subpart A, constitutes compliance with 
the notice content requirements of Sec. Sec.  248.6 and 248.7 of this 
part, although use of the model privacy form is not required.
    (b) Examples. The examples in this part provide guidance concerning 
the rule's application in ordinary circumstances. The facts and 
circumstances of each individual situation, however, will determine 
whether compliance with an example, to the extent practicable, 
constitutes compliance with this part.
    (c) Substituted compliance with CFTC financial privacy rules by 
futures commission merchants and introducing brokers. Except with 
respect to Sec.  248.30(b), any futures commission merchant or 
introducing broker (as those terms are defined in the Commodity Exchange 
Act (7 U.S.C. 1, et seq.)) registered by notice with the Commission for 
the purpose of conducting business in security futures products pursuant 
to section 15(b)(11)(A) of the Securities Exchange Act of 1934 (15 
U.S.C. 78o(b)(11)(A)) that is subject to and in compliance with the 
financial privacy rules of the Commodity Futures Trading Commission (17 
CFR part 160) will be deemed to be in compliance with this part.

[74 FR 62984, Dec. 1, 2009]



Sec.  248.3  Definitions.

    As used in this subpart, unless the context requires otherwise:
    (a) Affiliate of a broker, dealer, or investment company, or an 
investment adviser registered with the Commission means any company that 
controls, is controlled by, or is under common control with the broker, 
dealer, or investment company, or investment adviser registered with the 
Commission. In addition, a broker, dealer, or investment company, or an 
investment adviser registered with the Commission will be deemed an 
affiliate of a company for purposes of this subpart if:
    (1) That company is regulated under Title V of the GLBA by the 
Federal Trade Commission or by a Federal functional regulator other than 
the Commission; and
    (2) Rules adopted by the Federal Trade Commission or another federal 
functional regulator under Title V of the GLBA treat the broker, dealer, 
or investment company, or investment adviser registered with the 
Commission as an affiliate of that company.
    (b) Broker has the same meaning as in section 3(a)(4) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)).
    (c)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice whenever 
possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) Use distinctive type size, style, and graphic devices, such as 
shading or sidebars when you combine your notice with other information.
    (iii) Notices on web sites. If you provide a notice on a web page, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and you 
either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a

[[Page 229]]

page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly to 
the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (d) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, irrespective 
of the source of the underlying information.
    (e) Commission means the Securities and Exchange Commission.
    (f) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (g)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples. (i) An individual is your consumer if he or she 
provides nonpublic personal information to you in connection with 
obtaining or seeking to obtain brokerage services or investment advisory 
services, whether or not you provide brokerage services to the 
individual or establish a continuing relationship with the individual.
    (ii) An individual is not your consumer if he or she provides you 
only with his or her name, address, and general areas of investment 
interest in connection with a request for a prospectus, an investment 
adviser brochure, or other information about financial products or 
services.
    (iii) An individual is not your consumer if he or she has an account 
with another broker or dealer (the introducing broker-dealer) that 
carries securities for the individual in a special omnibus account with 
you (the clearing broker-dealer) in the name of the introducing broker-
dealer, and when you receive only the account numbers and transaction 
information of the introducing broker-dealer's consumers in order to 
clear transactions.
    (iv) If you are an investment company, an individual is not your 
consumer when the individual purchases an interest in shares you have 
issued only through a broker or dealer or investment adviser who is the 
record owner of those shares.
    (v) An individual who is a consumer of another financial institution 
is not your consumer solely because you act as agent for, or provide 
processing or other services to, that financial institution.
    (vi) An individual is not your consumer solely because he or she has 
designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she is 
a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (h) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (i) Control of a company means the power to exercise a controlling 
influence over the management or policies of a company whether through 
ownership of securities, by contract, or otherwise. Any person who owns 
beneficially, either directly or through one or more controlled 
companies, more than 25 percent of the voting securities of any company 
is presumed to control the company. Any person who does not own more 
than 25 percent of the voting securities of any company will be presumed 
not to control the company. Any presumption regarding control may be 
rebutted by evidence, but, in the case of an investment company, will 
continue until the Commission makes a decision to the contrary according 
to the procedures described in section 2(a)(9) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-2(a)(9)).
    (j) Customer means a consumer who has a customer relationship with 
you.
    (k)(1) Customer relationship means a continuing relationship between 
a consumer and you under which you provide one or more financial 
products or services to the consumer that are to be used primarily for 
personal, family, or household purposes.

[[Page 230]]

    (2) Examples--(i) Continuing relationship. A consumer has a 
continuing relationship with you if:
    (A) The consumer has a brokerage account with you, or if a 
consumer's account is transferred to you from another broker-dealer;
    (B) The consumer has an investment advisory contract with you 
(whether written or oral);
    (C) The consumer is the record owner of securities you have issued 
if you are an investment company;
    (D) The consumer holds an investment product through you, such as 
when you act as a custodian for securities or for assets in an 
Individual Retirement Arrangement;
    (E) The consumer purchases a variable annuity from you;
    (F) The consumer has an account with an introducing broker or dealer 
that clears transactions with and for its customers through you on a 
fully disclosed basis;
    (G) You hold securities or other assets as collateral for a loan 
made to the consumer, even if you did not make the loan or do not effect 
any transactions on behalf of the consumer; or
    (H) You regularly effect or engage in securities transactions with 
or for a consumer even if you do not hold any assets of the consumer.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if you open an account for the 
consumer solely for the purpose of liquidating or purchasing securities 
as an accommodation, i.e., on a one time basis, without the expectation 
of engaging in other transactions.
    (l) Dealer has the same meaning as in section 3(a)(5) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5)).
    (m) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The Director of the Office of Thrift Supervision;
    (5) The National Credit Union Administration Board
    (6) The Securities and Exchange Commission; and
    (7) The Commodity Futures Trading Commission.
    (n)(1) Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Financial institution does not include:
    (i) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (ii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party.
    (o)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (p) GLBA means the Gramm-Leach-Bliley Act (Pub. L. No. 106-102, 113 
Stat. 1338 (1999)).
    (q) Investment adviser has the same meaning as in section 202(a)(11) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)).
    (r) Investment company has the same meaning as in section 3 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3), and includes a 
separate series of the investment company.
    (s)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or

[[Page 231]]

    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other company 
that jointly employs the person).
    (2) Nonaffiliated third party includes any company that is an 
affiliate solely by virtue of your or your affiliate's direct or 
indirect ownership or control of the company in conducting merchant 
banking or investment banking activities of the type described in 
section 4(k)(4)(H) or insurance company investment activities of the 
type described in section 4(k)(4)(I) of the Bank Holding Company Act (12 
U.S.C. 1843(k)(4)(H) and (I)).
    (t)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived using 
any personally identifiable financial information that is not publicly 
available information.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (t)(1)(ii) of this section or when the publicly 
available information is disclosed in a manner that indicates the 
individual is or has been your consumer; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available information.
    (3) Examples of lists. (i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available information, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available 
information, and is not disclosed in a manner that indicates that any of 
the individuals on the list is a consumer of a financial institution.
    (u)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a loan, credit card, or other financial product or service;
    (B) Account balance information, payment history, overdraft history, 
and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your customers 
or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on a loan or 
servicing a loan;
    (F) Any information you collect through an Internet ``cookie'' (an 
information collecting device from a web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; or
    (B) Information that does not identify a consumer, such as aggregate 
information or blind data that does not contain personal identifiers 
such as account numbers, names, or addresses.

[[Page 232]]

    (v)(1) Publicly available information means any information that you 
reasonably believe is lawfully made available to the general public 
from:
    (i) Federal, State, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be made 
by federal, State, or local law.
    (2) Examples--(i) Reasonable belief. (A) You have a reasonable 
belief that information about your consumer is made available to the 
general public if you have confirmed, or your consumer has represented 
to you, that the information is publicly available from a source 
described in paragraphs (v)(1)(i)-(iii) of this section;
    (B) You have a reasonable belief that information about your 
consumer is made available to the general public if you have taken steps 
to submit the information, in accordance with your internal procedures 
and policies and with applicable law, to a keeper of federal, State, or 
local government records that is required by law to make the information 
publicly available.
    (C) You have a reasonable belief that an individual's telephone 
number is lawfully made available to the general public if you have 
located the telephone number in the telephone book or the consumer has 
informed you that the telephone number is not unlisted.
    (D) You do not have a reasonable belief that information about a 
consumer is publicly available solely because that information would 
normally be recorded with a keeper of federal, State, or local 
government records that is required by law to make the information 
publicly available, if the consumer has the ability in accordance with 
applicable law to keep that information nonpublic, such as where a 
consumer may record a deed in the name of a blind trust.
    (ii) Government records. Publicly available information in 
government records includes information in government real estate 
records and security interest filings.
    (iii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a web site that is 
available to the general public on an unrestricted basis. A web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available to 
the general public.
    (w) You means:
    (1) Any broker or dealer;
    (2) Any investment company; and
    (3) Any investment adviser registered with the Commission under the 
Investment Advisers Act of 1940.

[65 FR 40362, June 29, 2000, as amended at 66 FR 45147, Aug. 27, 2001; 
74 FR 40431, Aug. 11, 2009]

                       Privacy and Opt Out Notices



Sec.  248.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic personal 
information about the consumer to any nonaffiliated third party, if you 
make such a disclosure other than as authorized by Sec. Sec.  248.14 and 
248.15.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about the 
consumer to any nonaffiliated third party, other than as authorized by 
Sec. Sec.  248.14 and 248.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans. You do not have a customer relationship 
with a consumer if you buy a loan made to the consumer but do not have 
the servicing rights for that loan.

[[Page 233]]

    (3) Examples of establishing customer relationship. You establish a 
customer relationship when the consumer:
    (i) Effects a securities transaction with you or opens a brokerage 
account with you under your procedures;
    (ii) Opens a brokerage account with an introducing broker or dealer 
that clears transactions with and for its customers through you on a 
fully disclosed basis;
    (iii) Enters into an advisory contract with you (whether in writing 
or orally); or
    (iv) Purchases shares you have issued (and the consumer is the 
record owner of the shares), if you are an investment company.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised privacy notice, under Sec.  248.8, 
that covers the customer's new financial product or service; or
    (2) If the initial, revised, or annual notice that you most recently 
provided to that customer was accurate with respect to the new financial 
product or service, you do not need to provide a new privacy notice 
under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a customer relationship if:
    (i) Establishing the customer relationship is not at the customer's 
election;
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time; or
    (iii) A nonaffiliated broker or dealer or investment adviser 
establishes a customer relationship between you and a consumer without 
your prior knowledge.
    (2) Examples of exceptions--(i) Not at customer's election. 
Establishing a customer relationship is not at the customer's election 
if the customer's account is transferred to you by a trustee selected by 
the Securities Investor Protection Corporation (``SIPC'') and appointed 
by a United States Court.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when you and the 
individual agree over the telephone to enter into a customer 
relationship involving prompt delivery of the financial product or 
service.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the relationship 
is initiated in person at your office or through other means by which 
the customer may view the notice, such as on a web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec.  248.9. If 
you use a short-form initial notice for non-customers according to Sec.  
248.6(d), you may deliver your privacy notice according to Sec.  
248.6(d)(3).



Sec.  248.5  Annual privacy notice to customers required.

    (a)(1) General rule. You must provide a clear and conspicuous notice 
to customers that accurately reflects your privacy policies and 
practices not less than annually during the continuation of the customer 
relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may define 
the 12-consecutive-month period, but you must apply it to the customer 
on a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the calendar 
year in which you provided the initial notice. For example, if a 
customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required to 
provide an annual notice to a former customer.

[[Page 234]]

    (2) Examples. Your customer becomes a former customer when:
    (i) The individual's brokerage account is closed;
    (ii) The individual's investment advisory contract is terminated;
    (iii) You are an investment company and the individual is no longer 
the record owner of securities you have issued; or
    (iv) You are an investment company and your customer has been 
determined to be a lost securityholder as defined in 17 CFR 240.17a-
24(b).
    (c) Special rule for loans. If you do not have a customer 
relationship with a consumer under the special provision for loans in 
Sec.  248.4(c)(2), then you need not provide an annual notice to that 
consumer under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec.  248.9.



Sec.  248.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual, and revised privacy notices 
that you provide under Sec. Sec.  248.4, 248.5, and 248.8 must include 
each of the following items of information that applies to you or to the 
consumers to whom you send your privacy notice, in addition to any other 
information you wish to provide:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Sec. Sec.  248.14 and 
248.15;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Sec. Sec.  248.14 and 248.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec.  248.13 (and no other exception 
applies to that disclosure), a separate statement of the categories of 
information you disclose and the categories of third parties with whom 
you have contracted;
    (6) An explanation of the consumer's right under Sec.  248.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that is, 
notices regarding the ability to opt out of disclosures of information 
among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Sec. Sec.  248.14 and 248.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Sec. Sec.  248.4 and 248.5. When describing the 
categories with respect to those parties, it is sufficient to state that 
you make disclosures to other nonaffiliated companies:
    (1) For your everyday business purposes such as [include all that 
apply] to process transactions, maintain account(s), respond to court 
orders and legal investigations, or report to credit bureaus; or
    (2) As permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer-reporting agency.

[[Page 235]]

    (2) Categories of nonpublic personal information you disclose. (i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (e)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to whom 
you disclose. You satisfy the requirement to categorize the affiliates 
and nonaffiliated third parties to whom you disclose nonpublic personal 
information if you list the following categories, as applicable, and a 
few examples to illustrate the types of third parties in each category:
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec.  248.13 to a nonaffiliated third party to market 
products or services that you offer alone or jointly with another 
financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with which you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information to 
affiliates or nonaffiliated third parties except as authorized under 
Sec. Sec.  248.14 and 248.15, you may simply state that fact, in 
addition to the information you must provide under paragraphs (a)(1), 
(a)(8), (a)(9), and (b) of this section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security of 
nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical information 
about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-customers. 
(1) You may satisfy the initial notice requirements in Sec. Sec.  
248.4(a)(2), 248.7(b), and 248.7(c) for a consumer who is not a customer 
by providing a short-form initial notice at the same time as you deliver 
an opt out notice as required in Sec.  248.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
the privacy notice.
    (3) You must deliver your short-form initial notice according to 
Sec.  248.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a consumer 
who receives your short-form notice requests your privacy notice, you 
must deliver your privacy notice according to Sec.  248.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.

[[Page 236]]

    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Model privacy form. Pursuant to Sec.  248.2(a) and appendix A to 
subpart A of this part, Form S-P meets the notice content requirements 
of this section.

[65 FR 40362, June 29, 2000, as amended at 74 FR 62985, Dec. 1, 2009]



Sec.  248.7  Form of opt out notice to consumers; opt out methods.

    (a)(1) Form of opt out notice. If you are required to provide an opt 
out notice under Sec.  248.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal information 
that you disclose or reserve the right to disclose, and all of the 
categories of nonaffiliated third parties to which you disclose the 
information, as described in Sec.  248.6(a)(2) and (3) and state that 
the consumer can opt out of the disclosure of that information; and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his or 
her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provided with the initial notice but did not include with the subsequent 
notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec.  248.4.
    (c) Initial notice required when opt out notice delivered subsequent 
to initial notice. If you provide the opt out notice after the initial 
notice in accordance with Sec.  248.4, you must also include a copy of 
the initial notice with the opt out notice in writing or, if the 
consumer agrees, electronically.
    (d) Joint relationships. (1) If two or more consumers jointly obtain 
a financial product or service from you, you may provide a single opt 
out notice. Your opt out notice must explain how you will treat an opt 
out direction by a joint consumer.
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:

[[Page 237]]

    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint brokerage account with 
you and arrange for you to send statements to John's address, you may do 
any of the following, but you must explain in your opt out notice which 
opt out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary;
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction; or
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other.
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call).
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction. (1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (h) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec.  248.9.
    (i) Model privacy form. Pursuant to Sec.  248.2(a) and appendix A to 
subpart A of this part, Form S-P meets the notice content requirements 
of this section.

[65 FR 40362, June 29, 2000, as amended at 74 FR 62985, Dec. 1, 2009]



Sec.  248.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this subpart, 
you must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec.  248.4, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before you 
disclose the information to the nonaffiliated third party, to opt out of 
the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples. (1) Except as otherwise permitted by Sec. Sec.  
248.13, 248.14, and 248.15, you must provide a revised notice before 
you:
    (i) Disclose a new category of nonpublic personal information to any 
nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has not 
had the opportunity to exercise an opt out right regarding that 
disclosure.

[[Page 238]]

    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec.  248.9.



Sec.  248.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices and 
opt out notices, including short-form initial notices that this subpart 
requires so that each consumer can reasonably be expected to receive 
actual notice in writing or, if the consumer agrees, electronically.
    (b)(1) Examples of reasonable expectation of actual notice. You may 
reasonably expect that a consumer will receive actual notice if you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically, 
post the notice on the electronic site and require the consumer to 
acknowledge receipt of the notice as a necessary step to obtaining a 
particular financial product or service; or
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices; or
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. (1) You may reasonably expect that a 
customer will receive actual notice of your annual privacy notice if:
    (i) The customer uses your web site to access financial products and 
services electronically and agrees to receive notices at the web site 
and you post your current privacy notice continuously in a clear and 
conspicuous manner on the web site; or
    (ii) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (2) Example of reasonable expectation of receipt of annual privacy 
notice. You may reasonably expect that consumers who share an address 
will receive actual notice of your annual privacy notice if you deliver 
the notice with or in a stockholder or shareholder report under the 
conditions in 17 CFR 270.30d-1(f) or 17 CFR 270.30d-2(b), or with or in 
a prospectus under the conditions in 17 CFR 230.154.
    (d) Oral description of notice insufficient. You may not provide any 
notice required by this subpart solely by orally explaining the notice, 
either in person or over the telephone.
    (e) Retention or accessibility of notices for customers. (1) For 
customers only, you must provide the initial notice required by Sec.  
248.4(a)(1), the annual notice required by Sec.  248.5(a), and the 
revised notice required by Sec.  248.8, so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:
    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer; or
    (iii) Make your current privacy notice available on a web site (or a 
link to another web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your

[[Page 239]]

affiliates or other financial institutions, as identified in the notice, 
as long as the notice is accurate with respect to you and the other 
institutions.
    (g) Joint relationships. If two or more consumers jointly obtain a 
financial product or service from you, you may satisfy the initial, 
annual, and revised notice requirements of paragraph (a) of this section 
by providing one notice to those consumers jointly.

                          Limits on Disclosures



Sec.  248.10  Limits on disclosure of nonpublic personal information
to nonaffiliated third parties.

    (a)(1) Conditions for disclosure. Except as otherwise authorized in 
this subpart, you may not, directly or through any affiliate, disclose 
any nonpublic personal information about a consumer to a nonaffiliated 
third party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec.  248.4;
    (ii) You have provided to the consumer an opt out notice as required 
in Sec.  248.7;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that consumer 
to a nonaffiliated third party, other than as permitted by Sec. Sec.  
248.13, 248.14, and 248.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days after the date you mailed the notices.
    (ii) By electronic means. A customer opens an on-line account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the provision of brokerage services to a consumer 
as an accommodation, you provide the consumer with a reasonable 
opportunity to opt out if you provide the notices required in paragraph 
(a)(1) of this section at the time of the transaction and request that 
the consumer decide, as a necessary part of the transaction, whether to 
opt out before completing the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information. (1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information about 
a consumer that you have collected, regardless of whether you collected 
it before or after receiving the direction to opt out from the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.



Sec.  248.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec.  248.14 or Sec.  248.15, your 
disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec.  248.14 or Sec.  248.15 in the ordinary course of 
business to carry out the activity

[[Page 240]]

covered by the exception under which you received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account-processing services 
under the exception in Sec.  248.14(a), you may disclose that 
information under any exception in Sec.  248.14 or Sec.  248.15 in the 
ordinary course of business in order to provide those services. You 
could also disclose that information in response to a properly 
authorized subpoena or in the ordinary course of business to your 
attorneys, accountants, and auditors. You could not disclose that 
information to a third party for marketing purposes or use that 
information for your own marketing purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec.  248.14 or Sec.  
248.15, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if made 
directly to that person by the financial institution from which you 
received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. Sec.  248.14 and 
248.15:
    (i) You may use that list for your own purposes;
    (ii) You may disclose that list to another nonaffiliated third party 
only if the financial institution from which you purchased the list 
could have lawfully disclosed the list to that third party. That is, you 
may disclose the list in accordance with the privacy policy of the 
financial institution from which you received the list, as limited by 
the opt out direction of each consumer whose nonpublic personal 
information you intend to disclose, and you may disclose the list in 
accordance with an exception in Sec.  248.14 or Sec.  248.15, such as in 
the ordinary course of business to your attorneys, accountants, or 
auditors.
    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec.  248.14 or Sec.  248.15, the third party may disclose 
and use that information only as follows:
    (1) The third party may disclose the information to your affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the information; 
and
    (3) The third party may disclose and use the information pursuant to 
an exception in Sec.  248.14 or Sec.  248.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec.  248.14 or Sec.  248.15, the third 
party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose the 
information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.



Sec.  248.12  Limits on sharing account number information for
marketing purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, or transaction account to any nonaffiliated third party for use 
in telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose

[[Page 241]]

an account number or similar form of access number or access code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Example--Account number. An account number, or similar form of 
access number or access code, does not include a number or code in an 
encrypted form, as long as you do not provide the recipient with a means 
to decode the number or code.

                               Exceptions



Sec.  248.13  Exception to opt out requirements for service providers
and joint marketing.

    (a) General rule. (1) The opt out requirements in Sec. Sec.  248.7 
and 248.10 do not apply when you provide nonpublic personal information 
to a nonaffiliated third party to perform services for you or functions 
on your behalf, if you:
    (i) Provide the initial notice in accordance with Sec.  248.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information other 
than to carry out the purposes for which you disclosed the information, 
including use under an exception in Sec.  248.14 or Sec.  248.15 in the 
ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits the 
institution from disclosing or using the nonpublic personal information 
except as necessary to carry out the joint marketing or under an 
exception in Sec.  248.14 or Sec.  248.15 in the ordinary course of 
business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.



Sec.  248.14  Exceptions to notice and opt out requirements for
processing and servicing transactions.

    (a) Exceptions for processing and servicing transactions at 
consumer's request. The requirements for initial notice in Sec.  
248.4(a)(2), for the opt out in Sec. Sec.  248.7 and 248.10, and for 
initial notice in Sec.  248.13 in connection with service providers and 
joint marketing, do not apply if you disclose nonpublic personal 
information as necessary to effect, administer, or enforce a transaction 
that a consumer requests or authorizes, or in connection with:
    (1) Processing or servicing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related to 
a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate, or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain the 
consumer's account in the ordinary course

[[Page 242]]

of providing the financial service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: Account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by federal or State law; or
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.



Sec.  248.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to notice and opt out requirements. The requirements 
for initial notice in Sec.  248.4(a)(2), for the opt out in Sec. Sec.  
248.7 and 248.10, and for initial notice in Sec.  248.13 in connection 
with service providers and joint marketing do not apply when you 
disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2)(i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory organizations, 
guaranty funds or agencies, agencies that are rating you, persons that 
are assessing your compliance with industry standards, and your 
attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a State insurance authority, with 
respect to any person domiciled in that insurance authority's State that 
is engaged in providing insurance, and the Federal Trade Commission), 
self-regulatory organizations, or for an investigation on a matter 
related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.), or
    (ii) From a consumer report reported by a consumer reporting agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with federal, State, or local laws, rules and other 
applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons

[[Page 243]]

by federal, State, or local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, or 
other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated mortgage 
lender of the value of the assets in the consumer's brokerage or 
investment advisory account so that the lender can evaluate the 
consumer's application for a mortgage loan.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal information 
as permitted under Sec.  248.7(f).

                 Relation to Other Laws; Effective Date



Sec.  248.16  Protection of Fair Credit Reporting Act.

    Nothing in this subpart shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), and no inference shall be drawn on the basis of the provisions 
of this subpart regarding whether information is transaction or 
experience information under section 603 of that Act.



Sec.  248.17  Relation to State laws.

    (a) In general. This subpart shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or interpretation 
in effect in any State, except to the extent that such State statute, 
regulation, order, or interpretation is inconsistent with the provisions 
of this subpart, and then only to the extent of the inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this subpart if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this subpart, as determined 
by the Federal Trade Commission, after consultation with the Commission, 
on the Federal Trade Commission's own motion, or upon the petition of 
any interested party.



Sec.  248.18  Effective date; transition rule.

    (a) Effective date. This subpart is effective November 13, 2000. In 
order to provide sufficient time for you to establish policies and 
systems to comply with the requirements of this subpart, the compliance 
date for this subpart is July 1, 2001.
    (b)(1) Notice requirement for consumers who are your customers on 
the compliance date. By July 1, 2001, you must have provided an initial 
notice, as required by Sec.  248.4, to consumers who are your customers 
on July 1, 2001.
    (2) Example. You provide an initial notice to consumers who are your 
customers on July 1, 2001, if, by that date, you have established a 
system for providing an initial notice to all new customers and have 
mailed the initial notice to all your existing customers.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that you have entered into with a nonaffiliated third 
party to perform services for you or functions on your behalf satisfies 
the provisions of Sec.  248.13(a)(2), even if the contract does not 
include a requirement that the third party maintain the confidentiality 
of nonpublic personal information, as long as you entered into the 
agreement on or before July 1, 2000.



Sec. Sec.  248.19-248.29  [Reserved]



Sec.  248.30  Procedures to safeguard customer records and information;
disposal of consumer report information.

    (a) Every broker, dealer, and investment company, and every 
investment adviser registered with the Commission must adopt written 
policies and procedures that address administrative, technical, and 
physical safeguards for the protection of customer records and 
information. These written policies and procedures must be reasonably 
designed to:
    (1) Insure the security and confidentiality of customer records and 
information;
    (2) Protect against any anticipated threats or hazards to the 
security or integrity of customer records and information; and

[[Page 244]]

    (3) Protect against unauthorized access to or use of customer 
records or information that could result in substantial harm or 
inconvenience to any customer.
    (b) Disposal of consumer report information and records--(1) 
Definitions (i) Consumer report has the same meaning as in section 
603(d) of the Fair Credit Reporting Act (15 U.S.C. 1681a(d)).
    (ii) Consumer report information means any record about an 
individual, whether in paper, electronic or other form, that is a 
consumer report or is derived from a consumer report. Consumer report 
information also means a compilation of such records. Consumer report 
information does not include information that does not identify 
individuals, such as aggregate information or blind data.
    (iii) Disposal means:
    (A) The discarding or abandonment of consumer report information; or
    (B) The sale, donation, or transfer of any medium, including 
computer equipment, on which consumer report information is stored.
    (iv) Notice-registered broker-dealers means a broker or dealer 
registered by notice with the Commission under section 15(b)(11) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(11)).
    (v) Transfer agent has the same meaning as in section 3(a)(25) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(25)).
    (2) Proper disposal requirements--(i) Standard. Every broker and 
dealer other than notice-registered broker-dealers, every investment 
company, and every investment adviser and transfer agent registered with 
the Commission, that maintains or otherwise possesses consumer report 
information for a business purpose must properly dispose of the 
information by taking reasonable measures to protect against 
unauthorized access to or use of the information in connection with its 
disposal.
    (ii) Relation to other laws. Nothing in this section shall be 
construed:
    (A) To require any broker, dealer, or investment company, or any 
investment adviser or transfer agent registered with the Commission to 
maintain or destroy any record pertaining to an individual that is not 
imposed under other law; or
    (B) To alter or affect any requirement imposed under any other 
provision of law to maintain or destroy any of those records.

[65 FR 40362, June 29, 2000, as amended at 69 FR 71329, Dec. 8, 2004]



Sec. Sec.  248.31-248.100  [Reserved]



             Sec. Appendix A to Subpart A of Part 248--Forms

    A. Any person may view and print this form at: http://www.sec.gov/
about/forms/secforms.htm.
    B. Use of Form S-P by brokers, dealers, and investment companies, 
and investment advisers registered with the Commission constitutes 
compliance with the notice content requirements of Sec. Sec.  248.6 and 
248.7 of this part.

                      FORM S-P--Model Privacy Form

                        A. The Model Privacy Form

[[Page 245]]

[GRAPHIC] [TIFF OMITTED] TR01DE09.049


[[Page 246]]


[GRAPHIC] [TIFF OMITTED] TR01DE09.050


[[Page 247]]


[GRAPHIC] [TIFF OMITTED] TR01DE09.051


[[Page 248]]


[GRAPHIC] [TIFF OMITTED] TR01DE09.052


[[Page 249]]


[GRAPHIC] [TIFF OMITTED] TR01DE09.053


[[Page 250]]


[GRAPHIC] [TIFF OMITTED] TR01DE09.054


[[Page 251]]


[GRAPHIC] [TIFF OMITTED] TR01DE09.055

                         B. General Instructions

                  1. How the Model Privacy Form is Used

    (a) The model form may be used, at the option of a financial 
institution, including a group of financial institutions that use a 
common privacy notice, to meet the content requirements of the privacy 
notice and opt-out notice set forth in Sec. Sec.  248.6 and 248.7 of 
this part.
    (b) The model form is a standardized form, including page layout, 
content, format, style, pagination, and shading. Institutions seeking to 
obtain the safe harbor through use of the model form may modify it only 
as described in these instructions.
    (c) Note that disclosure of certain information, such as assets, 
income, and information from a consumer reporting agency, may give rise 
to obligations under the Fair Credit Reporting Act [15 U.S.C. 1681-
1681x] (FCRA), such as a requirement to permit a consumer to opt out of 
disclosures to affiliates or designation as a consumer reporting agency 
if disclosures are made to nonaffiliated third parties.
    (d) The word ``customer'' may be replaced by the word ``member'' 
whenever it appears in the model form, as appropriate.

                2. The Contents of the Model Privacy Form

    The model form consists of two pages, which may be printed on both 
sides of a single sheet of paper, or may appear on two separate pages. 
Where an institution provides a long list of institutions at the end of 
the model form in accordance with Instruction C.3(a)(1), or provides 
additional information in accordance with Instruction C.3(c), and such 
list or additional information exceeds the space available on page two 
of the model form, such list or additional information may extend to a 
third page.
    (a) Page One. The first page consists of the following components:
    (1) Date last revised (upper right-hand corner).
    (2) Title.
    (3) Key frame (Why?, What?, How?).
    (4) Disclosure table (``Reasons we can share your personal 
information'').
    (5) ``To limit our sharing'' box, as needed, for the financial 
institution's opt-out information.
    (6) ``Questions'' box, for customer service contact information.
    (7) Mail-in opt-out form, as needed.
    (b) Page Two. The second page consists of the following components:
    (1) Heading (Page 2).
    (2) Frequently Asked Questions (``Who we are'' and ``What we do'').
    (3) Definitions.
    (4) ``Other important information'' box, as needed.

                 3. The Format of the Model Privacy Form

    The format of the model form may be modified only as described 
below.
    (a) Easily readable type font. Financial institutions that use the 
model form must use an easily readable type font. While a number of 
factors together produce easily readable type font, institutions are 
required to use a minimum of 10-point font (unless otherwise expressly 
permitted in these Instructions) and sufficient spacing between the 
lines of type.
    (b) Logo. A financial institution may include a corporate logo on 
any page of the notice, so long as it does not interfere with the

[[Page 252]]

readability of the model form or the space constraints of each page.
    (c) Page size and orientation. Each page of the model form must be 
printed on paper in portrait orientation, the size of which must be 
sufficient to meet the layout and minimum font size requirements, with 
sufficient white space on the top, bottom, and sides of the content.
    (d) Color. The model form must be printed on white or light color 
paper (such as cream) with black or other contrasting ink color. Spot 
color may be used to achieve visual interest, so long as the color 
contrast is distinctive and the color does not detract from the 
readability of the model form. Logos may also be printed in color.
    (e) Languages. The model form may be translated into languages other 
than English.

            C. Information Required in the Model Privacy Form

    The information in the model form may be modified only as described 
below:

1. Name of the Institution or Group of Affiliated Institutions Providing 
                               the Notice

    Insert the name of the financial institution providing the notice or 
a common identity of affiliated institutions jointly providing the 
notice on the form wherever [name of financial institution] appears.

                               2. Page One

    (a) Last revised date. The financial institution must insert in the 
upper right-hand corner the date on which the notice was last revised. 
The information shall appear in minimum 8-point font as ``rev. [month/
year]'' using either the name or number of the month, such as ``rev. 
July 2009'' or ``rev. 7/09''.
    (b) General instructions for the ``What?'' box. (1) The bulleted 
list identifies the types of personal information that the institution 
collects and shares. All institutions must use the term ``Social 
Security number'' in the first bullet.
    (2) Institutions must use five (5) of the following terms to 
complete the bulleted list: income; account balances; payment history; 
transaction history; transaction or loss history; credit history; credit 
scores; assets; investment experience; credit-based insurance scores; 
insurance claim history; medical information; overdraft history; 
purchase history; account transactions; risk tolerance; medical-related 
debts; credit card or other debt; mortgage rates and payments; 
retirement assets; checking account information; employment information; 
wire transfer instructions.
    (c) General instructions for the disclosure table. The left column 
lists reasons for sharing or using personal information. Each reason 
correlates to a specific legal provision described in paragraph C.2(d) 
of this Instruction. In the middle column, each institution must provide 
a ``Yes'' or ``No'' response that accurately reflects its information 
sharing policies and practices with respect to the reason listed on the 
left. In the right column, each institution must provide in each box one 
of the following three (3) responses, as applicable, that reflects 
whether a consumer can limit such sharing: ``Yes'' if it is required to 
or voluntarily provides an opt-out; ``No'' if it does not provide an 
opt-out; or ``We don't share'' if it answers ``No'' in the middle 
column. Only the sixth row (``For our affiliates to market to you'') may 
be omitted at the option of the institution. See paragraph C.2(d)(6) of 
this Instruction.
    (d) Specific disclosures and corresponding legal provisions. (1) For 
our everyday business purposes. This reason incorporates sharing 
information under Sec. Sec.  248.14 and 248.15 and with service 
providers pursuant to Sec.  248.13 of this part other than the purposes 
specified in paragraphs C.2(d)(2) or C.2(d)(3) of these Instructions.
    (2) For our marketing purposes. This reason incorporates sharing 
information with service providers by an institution for its own 
marketing pursuant to Sec.  248.13 of this part. An institution that 
shares for this reason may choose to provide an opt-out.
    (3) For joint marketing with other financial companies. This reason 
incorporates sharing information under joint marketing agreements 
between two or more financial institutions and with any service provider 
used in connection with such agreements pursuant to Sec.  248.13 of this 
part. An institution that shares for this reason may choose to provide 
an opt-out.
    (4) For our affiliates' everyday business purposes--information 
about transactions and experiences. This reason incorporates sharing 
information specified in sections 603(d)(2)(A)(i) and (ii) of the FCRA. 
An institution that shares for this reason may choose to provide an opt-
out.
    (5) For our affiliates' everyday business purposes--information 
about creditworthiness. This reason incorporates sharing information 
pursuant to section 603(d)(2)(A)(iii) of the FCRA. An institution that 
shares for this reason must provide an opt-out.
    (6) For our affiliates to market to you. This reason incorporates 
sharing information specified in section 624 of the FCRA. This reason 
may be omitted from the disclosure table when: the institution does not 
have affiliates (or does not disclose personal information to its 
affiliates); the institution's affiliates do not use personal 
information in a manner that requires an opt-out; or the institution 
provides the affiliate marketing notice separately. Institutions that 
include

[[Page 253]]

this reason must provide an opt-out of indefinite duration. An 
institution that is required to provide an affiliate marketing opt-out, 
but does not include that opt-out in the model form under this part, 
must comply with section 624 of the FCRA and 17 CFR part 248, subpart B, 
with respect to the initial notice and opt-out and any subsequent 
renewal notice and opt-out. An institution not required to provide an 
opt-out under this subparagraph may elect to include this reason in the 
model form.
    (7) For nonaffiliates to market to you. This reason incorporates 
sharing described in Sec. Sec.  248.7 and 248.10(a) of this part. An 
institution that shares personal information for this reason must 
provide an opt-out.
    (e) To limit our sharing: A financial institution must include this 
section of the model form only if it provides an opt-out. The word 
``choice'' may be written in either the singular or plural, as 
appropriate. Institutions must select one or more of the applicable opt-
out methods described: telephone, such as by a toll-free number; a Web 
site; or use of a mail-in opt-out form. Institutions may include the 
words ``toll-free'' before telephone, as appropriate. An institution 
that allows consumers to opt out online must provide either a specific 
Web address that takes consumers directly to the opt-out page or a 
general Web address that provides a clear and conspicuous direct link to 
the opt-out page. The opt-out choices made available to the consumer who 
contacts the institution through these methods must correspond 
accurately to the ``Yes'' responses in the third column of the 
disclosure table. In the part titled ``Please note'' institutions may 
insert a number that is 30 or greater in the space marked ``[30].'' 
Instructions on voluntary or state privacy law opt-out information are 
in paragraph C.2(g)(5) of these Instructions.
    (f) Questions box. Customer service contact information must be 
inserted as appropriate, where [phone number] or [Web site] appear. 
Institutions may elect to provide either a phone number, such as a toll-
free number, or a Web address, or both. Institutions may include the 
words ``toll-free'' before the telephone number, as appropriate.
    (g) Mail-in opt-out form. Financial institutions must include this 
mail-in form only if they state in the ``To limit our sharing'' box that 
consumers can opt out by mail. The mail-in form must provide opt-out 
options that correspond accurately to the ``Yes'' responses in the third 
column in the disclosure table. Institutions that require customers to 
provide only name and address may omit the section identified as 
``[account ].'' Institutions that require additional or different 
information, such as a random opt-out number or a truncated account 
number, to implement an opt-out election should modify the ``[account 
]'' reference accordingly. This includes institutions that require 
customers with multiple accounts to identify each account to which the 
opt-out should apply. An institution must enter its opt-out mailing 
address: in the far right of this form (see version 3); or below the 
form (see version 4). The reverse side of the mail-in opt-out form must 
not include any content of the model form.
    (1) Joint accountholder. Only institutions that provide their joint 
accountholders the choice to opt out for only one accountholder, in 
accordance with paragraph C.3(a)(5) of these Instructions, must include 
in the far left column of the mail-in form the following statement: ``If 
you have a joint account, your choice(s) will apply to everyone on your 
account unless you mark below. [square] Apply my choice(s) only to me.'' 
The word ``choice'' may be written in either the singular or plural, as 
appropriate. Financial institutions that provide insurance products or 
services, provide this option, and elect to use the model form may 
substitute the word ``policy'' for ``account'' in this statement. 
Institutions that do not provide this option may eliminate this left 
column from the mail-in form.
    (2) FCRA Section 603(d)(2)(A)(iii) opt-out. If the institution 
shares personal information pursuant to section 603(d)(2)(A)(iii) of the 
FCRA, it must include in the mail-in opt-out form the following 
statement: ``[square] Do not share information about my creditworthiness 
with your affiliates for their everyday business purposes.''
    (3) FCRA Section 624 opt-out. If the institution incorporates 
section 624 of the FCRA in accord with paragraph C.2(d)(6) of these 
Instructions, it must include in the mail-in opt-out form the following 
statement: ``[square] Do not allow your affiliates to use my personal 
information to market to me.''
    (4) Nonaffiliate opt-out. If the financial institution shares 
personal information pursuant to Sec.  248.10(a) of this part, it must 
include in the mail-in opt-out form the following statement: ``[square] 
Do not share my personal information with nonaffiliates to market their 
products and services to me.''
    (5) Additional opt-outs. Financial institutions that use the 
disclosure table to provide opt-out options beyond those required by 
Federal law must provide those opt-outs in this section of the model 
form. A financial institution that chooses to offer an opt-out for its 
own marketing in the mail-in opt-out form must include one of the two 
following statements: ``[square] Do not share my personal information to 
market to me.'' or ``[square] Do not use my personal information to 
market to me.'' A financial institution that chooses to offer an opt-out 
for joint marketing must include the following statement: ``[square] Do 
not share my personal information with other financial institutions to 
jointly market to me.''

[[Page 254]]

    (h) Barcodes. A financial institution may elect to include a barcode 
and/or ``tagline'' (an internal identifier) in 6-point font at the 
bottom of page one, as needed for information internal to the 
institution, so long as these do not interfere with the clarity or text 
of the form.

                               3. Page Two

    (a) General Instructions for the Questions. Certain of the Questions 
may be customized as follows:
    (1) ``Who is providing this notice?'' This question may be omitted 
where only one financial institution provides the model form and that 
institution is clearly identified in the title on page one. Two or more 
financial institutions that jointly provide the model form must use this 
question to identify themselves as required by Sec.  248.9(f) of this 
part. Where the list of institutions exceeds four (4) lines, the 
institution must describe in the response to this question the general 
types of institutions jointly providing the notice and must separately 
identify those institutions, in minimum 8-point font, directly following 
the ``Other important information'' box, or, if that box is not included 
in the institution's form, directly following the ``Definitions.'' The 
list may appear in a multi-column format.
    (2) ``How does [name of financial institution] protect my personal 
information?'' The financial institution may only provide additional 
information pertaining to its safeguards practices following the 
designated response to this question. Such information may include 
information about the institution's use of cookies or other measures it 
uses to safeguard personal information. Institutions are limited to a 
maximum of 30 additional words.
    (3) ``How does [name of financial institution] collect my personal 
information?'' Institutions must use five (5) of the following terms to 
complete the bulleted list for this question: open an account; deposit 
money; pay your bills; apply for a loan; use your credit or debit card; 
seek financial or tax advice; apply for insurance; pay insurance 
premiums; file an insurance claim; seek advice about your investments; 
buy securities from us; sell securities to us; direct us to buy 
securities; direct us to sell your securities; make deposits or 
withdrawals from your account; enter into an investment advisory 
contract; give us your income information; provide employment 
information; give us your employment history; tell us about your 
investment or retirement portfolio; tell us about your investment or 
retirement earnings; apply for financing; apply for a lease; provide 
account information; give us your contact information; pay us by check; 
give us your wage statements; provide your mortgage information; make a 
wire transfer; tell us who receives the money; tell us where to send the 
money; show your government-issued ID; show your driver's license; order 
a commodity futures or option trade. Institutions that collect personal 
information from their affiliates and/or credit bureaus must include 
after the bulleted list the following statement: ``We also collect your 
personal information from others, such as credit bureaus, affiliates, or 
other companies.'' Institutions that do not collect personal information 
from their affiliates or credit bureaus but do collect information from 
other companies must include the following statement instead: ``We also 
collect your personal information from other companies.'' Only 
institutions that do not collect any personal information from 
affiliates, credit bureaus, or other companies can omit both statements.
    (4) ``Why can't I limit all sharing?'' Institutions that describe 
state privacy law provisions in the ``Other important information'' box 
must use the bracketed sentence: ``See below for more on your rights 
under state law.'' Other institutions must omit this sentence.
    (5) ``What happens when I limit sharing for an account I hold 
jointly with someone else?'' Only financial institutions that provide 
opt-out options must use this question. Other institutions must omit 
this question. Institutions must choose one of the following two 
statements to respond to this question: ``Your choices will apply to 
everyone on your account.'' or ``Your choices will apply to everyone on 
your account--unless you tell us otherwise.'' Financial institutions 
that provide insurance products or services and elect to use the model 
form may substitute the word ``policy'' for ``account'' in these 
statements.
    (b) General Instructions for the Definitions. The financial 
institution must customize the space below the responses to the three 
definitions in this section. This specific information must be in 
italicized lettering to set off the information from the standardized 
definitions.
    (1) Affiliates. As required by Sec.  248.6(a)(3) of this part, where 
[affiliate information] appears, the financial institution must:
    (i) If it has no affiliates, state: ``[name of financial 
institution] has no affiliates;''
    (ii) If it has affiliates but does not share personal information, 
state: ``[name of financial institution] does not share with our 
affiliates;'' or
    (iii) If it shares with its affiliates, state, as applicable: ``Our 
affiliates include companies with a [common corporate identity of 
financial institution] name; financial companies such as [insert 
illustrative list of companies]; nonfinancial companies, such as [insert 
illustrative list of companies] and others, such as [insert illustrative 
list].''
    (2) Nonaffiliates. As required by Sec.  248.6(c)(3) of this part, 
where [nonaffiliate information] appears, the financial institution 
must:

[[Page 255]]

    (i) If it does not share with nonaffiliated third parties, state: 
``[name of financial institution] does not share with nonaffiliates so 
they can market to you;'' or
    (ii) If it shares with nonaffiliated third parties, state, as 
applicable: ``Nonaffiliates we share with can include [list categories 
of companies such as mortgage companies, insurance companies, direct 
marketing companies, and nonprofit organizations].''
    (3) Joint Marketing. As required by Sec.  248.13 of this part, where 
[joint marketing] appears, the financial institution must:
    (i) If it does not engage in joint marketing, state: ``[name of 
financial institution] doesn't jointly market;'' or
    (ii) If it shares personal information for joint marketing, state, 
as applicable: ``Our joint marketing partners include [list categories 
of companies such as credit card companies].''
    (c) General instructions for the ``Other important information'' 
box. This box is optional. The space provided for information in this 
box is not limited. Only the following types of information can appear 
in this box.
    (1) State and/or international privacy law information; and/or
    (2) Acknowledgment of receipt form.

[74 FR 62985, Dec. 1, 2009]



      Subpart B_Regulation S-AM: Limitations on Affiliate Marketing

    Source: 74 FR 40431, Aug. 11, 2009, unless otherwise noted.



Sec.  248.101  Purpose and scope.

    (a) Purpose. The purpose of this subpart is to implement section 624 
of the Fair Credit Reporting Act, 15 U.S.C. 1681, et seq. (``FCRA''). 
Section 624, which was added to the FCRA by section 214 of the Fair and 
Accurate Credit Transactions Act of 2003, Public Law 108-159, 117 Stat. 
1952 (2003) (``FACT Act'' or ``Act''), regulates the use of consumer 
information received from an affiliate to make marketing solicitations.
    (b) Scope. This subpart applies to any broker or dealer other than a 
notice-registered broker or dealer, to any investment company, and to 
any investment adviser or transfer agent registered with the Commission. 
These entities are referred to in this subpart as ``you.''



Sec.  248.102  Examples.

    The examples in this subpart are not exclusive. The examples in this 
subpart provide guidance concerning the rules' application in ordinary 
circumstances. The facts and circumstances of each individual situation, 
however, will determine whether compliance with an example, to the 
extent applicable, constitutes compliance with this subpart. Examples in 
a paragraph illustrate only the issue described in the paragraph and do 
not illustrate any other issue that may arise under this subpart. 
Similarly, the examples do not illustrate any issues that may arise 
under other laws or regulations.



Sec. Sec.  248.103-248.119  [Reserved]



Sec.  248.120  Definitions.

    As used in this subpart, unless the context requires otherwise:
    (a) Affiliate of a broker, dealer, or investment company, or an 
investment adviser or transfer agent registered with the Commission 
means any person that is related by common ownership or common control 
with the broker, dealer, or investment company, or the investment 
adviser or transfer agent registered with the Commission. In addition, a 
broker, dealer, or investment company, or an investment adviser or 
transfer agent registered with the Commission will be deemed an 
affiliate of a company for purposes of this subpart if:
    (1) That company is regulated under section 214 of the FACT Act, 
Public Law 108-159, 117 Stat. 1952 (2003), by a government regulator 
other than the Commission; and
    (2) Rules adopted by the other government regulator under section 
214 of the FACT Act treat the broker, dealer, or investment company, or 
investment adviser or transfer agent registered with the Commission as 
an affiliate of that company.
    (b) Broker has the same meaning as in section 3(a)(4) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)). A ``broker'' does 
not include a broker registered by notice with the Commission under 
section 15(b)(11) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(b)(11)).
    (c) Clear and conspicuous means reasonably understandable and 
designed to call attention to the nature and significance of the 
information presented.

[[Page 256]]

    (d) Commission means the Securities and Exchange Commission.
    (e) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (f) Concise--(1) In general. The term ``concise'' means a reasonably 
brief expression or statement.
    (2) Combination with other required disclosures. A notice required 
by this subpart may be concise even if it is combined with other 
disclosures required or authorized by Federal or State law.
    (g) Consumer means an individual.
    (h) Control of a company means the power to exercise a controlling 
influence over the management or policies of a company whether through 
ownership of securities, by contract, or otherwise. Any person who owns 
beneficially, either directly or through one or more controlled 
companies, more than 25 percent of the voting securities of any company 
is presumed to control the company. Any person who does not own more 
than 25 percent of the voting securities of any company will be presumed 
not to control the company. Any presumption regarding control may be 
rebutted by evidence, but, in the case of an investment company, will 
continue until the Commission makes a decision to the contrary according 
to the procedures described in section 2(a)(9) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-2(a)(9)).
    (i) Dealer has the same meaning as in section 3(a)(5) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5)). A ``dealer'' does 
not include a dealer registered by notice with the Commission under 
section 15(b)(11) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(b)(11)).
    (j) Eligibility information means any information the communication 
of which would be a consumer report if the exclusions from the 
definition of ``consumer report'' in section 603(d)(2)(A) of the FCRA 
did not apply. Eligibility information does not include aggregate or 
blind data that does not contain personal identifiers such as account 
numbers, names, or addresses.
    (k) FCRA means the Fair Credit Reporting Act (15 U.S.C. 1681, et 
seq.).
    (l) GLBA means the Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.).
    (m) Investment adviser has the same meaning as in section 202(a)(11) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)).
    (n) Investment company has the same meaning as in section 3 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3) and includes a separate 
series of the investment company.
    (o) Marketing solicitation--(1) In general. The term ``marketing 
solicitation'' means the marketing of a product or service initiated by 
a person to a particular consumer that is:
    (i) Based on eligibility information communicated to that person by 
its affiliate as described in this subpart; and
    (ii) Intended to encourage the consumer to purchase or obtain such 
product or service.
    (2) Exclusion of marketing directed at the general public. A 
marketing solicitation does not include marketing communications that 
are directed at the general public. For example, television, general 
circulation magazine, billboard advertisements and publicly available 
Web sites that are not directed to particular consumers would not 
constitute marketing solicitations, even if those communications are 
intended to encourage consumers to purchase products and services from 
the person initiating the communications.
    (3) Examples of marketing solicitations. A marketing solicitation 
would include, for example, a telemarketing call, direct mail, e-mail, 
or other form of marketing communication directed to a particular 
consumer that is based on eligibility information received from an 
affiliate.
    (p) Person means any individual, partnership, corporation, trust, 
estate, cooperative, association, government or governmental subdivision 
or agency, or other entity.
    (q) Pre-existing business relationship--(1) In general. The term 
``pre-existing business relationship'' means a relationship between a 
person, or a person's licensed agent, and a consumer based on:
    (i) A financial contract between the person and the consumer which 
is in force on the date on which the consumer is sent a solicitation 
covered by this subpart;

[[Page 257]]

    (ii) The purchase, rental, or lease by the consumer of the person's 
goods or services, or a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) between the consumer and the person, during the 18-month 
period immediately preceding the date on which the consumer is sent a 
solicitation covered by this subpart; or
    (iii) An inquiry or application by the consumer regarding a product 
or service offered by that person during the three-month period 
immediately preceding the date on which the consumer is sent a 
solicitation covered by this subpart.
    (2) Examples of pre-existing business relationships. (i) If a 
consumer has a brokerage account with a broker-dealer that is currently 
in force, the broker-dealer has a pre-existing business relationship 
with the consumer and can use eligibility information it receives from 
its affiliates to make solicitations to the consumer about its products 
or services.
    (ii) If a consumer has an investment advisory contract with a 
registered investment adviser, the investment adviser has a pre-existing 
business relationship with the consumer and can use eligibility 
information it receives from its affiliates to make solicitations to the 
consumer about its products or services.
    (iii) If a consumer was the record owner of securities issued by an 
investment company, but the consumer redeems these securities, the 
investment company has a pre-existing business relationship with the 
consumer and can use eligibility information it receives from its 
affiliates to make solicitations to the consumer about its products or 
services for 18 months after the date the consumer redeemed the 
investment company's securities.
    (iv) If a consumer applies for a margin account offered by a broker-
dealer, but does not obtain a product or service from or enter into a 
financial contract or transaction with the broker-dealer, the broker-
dealer has a pre-existing business relationship with the consumer and 
can therefore use eligibility information it receives from its 
affiliates to make solicitations to the consumer about its products or 
services for three months after the date of the application.
    (v) If a consumer makes a telephone inquiry to a broker-dealer about 
its products or services and provides contact information to the broker-
dealer, but does not obtain a product or service from or enter into a 
financial contract or transaction with the institution, the broker-
dealer has a pre-existing business relationship with the consumer and 
can therefore use eligibility information it receives from its 
affiliates to make solicitations to the consumer about its products or 
services for three months after the date of the inquiry.
    (vi) If a consumer makes an inquiry by e-mail to a broker-dealer 
about one of its affiliated investment company's products or services 
but does not obtain a product or service from, or enter into a financial 
contract or transaction with the broker-dealer or the investment 
company, the broker-dealer and the investment company both have a pre-
existing business relationship with the consumer and can therefore use 
eligibility information they receive from their affiliates to make 
solicitations to the consumer about their products or services for three 
months after the date of the inquiry.
    (vii) If a consumer who has a pre-existing business relationship 
with an investment company that is part of a group of affiliated 
companies makes a telephone call to the centralized call center for the 
affiliated companies to inquire about products or services offered by a 
broker-dealer affiliated with the investment company, and provides 
contact information to the call center, the call constitutes an inquiry 
to the broker-dealer. In these circumstances, the broker-dealer has a 
pre-existing business relationship with the consumer and can therefore 
use eligibility information it receives from the investment company to 
make solicitations to the consumer about its products or services for 
three months after the date of the inquiry.
    (3) Examples where no pre-existing business relationship is created. 
(i) If a consumer makes a telephone call to a centralized call center 
for a group of affiliated companies to inquire about the

[[Page 258]]

consumer's existing account at a broker-dealer, the call does not 
constitute an inquiry to any affiliate other than the broker-dealer that 
holds the consumer's account and does not establish a pre-existing 
business relationship between the consumer and any affiliate of the 
account-holding broker-dealer.
    (ii) If a consumer who has an advisory contract with a registered 
investment adviser makes a telephone call to an affiliate of the 
investment adviser to ask about the affiliate's retail locations and 
hours, but does not make an inquiry about the affiliate's products or 
services, the call does not constitute an inquiry and does not establish 
a pre-existing business relationship between the consumer and the 
affiliate. Also, the affiliate's capture of the consumer's telephone 
number does not constitute an inquiry and does not establish a pre-
existing business relationship between the consumer and the affiliate.
    (iii) If a consumer makes a telephone call to a broker-dealer in 
response to an advertisement offering a free promotional item to 
consumers who call a toll-free number, but the advertisement does not 
indicate that the broker-dealer's products or services will be marketed 
to consumers who call in response, the call does not create a pre-
existing business relationship between the consumer and the broker-
dealer because the consumer has not made an inquiry about a product or 
service offered by the institution, but has merely responded to an offer 
for a free promotional item.
    (r) Transfer agent has the same meaning as in section 3(a)(25) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(25)).
    (s) You means:
    (1) Any broker or dealer other than a broker or dealer registered by 
notice with the Commission under section 15(b)(11) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(b)(11));
    (2) Any investment company;
    (3) Any investment adviser registered with the Commission under the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); and
    (4) Any transfer agent registered with the Commission under section 
17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1).



Sec.  248.121  Affiliate marketing opt out and exceptions.

    (a) Initial notice and opt out requirement--(1) In general. You may 
not use eligibility information about a consumer that you receive from 
an affiliate to make a marketing solicitation to the consumer, unless:
    (i) It is clearly and conspicuously disclosed to the consumer in 
writing or, if the consumer agrees, electronically, in a concise notice 
that you may use eligibility information about that consumer received 
from an affiliate to make marketing solicitations to the consumer;
    (ii) The consumer is provided a reasonable opportunity and a 
reasonable and simple method to ``opt out,'' or the consumer prohibits 
you from using eligibility information to make marketing solicitations 
to the consumer; and
    (iii) The consumer has not opted out.
    (2) Example. A consumer has a brokerage account with a broker-
dealer. The broker-dealer furnishes eligibility information about the 
consumer to its affiliated investment adviser. Based on that eligibility 
information, the investment adviser wants to make a marketing 
solicitation to the consumer about its discretionary advisory accounts. 
The investment adviser does not have a pre-existing business 
relationship with the consumer and none of the other exceptions apply. 
The investment adviser is prohibited from using eligibility information 
received from its broker-dealer affiliate to make marketing 
solicitations to the consumer about its discretionary advisory accounts 
unless the consumer is given a notice and opportunity to opt out and the 
consumer does not opt out.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By an affiliate that has or has previously had a pre-existing 
business relationship with the consumer; or
    (ii) As part of a joint notice from two or more members of an 
affiliated group of companies, provided that at least one of the 
affiliates on the joint notice

[[Page 259]]

has or has previously had a pre-existing business relationship with the 
consumer.
    (b) Making marketing solicitations--(1) In general. For purposes of 
this subpart, you make a marketing solicitation if:
    (i) You receive eligibility information from an affiliate;
    (ii) You use that eligibility information to do one or more of the 
following:
    (A) Identify the consumer or type of consumer to receive a marketing 
solicitation;
    (B) Establish criteria used to select the consumer to receive a 
marketing solicitation; or
    (C) Decide which of your products or services to market to the 
consumer or tailor your marketing solicitation to that consumer; and
    (iii) As a result of your use of the eligibility information, the 
consumer is provided a marketing solicitation.
    (2) Receiving eligibility information from an affiliate, including 
through a common database. You may receive eligibility information from 
an affiliate in various ways, including when the affiliate places that 
information into a common database that you may access.
    (3) Receipt or use of eligibility information by your service 
provider. Except as provided in paragraph (b)(5) of this section, you 
receive or use an affiliate's eligibility information if a service 
provider acting on your behalf (whether an affiliate or a nonaffiliated 
third party) receives or uses that information in the manner described 
in paragraph (b)(1)(i) or (b)(1)(ii) of this section. All relevant facts 
and circumstances will determine whether a person is acting as your 
service provider when it receives or uses an affiliate's eligibility 
information in connection with marketing your products and services.
    (4) Use by an affiliate of its own eligibility information. Unless 
you have used eligibility information that you receive from an affiliate 
in the manner described in paragraph (b)(1)(ii) of this section, you do 
not make a marketing solicitation subject to this subpart if your 
affiliate:
    (i) Uses its own eligibility information that it obtained in 
connection with a pre-existing business relationship it has or had with 
the consumer to market your products or services to the affiliate's 
consumer; or
    (ii) Directs its service provider to use the affiliate's own 
eligibility information that it obtained in connection with a pre-
existing business relationship it has or had with the consumer to market 
your products or services to the consumer, and you do not communicate 
directly with the service provider regarding that use.
    (5) Use of eligibility information by a service provider--(i) In 
general. You do not make a marketing solicitation subject to this 
subpart if a service provider (including an affiliated or third-party 
service provider that maintains or accesses a common database that you 
may access) receives eligibility information from your affiliate that 
your affiliate obtained in connection with a pre-existing business 
relationship it has or had with the consumer and uses that eligibility 
information to market your products or services to that affiliate's 
consumer, so long as:
    (A) Your affiliate controls access to and use of its eligibility 
information by the service provider (including the right to establish 
the specific terms and conditions under which the service provider may 
use such information to market your products or services);
    (B) Your affiliate establishes specific terms and conditions under 
which the service provider may access and use your affiliate's 
eligibility information to market your products and services (or those 
of affiliates generally) to your affiliate's consumers, such as the 
identity of the affiliated companies whose products or services may be 
marketed to the affiliate's consumers by the service provider, the types 
of products or services of affiliated companies that may be marketed, 
and the number of times your affiliate's consumers may receive marketing 
materials, and periodically evaluates the service provider's compliance 
with those terms and conditions;
    (C) Your affiliate requires the service provider to implement 
reasonable policies and procedures designed to ensure that the service 
provider uses your affiliate's eligibility information in accordance 
with the terms and conditions established by your affiliate relating to

[[Page 260]]

the marketing of your products or services;
    (D) Your affiliate is identified on or with the marketing materials 
provided to the consumer; and
    (E) You do not directly use your affiliate's eligibility information 
in the manner described in paragraph (b)(1)(ii) of this section.
    (ii) Writing requirements. (A) The requirements of paragraphs 
(b)(5)(i)(A) and (C) of this section must be set forth in a written 
agreement between your affiliate and the service provider; and
    (B) The specific terms and conditions established by your affiliate 
as provided in paragraph (b)(5)(i)(B) of this section must be set forth 
in writing.
    (6) Examples of making marketing solicitations. (i) A consumer has 
an investment advisory contract with a registered investment adviser 
that is affiliated with a broker-dealer. The broker-dealer receives 
eligibility information about the consumer from the investment adviser. 
The broker-dealer uses that eligibility information to identify the 
consumer to receive a marketing solicitation about brokerage products 
and services, and, as a result, the broker-dealer provides a marketing 
solicitation to the consumer about its brokerage services. Pursuant to 
paragraph (b)(1) of this section, the broker-dealer has made a marketing 
solicitation to the consumer.
    (ii) The same facts as in the example in paragraph (b)(6)(i) of this 
section, except that after using the eligibility information to identify 
the consumer to receive a marketing solicitation about brokerage 
products and services, the broker-dealer asks the registered investment 
adviser to send the marketing solicitation to the consumer and the 
investment adviser does so. Pursuant to paragraph (b)(1) of this 
section, the broker-dealer has made a marketing solicitation to the 
consumer because it used eligibility information about the consumer that 
it received from an affiliate to identify the consumer to receive a 
marketing solicitation about its products or services, and, as a result, 
a marketing solicitation was provided to the consumer about the broker-
dealer's products and services.
    (iii) The same facts as in the example in paragraph (b)(6)(i) of 
this section, except that eligibility information about consumers who 
have an investment advisory contract with a registered investment 
adviser is placed into a common database that all members of the 
affiliated group of companies may independently access and use. Without 
using the investment adviser's eligibility information, the broker-
dealer develops selection criteria and provides those criteria, 
marketing materials, and related instructions to the investment adviser. 
The investment adviser reviews eligibility information about its own 
consumers using the selection criteria provided by the broker-dealer to 
determine which consumers should receive the broker-dealer's marketing 
materials and sends the broker-dealer's marketing materials to those 
consumers. Even though the broker-dealer has received eligibility 
information through the common database as provided in paragraph (b)(2) 
of this section, it did not use that information to identify consumers 
or establish selection criteria; instead, the investment adviser used 
its own eligibility information. Therefore, pursuant to paragraph 
(b)(4)(i) of this section, the broker-dealer has not made a marketing 
solicitation to the consumer.
    (iv) The same facts as in the example in paragraph (b)(6)(iii) of 
this section, except that the registered investment adviser provides the 
broker-dealer's criteria to the investment adviser's service provider 
and directs the service provider to use the investment adviser's 
eligibility information to identify investment adviser consumers who 
meet the criteria and to send the broker-dealer's marketing materials to 
those consumers. The broker-dealer does not communicate directly with 
the service provider regarding the use of the investment adviser's 
information to market its products or services to the investment 
adviser's consumers. Pursuant to paragraph (b)(4)(ii) of this section, 
the broker-dealer has not made a marketing solicitation to the consumer.
    (v) An affiliated group of companies includes an investment company, 
a principal underwriter for the investment company, a retail broker-
dealer,

[[Page 261]]

and a transfer agent that also acts as a service provider. Each 
affiliate in the group places information about its consumers into a 
common database. The service provider has access to all information in 
the common database. The investment company controls access to and use 
of its eligibility information by the service provider. This control is 
set forth in a written agreement between the investment company and the 
service provider. The written agreement also requires the service 
provider to establish reasonable policies and procedures designed to 
ensure that the service provider uses the investment company's 
eligibility information in accordance with specific terms and conditions 
established by the investment company relating to the marketing of the 
products and services of all affiliates, including the principal 
underwriter and the retail broker-dealer. In a separate written 
communication, the investment company specifies the terms and conditions 
under which the service provider may use the investment company's 
eligibility information to market the retail broker-dealer's products 
and services to the investment company's consumers. The specific terms 
and conditions are: a list of affiliated companies (including the retail 
broker-dealer) whose products or services may be marketed to the 
investment company's consumers by the service provider; the specific 
products or services or types of products or services that may be 
marketed to the investment company's consumers by the service provider; 
the categories of eligibility information that may be used by the 
service provider in marketing products or services to the investment 
company's consumers; the types or categories of the investment company's 
consumers to whom the service provider may market products or services 
of investment company affiliates; the number and types of marketing 
communications that the service provider may send to the investment 
company's consumers; and the length of time during which the service 
provider may market the products or services of the investment company's 
affiliates to its consumers. The investment company periodically 
evaluates the service provider's compliance with these terms and 
conditions. The retail broker-dealer asks the service provider to market 
brokerage services to certain of the investment company's consumers. 
Without using the investment company's eligibility information, the 
retail broker-dealer develops selection criteria and provides those 
criteria, its marketing materials, and related instructions to the 
service provider. The service provider uses the investment company's 
eligibility information from the common database to identify the 
investment company's consumers to whom brokerage services will be 
marketed. When the retail broker-dealer's marketing materials are 
provided to the identified consumers, the name of the investment company 
is displayed on the retail broker-dealer's marketing materials, an 
introductory letter that accompanies the marketing materials, an account 
statement that accompanies the marketing materials, or the envelope 
containing the marketing materials. The requirements of paragraph (b)(5) 
of this section have been satisfied, and the retail broker-dealer has 
not made a marketing solicitation to the consumer.
    (vi) The same facts as in the example in paragraph (b)(6)(v) of this 
section, except that the terms and conditions permit the service 
provider to use the investment company's eligibility information to 
market the products and services of other affiliates to the investment 
company's consumers whenever the service provider deems it appropriate 
to do so. The service provider uses the investment company's eligibility 
information in accordance with the discretion afforded to it by the 
terms and conditions. Because the terms and conditions are not specific, 
the requirements of paragraph (b)(5) of this section have not been 
satisfied.
    (c) Exceptions. The provisions of this subpart do not apply to you 
if you use eligibility information that you receive from an affiliate:
    (1) To make a marketing solicitation to a consumer with whom you 
have a pre-existing business relationship;
    (2) To facilitate communications to an individual for whose benefit 
you provide employee benefit or other services pursuant to a contract 
with an employer related to and arising out of the

[[Page 262]]

current employment relationship or status of the individual as a 
participant or beneficiary of an employee benefit plan;
    (3) To perform services on behalf of an affiliate, except that this 
paragraph shall not be construed as permitting you to send marketing 
solicitations on behalf of an affiliate if the affiliate would not be 
permitted to send the marketing solicitation as a result of the election 
of the consumer to opt out under this subpart;
    (4) In response to a communication about your products or services 
initiated by the consumer;
    (5) In response to an authorization or request by the consumer to 
receive solicitations; or
    (6) If your compliance with this subpart would prevent you from 
complying with any provision of State insurance laws pertaining to 
unfair discrimination in any State in which you are lawfully doing 
business.
    (d) Examples of exceptions--(1) Example of the pre-existing business 
relationship exception. A consumer has a brokerage account with a 
broker-dealer. The consumer also has a deposit account with the broker-
dealer's affiliated depository institution. The broker-dealer receives 
eligibility information about the consumer from its depository 
institution affiliate and uses that information to make a marketing 
solicitation to the consumer about the broker-dealer's college savings 
accounts. The broker-dealer may make this marketing solicitation even if 
the consumer has not been given a notice and opportunity to opt out 
because the broker-dealer has a pre-existing business relationship with 
the consumer.
    (2) Examples of service provider exception. (i) A consumer has a 
brokerage account with a broker-dealer. The broker-dealer furnishes 
eligibility information about the consumer to its affiliate, a 
registered investment adviser. Based on that eligibility information, 
the investment adviser wants to make a marketing solicitation to the 
consumer about its advisory services. The investment adviser does not 
have a pre-existing business relationship with the consumer and none of 
the other exceptions in paragraph (c) of this section apply. The 
consumer has been given an opt out notice and has elected to opt out of 
receiving such marketing solicitations. The investment adviser asks a 
service provider to send the marketing solicitation to the consumer on 
its behalf. The service provider may not send the marketing solicitation 
on behalf of the investment adviser because, as a result of the 
consumer's opt out election, the investment adviser is not permitted to 
make the marketing solicitation.
    (ii) The same facts as in paragraph (d)(2)(i) of this section, 
except the consumer has been given an opt out notice, but has not 
elected to opt out. The investment adviser asks a service provider to 
send the solicitation to the consumer on its behalf. The service 
provider may send the marketing solicitation on behalf of the investment 
adviser because, as a result of the consumer's not opting out, the 
investment adviser is permitted to make the marketing solicitation.
    (3) Examples of consumer-initiated communications. (i) A consumer 
who is the record owner of shares in an investment company initiates a 
communication with an affiliated registered investment adviser about 
advisory services. The affiliated investment adviser may use eligibility 
information about the consumer it obtains from the investment company or 
any other affiliate to make marketing solicitations regarding the 
affiliated investment adviser's services in response to the consumer-
initiated communication.
    (ii) A consumer who has a brokerage account with a broker-dealer 
contacts the broker-dealer to request information about how to save and 
invest for a child's college education without specifying the type of 
savings or investment vehicle in which the consumer may be interested. 
Information about a range of different products or services offered by 
the broker-dealer and one or more of its affiliates may be responsive to 
that communication. Such products, services, and investments may include 
the following: investments in affiliated investment companies; 
investments in section 529 plans offered by the broker-dealer; or trust 
services offered by a different financial institution in the affiliated 
group. Any affiliate offering

[[Page 263]]

products or services that would be responsive to the consumer's request 
for information about saving and investing for a child's college 
education may use eligibility information to make marketing 
solicitations to the consumer in response to this communication.
    (iii) A registered investment adviser makes a marketing call to the 
consumer without using eligibility information received from an 
affiliate. The investment adviser leaves a voice-mail message that 
invites the consumer to call a toll-free number to receive information 
about services offered by the investment adviser. If the consumer calls 
the toll-free number to inquire about the investment advisory services, 
the call is a consumer-initiated communication about a product or 
service, and the investment adviser may now use eligibility information 
it receives from its affiliates to make marketing solicitations to the 
consumer.
    (iv) A consumer calls a broker-dealer to ask about retail locations 
and hours, but does not request information about its products or 
services. The broker-dealer may not use eligibility information it 
receives from an affiliate to make marketing solicitations to the 
consumer because the consumer-initiated communication does not relate to 
the broker-dealer's products or services. Thus, the use of eligibility 
information received from an affiliate would not be responsive to the 
communication and the exception does not apply.
    (v) A consumer calls a broker-dealer to ask about retail locations 
and hours. The customer service representative asks the consumer if 
there is a particular product or service about which the consumer is 
seeking information. The consumer responds that the consumer wants to 
stop in and find out about mutual funds (i.e., registered open-end 
investment companies). The customer service representative offers to 
provide that information by telephone and mail additional information to 
the consumer. The consumer agrees and provides or confirms contact 
information for receipt of the materials to be mailed. The broker-dealer 
may use eligibility information it receives from an affiliate to make 
marketing solicitations to the consumer about mutual funds because such 
marketing solicitations would respond to the consumer-initiated 
communication about mutual funds.
    (4) Examples of consumer authorization or request for marketing 
solicitations. (i) A consumer who has a brokerage account with a broker-
dealer authorizes or requests information about life insurance offered 
by the broker-dealer's insurance affiliate. The authorization or 
request, whether given to the broker-dealer or the insurance affiliate, 
would permit the insurance affiliate to use eligibility information 
about the consumer it obtains from the broker-dealer or any other 
affiliate to make marketing solicitations to the consumer about life 
insurance.
    (ii) A consumer completes an online application to open an online 
brokerage account with a broker-dealer. The broker-dealer's online 
application contains a blank check box that the consumer may check to 
authorize or request information from the broker-dealer's affiliates. 
The consumer checks the box. The consumer has authorized or requested 
marketing solicitations from the broker-dealer's affiliates.
    (iii) A consumer completes an online application to open an online 
brokerage account with a broker-dealer. The broker-dealer's online 
application contains a check box indicating that the consumer authorizes 
or requests information from the broker-dealer's affiliates. The 
consumer does not deselect the check box. The consumer has not 
authorized or requested marketing solicitations from the broker-dealer's 
affiliates.
    (iv) The terms and conditions of a brokerage account agreement 
contain preprinted boilerplate language stating that by applying to open 
an account the consumer authorizes or requests to receive solicitations 
from the broker-dealer's affiliates. The consumer has not authorized or 
requested marketing solicitations from the broker-dealer's affiliates.
    (e) Relation to affiliate-sharing notice and opt out. Nothing in 
this subpart limits the responsibility of a person to comply with the 
notice and opt out provisions of Section 603(d)(2)(A)(iii) of

[[Page 264]]

the FCRA (15 U.S.C. 1681a(d)(2)(A)(iii)) where applicable.



Sec.  248.122  Scope and duration of opt out.

    (a) Scope of opt out--(1) In general. Except as otherwise provided 
in this section, the consumer's election to opt out prohibits any 
affiliate covered by the opt out notice from using eligibility 
information received from another affiliate as described in the notice 
to make marketing solicitations to the consumer.
    (2) Continuing relationship--(i) In general. If the consumer 
establishes a continuing relationship with you or your affiliate, an opt 
out notice may apply to eligibility information obtained in connection 
with:
    (A) A single continuing relationship or multiple continuing 
relationships that the consumer establishes with you or your affiliates, 
including continuing relationships established subsequent to delivery of 
the opt out notice, so long as the notice adequately describes the 
continuing relationships covered by the opt out; or
    (B) Any other transaction between the consumer and you or your 
affiliates as described in the notice.
    (ii) Examples of continuing relationships. A consumer has a 
continuing relationship with you or your affiliate if the consumer:
    (A) Opens a brokerage account or enters into an advisory contract 
with you or your affiliate;
    (B) Obtains a loan for which you or your affiliate owns the 
servicing rights;
    (C) Purchases investment company shares in his or her own name;
    (D) Holds an investment through you or your affiliate; such as when 
you act or your affiliate acts as a custodian for securities or for 
assets in an individual retirement arrangement;
    (E) Enters into an agreement or understanding with you or your 
affiliate whereby you or your affiliate undertakes to arrange or broker 
a home mortgage loan for the consumer;
    (F) Enters into a lease of personal property with you or your 
affiliate; or
    (G) Obtains financial, investment, or economic advisory services 
from you or your affiliate for a fee.
    (3) No continuing relationship--(i) In general. If there is no 
continuing relationship between a consumer and you or your affiliate, 
and you or your affiliate obtain eligibility information about a 
consumer in connection with a transaction with the consumer, such as an 
isolated transaction or an application that is denied, an opt out notice 
provided to the consumer only applies to eligibility information 
obtained in connection with that transaction.
    (ii) Examples of isolated transactions. An isolated transaction 
occurs if:
    (A) The consumer uses your or your affiliate's ATM to withdraw cash 
from an account at another financial institution; or
    (B) A broker-dealer opens a brokerage account for the consumer 
solely for the purpose of liquidating or purchasing securities as an 
accommodation, i.e., on a one-time basis, without the expectation of 
engaging in other transactions.
    (4) Menu of alternatives. A consumer may be given the opportunity to 
choose from a menu of alternatives when electing to prohibit 
solicitations, such as by electing to prohibit solicitations from 
certain types of affiliates covered by the opt out notice but not other 
types of affiliates covered by the notice, electing to prohibit 
marketing solicitations based on certain types of eligibility 
information but not other types of eligibility information, or electing 
to prohibit marketing solicitations by certain methods of delivery but 
not other methods of delivery. However, one of the alternatives must 
allow the consumer to prohibit all marketing solicitations from all of 
the affiliates that are covered by the notice.
    (5) Special rule for a notice following termination of all 
continuing relationships--(i) In general. A consumer must be given a new 
opt out notice if, after all continuing relationships with you or your 
affiliate(s) are terminated, the consumer subsequently establishes 
another continuing relationship with you or your affiliate(s) and the 
consumer's eligibility information is to be used to make a marketing 
solicitation. The new opt out notice must apply, at a minimum, to 
eligibility information obtained in connection with the new continuing 
relationship. Consistent

[[Page 265]]

with paragraph (b) of this section, the consumer's decision not to opt 
out after receiving the new opt out notice would not override a prior 
opt out election by the consumer that applies to eligibility information 
obtained in connection with a terminated relationship, regardless of 
whether the new opt out notice applies to eligibility information 
obtained in connection with the terminated relationship.
    (ii) Example. A consumer has an advisory contract with a company 
that is registered with the Commission as both a broker-dealer and an 
investment adviser, and that is part of an affiliated group. The 
consumer terminates the advisory contract. One year after terminating 
the advisory contract, the consumer opens a brokerage account with the 
same company. The consumer must be given a new notice and opportunity to 
opt out before the company's affiliates may make marketing solicitations 
to the consumer using eligibility information obtained by the company in 
connection with the new brokerage account relationship, regardless of 
whether the consumer opted out in connection with the advisory contract.
    (b) Duration of opt out. The election of a consumer to opt out must 
be effective for a period of at least five years (the ``opt out 
period'') beginning when the consumer's opt out election is received and 
implemented, unless the consumer subsequently revokes the opt out in 
writing or, if the consumer agrees, electronically. An opt out period of 
more than five years may be established, including an opt out period 
that does not expire unless revoked by the consumer.
    (c) Time of opt out. A consumer may opt out at any time.



Sec.  248.123  Contents of opt out notice; consolidated and equivalent
notices.

    (a) Contents of opt out notice--(1) In general. A notice must be 
clear, conspicuous, and concise, and must accurately disclose:
    (i) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC bank and securities companies and the 
XYZ insurance companies'';
    (ii) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and securities companies and the XYZ insurance companies'';
    (iii) A general description of the types of eligibility information 
that may be used to make marketing solicitations to the consumer;
    (iv) That the consumer may elect to limit the use of eligibility 
information to make marketing solicitations to the consumer;
    (v) That the consumer's election will apply for the specified period 
of time stated in the notice and, if applicable,

[[Page 266]]

that the consumer will be allowed to renew the election once that period 
expires;
    (vi) If the notice is provided to consumers who may have previously 
opted out, such as if a notice is provided to consumers annually, that 
the consumer who has chosen to limit marketing solicitations does not 
need to act again until the consumer receives a renewal notice; and
    (vii) A reasonable and simple method for the consumer to opt out.
    (2) Joint relationships. (i) If two or more consumers jointly obtain 
a product or service, a single opt out notice may be provided to the 
joint consumers. Any of the joint consumers may exercise the right to 
opt out.
    (ii) The opt out notice must explain how an opt out direction by a 
joint consumer will be treated. An opt out direction by a joint consumer 
may be treated as applying to all of the associated joint consumers, or 
each joint consumer may be permitted to opt out separately. If each 
joint consumer is permitted to opt out separately, one of the joint 
consumers must be permitted to opt out on behalf of all of the joint 
consumers and the joint consumers must be permitted to exercise their 
separate rights to opt out in a single response.
    (iii) It is impermissible to require all joint consumers to opt out 
before implementing any opt out direction.
    (3) Alternative contents. If the consumer is afforded a broader 
right to opt out of receiving marketing than is required by this 
subpart, the requirements of this section may be satisfied by providing 
the consumer with a clear, conspicuous, and concise notice that 
accurately discloses the consumer's opt out rights.
    (4) Model notices. Model notices are provided in the Appendix to 
this subpart.
    (b) Coordinated and consolidated notices. A notice required by this 
subpart may be coordinated and consolidated with any other notice or 
disclosure required to be issued under any other provision of law by the 
entity providing the notice, including but not limited to the notice 
described in section 603(d)(2)(A)(iii) of the FCRA (15 U.S.C. 
1681a(d)(2)(A)(iii)) and the GLBA privacy notice.
    (c) Equivalent notices. A notice or other disclosure that is 
equivalent to the notice required by this subpart, and that is provided 
to a consumer together with disclosures required by any other provision 
of law, satisfies the requirements of this section.



Sec.  248.124  Reasonable opportunity to opt out.

    (a) In general. You must not use eligibility information that you 
receive from an affiliate to make marketing solicitations to a consumer 
about your products or services unless the consumer is provided a 
reasonable opportunity to opt out, as required by Sec.  
248.121(a)(1)(ii).
    (b) Examples of a reasonable opportunity to opt out. The consumer is 
given a reasonable opportunity to opt out if:
    (1) By mail. The opt out notice is mailed to the consumer. The 
consumer is given 30 days from the date the notice is mailed to elect to 
opt out by any reasonable means.
    (2) By electronic means. (i) The opt out notice is provided 
electronically to the consumer, such as by posting the notice at an 
Internet Web site at which the consumer has obtained a product or 
service. The consumer acknowledges receipt of the electronic notice. The 
consumer is given 30 days after the date the consumer acknowledges 
receipt to elect to opt out by any reasonable means.
    (ii) The opt out notice is provided to the consumer by e-mail where 
the consumer has agreed to receive disclosures by e-mail from the person 
sending the notice. The consumer is given 30 days after the e-mail is 
sent to elect to opt out by any reasonable means.
    (3) At the time of an electronic transaction. The opt out notice is 
provided to the consumer at the time of an electronic transaction, such 
as a transaction conducted on an Internet Web site. The consumer is 
required to decide, as a necessary part of proceeding with the 
transaction, whether to opt out before completing the transaction. There 
is a simple process that the consumer may use to opt out at that time 
using the same mechanism through which the transaction is conducted.

[[Page 267]]

    (4) At the time of an in-person transaction. The opt out notice is 
provided to the consumer in writing at the time of an in-person 
transaction. The consumer is required to decide, as a necessary part of 
proceeding with the transaction, whether to opt out before completing 
the transaction, and is not permitted to complete the transaction 
without making a choice. There is a simple process that the consumer may 
use during the course of the in-person transaction to opt out, such as 
completing a form that requires consumers to write a ``yes'' or ``no'' 
to indicate their opt out preference or that requires the consumer to 
check one of two blank check boxes--one that allows consumers to 
indicate that they want to opt out and one that allows consumers to 
indicate that they do not want to opt out.
    (5) By including in a privacy notice. The opt out notice is included 
in a GLBA privacy notice. The consumer is allowed to exercise the opt 
out within a reasonable period of time and in the same manner as the opt 
out under that privacy notice.



Sec.  248.125  Reasonable and simple methods of opting out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a marketing 
solicitation to the consumer about your products or services, unless the 
consumer is provided a reasonable and simple method to opt out, as 
required by Sec.  248.121(a)(1)(ii).
    (b) Examples--(1) Reasonable and simple opt out methods. Reasonable 
and simple methods for exercising the opt out right include:
    (i) Designating a check-off box in a prominent position on the opt 
out form;
    (ii) Including a reply form and a self-addressed envelope together 
with the opt out notice;
    (iii) Providing an electronic means to opt out, such as a form that 
can be electronically mailed or processed at an Internet Web site, if 
the consumer agrees to the electronic delivery of information;
    (iv) Providing a toll-free telephone number that consumers may call 
to opt out; or
    (v) Allowing consumers to exercise all of their opt out rights 
described in a consolidated opt out notice that includes the GLBA 
privacy, FCRA affiliate sharing, and FCRA affiliate marketing opt outs, 
by a single method, such as by calling a single toll-free telephone 
number.
    (2) Opt out methods that are not reasonable and simple. Reasonable 
and simple methods for exercising an opt out right do not include:
    (i) Requiring the consumer to write his or her own letter;
    (ii) Requiring the consumer to call or write to obtain a form for 
opting out, rather than including the form with the opt out notice; or
    (iii) Requiring the consumer who receives the opt out notice in 
electronic form only, such as through posting at an Internet Web site, 
to opt out solely by paper mail or by visiting a different Web site 
without providing a link to that site.
    (c) Specific opt out means. Each consumer may be required to opt out 
through a specific means, as long as that means is reasonable and simple 
for that consumer.



Sec.  248.126  Delivery of opt out notices.

    (a) In general. The opt out notice must be provided so that each 
consumer can reasonably be expected to receive actual notice. For opt 
out notices provided electronically, the notice may be provided in 
compliance with either the electronic disclosure provisions in this 
subpart or the provisions in section 101 of the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001, et seq.
    (b) Examples of reasonable expectation of actual notice. A consumer 
may reasonably be expected to receive actual notice if the affiliate 
providing the notice:
    (1) Hand-delivers a printed copy of the notice to the consumer;
    (2) Mails a printed copy of the notice to the last known mailing 
address of the consumer;
    (3) Provides a notice by e-mail to a consumer who has agreed to 
receive electronic disclosures by e-mail from the affiliate providing 
the notice; or

[[Page 268]]

    (4) Posts the notice on the Internet Web site at which the consumer 
obtained a product or service electronically and requires the consumer 
to acknowledge receipt of the notice.
    (c) Examples of no reasonable expectation of actual notice. A 
consumer may not reasonably be expected to receive actual notice if the 
affiliate providing the notice:
    (1) Only posts the notice on a sign in a branch or office or 
generally publishes the notice in a newspaper;
    (2) Sends the notice by e-mail to a consumer who has not agreed to 
receive electronic disclosures by e-mail from the affiliate providing 
the notice; or
    (3) Posts the notice on an Internet Web site without requiring the 
consumer to acknowledge receipt of the notice.



Sec.  248.127  Renewal of opt out elections.

    (a) Renewal notice and opt out requirement--(1) In general. After 
the opt out period expires, you may not make marketing solicitations to 
a consumer who previously opted out, unless:
    (i) The consumer has been given a renewal notice that complies with 
the requirements of this section and Sec. Sec.  248.124 through 248.126, 
and a reasonable opportunity and a reasonable and simple method to renew 
the opt out, and the consumer does not renew the opt out; or
    (ii) An exception in Sec.  248.121(c) applies.
    (2) Renewal period. Each opt out renewal must be effective for a 
period of at least five years as provided in Sec.  248.122(b).
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By the affiliate that provided the previous opt out notice, or 
its successor; or
    (ii) As part of a joint renewal notice from two or more members of 
an affiliated group of companies, or their successors, that jointly 
provided the previous opt out notice.
    (b) Contents of renewal notice. The renewal notice must be clear, 
conspicuous, and concise, and must accurately disclose:
    (1) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate it is being 
provided by multiple companies with the ABC name or multiple companies 
in the ABC group or family of companies, for example, by stating that 
the notice is provided by ``all of the ABC companies,'' ``the ABC 
banking, credit card, insurance, and securities companies,'' or by 
listing the name of each affiliate providing the notice. But if the 
affiliates providing the joint notice do not all share a common name, 
then the notice must either separately identify each affiliate by name 
or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and securities companies and the 
XYZ insurance companies'';
    (2) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and securities companies and the XYZ insurance companies'';
    (3) A general description of the types of eligibility information 
that may be used to make marketing solicitations to the consumer;

[[Page 269]]

    (4) That the consumer previously elected to limit the use of certain 
information to make marketing solicitations to the consumer;
    (5) That the consumer's election has expired or is about to expire;
    (6) That the consumer may elect to renew the consumer's previous 
election;
    (7) If applicable, that the consumer's election to renew will apply 
for the specified period of time stated in the notice and that the 
consumer will be allowed to renew the election once that period expires; 
and
    (8) A reasonable and simple method for the consumer to opt out.
    (c) Timing of the renewal notice--(1) In general. A renewal notice 
may be provided to the consumer either:
    (i) A reasonable period of time before the expiration of the opt out 
period; or
    (ii) Any time after the expiration of the opt out period but before 
marketing solicitations that would have been prohibited by the expired 
opt out are made to the consumer.
    (2) Combination with annual privacy notice. If you provide an annual 
privacy notice under the GLBA, providing a renewal notice with the last 
annual privacy notice provided to the consumer before expiration of the 
opt out period is a reasonable period of time before expiration of the 
opt out in all cases.
    (d) No effect on opt out period. An opt out period may not be 
shortened by sending a renewal notice to the consumer before expiration 
of the opt out period, even if the consumer does not renew the opt out.



Sec.  248.128  Effective date, compliance date, and prospective 
application.

    (a) Effective date. This subpart is effective September 10, 2009.
    (b) Mandatory compliance date. Compliance with this subpart is 
required not later than January 1, 2010.
    (c) Prospective application. The provisions of this subpart do not 
prohibit you from using eligibility information that you receive from an 
affiliate to make a marketing solicitation to a consumer if you receive 
such information prior to January 1, 2010. For purposes of this section, 
you are deemed to receive eligibility information when such information 
is placed into a common database and is accessible by you.



           Sec. Appendix to Subpart B of Part 248--Model Forms

    a. Although you and your affiliates are not required to use the 
model forms in this Appendix, use of a model form (if applicable to each 
person that uses it) complies with the requirement in section 624 of the 
FCRA for clear, conspicuous, and concise notices.
    b. Although you may need to change the language or format of a model 
form to reflect your actual policies and procedures, any such changes 
may not be so extensive as to affect the substance, clarity, or 
meaningful sequence of the language in the model forms. Acceptable 
changes include, for example:
    1. Rearranging the order of the references to ``your income,'' 
``your account history,'' and ``your credit score.''
    2. Substituting other types of information for ``income,'' ``account 
history,'' or ``credit score'' for accuracy, such as ``payment 
history,'' ``credit history,'' ``payoff status,'' or ``claims history.''
    3. Substituting a clearer and more accurate description of the 
affiliates providing or covered by the notice for phrases such as ``the 
[ABC] group of companies.''
    4. Substituting other types of affiliates covered by the notice for 
``credit card,'' ``insurance,'' or ``securities'' affiliates.
    5. Omitting items that are not accurate or applicable. For example, 
if a person does not limit the duration of the opt out period, the 
notice may omit information about the renewal notice.
    6. Adding a statement informing the consumer how much time they have 
to opt out before shared eligibility information may be used to make 
solicitations to them.
    7. Adding a statement that the consumer may exercise the right to 
opt out at any time.
    8. Adding the following statement, if accurate: ``If you previously 
opted out, you do not need to do so again.''
    9. Providing a place on the form for the consumer to fill in 
identifying information, such as his or her name and address.
    10. Adding disclosures regarding the treatment of opt-outs by joint 
consumers to comply with Sec.  248.123(a)(2), if applicable.

[[Page 270]]

  A-1--Model Form for Initial Opt Out Notice (Single-Affiliate Notice)

        A-2--Model Form for Initial Opt Out Notice (Joint Notice)

      A-3--Model Form for Renewal Notice (Single-Affiliate Notice)

            A-4--Model Form for Renewal Notice (Joint Notice)

          A-5--Model Form for Voluntary ``No Marketing'' Notice

 A-1--Model Form for Initial Opt Out Notice (Single-Affiliate Notice)--
          [Your Choice to Limit Marketing]/[Marketing Opt Out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You may limit our affiliates in the [ABC] group 
of companies, such as our [investment adviser, broker, transfer agent, 
and investment company] affiliates, from marketing their products or 
services to you based on your personal information that we collect and 
share with them. This information includes your [income], your [account 
history with us], and your [credit score].
     Your choice to limit marketing offers from our 
affiliates will apply [until you tell us to change your choice]/[for x 
years from when you tell us your choice]/[for at least 5 years from when 
you tell us your choice]. [Include if the opt out period expires.] Once 
that period expires, you will receive a renewal notice that will allow 
you to continue to limit marketing offers from our affiliates for 
[another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
our affiliates, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:
     By telephone: 1-877--
     On the Web: www.--.com
     By mail: check the box and complete the form 
below, and send the form to:

[Company name]

[Company address]

     Do not allow your affiliates to use my personal information to 
market to me.

A-2--Model Form for Initial Opt Out Notice (Joint Notice)--[Your Choice 
                 to Limit Marketing]/[Marketing Opt Out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You may limit the [ABC] companies, such as the 
[ABC investment companies, investment advisers, transfer agents, and 
broker-dealers] affiliates, from marketing their products or services to 
you based on your personal information that they receive from other 
[ABC] companies. This information includes your [income], your [account 
history], and your [credit score].
     Your choice to limit marketing offers from the 
[ABC] companies will apply [until you tell us to change your choice]/
[for x years from when you tell us your choice]/[for at least 5 years 
from when you tell us your choice]. [Include if the opt out period 
expires.] Once that period expires, you will receive a renewal notice 
that will allow you to continue to limit marketing offers from the [ABC] 
companies for [another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
the [ABC] companies, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:
     By telephone: 1-877--
     On the Web: www.--.com
     By mail: check the box and complete the form 
below, and send the form to:

[Company name]

[Company address]

     Do not allow any company [in the ABC group of companies] to use my 
personal information to market to me.

A-3--Model Form for Renewal Notice (Single-Affiliate Notice)--[Renewing 
    Your Choice to Limit Marketing]/[Renewing Your Marketing Opt Out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You previously chose to limit our affiliates in 
the [ABC] group of companies, such

[[Page 271]]

as our [investment adviser, investment company, transfer agent, and 
broker-dealer] affiliates, from marketing their products or services to 
you based on your personal information that we share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:
     By telephone: 1-877--
     On the Web: www.--.com
     By mail: check the box and complete the form 
below, and send the form to:

[Company name]

[Company address]

     Renew my choice to limit marketing for [x] more years.

A-4--Model Form for Renewal Notice (Joint Notice)--[Renewing Your Choice 
          to Limit Marketing]/[Renewing Your Marketing Opt Out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You previously chose to limit the [ABC] 
companies, such as the [ABC investment adviser, investment company, 
transfer agent, and broker-dealer] affiliates, from marketing their 
products or services to you based on your personal information that they 
receive from other ABC companies. This information includes your 
[income], your [account history], and your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:
     By telephone: 1-877--
     On the Web: www.--.com
     By mail: check the box and complete the form 
below, and send the form to:

[Company name]

[Company address]

     Renew my choice to limit marketing for [x] more years.

 A-5--Model Form for Voluntary ``No Marketing'' Notice--Your Choice to 
                             Stop Marketing

     [Name of Affiliate] is providing this notice.
     You may choose to stop all marketing from us and 
our affiliates.
     [Your choice to stop marketing from us and our 
affiliates will apply until you tell us to change your choice.]
    To stop all marketing, contact us [include all that apply]:
     By telephone: 1-877--
     On the Web: www.--.com
     By mail: check the box and complete the form 
below, and send the form to:

[Company name]

[Company address]

     Do not market to me.



           Subpart C_Regulation S	ID: Identity Theft Red Flags

    Source: 78 FR 23663, Apr. 17, 2013, unless otherwise noted.



Sec.  248.201  Duties regarding the detection, prevention, and 
mitigation of identity theft.

    (a) Scope. This section applies to a financial institution or 
creditor, as defined in the Fair Credit Reporting Act (15 U.S.C. 1681), 
that is:
    (1) A broker, dealer or any other person that is registered or 
required to be registered under the Securities Exchange Act of 1934;
    (2) An investment company that is registered or required to be 
registered under the Investment Company Act of 1940, that has elected to 
be regulated as a business development company under that Act, or that 
operates as an employees' securities company under that Act; or
    (3) An investment adviser that is registered or required to be 
registered under the Investment Advisers Act of 1940.
    (b) Definitions. For purposes of this subpart, and Appendix A of 
this subpart, the following definitions apply:
    (1) Account means a continuing relationship established by a person 
with a financial institution or creditor to obtain a product or service 
for personal, family, household or business purposes. Account includes a 
brokerage account, a mutual fund account (i.e., an account with an open-
end investment company), and an investment advisory account.
    (2) The term board of directors includes:
    (i) In the case of a branch or agency of a foreign financial 
institution or

[[Page 272]]

creditor, the managing official of that branch or agency; and
    (ii) In the case of a financial institution or creditor that does 
not have a board of directors, a designated employee at the level of 
senior management.
    (3) Covered account means:
    (i) An account that a financial institution or creditor offers or 
maintains, primarily for personal, family, or household purposes, that 
involves or is designed to permit multiple payments or transactions, 
such as a brokerage account with a broker-dealer or an account 
maintained by a mutual fund (or its agent) that permits wire transfers 
or other payments to third parties; and
    (ii) Any other account that the financial institution or creditor 
offers or maintains for which there is a reasonably foreseeable risk to 
customers or to the safety and soundness of the financial institution or 
creditor from identity theft, including financial, operational, 
compliance, reputation, or litigation risks.
    (4) Credit has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (5) Creditor has the same meaning as in 15 U.S.C. 1681m(e)(4).
    (6) Customer means a person that has a covered account with a 
financial institution or creditor.
    (7) Financial institution has the same meaning as in 15 U.S.C. 
1681a(t).
    (8) Identifying information means any name or number that may be 
used, alone or in conjunction with any other information, to identify a 
specific person, including any--
    (i) Name, Social Security number, date of birth, official State or 
government issued driver's license or identification number, alien 
registration number, government passport number, employer or taxpayer 
identification number;
    (ii) Unique biometric data, such as fingerprint, voice print, retina 
or iris image, or other unique physical representation;
    (iii) Unique electronic identification number, address, or routing 
code; or
    (iv) Telecommunication identifying information or access device (as 
defined in 18 U.S.C. 1029(e)).
    (9) Identity theft means a fraud committed or attempted using the 
identifying information of another person without authority.
    (10) Red Flag means a pattern, practice, or specific activity that 
indicates the possible existence of identity theft.
    (11) Service provider means a person that provides a service 
directly to the financial institution or creditor.
    (12) Other definitions.
    (i) Broker has the same meaning as in section 3(a)(4) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)).
    (ii) Commission means the Securities and Exchange Commission.
    (iii) Dealer has the same meaning as in section 3(a)(5) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5)).
    (iv) Investment adviser has the same meaning as in section 
202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)(11)).
    (v) Investment company has the same meaning as in section 3 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3), and includes a 
separate series of the investment company.
    (vi) Other terms not defined in this subpart have the same meaning 
as in the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.).
    (c) Periodic identification of covered accounts. Each financial 
institution or creditor must periodically determine whether it offers or 
maintains covered accounts. As a part of this determination, a financial 
institution or creditor must conduct a risk assessment to determine 
whether it offers or maintains covered accounts described in paragraph 
(b)(3)(ii) of this section, taking into consideration:
    (1) The methods it provides to open its accounts;
    (2) The methods it provides to access its accounts; and
    (3) Its previous experiences with identity theft.
    (d) Establishment of an Identity Theft Prevention Program--
    (1) Program requirement. Each financial institution or creditor that 
offers or maintains one or more covered accounts must develop and 
implement a written Identity Theft Prevention Program (Program) that is 
designed to detect, prevent, and mitigate identity theft in connection 
with the opening of

[[Page 273]]

a covered account or any existing covered account. The Program must be 
appropriate to the size and complexity of the financial institution or 
creditor and the nature and scope of its activities.
    (2) Elements of the Program. The Program must include reasonable 
policies and procedures to:
    (i) Identify relevant Red Flags for the covered accounts that the 
financial institution or creditor offers or maintains, and incorporate 
those Red Flags into its Program;
    (ii) Detect Red Flags that have been incorporated into the Program 
of the financial institution or creditor;
    (iii) Respond appropriately to any Red Flags that are detected 
pursuant to paragraph (d)(2)(ii) of this section to prevent and mitigate 
identity theft; and
    (iv) Ensure the Program (including the Red Flags determined to be 
relevant) is updated periodically, to reflect changes in risks to 
customers and to the safety and soundness of the financial institution 
or creditor from identity theft.
    (e) Administration of the Program. Each financial institution or 
creditor that is required to implement a Program must provide for the 
continued administration of the Program and must:
    (1) Obtain approval of the initial written Program from either its 
board of directors or an appropriate committee of the board of 
directors;
    (2) Involve the board of directors, an appropriate committee 
thereof, or a designated employee at the level of senior management in 
the oversight, development, implementation and administration of the 
Program;
    (3) Train staff, as necessary, to effectively implement the Program; 
and
    (4) Exercise appropriate and effective oversight of service provider 
arrangements.
    (f) Guidelines. Each financial institution or creditor that is 
required to implement a Program must consider the guidelines in Appendix 
A to this subpart and include in its Program those guidelines that are 
appropriate.



Sec.  248.202  Duties of card issuers regarding changes of address.

    (a) Scope. This section applies to a person described in Sec.  
248.201(a) that issues a credit or debit card (card issuer).
    (b) Definitions. For purposes of this section:
    (1) Cardholder means a consumer who has been issued a credit card or 
debit card as defined in 15 U.S.C. 1681a(r).
    (2) Clear and conspicuous means reasonably understandable and 
designed to call attention to the nature and significance of the 
information presented.
    (3) Other terms not defined in this subpart have the same meaning as 
in the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.).
    (c) Address validation requirements. A card issuer must establish 
and implement reasonable written policies and procedures to assess the 
validity of a change of address if it receives notification of a change 
of address for a consumer's debit or credit card account and, within a 
short period of time afterwards (during at least the first 30 days after 
it receives such notification), the card issuer receives a request for 
an additional or replacement card for the same account. Under these 
circumstances, the card issuer may not issue an additional or 
replacement card, until, in accordance with its reasonable policies and 
procedures and for the purpose of assessing the validity of the change 
of address, the card issuer:
    (1)(i) Notifies the cardholder of the request:
    (A) At the cardholder's former address; or
    (B) By any other means of communication that the card issuer and the 
cardholder have previously agreed to use; and
    (ii) Provides to the cardholder a reasonable means of promptly 
reporting incorrect address changes; or
    (2) Otherwise assesses the validity of the change of address in 
accordance with the policies and procedures the card issuer has 
established pursuant to Sec.  248.201.
    (d) Alternative timing of address validation. A card issuer may 
satisfy the requirements of paragraph (c) of this section if it 
validates an address pursuant to the methods in paragraph (c)(1) or

[[Page 274]]

(c)(2) of this section when it receives an address change notification, 
before it receives a request for an additional or replacement card.
    (e) Form of notice. Any written or electronic notice that the card 
issuer provides under this paragraph must be clear and conspicuous and 
be provided separately from its regular correspondence with the 
cardholder.



  Sec. Appendix A to Subpart C of Part 248--Interagency Guidelines on 
          Identity Theft Detection, Prevention, and Mitigation

    Section 248.201 requires each financial institution and creditor 
that offers or maintains one or more covered accounts, as defined in 
Sec.  248.201(b)(3), to develop and provide for the continued 
administration of a written Program to detect, prevent, and mitigate 
identity theft in connection with the opening of a covered account or 
any existing covered account. These guidelines are intended to assist 
financial institutions and creditors in the formulation and maintenance 
of a Program that satisfies the requirements of Sec.  248.201.

                             I. The Program

    In designing its Program, a financial institution or creditor may 
incorporate, as appropriate, its existing policies, procedures, and 
other arrangements that control reasonably foreseeable risks to 
customers or to the safety and soundness of the financial institution or 
creditor from identity theft.

                   II. Identifying Relevant Red Flags

    (a) Risk Factors. A financial institution or creditor should 
consider the following factors in identifying relevant Red Flags for 
covered accounts, as appropriate:
    (1) The types of covered accounts it offers or maintains;
    (2) The methods it provides to open its covered accounts;
    (3) The methods it provides to access its covered accounts; and
    (4) Its previous experiences with identity theft.
    (b) Sources of Red Flags. Financial institutions and creditors 
should incorporate relevant Red Flags from sources such as:
    (1) Incidents of identity theft that the financial institution or 
creditor has experienced;
    (2) Methods of identity theft that the financial institution or 
creditor has identified that reflect changes in identity theft risks; 
and
    (3) Applicable regulatory guidance.
    (c) Categories of Red Flags. The Program should include relevant Red 
Flags from the following categories, as appropriate. Examples of Red 
Flags from each of these categories are appended as Supplement A to this 
Appendix A.
    (1) Alerts, notifications, or other warnings received from consumer 
reporting agencies or service providers, such as fraud detection 
services;
    (2) The presentation of suspicious documents;
    (3) The presentation of suspicious personal identifying information, 
such as a suspicious address change;
    (4) The unusual use of, or other suspicious activity related to, a 
covered account; and
    (5) Notice from customers, victims of identity theft, law 
enforcement authorities, or other persons regarding possible identity 
theft in connection with covered accounts held by the financial 
institution or creditor.

                        III. Detecting Red Flags

    The Program's policies and procedures should address the detection 
of Red Flags in connection with the opening of covered accounts and 
existing covered accounts, such as by:
    (a) Obtaining identifying information about, and verifying the 
identity of, a person opening a covered account, for example, using the 
policies and procedures regarding identification and verification set 
forth in the Customer Identification Program rules implementing 31 
U.S.C. 5318(l) (31 CFR 1023.220 (broker-dealers) and 1024.220 (mutual 
funds)); and
    (b) Authenticating customers, monitoring transactions, and verifying 
the validity of change of address requests, in the case of existing 
covered accounts.

              IV. Preventing and Mitigating Identity Theft

    The Program's policies and procedures should provide for appropriate 
responses to the Red Flags the financial institution or creditor has 
detected that are commensurate with the degree of risk posed. In 
determining an appropriate response, a financial institution or creditor 
should consider aggravating factors that may heighten the risk of 
identity theft, such as a data security incident that results in 
unauthorized access to a customer's account records held by the 
financial institution, creditor, or third party, or notice that a 
customer has provided information related to a covered account held by 
the financial institution or creditor to someone fraudulently claiming 
to represent the financial institution or creditor or to a fraudulent 
Web site. Appropriate responses may include the following:
    (a) Monitoring a covered account for evidence of identity theft;
    (b) Contacting the customer;

[[Page 275]]

    (c) Changing any passwords, security codes, or other security 
devices that permit access to a covered account;
    (d) Reopening a covered account with a new account number;
    (e) Not opening a new covered account;
    (f) Closing an existing covered account;
    (g) Not attempting to collect on a covered account or not selling a 
covered account to a debt collector;
    (h) Notifying law enforcement; or
    (i) Determining that no response is warranted under the particular 
circumstances.

                         V. Updating the Program

    Financial institutions and creditors should update the Program 
(including the Red Flags determined to be relevant) periodically, to 
reflect changes in risks to customers or to the safety and soundness of 
the financial institution or creditor from identity theft, based on 
factors such as:
    (a) The experiences of the financial institution or creditor with 
identity theft;
    (b) Changes in methods of identity theft;
    (c) Changes in methods to detect, prevent, and mitigate identity 
theft;
    (d) Changes in the types of accounts that the financial institution 
or creditor offers or maintains; and
    (e) Changes in the business arrangements of the financial 
institution or creditor, including mergers, acquisitions, alliances, 
joint ventures, and service provider arrangements.

                VI. Methods for Administering the Program

    (a) Oversight of Program. Oversight by the board of directors, an 
appropriate committee of the board, or a designated employee at the 
level of senior management should include:
    (1) Assigning specific responsibility for the Program's 
implementation;
    (2) Reviewing reports prepared by staff regarding compliance by the 
financial institution or creditor with Sec.  248.201; and
    (3) Approving material changes to the Program as necessary to 
address changing identity theft risks.
    (b) Reports. (1) In general. Staff of the financial institution or 
creditor responsible for development, implementation, and administration 
of its Program should report to the board of directors, an appropriate 
committee of the board, or a designated employee at the level of senior 
management, at least annually, on compliance by the financial 
institution or creditor with Sec.  248.201.
    (2) Contents of report. The report should address material matters 
related to the Program and evaluate issues such as: The effectiveness of 
the policies and procedures of the financial institution or creditor in 
addressing the risk of identity theft in connection with the opening of 
covered accounts and with respect to existing covered accounts; service 
provider arrangements; significant incidents involving identity theft 
and management's response; and recommendations for material changes to 
the Program.
    (c) Oversight of service provider arrangements. Whenever a financial 
institution or creditor engages a service provider to perform an 
activity in connection with one or more covered accounts the financial 
institution or creditor should take steps to ensure that the activity of 
the service provider is conducted in accordance with reasonable policies 
and procedures designed to detect, prevent, and mitigate the risk of 
identity theft. For example, a financial institution or creditor could 
require the service provider by contract to have policies and procedures 
to detect relevant Red Flags that may arise in the performance of the 
service provider's activities, and either report the Red Flags to the 
financial institution or creditor, or to take appropriate steps to 
prevent or mitigate identity theft.

                VII. Other Applicable Legal Requirements

    Financial institutions and creditors should be mindful of other 
related legal requirements that may be applicable, such as:
    (a) For financial institutions and creditors that are subject to 31 
U.S.C. 5318(g), filing a Suspicious Activity Report in accordance with 
applicable law and regulation;
    (b) Implementing any requirements under 15 U.S.C. 1681c-1(h) 
regarding the circumstances under which credit may be extended when the 
financial institution or creditor detects a fraud or active duty alert;
    (c) Implementing any requirements for furnishers of information to 
consumer reporting agencies under 15 U.S.C. 1681s-2, for example, to 
correct or update inaccurate or incomplete information, and to not 
report information that the furnisher has reasonable cause to believe is 
inaccurate; and
    (d) Complying with the prohibitions in 15 U.S.C. 1681m on the sale, 
transfer, and placement for collection of certain debts resulting from 
identity theft.

                       Supplement A to Appendix A

    In addition to incorporating Red Flags from the sources recommended 
in section II.b. of the Guidelines in Appendix A to this subpart, each 
financial institution or creditor may consider incorporating into its 
Program, whether singly or in combination, Red Flags from the following 
illustrative examples in connection with covered accounts:

   Alerts, Notifications or Warnings From a Consumer Reporting Agency

    1. A fraud or active duty alert is included with a consumer report.

[[Page 276]]

    2. A consumer reporting agency provides a notice of credit freeze in 
response to a request for a consumer report.
    3. A consumer reporting agency provides a notice of address 
discrepancy, as referenced in Sec. 605(h) of the Fair Credit Reporting 
Act (15 U.S.C. 1681c(h)).
    4. A consumer report indicates a pattern of activity that is 
inconsistent with the history and usual pattern of activity of an 
applicant or customer, such as:
    a. A recent and significant increase in the volume of inquiries;
    b. An unusual number of recently established credit relationships;
    c. A material change in the use of credit, especially with respect 
to recently established credit relationships; or
    d. An account that was closed for cause or identified for abuse of 
account privileges by a financial institution or creditor.

                          Suspicious Documents

    5. Documents provided for identification appear to have been altered 
or forged.
    6. The photograph or physical description on the identification is 
not consistent with the appearance of the applicant or customer 
presenting the identification.
    7. Other information on the identification is not consistent with 
information provided by the person opening a new covered account or 
customer presenting the identification.
    8. Other information on the identification is not consistent with 
readily accessible information that is on file with the financial 
institution or creditor, such as a signature card or a recent check.
    9. An application appears to have been altered or forged, or gives 
the appearance of having been destroyed and reassembled.

               Suspicious Personal Identifying Information

    10. Personal identifying information provided is inconsistent when 
compared against external information sources used by the financial 
institution or creditor. For example:
    a. The address does not match any address in the consumer report; or
    b. The Social Security Number (SSN) has not been issued, or is 
listed on the Social Security Administration's Death Master File.
    11. Personal identifying information provided by the customer is not 
consistent with other personal identifying information provided by the 
customer. For example, there is a lack of correlation between the SSN 
range and date of birth.
    12. Personal identifying information provided is associated with 
known fraudulent activity as indicated by internal or third-party 
sources used by the financial institution or creditor. For example:
    a. The address on an application is the same as the address provided 
on a fraudulent application; or
    b. The phone number on an application is the same as the number 
provided on a fraudulent application.
    13. Personal identifying information provided is of a type commonly 
associated with fraudulent activity as indicated by internal or third-
party sources used by the financial institution or creditor. For 
example:
    a. The address on an application is fictitious, a mail drop, or a 
prison; or
    b. The phone number is invalid, or is associated with a pager or 
answering service.
    14. The SSN provided is the same as that submitted by other persons 
opening an account or other customers.
    15. The address or telephone number provided is the same as or 
similar to the address or telephone number submitted by an unusually 
large number of other persons opening accounts or by other customers.
    16. The person opening the covered account or the customer fails to 
provide all required personal identifying information on an application 
or in response to notification that the application is incomplete.
    17. Personal identifying information provided is not consistent with 
personal identifying information that is on file with the financial 
institution or creditor.
    18. For financial institutions and creditors that use challenge 
questions, the person opening the covered account or the customer cannot 
provide authenticating information beyond that which generally would be 
available from a wallet or consumer report.

 Unusual Use of, or Suspicious Activity Related to, the Covered Account

    19. Shortly following the notice of a change of address for a 
covered account, the institution or creditor receives a request for a 
new, additional, or replacement means of accessing the account or for 
the addition of an authorized user on the account.
    20. A covered account is used in a manner that is not consistent 
with established patterns of activity on the account. There is, for 
example:
    a. Nonpayment when there is no history of late or missed payments;
    b. A material increase in the use of available credit;
    c. A material change in purchasing or spending patterns; or
    d. A material change in electronic fund transfer patterns in 
connection with a deposit account.
    21. A covered account that has been inactive for a reasonably 
lengthy period of time is used (taking into consideration the type of 
account, the expected pattern of usage and other relevant factors).
    22. Mail sent to the customer is returned repeatedly as 
undeliverable although transactions continue to be conducted in 
connection with the customer's covered account.

[[Page 277]]

    23. The financial institution or creditor is notified that the 
customer is not receiving paper account statements.
    24. The financial institution or creditor is notified of 
unauthorized charges or transactions in connection with a customer's 
covered account.

   Notice From Customers, Victims of Identity Theft, Law Enforcement 
   Authorities, or Other Persons Regarding Possible Identity Theft in 
 Connection With Covered Accounts Held by the Financial Institution or 
                                Creditor

    25. The financial institution or creditor is notified by a customer, 
a victim of identity theft, a law enforcement authority, or any other 
person that it has opened a fraudulent account for a person engaged in 
identity theft.



PART 249_FORMS, SECURITIES EXCHANGE ACT OF 1934--Table of Contents



Sec.
249.0-1 Availability of forms.

 Subpart A_Forms for Registration or Exemption of, and Notification of 
             Action Taken by, National Securities Exchanges

249.1 Form 1, for application for, and amendments to applications for, 
          registration as a national securities exchange or exemption 
          from registration pursuant to Section 5 of the Exchange Act.
249.10 Form 1-N for notice registration as a national securities 
          exchange.
249.11 Form R31 for reporting covered sales and covered round turn 
          transactions under section 31 of the Act.
249.25 Form 25, for notification of removal from listing and/or 
          registration.
249.26 Form 26, for notification of the admission to trading of a 
          substituted or additional class of security under Rule 12a-5 
          (Sec.  240.12a-5 of this chapter).

  Subpart B_Forms for Reports To Be Filed by Officers, Directors, and 
                            Security Holders

249.103 Form 3, initial statement of beneficial ownership of securities.
249.104 Form 4, statement of changes in beneficial ownership of 
          securities.
249.105 Form 5, annual statement of beneficial ownership of securities.

   Subpart C_Forms for Applications for Registration of Securities on 
            National Securities Exchanges and Similar Matters

249.208 [Reserved]
249.208a Form 8-A, for registration of certain classes of securities 
          pursuant to section 12(b) or (g) of the Securities Exchange 
          Act of 1934.
249.208b-249.208c [Reserved]
249.210 Form 10, general form for registration of securities pursuant to 
          section 12(b) or (g) of the Securities Exchange Act of 1934.
249.210b [Reserved]
249.218 Form 18, for foreign governments and political subdivisions 
          thereof.
249.220f Form 20-F, registration of securities of foreign private 
          issuers pursuant to section 12(b) or (g), annual and 
          transition reports pursuant to sections 13 and 15(d), and 
          shell company reports required under Rule 13a-19 or 15d-19 
          (Sec.  240.13a-19 or Sec.  240.15d-19 of this chapter).
249.240f Form 40-F, for registration of securities of certain Canadian 
          issuers pursuant to section 12(b) or (g) and for reports 
          pursuant to section 15(d) and Rule 15d-4 (Sec.  240.15d-4 of 
          this chapter).
249.250 Form F-X, for appointment of agent for service of process by 
          issuers registering securities on Form F-8, F-9, F-10 or F-80 
          (Sec.  239.38, 239.39, 239.40 or 239.41 of this chapter), or 
          registering securities or filing periodic reports on Form 40-F 
          (Sec.  249.240f of this chapter), or by any issuer or other 
          non-U.S. person filing tender offer documents on Schedule 13E-
          4F, 14D-1F or 14D-9F (Sec.  240.13e-102, 240.14d-102 or 
          240.14d-103 of this chapter), or by any non-U.S. person acting 
          as trustee with respect to securities registered on Form F-7 
          (Sec.  249.37 of this chapter), F-8, F-9, F-10 or F-80.

   Subpart D_Forms for Annual and Other Reports of Issuers and Other 
  Persons Required Under Sections 13, 14A, and 15(d) of the Securities 
                          Exchange Act of 1934

249.306 Form 6-K report of foreign issuer pursuant to Rules 13a-16 
          (Sec.  240.13a-16 of this chapter) and 15d-16 (Sec.  240.15d-
          16 of this chapter) under the Securities Exchange Act of 1934.
249.308 Form 8-K, for current reports.
249.308a Form 10-Q, for quarterly and transition reports under sections 
          13 or 15(d) of the Securities Exchange Act of 1934.
249.310 Form 10-K, for annual and transition reports pursuant to 
          sections 13 or 15(d) of the Securities Exchange Act of 1934.
249.310b-249.310c [Reserved]
249.311 Form 11-K, for annual reports of employee stock purchase, 
          savings and similar plans pursuant to section 15(d) of the 
          Securities Exchange Act of 1934.
249.312 Form 10-D, periodic distribution reports by asset-backed 
          issuers.
249.318 Form 18-K, annual report for foreign governments and political 
          subdivisions thereof.
249.322 Form 12b-25--Notification of late filing.

[[Page 278]]

249.323 Form 15, certification of termination of registration of a class 
          of security under section 12(g) or notice of suspension of 
          duty to file reports pursuant to sections 13 and 15(d) of the 
          Act.
249.324 Form 15F, certification by a foreign private issuer regarding 
          the termination of registration of a class of securities under 
          section 12(g) or the duty to file reports under section 13(a) 
          or section 15(d).
249.325 Form 13F, report of institutional investment manager pursuant to 
          section 13(f) of the Securities Exchange Act of 1934.
249.326 Form N-PX, annual report of proxy voting record.
249.327 Form 13H, Information required on large traders pursuant to 
          Section 13(h) of the Securities Exchange Act of 1934 and rules 
          thereunder.
249.328T Form 17-H, Risk assessment report for brokers and dealers 
          pursuant to section 17(h) of the Securities Exchange Act of 
          1934 and rules thereunder.
249.330 Form N-CEN, annual report of registered investment companies.
249.331 Form N-CSR, certified shareholder report.
249.332 Form SHO, report of institutional investment managers pursuant 
          to section 13(f)(2) of the Securities Exchange Act of 1934.
249.333 Form F-SR.
249.444 Form SE, form for submission of paper format exhibits by 
          electronic filers.
249.445 [Reserved]
249.446 Form ID, uniform application for access codes to file on EDGAR.
249.447 Form TH--Notification of reliance on temporary hardship 
          exemption.

  Subpart E_Forms for Statements Made in Connection With Exempt Tender 
                                 Offers

249.480 Form CB, tender offer statement in connection with a tender 
          offer for a foreign private issuer.

  Subpart F_Forms for Registration of Brokers and Dealers Transacting 
                  Business on Over-the-Counter Markets

249.501 Form BD, for application for registration as a broker and dealer 
          or to amend or supplement such an application.
249.501a Form BDW, notice of withdrawal from registration as broker-
          dealer pursuant to Sec.  240.15b6-1, Sec.  240.15Bc3-1, or 
          Sec.  240.15Cc1-1 of this chapter.
249.501b Form BD-N for notice registration as a broker-dealer.
249.507 Form 7-M, consent to service of process by an individual 
          nonresident broker-dealer.
249.508 Form 8-M, consent to service of process by a corporation which 
          is a nonresident broker-dealer.
249.509 Form 9-M, consent to service of process by a partnership 
          nonresident broker-dealer.
249.510 Form 10-M, consent to service of process by a nonresident 
          general partner of a broker-dealer firm.

  Subpart G_Forms for Reports To Be Made by Certain Exchange Members, 
Brokers, Dealers, Security-Based Swap Dealers, and Major Security-Based 
                            Swap Participants

249.617 Form X-17A-5, information required of certain brokers, dealers, 
          security-based swap dealers, and major security-based swap 
          participants pursuant to sections 15F and 17 of the Securities 
          Exchange Act of 1934 and Sec. Sec.  240.17a-5, 240.17a-10, 
          240.17a-11, 240.17a-12, and 240.18a-79 of this chapter, as 
          applicable.
249.618 Form BD-Y2K, information required of broker-dealers pursuant to 
          section 17 of the Securities Exchange Act of 1934 and Sec.  
          240.17a-5 of this chapter.
249.619 Form TA-Y2K, information required of transfer agents pursuant to 
          section 17 of the Securities Exchange Act of 1934 and Sec.  
          240.17Ad-18 of this chapter.
249.620-249.634 [Reserved]
249.635 Form X-17A-19, report by national securities exchanges and 
          registered national securities associations of changes in the 
          membership status of any of their members.
249.636 [Reserved]
249.637 Form ATS, information required of alternative trading systems 
          pursuant to Sec.  242.301(b)(2) of this chapter.
249.638 Form ATS-R, information required of alternative trading systems 
          pursuant to Sec.  242.301(b)(8) of this chapter.
249.639 Form custody.
249.640 Form ATS-N, information required of NMS Stock ATSs pursuant to 
          Sec.  242.304(a) of this chapter.
249.641 Form CRS, Relationship Summary for Brokers and Dealers Providing 
          Services to Retail Investors, pursuant to Sec.  240.17a-14 of 
          this chapter.

[[Page 279]]

             Subpart H_Forms for Reports as to Stabilization

249.709 [Reserved]

Subpart I_Forms for Self-Regulatory Organization Rule Changes and Forms 
 for Registration of and Reporting by National Securities Associations 
                 and Affiliated Securities Associations

249.801 Form X-15AA-1, for application for registration as a national 
          securities association or affiliated securities association.
249.802 Form X-15AJ-1, for amendatory and/or supplementary statements to 
          registration statement of a national securities association or 
          an affiliated securities association.
249.803 Form X-15AJ-2, for annual consolidated supplement of a national 
          securities association or an affiliated securities 
          association.
249.819 Form 19b-4, for electronic filings with respect to proposed rule 
          changes, advance notices and security-based swap submissions 
          by all self-regulatory organizations.
249.820 Form 19b-4(e) for the listing and trading of new derivative 
          securities products by self-regulatory organizations that are 
          not deemed proposed rule changes pursuant to Rule 19b-
          4(e)(Sec.  240.19b-4(e)).
249.821 Form PILOT, information required of self-regulatory 
          organizations operating pilot trading systems pursuant to 
          Sec.  240.19b-5 of this chapter.
249.822 Form 19b-7, for electronic filing with respect to proposed rule 
          changes by self-regulatory organizations under Section 
          19(b)(7)(A) of the Securities Exchange Act of 1934.

Subpart J [Reserved]

    Subpart K_Forms for Registration of, and Reporting by Securities 
                         Information Processors

249.1001 Form SIP, for application for registration as a securities 
          information processor or to amend such an application or 
          registration.
249.1002 Form CC, for application for registration as a competing 
          consolidator or to amend such an application or registration.

    Subpart L_Forms for Registration of Municipal Securities Dealers

249.1100 Form MSD, application for registration as a municipal 
          securities dealer pursuant to rule 15Ba2-1 under the 
          Securities Exchange Act of 1934 or amendment to such 
          application.
249.1110 Form MSDW, notice of withdrawal from registration as a 
          municipal securities dealer pursuant to Rule 15Bc3-1 (17 CFR 
          240.15Bc3-1).

Subpart M_Forms for Reporting and Inquiry With Respect to Missing, Lost, 
                    Stolen, or Counterfeit Securities

249.1200 Form X-17F-1A--Report for missing, lost, stolen or counterfeit 
          securities.

Subpart N_Forms for Registration of Municipal Advisors and for Providing 
              Information Regarding Certain Natural Persons

249.1300 Form MA, for registration as a municipal advisor, and for 
          amendments to registration.
249.1300T Form MA-T, for temporary registration as a municipal advisor, 
          and for amendments to, and withdrawals from, temporary 
          registration.
249.1310 Form MA-I, for providing information regarding natural person 
          municipal advisors, and for amendments to such information.
249.1320 Form MA-W, for withdrawal from registration as a municipal 
          advisor.
249.1330 Form MA-NR, for appointment of agent for service of process by 
          non-resident municipal advisor, non-resident general partner 
          or managing agent of a municipal advisor, and non-resident 
          natural person associated with a municipal advisor.

               Subpart O_Forms for Asset-Backed Securities

249.1400 Form ABS-15G, Asset-backed securitizer report pursuant to 
          Section 15G of the Securities Exchange Act of 1934.
249.1401 Form ABS-EE, for submission of the asset-data file exhibits and 
          related documents.

      Subpart P_Forms for Registration of Security-Based Swap Data 
                              Repositories

249.1500 Form SDR, for application for registration as a security-based 
          swap data repository, amendments thereto, or withdrawal from 
          registration.

    Subpart Q_Registration of Security-Based Swap Dealers and Major 
                    Security-Based Swap Participants

249.1600 Form SBSE, for application for registration as a security-based 
          swap dealer or major security-based swap participant

[[Page 280]]

          or to amend such an application for registration.
249.1600a Form SBSE-A, for application for registration as a security-
          based swap dealer or major security-based swap participant or 
          to amend such an application for registration by firms 
          registered or registering with the Commodity Futures Trading 
          Commission as a swap dealer or major swap participant that are 
          not also registered or registering with the Commission as a 
          broker or dealer.
249.1600b Form SBSE-BD, for application for registration as a security-
          based swap dealer or major security-based swap participant or 
          to amend such an application for registration by firms 
          registered or registering with the Commission as a broker or 
          dealer.
249.1600c Form SBSE-C, for certification by security-based swap dealers 
          and major security-based swap participants.
249.1601 Form SBSE-W, for withdrawal from registration as a security-
          based swap dealer or major security-based swap participant or 
          to amend such an application for registration.

Subpart R_Forms for Registration of, and Filings by, Security-Based Swap 
                          Execution Facilities

249.1701 Form SBSEF, for application for registration as a security-
          based swap execution facility or to amend such application or 
          registration.
249.1702 Submission cover sheet, for rule and product submissions.

Subpart S [Reserved]

   Subpart T_Form SCI, for filing notices and reports as required by 
                             Regulation SCI.

249.1900 Form SCI, for filing notices and reports as required by 
          Regulation SCI.

           Subpart U_Forms for Registration of Funding Portals

249.2000 Form Funding Portal.

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et 
seq.; 18 U.S.C. 1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 1904; Sec. 
102(a)(3) Pub. L. 112-106, 126 Stat. 309 (2012), Sec. 107 Pub. L. 112-
106, 126 Stat. 313 (2012), Sec. 72001 Pub. L. 114-94, 129 Stat. 1312 
(2015), and secs. 2 and 3 Pub. L. 116-222, 134 Stat. 1063 (2020), unless 
otherwise noted.
    Section 249.220f is also issued under secs. 3(a), 202, 208, 302, 
306(a), 401(a), 401(b), 406 and 407, Pub. L. 107-204, 116 Stat. 745, and 
secs. 2 and 3, Pub. L. 116-222, 134 Stat. 1063.
    Section 249.240f is also issued under secs. 3(a), 202, 208, 302, 
306(a), 401(a), 406 and 407, Pub. L. 107-204, 116 Stat. 745.
    Section 249.308 is also issued under 15 U.S.C. 80a-29 and 80a-37.
    Section 249.308a is also issued under secs. 3(a) and 302, Pub. L. 
107-204, 116 Stat. 745.
    Section 249.308b is also issued under secs. 3(a) and 302, Pub. L. 
107-204, 116 Stat. 745.
    Section 249.310 is also issued under secs. 3(a), 202, 208, 302, 406 
and 407, Pub. L. 107-204, 116 Stat. 745.
    Section 249.326(T) also issued under section 13(f)(1) (15 U.S.C. 
78m(f)(1)).
    Section 249.330 is also issued under 15 U.S.C. 80a-29(a).
    Section 249.331 is also issued under 15 U.S.C. 78j-1, 7202, 7233, 
7241, 7264, 7265; and 18 U.S.C. 1350.
    Section 249.617 is also issued under Pub. L. 111-203, Sec.  939, 
939A, 124. Stat. 1376 (2010) (15 U.S.C. 78c, 15 U.S.C. 78o-7 note).
    Section 249.640 is also issued under Public Law 111-203, sec. 913, 
124 Stat. 1376 (2010).
    Section 249.819 is also issued under 12 U.S.C. 5465(e).
    Section 249.1400 is also issued under sec. 943, Pub. L. 111-203, 124 
Stat. 1376.

    Editorial Note: Nomenclature changes to part 249 appear at 57 FR 
36501, Aug. 13, 1992, and 57 FR 47409, Oct. 16, 1992.



Sec.  249.0-1  Availability of forms.

    (a) This part identifies and describes the forms prescribed for use 
under the Securities Exchange Act of 1934.
    (b) Any person may obtain a copy of any form prescribed for use in 
this part by written request to the Securities and Exchange Commission, 
100 F Street, NE, Washington, DC 20549. Any person may inspect the forms 
at this address and at the Commission's regional offices. (See Sec.  
200.11 of this chapter for the addresses of SEC regional offices).

[46 FR 17757, Mar. 20, 1981, as amended at 47 FR 26820, June 22, 1982; 
59 FR 5946, Feb. 9, 1994; 73 FR 979, Jan. 4, 2008]



 Subpart A_Forms for Registration or Exemption of, and Notification of 
             Action Taken by, National Securities Exchanges



Sec.  249.1  Form 1, for application for, and amendments to applications
for, registration as a national securities exchange or exemption from 
registration pursuant to Section 5 of the Exchange Act.

    The form shall be used for application for, and amendments to 
applications for, registration as a national securities exchange or 
exemption from

[[Page 281]]

registration pursuant to Section 5 of the Act, (15 U.S.C. 78e).

[63 FR 70925, Dec. 22, 1998]

    Editorial Note: For Federal Register citations affecting Form 1, see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.10  Form 1-N for notice registration as a national securities
exchange.

    This form shall be used for notice, and amendments to the notice, to 
permit an exchange to register as a national securities exchange solely 
for the purposes of trading security futures products pursuant to 
Section 6(g) of the Act (15 U.S.C. 78f(g)).

[66 FR 43743, Aug. 20, 2001]

    Editorial Note: For Federal Register citations affecting Form 1-10, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.11  Form R31 for reporting covered sales and covered round
turn transactions under section 31 of the Act.

    This form shall be used by each national securities exchange to 
report to the Commission within ten business days after the end of every 
month the aggregate dollar amount of sales of securities that occurred 
on the exchange, had a charge date in the month of the report, and are 
subject to fees pursuant to section 31(b) of the Act (15 U.S.C. 78ee) 
and Sec.  240.31 of this chapter; and the total number of round turn 
transactions in security futures that occurred on the exchange, had a 
charge date in the month of the report, and are subject to assessments 
pursuant to section 31(d) of the Act and Sec.  240.31 of this chapter. 
This form also shall be used by a national securities association to 
report to the Commission within ten business days after the end of every 
month the aggregate dollar amount of sales of securities that occurred 
by or through a member of the association otherwise than on a national 
securities exchange, had a charge date in the month of the report, and 
are subject to fees pursuant to section 31(c) of the Act and Sec.  
240.31 of this chapter; and the total number of round turn transactions 
in security futures that occurred by or through any member of the 
association otherwise than on a national securities exchange, had a 
charge date in the month of the report, and are subject to assessments 
pursuant to section 31(d) of the Act and Sec.  240.31 of this chapter.

[69 FR 41080, July 7, 2004]

    Editorial Note: For Federal Register citations affecting Form R31, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.25  Form 25, for notification of removal from listing 
and/or registration.

    This form shall be used by registered national securities exchanges 
and issuers for notification of removal of a class of securities from 
listing on a national securities exchange and/or withdrawal of 
registration under section 12(b) of the Act (15 U.S.C. 78l(b)).

[70 FR 42469, July 22, 2005]

    Editorial Note: For Federal Register citations affecting Form 25, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.26  Form 26, for notification of the admission to trading
of a substituted or additional class of security under Rule 12a-5
(Sec.  240.12a-5 of this chapter).

    This form shall be used by a registered national securities exchange 
for notification of the admission to trading of a substituted or 
additional class of security under Rule 12a-5.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 26, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



  Subpart B_Forms for Reports To Be Filed by Officers, Directors, and 
                            Security Holders



Sec.  249.103  Form 3, initial statement of beneficial ownership of 
securities.

    This Form shall be filed pursuant to Rule 16a-3 (Sec.  240.16a-3 of 
this chapter) for initial statements of beneficial

[[Page 282]]

ownership of securities. The Commission is authorized to solicit the 
information required by this Form pursuant to sections 16(a) and 23(a) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a) and 78w(a)); 
and sections 30(h) and 38 of the Investment Company Act of 1940 (15 
U.S.C. 80a-29(h) and 80a-37), and the rules and regulations thereunder. 
Disclosure of information specified on this Form is mandatory. The 
information will be used for the primary purpose of disclosing the 
holdings of directors, officers and beneficial owners of registered 
companies. Information disclosed will be a matter of public record and 
available for inspection by members of the public. The Commission can 
use the information in investigations or litigation involving the 
federal securities laws or other civil, criminal, or regulatory statutes 
or provisions, as well as for referral to other governmental authorities 
and self-regulatory organizations. Failure to disclose required 
information may result in civil or criminal action against persons 
involved for violations of the federal securities laws and rules.

[56 FR 7274, Feb. 21, 1991, as amended at 72 FR 45112, Aug. 10, 2007]

    Editorial Note: For Federal Register citations affecting Form 3, see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.104  Form 4, statement of changes in beneficial ownership of
securities.

    This Form shall be filed pursuant to Rule 16a-3 (Sec.  240.16a-3 of 
this chapter) for statements of changes in beneficial ownership of 
securities. The Commission is authorized to solicit the information 
required by this Form pursuant to sections 16(a) and 23(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78p(a) and 78w(a)); and 
sections 30(h) and 38 of the Investment Company Act of 1940 (15 U.S.C. 
80a-29(h) and 80a-37), and the rules and regulations thereunder. 
Disclosure of information specified on this Form is mandatory. The 
information will be used for the primary purpose of disclosing the 
holdings of directors, officers and beneficial owners of registered 
companies. Information disclosed will be a matter of public record and 
available for inspection by members of the public. The Commission can 
use the information in investigations or litigation involving the 
federal securities laws or other civil, criminal, or regulatory statutes 
or provisions, as well as for referral to other governmental authorities 
and self-regulatory organizations. Failure to disclose required 
information may result in civil or criminal action against persons 
involved for violations of the federal securities laws and rules.

[56 FR 7274, Feb. 21, 1991, as amended at 72 FR 45112, Aug. 10, 2007]

    Editorial Note: For Federal Register citations affecting Form 4, see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.105  Form 5, annual statement of beneficial ownership of
securities.

    This Form shall be filed pursuant to Rule 16a-3 (Sec.  240.16a-3 of 
this chapter) for annual statements of beneficial ownership of 
securities. The Commission is authorized to solicit the information 
required by this Form pursuant to sections 16(a) and 23(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78p(a) and 78w(a)); and 
sections 30(h) and 38 of the Investment Company Act of 1940 (15 U.S.C. 
80a-29(h) and 80a-37), and the rules and regulations thereunder. 
Disclosure of information specified on this Form is mandatory. The 
information will be used for the primary purpose of disclosing the 
holdings of directors, officers and beneficial owners of registered 
companies. Information disclosed will be a matter of public record and 
available for inspection by members of the public. The Commission can 
use the information in investigations or litigation involving the 
federal securities laws or other civil, criminal, or regulatory statutes 
or provisions, as well as for referral to other governmental authorities 
and self-regulatory organizations. Failure to disclose required 
information may result in civil or criminal action against persons 
involved for violations of the federal securities laws and rules.

[56 FR 7274, Feb. 21, 1991, as amended at 72 FR 45112, Aug. 10, 2007]

[[Page 283]]


    Editorial Note: For Federal Register citations affecting Form 5, see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



   Subpart C_Forms for Applications for Registration of Securities on 
            National Securities Exchanges and Similar Matters



Sec.  249.208  [Reserved]



Sec.  249.208a  Form 8-A, for registration of certain classes of
securities pursuant to section 12 (b) or (g) of the Securities Exchange
Act of 1934.

    (a) Subject to paragraph (b) of this section, this form may be used 
for registration pursuant to section 12(b) or (g) of the Securities 
Exchange Act of 1934 of any class of securities of any issuer which:
    (1) Is required to file reports pursuant to sections 13 and 15(d) of 
that Act;
    (2) Is concurrently qualifying a Tier 2 offering statement relating 
to that class of securities using the Form S-1 or Form S-11 disclosure 
models; or
    (3) Pursuant to an order exempting the exchange on which the issuer 
has securities listed from registration as a national securities 
exchange.
    (b) If the registrant would be required to file an annual report 
pursuant to section 15(d) of the Act for its last fiscal year, except 
for the fact that the registration statement on this form will become 
effective before such report is required to be filed, an annual report 
for such fiscal year shall nevertheless be filed within the period 
specified in the appropriate annual report form.
    (c) If this form is used for the registration of a class of 
securities under Section 12(b) of the Act (15 U.S.C. 78l(b)), it shall 
become effective;
    (1) If a class of securities is not concurrently being registered 
under the Securities Act of 1933 (15 U.S.C. 77a et seq.)(``Securities 
Act''), upon the later of receipt by the Commission of certification 
from the national securities exchange listed on the form or the filing 
of the Form 8-A with the Commission; or
    (2) If a class of securities is concurrently being registered under 
the Securities Act, upon the later of the Filing of the Form 8-A with 
the Commission, receipt by the Commission of certification from the 
national securities exchange listed on the form, or the effectiveness of 
the Securities Act registration statement relating to the class of 
securities.
    (d) If this form is used for the registration of a class of 
securities under Section 12(g) of the Act (15 U.S.C. 78l(g)), it shall 
become effective:
    (1) If a class of securities is not concurrently being registered 
under the Securities Act, upon the filing of the Form 8-A with the 
Commission; or
    (2) If a class of securities is concurrently being registered under 
the Securities Act, upon the later of the filing of the Form 8-A with 
the Commission or the effectiveness of the Securities registration 
statement relating to the class of securities.
    (e) Notwithstanding the foregoing in paragraphs (c) and (d) of this 
section, if the form is used for registration of a class of securities 
being offered under Regulation A, it shall become effective:
    (1) For the registration of a class of securities under Section 
12(b), upon the latest of the filing of the form with the Commission, 
the qualification of the Regulation A offering statement or the receipt 
by the Commission of certification from the national securities exchange 
listed on the form; or
    (2) For the registration of a class of securities under Section 
12(g), upon the later of the filing of the form and qualification of 
that Regulation A offering statement.

[43 FR 21663, May 19, 1978]

    Editorial Note: For Federal Register citations affecting Form 8-A, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec. Sec.  249.208b-249.208c  [Reserved]

    Editorial Note: Amended Form 8-A replaces former Form 8-C; see Sec.  
249.208a of this chapter.



Sec.  249.210  Form 10, general form for registration of securities
pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934.

    This form shall be used for registration pursuant to section 12 (b) 
or (g) of the Securities Exchange Act of 1934 of

[[Page 284]]

classes of securities of issuers for which no other form is prescribed.

(Secs. 7, 10, 19(a), 48 Stat. 78, 81, 85; secs. 205, 209, 48 Stat. 906, 
908; sec. 8, 68 Stat. 685; 15 U.S.C. 77g, 77j, 77s(a); secs. 12, 13, 14, 
15(d), 23, 48 Stat. 892, 894, 895, 901; sec. 203(a), 49 Stat. 704; secs. 
1, 3, 8, 49 Stat. 1375, 1377, 1379; sec. 202, 68 Stat. 686; secs. 3, 4, 
5, 6, 10, 78 Stat. 565-568, 569, 570-574, 88a; secs. 1, 2, 3, 82 Stat. 
454, 455; secs.1, 2, 3-5, 28(c), 84 Stat. 1435, 1479; sec. 105(b), 88 
Stat. 1503; secs. 8, 9, 10, 18, 89 Stat. 117, 118, 119, 155 (15 U.S.C. 
78l, 78m, 78n, 78o(d), 78w))

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 10 see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.210b  [Reserved]



Sec.  249.218  Form 18, for foreign governments and political subdivisions
thereof.

    This form shall be used for the registration of securities of any 
foreign government or political subdivision thereof.

[47 FR 54781, Dec. 6, 1982]

    Editorial Note: For Federal Register citations affecting Form 18, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.220f  Form 20-F, registration of securities of foreign private
issuers pursuant to section 12(b) or (g), annual and transition reports 
pursuant to sections 13 and 15(d), and shell company reports required 
          under Rule 13a-19 or 15d-19 (Sec.  240.13a-19 or Sec.  
          240.15d-19 of this chapter).

    (a) Any foreign private issuer, other than an asset-backed issuer 
(as defined in Sec.  229.1101 of this chapter), may use this form as a 
registration statement under section 12 (15 U.S.C. 78l) of the 
Securities Exchange Act of 1934 (the ``Exchange Act'') (15 U.S.C. 78a et 
seq.), as an annual or transition report filed under section 13(a) or 
15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)), or as a shell 
company report required under Rule 13a-19 or Rule 15d-19 under the 
Exchange Act (Sec.  240.13a-19 or 240.15d-19 of this chapter).
    (b) An annual report on this form shall be filed within six months 
after the end of the fiscal year covered by such report.
    (c) A transition report on this form shall be filed in accordance 
with the requirements set forth in Sec.  240.13a-10 or Sec.  240.15d-10 
applicable when the issuer changes its fiscal year end.

[47 FR 54781, Dec. 6, 1982, as amended at 70 FR 1625, Jan. 7, 2005; 70 
FR 42248, July 21, 2005]

    Editorial Note: For Federal Register citations affecting Form 20-F, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.240f  Form 40-F, for registration of securities of certain
Canadian issuers pursuant to section 12(b) or (g) and for reports
pursuant to section 15(d) and Rule 15d-4 (Sec.  240.15d-4 of this chapter).

    (a) Form 40-F may be used to file reports with the Commission 
pursuant to section 15(d) of the Securities Exchange Act of 1934 (the 
``Exchange Act'') and Rule 15d-4 (17 CFR 240.15d-4) thereunder by 
registrants that are subject to the reporting requirements of that 
section solely by reason of their having filed a registration statement 
on Form F-7, F-8, F-10 or F-80 under the Securities Act of 1933 (the 
``Securities Act'').

    Note to paragraph (a): No reporting obligation arises under section 
15(d) of the Securities Act from the registration of securities on Form 
F-7, F-8 or F-80 if the issuer, at the time of filing such Form, is 
exempt from the requirements of section 12(g) of the Exchange Act 
pursuant to Rule 12g3-2(b). See Rule 12h-4 under the Exchange Act.

    (b) Form 40-F may be used to register securities with the Commission 
pursuant to section 12(b) or 12(g) of the Exchange Act, to file reports 
with the Commission pursuant to section 13(a) of the Exchange Act and 
Rule 13a-3 (17 CFR 240.13a-3) thereunder, and to file reports with the 
Commission pursuant to section 15(d) of the Exchange Act if:
    (1) The registrant is incorporated or organized under the laws of 
Canada or any Canadian province or territory;
    (2) The registrant is a foreign private issuer or a crown 
corporation;

[[Page 285]]

    (3) The registrant has been subject to the periodic reporting 
requirements of any securities commission or equivalent regulatory 
authority in Canada for a period of at least 12 calendar months 
immediately preceding the filing of this Form and is currently in 
compliance with such obligations; and
    (4) The aggregate market value of the public float of the 
registrant's outstanding equity shares is $75 million or more.

                              Instructions

    1. For purposes of this Form, ``foreign private issuer'' shall be 
construed in accordance with Rule 405 under the Securities Act.
    2. For purposes of this Form, the term ``crown corporation'' shall 
mean a corporation all of whose common shares or comparable equity is 
owned directly or indirectly by the Government of Canada or a Province 
or Territory of Canada.
    3. For purposes of this Form, the ``public float'' of specified 
securities shall mean only such securities held by persons other than 
affiliates of the issuer.
    4. For the purposes of this Form, an ``affiliate'' of a person is 
anyone who beneficially owns directly or indirectly, or exercises 
control or direction over, more than 10 percent of the outstanding 
equity shares of such person. The determination of a person's affiliates 
shall be made as of the end of such person's most recently completed 
fiscal year.
    5. For purposes of this Form, ``equity shares'' shall mean common 
shares, non-voting equity shares and subordinate or restricted voting 
equity shares, but shall not include preferred shares.
    6. For purposes of this Form, the market value of outstanding equity 
shares (whether or not held by affiliates) shall be computed by use of 
the price at which the shares were last sold, or the average of the bid 
and asked prices of such shares, in the principal market for such shares 
as of a date within 60 days prior to the date of filing. If there is no 
market for any of such securities, the book value of such securities 
computed as of the latest practicable date prior to the filing of this 
Form shall be used for purposes of calculating the market value, unless 
the issuer of such securities is in bankruptcy or receivership or has an 
accumulated capital deficit, in which case one-third of the principal 
amount, par value or stated value of such securities shall be used.

    (c) If the registrant is a successor registrant subsisting after a 
business combination, it shall be deemed to meet the 12-month reporting 
requirement of paragraph (b)(3) of this section if:
    (1) The time the successor registrant has been subject to the 
continuous disclosure requirements of any securities commission or 
equivalent regulatory authority in Canada, when added separately to the 
time each predecessor had been subject to such requirements at the time 
of the business combination, in each case equals at least 12 calendar 
months, provided, however, that any predecessor need not be considered 
for purposes of the reporting history calculation if the reporting 
histories of predecessors whose assets and gross revenues, respectively, 
would contribute at least 80 percent of the total assets and gross 
revenues from continuing operations of the successor registrant, as 
measured based on pro forma combination of such participating companies' 
most recently completed fiscal years immediately prior to the business 
combination, when combined with the reporting history of the successor 
registrant in each case satisfy such 12-month reporting requirement; and
    (2) The successor registrant has been subject to such continuous 
disclosure requirements since the business combination, and is currently 
in compliance with its obligations thereunder.
    (d) This Form shall not be used if the registrant is an investment 
company registered or required to be registered under the Investment 
Company Act of 1940.
    (e) Registrants registering securities on this Form, and registrants 
filing annual reports on this Form who have not previously filed a Form 
F-X (Sec.  249.250 of this chapter) in connection with the class of 
securities in relation to which the obligation to file this report 
arises, shall file a Form F-X with the Commission together with this 
Form.

[56 FR 30075, July 1, 1991]

    Editorial Note: For Federal Register citations affecting Form 40-F, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 286]]



Sec.  249.250  Form F-X, for appointment of agent for service of process
by issuers registering securities on Form F-8, F-9, F-10 or F-80 
(Sec.  239.38, 239.39, 239.40 or 239.41 of this chapter), or registering
securities 
          or filing periodic reports on Form 40-F (Sec.  249.240f of 
          this chapter), or by any issuer or other non-U.S. person 
          filing tender offer documents on Schedule 13E-4F, 14D-1F or 
          14D-9F (Sec.  240.13e-102, 240.14d-102 or 240.14d-103 of this 
          chapter), or by any non-U.S. person acting as trustee with 
          respect to securities registered on Form F-7 (Sec.  249.37 of 
          this chapter), F-8, F-9, F-10 or F-80.

    Form F-X shall be filed with the Commission:
    (a) By any issuer registering securities on Form F-8, F-9, F-10 or 
F-80 under the Securities Act of 1933;
    (b) By any issuer registering securities on Form 40-F under the 
Securities Exchange Act of 1934;
    (c) By any issuer filing a periodic report on Form 40-F, if it has 
not previously filed a Form F-X in connection with the class of 
securities in relation to which the obligation to file a report on Form 
40-F arises;
    (d) By any issuer or other non-U.S. person filing tender offer 
documents on Schedule 13E-4F, 14D-1F or 14D-9F; and
    (e) By any non-U.S. person acting as trustee with respect to 
securities registered on Form F-7, F-8, F-9, F-10 or F-80.

[56 FR 30076, July 1, 1991]

    Editorial Note: For Federal Register citations affecting Form F-X, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



   Subpart D_Forms for Annual and Other Reports of Issuers and Other 
  Persons Required Under Sections 13, 14A, and 15(d) of the Securities 
                          Exchange Act of 1934



Sec.  249.306  Form 6-K, report of foreign issuer pursuant to
Rules 13a-16 (Sec.  240.13a-16 of this chapter) and 15d-16 
(Sec.  240.15d-16 of this chapter) under the Securities Exchange Act
of 1934.

    This form shall be used by foreign issuers which are required to 
furnish reports pursuant to Rule 13a-16 (Sec.  240.13a-16 of this 
chapter) or 15d-16 (Sec.  240.15d-16 of this chapter) under the 
Securities Exchange Act of 1934.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 6-K, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.308  Form 8-K, for current reports.

    This form shall be used for the current reports required by Rule 
13a-11 or Rule 15d-11 (Sec.  240.13a-11 or Sec.  240.15d-11 of this 
chapter) and for reports of nonpublic information required to be 
disclosed by Regulation FD (Sec. Sec.  243.100 and 243.101 of this 
chapter).

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 8-K, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.308a  Form 10-Q, for quarterly and transition reports under
sections 13 or 15(d) of the Securities Exchange Act of 1934.

    (a) Form 10-Q shall be used for quarterly reports under section 13 
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 
78o(d)), required to be filed pursuant to Sec.  240.13a-13 or Sec.  
240.15d-13 of this chapter. A quarterly report on this form pursuant to 
Sec.  240.13a-13 or Sec.  240.15d-13 of this chapter shall be filed 
within the following period after the end of the first three fiscal 
quarters of each fiscal year, but no quarterly report need be filed for 
the fourth quarter of any fiscal year:
    (1) 40 days after the end of the fiscal quarter for large 
accelerated filers and accelerated filers (as defined in Sec.  240.12b-2 
of this chapter); and
    (2) 45 days after the end of the fiscal quarter for all other 
registrants.
    (b) Form 10-Q also shall be used for transition and quarterly 
reports filed pursuant to Sec.  240.13a-10 or Sec.  240.15d-10 of this 
chapter. Such transition or quarterly reports shall be filed in 
accordance with the requirements set forth in Sec.  240.13a-10 or Sec.  
240.15d-10 of this chapter

[[Page 287]]

applicable when the registrant changes its fiscal year end.

[67 FR 58506, Sept. 16, 2002, as amended at 69 FR 68236, Nov. 23, 2004; 
70 FR 76642, Dec. 27, 2005]

    Editorial Note: For Federal Register citations affecting Form 10-Q, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.310  Form 10-K, for annual and transition reports pursuant
to sections 13 or 15(d) of the Securities Exchange Act of 1934.

    (a) This form shall be used for annual reports pursuant to sections 
13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 
78o(d)) for which no other form is prescribed. This form also shall be 
used for transition reports filed pursuant to section 13 or 15(d) of the 
Securities Exchange Act of 1934.
    (b) Annual reports on this form shall be filed within the following 
period:
    (1) 60 days after the end of the fiscal year covered by the report 
(75 days for fiscal years ending before December 15, 2006) for large 
accelerated filers (as defined in Sec.  240.12b-2 of this chapter);
    (2) 75 days after the end of the fiscal year covered by the report 
for accelerated filers (as defined in Sec.  240.12b-2 of this chapter); 
and
    (3) 90 days after the end of the fiscal year covered by the report 
for all other registrants.
    (c) Transition reports on this form shall be filed in accordance 
with the requirements set forth in Sec.  240.13a-10 or Sec.  240.15d-10 
of this chapter applicable when the registrant changes its fiscal year 
end.
    (d) Notwithstanding paragraphs (b) and (c) of this section, all 
schedules required by Article 12 of Regulation S-X (Sec. Sec.  210.12-
01-210.12-29 of this chapter) may, at the option of the registrant, be 
filed as an amendment to the report not later than 30 days after the 
applicable due date of the report.

[70 FR 76642, Dec. 27, 2005]

    Editorial Note: For Federal Register citations affecting Form 10-K, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec. Sec.  249.310b-249.310c  [Reserved]



Sec.  249.311  Form 11-K, for annual reports of employee stock purchase,
savings and similar plans pursuant to section 15(d) of the Securities
Exchange Act of 1934.

    This form shall be used for annual reports pursuant to section 15(d) 
of the Securities Exchange Act of 1934 with respect to employee stock 
purchase, savings and similar plans, interests in which constitute 
securities which have been registered under the Securities Act of 1933. 
Such a report is required to be filed even though the issuer of the 
securities offered to employees pursuant to the plan also files annual 
reports pursuant to section 13 or 15(d) of the Securities Exchange Act 
of 1934. However, attention is directed to Rule 15d-21 (Sec.  240.15d-21 
of this chapter) which provides that in certain cases the information 
required by this form may be furnished with respect to the plan as a 
part of the annual report of such issuer. Reports on this form shall be 
filed within 90 days after the end of the fiscal year of the plan, or, 
in the case of a plan subject to the Employee Retirement Income Security 
Act of 1974, within 180 days after the plan's fiscal year end.

[43 FR 21663, May 19, 1978]

    Editorial Note: For Federal Register citations affecting Form 11-K, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.312  Form 10-D, periodic distribution reports by asset-backed
issuers.

    This form shall be used by asset-backed issuers to file periodic 
distribution reports pursuant to Sec.  240.13a-17 or Sec.  240.15d-17 of 
this chapter. A distribution report on this form pursuant to Sec.  
240.13a-17 or Sec.  240.15d-17 of this chapter shall be filed within 15 
days after each required distribution date on the asset-backed 
securities, as specified in the governing documents for such securities.

[70 FR 1626, Jan. 7, 2005]

    Editorial Note: For Federal Register citations affecting Form 10-D, 
see the List of CFR Sections Affected, which appears in the

[[Page 288]]

Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.318  Form 18-K, annual report for foreign governments and
political subdivisions thereof.

    This form shall be used for the annual reports of foreign 
governments or political subdivisions thereof.

[47 FR 54790, Dec. 6, 1982]

    Editorial Note: For Federal Register citations affecting Form 18-K, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.322  Form 12b-25--Notification of late filing.

    (a) This form shall be filed pursuant to Sec.  240.12b-25 of this 
chapter by issuers who are unable to file timely all or any required 
portion of an annual or transition report on Form 10-K and Form 10-KSB, 
20-F, or 11-K (Sec.  249.310, 249.310b, 249.220f or 249.311), a 
quarterly or transition report on Form 10-Q and Form 10-QSB (Sec. Sec.  
249.308a and 249.308b), or a distribution report on Form 10-D (Sec.  
249.312) pursuant to section 13 or 15(d) of the Act (15 U.S.C. 78m or 
78o(d)) or an annual report on Form N-CEN (Sec. Sec.  249.330; 274.101) 
or a semi-annual or annual report on Form N-CSR (Sec. Sec.  249.331; 
274.128) pursuant to section 13 or 15(d) of the Act or section 30 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-29). The filing shall 
consist of a signed original and three conformed copies, and shall be 
filed with the Commission at Washington, DC 20549, no later than one 
business day after the due date for the periodic report in question. 
Copies of this form may be obtained from ``Publications,'' Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549 and at 
our Web site at http://www.sec.gov.
    (b) This form shall not be used by electronic filers unable to 
timely file a report solely due to electronic difficulties. Filers 
unable to submit a report within the time period prescribed due to 
electronic difficulties should comply with either Rule 201 or Rule 202 
of Regulation S-T (Sec.  232.201 or Sec.  232.202 of this chapter), or 
apply for an adjustment in filing date pursuant to Rule 13(b) of 
Regulation S-T (Sec.  232.13(b) of this chapter).
    (c) Interactive data submissions. This form shall not be used by 
electronic filers with respect to the submission or posting of an 
Interactive Data File (Sec.  232.11 of this chapter). Electronic filers 
unable to submit or post an Interactive Data File within the time period 
prescribed should comply with either Rule 201 or 202 of Regulation S-T 
(Sec. Sec.  232.201 and 232.202 of this chapter).

[50 FR 1449, Jan. 11, 1985, as amended at 70 FR 1630, Jan. 7, 2005; 73 
FR 32228, June 5, 2008; 74 FR 6821, Feb. 10, 2009; 81 FR 82020, June 1, 
2018]

    Editorial Note: For Federal Register citations affecting Form 12b-
25, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.323  Form 15, certification of termination of registration
of a class of security under section 12(g) or notice of suspension of 
duty to file reports pursuant to sections 13 and 15(d) of the Act.

    (a) This form shall be filed by each issuer to certify that the 
number of holders of record of a class of security registered under 
section 12(g) of the Act is reduced to less than 300 persons, or that 
the number of holders of record of a class of security registered under 
section 12(g) of the Act is reduced to less than 500 persons and the 
total assets of the issuer have not exceeded $10 million on the last day 
of each of the issuer's most recent three fiscal years. Registration 
terminates 90 days after the filing of the certificate or within such 
shorter time as the Commission may direct.
    (b) This form shall also be filed by each issuer required to file 
reports pursuant to section 15(d) of the Act, as a notification that the 
duty to file such reports is suspended pursuant to section 15(d) of the 
Act because all securities of each class of such issuer registered under 
the Securities Act of 1933 are held of record by less than 300 persons 
at the beginning of its fiscal year,

[[Page 289]]

or otherwise pursuant to the provisions of Rule 12h-3 (17 CFR 240.12h-
3).

(Secs. 12(g)(4), 12(h), 13(a), 15(d), 23(a), 48 Stat. 892, 894, 895, 
901; sec. 203(a), 49 Stat. 704; secs. 3, 8, 49 Stat. 1377, 1379; secs. 
3, 4, 6, 78 Stat. 565-568, 569, 570-574; sec. 18, 89 Stat. 155; sec. 
204, 91 Stat. 1500; 15 U.S.C. 78l(g)(4), 78l(h), 78m(a), 78o(d), 78w(a))

[49 FR 12690, Mar. 30, 1984, as amended at 51 FR 25362, July 14, 1986; 
61 FR 21356, May 9, 1996]

    Editorial Note: For Federal Register citations affecting Form 15, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.324  Form 15F, certification by a foreign private issuer
regarding the termination of registration of a class of securities under 
section 12(g) or the duty to file reports under section 13(a)
or section 15(d).

    This form shall be filed by a foreign private issuer to disclose and 
certify the information on the basis of which it meets the requirements 
specified in Rule 12h-6 (Sec.  240.12h-6 of this chapter) to terminate 
the registration of a class of securities under section 12(g) of the Act 
(15 U.S.C. 78l(g)) or the duty to file reports under section 13(a) of 
the Act (15 U.S.C. 78m(a)) or section 15(d) of the Act (15 U.S.C. 
78(o)(d)). In each instance, unless the Commission objects, termination 
occurs 90 days, or such shorter time as the Commission may direct, after 
the filing of Form 15F.

[72 FR 16958, Apr. 5, 2007]

    Editorial Note: For Federal Register citations affecting Form 15F, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.325  Form 13F, report of institutional investment manager
pursuant to section 13(f) of the Securities Exchange Act of 1934.

    This form shall be used by institutional investment managers which 
are required to furnish reports pursuant to section 13(f) of the 
Securities Exchange Act of 1934. (15 U.S.C. 78m(f)) and Rule 13f-1 
thereunder (Sec.  240.13f-1 of this chapter).

[43 FR 26705, June 22, 1978]

    Editorial Note: For Federal Register citations affecting Form 13F, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.326  Form N-PX, annual report of proxy voting record.

    This form shall be used by institutional investment managers to file 
an annual report pursuant to Sec.  240.14Ad-1 of this chapter containing 
the manager's proxy voting record.

[87 FR 78808, Dec. 22, 2022]

    Effective Date Note: At 87 FR 78808, Dec. 22, 2022, Sec.  249.326 
was added, effective July 1, 2024.



Sec.  249.327  Form 13H, Information required on large traders pursuant
to Section 13(h) of the Securities Exchange Act of 1934 and rules thereunder.

    This form shall be used by persons that are large traders required 
to furnish identifying information to the Commission pursuant to Section 
13(h)(1) of the Securities Exchange Act of 1934 [15 U.S.C. 78m(h)(1)] 
and Sec.  240.13h-1(b) of this chapter.

[76 FR 47004, Aug. 3, 2011]

    Editorial Note: For Federal Register citations affecting Form 13H, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.328T  Form 17-H, Risk assessment report for brokers and 
dealers pursuant to section 17(h) of the Securities Exchange Act of 1934
and rules thereunder. This form shall be used by brokers and dealers in
reporting information to the Commission concerning certain of their associated 
persons pursuant to section 17(h) of the Securities Exchange Act of 1934 
[15 U.S.C. 78q(h)] and Rules 17h-1T and 17h-2T thereunder [Sec. Sec.  
240.17h-1T and 240.17h-2T of this chapter].

[57 FR 32171, July 21, 1992]

    Editorial Note: For Federal Register citations affecting Form 17-H, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 290]]



Sec.  249.330  Form N-CEN, annual report of registered investment companies.

    This form shall be used by registered unit investment trusts and 
small business investment companies for annual reports to be filed 
pursuant to Sec.  270.30a-1 of this chapter in satisfaction of the 
requirement of section 30(a) of the Investment Company Act of 1940 (15 
U.S.C. 80a-29(a)) that every registered investment company must file 
annually with the Commission such information, documents, and reports as 
investment companies having securities registered on a national 
securities exchange are required to file annually pursuant to section 
13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) and the 
rules and regulations thereunder.
    Note: The text of Form N-CEN will not appear in the Code of Federal 
Regulations.

[81 FR 82020, Nov. 18, 2016]

    Editorial Note: For Federal Register citations affecting Form N-CEN, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.331  Form N-CSR, certified shareholder report.

    This form shall be used by registered management investment 
companies to file reports pursuant to Sec.  270.30b2-1(a) of this 
chapter not later than 10 days after the transmission to stockholders of 
any report that is required to be transmitted to stockholders under 
Sec.  270.30e-1 of this chapter.

[68 FR 5365, Feb. 3, 2003]

    Editorial Note: For Federal Register citations affecting Form N-CSR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.332  Form SHO, report of institutional investment managers
pursuant to section 13(f)(2) of the Securities Exchange Act of 1934.

    This form shall be used by institutional investment managers that 
are required to furnish reports pursuant to section 13(f)(2) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m(f)(2)) and 17 CFR 
240.13f-2 (Rule 13f-2).

[88 FR 75185, Nov. 1, 2023]



Sec.  249.333  Form F-SR.

    This form shall be used for reporting of purchases by or on behalf 
of the issuer or an affiliated purchaser of equity securities registered 
by the issuer pursuant to section 12 of the Exchange Act (15 U.S.C. 78l) 
that does not file quarterly reports on Form 10-Q (Sec.  249.308a), and 
annual reports on Form 10-K (Sec.  249.310), pursuant to Sec.  240.13a-
21 of this chapter.

[88 FR 36058, June 1, 2023]

    Editorial Note: For Federal Register citations affecting Form F-SR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.444  Form SE, form for submission of paper format exhibits 
by electronic filers.

    This form shall be used by an electronic filer for the submission of 
any paper format document relating to an otherwise electronic filing, as 
provided in Rule 311 of Regulation S-T (Sec.  232.311 of this chapter).

[58 FR 14686, Mar. 18, 1993]

    Editorial Note: For Federal Register citations affecting Form SE, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.445  [Reserved]



Sec.  249.446  Form ID, uniform application for access codes to file on EDGAR.

    Form ID must be filed by registrants, third party filers, or their 
agents, , to request the following access codes to permit filing on 
EDGAR:
    (a) Central Index Key (CIK)--uniquely identifies each filer, filing 
agent, and training agent.
    (b) CIK Confirmation Code (CCC)--used in the header of a filing in 
conjunction with the CIK of the filer to ensure that the filing has been 
authorized by the filer.
    (c) Password (PW)--allows a filer, filing agent or training agent to 
log on to the EDGAR system, submit filings, and change its CCC.
    (d) Password Modification Authorization Code (PMAC)--allows a filer, 
filing

[[Page 291]]

agent or training agent to change its Password.

[69 FR 22710, Apr. 26, 2004, as amended at 86 FR 25805, May 11, 2021]

    Editorial Note: For Federal Register citations affecting Form ID, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.447  Form TH--Notification of reliance on temporary hardship
exemption.

    Form TH shall be filed by any electronic filer who submits to the 
Commission, pursuant to a temporary hardship exemption, a document in 
paper format that otherwise would be required to be submitted 
electronically, as prescribed by Rule 201(a) of Regulation S-T (Sec.  
232.201(a) of this chapter).

[58 FR 14686, Mar. 18, 1993]

    Editorial Note: For Federal Register citations affecting Form TH, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



  Subpart E_Forms for Statements Made in Connection With Exempt Tender 
                                 Offers

    Source: 64 FR 61406, Nov. 10, 1999, unless otherwise noted.



Sec.  249.480  Form CB, tender offer statement in connection with a tender 
offer for a foreign private issuer.

    This form is used to report an issuer tender offer conducted in 
compliance with Sec.  240.13e-4(h)(8) of this chapter and a third-party 
tender offer conducted in compliance with Sec.  240.14d-1(c) of this 
chapter. This report also is used by a subject company pursuant to Sec.  
240.14e-2(d) of this chapter.

[64 FR 61406, Nov. 10, 1999]

    Editorial Note: For Federal Register citations affecting Form CB, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



  Subpart F_Forms for Registration of Brokers and Dealers Transacting 
                  Business on Over-the-Counter Markets



Sec.  249.501  Form BD, for application for registration as a broker
and dealer or to amend or supplement such an application.

    (a) This form shall be used for application for registration as a 
broker-dealer under the Securities Exchange Act of 1934, or to amend 
such application.
    (b) Interim Form BD shall be used for application for registration 
as broker-dealer under the Securities Exchange Act of 1934, or to amend 
such application, only by order of the Commission. In the event broker-
dealers are required to comply with their filing obligations on Interim 
Form BD, the form will be made available at the Commission's Publication 
Office at (202) 942-4040.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form BD, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.501a  Form BDW, notice of withdrawal from registration as
broker-dealer pursuant to Sec.  240.15b6-1, Sec.  240.15Bc3-1, or
Sec.  240.15Cc1-1 of this chapter.

    (a) This form shall be used for filing a notice of withdrawal as 
broker-dealer pursuant to Rule 15b6-1 (Sec.  240.15b6-1 of this 
chapter), Rule 15Bc3-1 Sec.  240.15B3-1 of this chapter), or Rule 15Cc1-
1 (Sec.  240.15Cc1-1 of this chapter). Under sections 15(b), 15B, 15C, 
17(a), and 23(a) of the Securities Exchange Act of 1934 (17 CFR part 
240), and the rules and regulations thereunder, the Commission is 
authorized to solicit the information required to be supplied by this 
form from registrants desiring to withdraw their registration as a 
broker-dealer. Disclosure of the information specified in this form is 
mandatory prior to processing of applications for withdrawal, except for 
social security account numbers, disclosure of which is voluntary. The 
information will be

[[Page 292]]

used for the primary purpose of determining whether it is in the public 
interest to permit a broker-dealer to withdraw his registration. This 
notice will be made a matter of public record. Therefore, any 
information, given will be available for inspection by any member of the 
public. Because of the public nature of the information the Commission 
can utilize it for a variety of purposes, including referral to other 
governmental authorities or securities self-regulatory organizations for 
investigatory purposes or in connection with litigation involving the 
Federal securities laws and other civil, criminal or regulatory statutes 
or provisions. Social security account numbers, if furnished, will 
assist the Commission in identifying registrants and, therefore, in 
promptly processing applications for withdrawal. Failure to disclose the 
information requested by Form BDW, except for social security account 
numbers, may result in the registrant not being permitted to withdraw 
his registration.
    (b) Interim Form BDW shall be used for application for registration 
as broker-dealer under the Securities Exchange Act of 1934, or to amend 
such application, only by order of the Commission. In the event broker-
dealers are required to comply with their filing obligations on Interim 
Form BD, the form will be made available at the Commission's Publication 
Office at (202) 942-4040.

[52 FR 16844, May 6, 1987]

    Editorial Note: For Federal Register citations affecting Form BDW, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.501b  Form BD-N for notice registration as a broker-dealer.

    This form shall be used for notice of registration as a broker-
dealer pursuant to Section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) for the limited purpose of trading security futures 
products, or to amend such notice.

[66 FR 45147, Aug. 27, 2001]

    Editorial Note: For Federal Register citations affecting Form BD-N, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.507  Form 7-M, consent to service of process by an individual
nonresident broker-dealer.

    This form shall be filed pursuant to Rule 15b1-5 (Sec.  240.15b1-5 
of this chapter) by each individual nonresident broker-dealer registered 
or applying for registration pursuant to section 15 of the Act.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 7-M, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.508  Form 8-M, consent to service of process by a corporation
which is a nonresident broker-dealer.

    This form shall be filed pursuant to Rule 15b1-5 (Sec.  240.15b1-5 
of this chapter) by each corporate nonresident broker-dealer registered 
or applying for registration pursuant to section 15 of the Act.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 8-M, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.509  Form 9-M, consent to service of process by a partnership
nonresident broker-dealer.

    This form shall be filed pursuant to Rule 15b1-5 (Sec.  240.15b1-5 
of this chapter) by each partnership nonresident broker-dealer 
registered or applying for registration pursuant to section 15 of the 
Act.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form 9-M, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.510  Form 10-M, consent to service of process by a nonresident
general partner of a broker-dealer firm.

    This form shall be filed pursuant to Rule 15b1-5 (Sec.  240.15b1-5 
of this chapter) by each nonresident general partner of a broker-dealer 
firm registered or applying for registration pursuant to section 15 of 
the Act.

[33 FR 18995, Dec. 20, 1968]

[[Page 293]]


    Editorial Note: For Federal Register citations affecting Form 10-M, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



  Subpart G_Forms for Reports To Be Made by Certain Exchange Members, 
Brokers, Dealers, Security-Based Swap Dealers, and Major Security-Based 
                            Swap Participants



Sec.  249.617  Form X-17A-5, information required of certain brokers,
dealers, security-based swap dealers, and major security-based swap
participants pursuant to sections 15F and 17 of the Securities Exchange 
Act of 1934 
          and Sec. Sec.  240.17a-5, 240.17a-10, 240.17a-11, 240.17a-12, 
          and 240.18a-79 of this chapter, as applicable.

    Appropriate parts of Form X-17A-5, as applicable, shall be used by 
brokers, dealers, security-based swap dealers, and major security-based 
swap participants required to file reports under Sec. Sec.  240.17a-5, 
240.17a-10, 240.17a-11, 240.17a-12, and 240.18a-7 of this chapter, as 
applicable.

[84 FR 68669, Dec. 16, 2019]

    Editorial Note: For Federal Register citations affecting Form X-17A-
5, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.618  Form BD-Y2K, information required of broker-dealers
pursuant to section 17 of the Securities Exchange Act of 1934 and
Sec.  240.17a-5 of this chapter.

    This form shall be used by every broker-dealer required to file 
reports under Sec.  240.17a-5(e) of this chapter.

[63 FR 37674, July 13, 1998]

    Editorial Note: For Federal Register citations affecting Form BD-
Y2K, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.619  Form TA-Y2K, information required of transfer agents
pursuant to section 17 of the Securities Exchange Act of 1934 and
Sec.  240.17Ad-18 of this chapter.

    This form shall be used by every registered transfer agent required 
to file reports under Sec.  240.17Ad-18 of this chapter.

[63 FR 37694, July 13, 1998]

    Editorial Note: For Federal Register citations affecting Form TA-
Y2K, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec. Sec.  249.620-249.634  [Reserved]



Sec.  249.635  Form X-17A-19, report by national securities exchanges
and registered national securities associations of changes in the membership
status of any of their members.

    This form shall be completed and filed by each national securities 
exchange or registered national securities association as required by 
Sec.  240.17a-19 of this chapter within 5 business days of the 
occurrence of the initiation of the membership of any person or the 
suspension or termination of the membership of any of its members.

[45 FR 39841, June 12, 1980]

    Editorial Note: For Federal Register citations affecting Form X-17A-
19, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.636  [Reserved]



Sec.  249.637  Form ATS, information required of alternative trading
systems pursuant to Sec.  242.301(b)(2) of this chapter.

    This form shall be used by every alternative trading system to file 
required notices, reports and amendments under Sec.  242.301(b)(2) of 
this chapter.

[63 FR 70933, Dec. 22, 1998]

    Editorial Note: For Federal Register citations affecting Form ATS, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.638  Form ATS-R, information required of alternative trading
systems pursuant to Sec.  242.301(b)(8) of this chapter.

    This form shall be used by every alternative trading system to file 
required reports under Sec.  242.301(b)(8) of this chapter.

[63 FR 70943, Dec. 22, 1998]

[[Page 294]]


    Editorial Note: For Federal Register citations affecting Form ATS-R, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.639  Form custody.

    This form shall be used for reports of information required by Sec.  
240.17a-5 of this chapter.

    Editorial Note: For Federal Register citations affecting Form 
Custody, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.

[78 FR 51994, Aug. 21, 2013]



Sec.  249.640  Form ATS-N, information required of NMS Stock ATSs 
pursuant to Sec.  242.304(a) of this chapter.

    This form shall be used by every NMS Stock ATS to file required 
reports under Sec.  242.304(a) of this chapter.

[83 FR 38913, Aug. 7, 2018]

    Editorial Note: For Federal Register citations affecting Form ATS-N, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.641  Form CRS, Relationship Summary for Brokers and Dealers
Providing Services to Retail Investors, pursuant to Sec.  240.17a-14 of
this chapter.

    This form shall be prepared and filed by brokers and dealers 
registered with the Securities and Exchange Commission pursuant to 
Section 15 of the Act that offer services to a retail investor pursuant 
to Sec.  240.17a-14 of this chapter.

[84 FR 33630, July 12, 2019]

    Editorial Note: For Federal Register citations affecting Form CRS, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



             Subpart H_Forms For Reports as to Stabilization



Sec.  249.709  [Reserved]



Subpart I_Forms for Self-Regulatory Organization Rule Changes and Forms 
 for Registration of and Reporting by National Securities Associations 
                 and Affiliated Securities Associations



Sec.  249.801  Form X-15AA-1, for application for registration as a 
national securities association or affiliated securities association.

    This form shall be filed as an application for registration as a 
national securities association or as an affiliated securities 
association pursuant to Rule 15Aa-1 (Sec.  240.15Aa-1 of this chapter).

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form X-
15AA-1, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.802  Form X-15AJ-1, for amendatory and/or supplementary 
statements to registration statement of a national securities association
or an affiliated securities association.

    This form shall be filed pursuant to Rule 15Aj-1 (Sec.  240.15Aj-1 
of this chapter) as amendatory and/or supplementary statements to 
registration statement of a national securities association or an 
affiliated securities association.

[33 FR 18995, Dec. 20, 1968]

    Editorial Note: For Federal Register citations affecting Form X-
15AJ-1, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.803  Form X-15AJ-2, for annual consolidated supplement of
a national securities association or an affiliated securities association.

    This form shall be filed pursuant to Rule 15Aj-1 (Sec.  240.15Aj-1 
of this chapter) for the annual consolidated supplement to registration 
statement of a national securities association or an affiliated 
securities association.

[33 FR 18995, Dec. 20, 1968]

[[Page 295]]


    Editorial Note: For Federal Register citations affecting Form X-
15AJ-2, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.819  Form 19b-4, for electronic filings with respect to 
proposed rule changes, advance notices and security-based swap submissions

    This form shall be used by all self-regulatory organizations, as 
defined in Section 3(a)(26) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(26)), to file electronically proposed rule changes with 
the Commission pursuant to Section 19(b) of the Act (15 U.S.C. 78s(b)) 
and Sec.  240.19b-4 of this chapter, advance notices with the Commission 
pursuant to Section 806(e) of the Payment, Clearing and Settlement 
Supervision Act (12 U.S.C. 5465(e)) and Sec.  240.19b-4 of this chapter 
and security-based swap submissions with the Commission pursuant to 
Section 3C(b)(2) of the Act (15 U.S.C. 78c-3(b)(2)) and Sec.  240.19b-4 
of this chapter.

[77 FR 41650, July 13, 2012]

    Editorial Note: Copies of Form 19b-4 have been filed with the Office 
of the Federal Register and will be forwarded to the self-regulatory 
organizations. Copies may be requested from the Commission.



Sec.  249.820  Form 19b-4(e) for the listing and trading of new 
derivative securities products by self-regulatory organizations that 
are not deemed proposed rule changes pursuant to Rule 19b-4(e)
(Sec.  240.19b-4(e)).

    This form shall be used by all self-regulatory organizations, as 
defined in section 3(a)(26) of the Act, to notify the Commission of a 
self-regulatory organization's listing and trading of a new derivative 
securities product that is not deemed a proposed rule change, pursuant 
to Rule 19b-4(e) under the Act (17 CFR 240.19b-4(e)).

[63 FR 70967, Dec. 22, 1998]

    Editorial Note: For Federal Register citations affecting Form 19b-
4(e), see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.821  Form PILOT, information required of self-regulatory
organizations operating pilot trading systems pursuant to 
Sec.  240.19b-5 of this chapter.

    This form shall be used by all self-regulatory organizations, as 
defined in section 3(a)(26) of the Act, (15 U.S.C 78c(a)(26)), to file 
required information and reports with regard to pilot trading systems 
pursuant to Sec.  240.19b-5 of this chapter.

[63 FR 70946, Dec. 22, 1998]

    Editorial Note: For Federal Register citations affecting Form PILOT, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.822  Form 19b-7, for electronic filing with respect to 
proposed rule changes by self-regulatory organizations under
Section 19(b)(7)(A) of the Securities Exchange Act of 1934.

    This form shall be used by self-regulatory organizations, as defined 
in section 3(a)(25) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(25)), to file electronically proposed rule changes with the 
Commission pursuant to section 19(b)(7) of the Act (15 U.S.C. 78s(b)(7)) 
and Sec.  240.19b-7 of this chapter.

[73 FR 16190, Mar. 27, 2008]

Subpart J [Reserved]



    Subpart K_Form for Registration of, and Reporting by Securities 
                         Information Processors



Sec.  249.1001  Form SIP, for application for registration as a 
securities information processor or to amend such an application or
registration.

    This form shall be used for application for registration as a 
securities information processor, pursuant to section 11A(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78k-1(b)) and Sec.  242.609 
of this chapter, or to amend such an application or registration.

[70 FR 37632, June 29, 2005]

    Editorial Note: For Federal Register citations affecting Form SIP, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 296]]



Sec.  249.1002  Form CC, for application for registration as a 
competing consolidator or to amend such an application or registration.

    This form shall be used for application for registration as a 
competing consolidator, pursuant to section 11A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78k-1) and Sec.  242.614 of this 
chapter, or to amend such an application or registration.

[86 FR 18814, Apr. 9, 2021]



    Subpart L_Forms for Registration of Municipal Securities Dealers



Sec.  249.1100  Form MSD, application for registration as a municipal
securities dealer pursuant to rule 15Ba2-1 under the Securities Exchange
Act of 1934 or amendment to such application.

    This Form is to be used by a bank or a separately identifiable 
department or division of a bank (as defined by the Municipal Securities 
Rulemaking Board) to apply for registration as a municipal securities 
dealer with the Securities and Exchange Commission pursuant to section 
15B(a) of the Securities Exchange Act of 1934 (the ``Act''), or to amend 
such application.

    Note: Copies of Form MSD have been filed with the Office of the 
Federal Register as part of this document. Copies of Forms BD and MSD 
may be obtained from the Office of Reports and Information Services; 
Securities and Exchange Commission, 500 North Capitol Street, 
Washington, DC, 20549. Only printed copies of Form MSD should be used to 
apply for registration with the Commission.

[40 FR 49777, Oct. 24, 1975; 40 FR 54425, Nov. 24, 1975]

    Editorial Note: For Federal Register citations affecting Form MSD, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.1110  Form MSDW, notice of withdrawal from registration as a 
municipal securities dealer pursuant to Rule 15Bc3-1 (17 CFR 240.15Bc3-1).

    This form is to be used by a bank or a separately identifiable 
department or division of a bank (as defined by the Municipal Securities 
Rulemaking Board) to withdraw from registration with the Securities and 
Exchange Commission as a municipal securities dealer pursuant to section 
15B(c) of the Securities Exchange Act of 1934.

    Note: Copies of Form MSDW have been filed with the Office of the 
Federal Register as part of this document. Copies of Form MSDW may be 
obtained from the Publications Section, Securities and Exchange 
Commission, 500 North Capitol Street, Washington, DC 20549.

[41 FR 28949, July 14, 1976]

    Editorial Note: For Federal Register citations affecting Form MSDW, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Subpart M_Forms for Reporting and Inquiry With Respect to Missing, Lost, 
                    Stolen, or Counterfeit Securities



Sec.  249.1200  Form X-17F-1A--Report for missing, lost, stolen or
counterfeit securities.

    This form is to be filed with the Commission or its designee 
pursuant to paragraph (c) of Sec.  240.17f-1 of this chapter by all 
reporting institutions subject to section 17(f)(1) of the Securities 
Exchange Act of 1934.

[44 FR 31504, May 31, 1979]

    Editorial Note: For Federal Register citations affecting Form X-17F-
1A, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Subpart N_Forms for Registration of Municipal Advisors and for Providing 
              Information Regarding Certain Natural Persons

    Source: 78 FR 67639, Nov. 12, 2013, unless otherwise noted.



Sec.  249.1300  Form MA, for registration as a municipal advisor, and
for amendments to registration.

    The form shall be used for registration as a municipal advisor 
pursuant to section 15B of the Securities Exchange Act of 1934 (15 
U.S.C. 78o-4) and for amendments to registrations.

    Editorial Note: For Federal Register citations affecting Form MA-T, 
see the List of CFR Sections Affected, which appears in the

[[Page 297]]

Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.1300T  Form MA-T, for temporary registration as a municipal
advisor, and for amendments to, and withdrawals from, temporary registration.

    The form shall be used for temporary registration as a municipal 
advisor, and for amendments to, and withdrawals from, temporary 
registration pursuant to Section 15B of the Exchange Act, (15 U.S.C. 
78o-4).

    Editorial Note: For Federal Register citations affecting Form MA-T, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.1310  Form MA-I, for providing information regarding natural
person municipal advisors, and for amendments to such information.

    The form shall be used for providing information regarding natural 
person municipal advisors, and for amendments to such information.

    Editorial Note: For Federal Register citations affecting Form MA-I, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.1320  Form MA-W, for withdrawal from registration as a municipal
advisor.

    The form shall be used for filing a notice of withdrawal from 
registration as a municipal advisor pursuant to section 15B of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-4).

    Editorial Note: For Federal Register citations affecting Form MA-W, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.1330  Form MA-NR, for appointment of agent for service of process
by non-resident municipal advisor, non-resident general partner or managing 
agent of a municipal advisor, and non-resident natural person associated 
with a municipal advisor.

    The form shall be used to furnish information pertaining to the 
appointment of agent for service of process by a non-resident municipal 
advisor and by registered municipal advisors to furnish the same for 
each of its non-resident general partner or managing agent, or non-
resident natural person associated with a municipal advisor pursuant to 
section 15B of the Securities Exchange Act of 1934 (15 U.S.C. 78o-4).

    Editorial Note: For Federal Register citations affecting Form MA-NR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



               Subpart O_Forms for Asset-Backed Securities



Sec.  249.1400  Form ABS-15G, Asset-backed securitizer report pursuant to 
Section 15G of the Securities Exchange Act of 1934.

    This form shall be used for reports of information required by Rule 
15Ga-1 (Sec.  240.15Ga-1 of this chapter).

[76 FR 4515, Jan. 26, 2011]

    Editorial Note: For Federal Register citations affecting Form ABS-
15G, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.1401  Form ABS-EE, for submission of the asset-data file exhibits 
and related documents.

    This Form shall be used by an electronic filer for the submission of 
information required by Item 1111(h) (Sec.  229.1111(h) of this 
chapter).

[79 FR 57346, Sept. 24, 2014]

    Editorial Note: For Federal Register citations affecting Form ABS-
EE, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



      Subpart P_Forms for Registration of Security-Based Swap Data 
                              Repositories



Sec.  249.1500  Form SDR, for application for registration as a 
security-based swap data repository, amendments thereto, or withdrawal 
from registration.

    The form shall be used for registration as a security-based swap 
data repository, and for the amendments to and withdrawal from such 
registration

[[Page 298]]

pursuant to section 13(n) of the Exchange Act (15 U.S.C. 78m(n)).

[80 FR 14557, Mar. 19, 2015]

    Editorial Note: For Federal Register citations affecting Form SDR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



    Subpart Q_Registration of Security-Based Swap Dealers and Major 
                    Security-Based Swap Participants

    Source: 80 FR 49017 Aug. 14, 2015, unless otherwise noted.



Sec.  249.1600  Form SBSE, for application for registration as a 
security-based swap dealer or major security-based swap participant or
to amend such an application for registration.

    This form shall be used for application for registration as a 
security-based swap dealer or major security-based swap participant by 
firms that are not registered with the Commission as a broker or dealer 
and that are not registered or registering with the Commodity Futures 
Trading Commission as a swap dealer or major swap participant, pursuant 
to Section 15F(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
10(b)) and to amend such an application for registration.

    Editorial Note: For Federal Register citations affecting Form SBSE, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249.1600a  Form SBSE-A, for application for registration as a 
security-based swap dealer or major security-based swap participant or
to amend such an application for registration by firms registered or 
          registering with the Commodity Futures Trading Commission as a 
          swap dealer or major swap participant that are not also 
          registered or registering with the Commission as a broker or 
          dealer.

    This form shall be used instead of Form SBSE (Sec.  249.1600) to 
apply for registration as a security-based swap dealer or major 
security-based swap participant by firms that are not registered or 
registering with the Commission as a broker or dealer but that are 
registered or registering with the Commodity Futures Trading Commission 
as a swap dealer or major swap participant, pursuant to Section 15F(b) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78o-10(b)) and to 
amend such an application for registration. An entity that is registered 
or registering with the Commission as a broker or dealer and is also 
registered or registering with the Commodity Futures Trading Commission 
as a swap dealer or major swap participant shall apply for registration 
as a security-based swap dealer or major security-based swap participant 
on Form SBSE-BD (Sec.  249.1600b) and not on this Form SBSE-A.

    Editorial Note: For Federal Register citations affecting Form SBSE-
A, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.1600b  Form SBSE-BD, for application for registration as a
security-based swap dealer or major security-based swap participant or
to amend such an application for registration by firms registered or 
          registering with the Commission as a broker or dealer.

    This form shall be used instead of either Form SBSE (Sec.  249.1600) 
or SBSE-A (Sec.  249.1600a) to apply for registration as a security-
based swap dealer or major security-based swap participant solely by 
firms registered or registering with the Commission as a broker or 
dealer, pursuant to Section 15F(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o-10(b)) and to amend such an application for 
registration. An entity that is registered or registering with the 
Commission as a broker or dealer and is also registered or registering 
with the Commodity Futures Trading Commission as a swap dealer or major 
swap participant, shall apply for registration as a security-based swap 
dealer or major security-based swap participant on this Form SBSE-BD and 
not on Form SBSE-A.

    Editorial Note: For Federal Register citations affecting Form SBSE-
BD, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.

[[Page 299]]



Sec.  249.1600c  Form SBSE-C, for certification by security-based swap
dealers and major security-based swap participants.

    This form shall be used to file required certifications on Form 
SBSE-C pursuant to Sec.  240.15Fb2-1(a) of this chapter.

    Editorial Note: For Federal Register citations affecting Form SBSE-
C, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  249.1601  Form SBSE-W, for withdrawal from registration as a 
security-based swap dealer or major security-based swap participant or
to amend such an application for registration.

    This form shall be used to withdraw from registration as a security-
based swap dealer or major security-based swap participant, pursuant to 
Section 15F(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
10(b)).

    Editorial Note: For Federal Register citations affecting Form SBSE-
W, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Subpart R_Forms for Registration of, and Filings by, Security-Based Swap 
                          Execution Facilities

    Source: 88 FR 87316, Dec. 15, 2023, unless otherwise noted.



Sec.  249.1701  Form SBSEF, for application for registration as a 
security-based swap execution facility or to amend such application
or registration.

    This form shall be used for application for registration as a 
security-based swap execution facility, pursuant to section 3D of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c-4) and Sec.  242.803 of 
this chapter, or to amend such application or registration.



Sec.  249.1702  Submission cover sheet, for rule and product submissions.

    This submission cover sheet shall be used by registered security-
based swap execution facilities for making submissions pursuant to 
Sec. Sec.  242.804 through 242.807, 242.809, and 242.816).

Subpart S [Reserved]



   Subpart T_Form SCI, for filing notices and reports as required by 
                             Regulation SCI.



Sec.  249.1900.  Form SCI, for filing notices and reports as required 
by Regulation SCI.

    Form SCI shall be used to file notices and reports as required by 
Regulation SCI (Sec. Sec.  242.1000 through 242.1007).

[79 FR 72440, Dec. 5, 2014]

    Editorial Note: For Federal Register citations affecting Form SCI, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



           Subpart U_Forms for Registration of Funding Portals



Sec.  249.2000  Form Funding Portal.

    This form shall be used for filings by funding portals under 
Regulation Crowdfunding (part 227 of this chapter).

[80 FR 71570, Nov. 16, 2015]

    Editorial Note: For Federal Register citations affecting Form 
Funding Portal, see the List of CFR Sections Affected, which appears in 
the Finding Aids section of the printed volume and at www.govinfo.gov.

 PART 249a_FORMS, SECURITIES INVESTOR PROTECTION ACT OF 1970 [RESERVED]



PART 249b_FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934--Table of Contents



Sec.
249b.1-249b.99 [Reserved]
249b.100 Form TA-1, uniform form for registration as a transfer agent 
          pursuant to section 17A of the Securities Exchange Act of 
          1934.
249b.101 Form TA-W, notice of withdrawal from registration as transfer 
          agent.
249b.102 Form TA-2, form to be used by transfer agents registered 
          pursuant to section 17A of the Securities Exchange Act of 1934 
          for the annual report of transfer agent activities.

[[Page 300]]

249b.200 Form CA-1, form for registration or for exemption from 
          registration as a clearing agency and for amendment to 
          registration as a clearing agency pursuant to section 17A of 
          the Securities Exchange Act of 1934.
249b.300 FORM NRSRO, application for registration as a nationally 
          recognized statistical rating organization pursuant to section 
          15E of the Securities Exchange Act of 1934 and Sec.  240.17g-1 
          of this chapter.
249b.400 Form SD, specialized disclosure report.

    Authority: 15 U.S.C. 78a et seq., unless otherwise noted;
    Sections 249b.100 and 249b.102 also issued under secs. 17, 17A and 
23(a); 48 Stat. 897, as amended, 89 Stat. 137, 141 and 48 Stat. 901 (15 
U.S.C. 78q, 78q-1, 78w(a)).
    Section 249b.400 is also issued under secs. 1502 and 1504, Pub. L. 
111-203, 124 Stat. 2213 and 2220.



Sec. Sec.  249b.1-249b.99  [Reserved]



Sec.  249b.100  Form TA-1, \1\ uniform form for registration as a transfer
agent pursuant to section 17A of the Securities Exchange Act of 1934.
---------------------------------------------------------------------------

    \1\ Copies of the form may be obtained from the Publications 
Section, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549 and from each of the Commission's regional offices.
---------------------------------------------------------------------------

    This form shall be used for application for registration as a 
transfer agent and for amendment to registration as a transfer agent 
pursuant to section 17A of the Securities Exchange Act of 1934.

[40 FR 51184, Nov. 4, 1975, as amended at 51 FR 12127, Apr. 9, 1986; 73 
FR 32228, June 5, 2008]

    Editorial Note: For Federal Register citations affecting Form TA-1, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249b.101  Form TA-W, notice of withdrawal from registration as
transfer agent.

    This form shall be used for withdrawing, pursuant to section 17A of 
the Securities Exchange Act of 1934, the registration of transfer agents 
registered with the Commission.

(Secs. 2, 17, 17A and 23(a); (15 U.S.C. 78b, 78a, 78a-1 and 78w(a)))

[42 FR 44984, Sept. 8, 1977]

    Editorial Note: For Federal Register citations affecting Form TA-W, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249b.102  Form TA-2, \1\ form to be used by transfer agents registered
pursuant to section 17A of the Securities Exchange Act of 1934 for the annual 
          report of transfer agent activities.

    This form shall be used on an annual basis for registered transfer 
agents for reporting their business activities.

[51 FR 12134, Apr. 9, 1986, as amended at 73 FR 32228, June 5, 2008]

    Editorial Note: For Federal Register citations affecting Form TA-2, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249b.200  Form CA-1, \1\ form for registration or for exemption from
registration as a clearing agency and for amendment to registration as a 
clearing agency pursuant to section 17A of the Securities Exchange Act of 1934.

    This form shall be used for application for registration or for 
exemption from registration as a clearing agency and for amendment to 
registration as a clearing agency pursuant to section 17A of the 
Securities Exchange Act of 1934.

[40 FR 52359, Nov. 10, 1975, as amended at 51 FR 12134, Apr. 9, 1986; 73 
FR 32228, June 5, 2008]

    Editorial Note: For Federal Register citations affecting Form CA-1, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249b.300  FORM NRSRO, application for registration as a nationally
recognized statistical rating organization pursuant to section 15E of 
the Securities Exchange Act of 1934 and Sec.  240.17g-1 of this chapter.

    This Form shall be used for an initial application for and an 
application to add a class of credit ratings to, a supplement to an 
initial application for and an application to add a class of

[[Page 301]]

credit ratings to, an update and amendment to an application for, and a 
withdrawal from a registration as a nationally recognized statistical 
rating organization pursuant to section 15E of the Securities Exchange 
Act of 1934 (15 U.S.C. 78o-7) and Sec.  240.17g-1 of this chapter.

[72 FR 33624, June 18, 2007]

    Editorial Note: For Federal Register citations affecting Form NRSRO, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  249b.400  Form SD, specialized disclosure report.

    (a) This Form shall be filed pursuant to Sec.  240.13p-1 of this 
chapter by registrants that file reports with the Commission pursuant to 
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 and are 
required to disclose the information required by Section 13(p) under the 
Securities Exchange Act of 1934 and Rule 13p-1 (Sec.  240.13p-1) of this 
chapter.
    (b) This Form shall be filed pursuant to Rule 13q-1 (Sec.  240.13q-
1) of this chapter by resource extraction issuers that are required to 
disclose the information required by Section 13(q) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(q)) and Rule 13q-1 of this chapter.

[77 FR 56362, Sept. 12, 2012, as amended at 77 FR 56418, Sept. 12, 2012]

    Editorial Note: For Federal Register citations affecting Form SD, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



PART 250_CROSS-BORDER ANTIFRAUD LAW-ENFORCEMENT AUTHORITY--Table of Contents



    Authority: 15 U.S.C. 77s, 77v(c), 78w, 78aa(b), 80b-11, and 80b-
14(b).

    Source: 79 FR 47372, Aug. 12, 2014, unless otherwise noted.



Sec.  250.1  Cross-border antifraud law-enforcement authority.

    (a) Notwithstanding any other Commission rule or regulation, the 
antifraud provisions of the securities laws apply to:
    (1) Conduct within the United States that constitutes significant 
steps in furtherance of the violation; or
    (2) Conduct occurring outside the United States that has a 
foreseeable substantial effect within the United States.
    (b) The antifraud provisions of the securities laws apply to conduct 
described in paragraph (a)(1) of this section even if:
    (1) The violation relates to a securities transaction or securities 
transactions occurring outside the United States that involves only 
foreign investors; or
    (2) The violation is committed by a foreign adviser and involves 
only foreign investors.
    (c) Violations of the antifraud provisions of the securities laws 
described in this section may be pursued in judicial proceedings brought 
by the Commission or the United States.

                        PARTS 251	254 [RESERVED]



PART 255_PROPRIETARY TRADING AND CERTAIN INTERESTS IN AND RELATIONSHIPS
WITH COVERED FUNDS--Table of Contents



                   Subpart A_Authority and Definitions

Sec.
255.1 Authority, purpose, scope, and relationship to other authorities
255.2 Definitions.

                      Subpart B_Proprietary Trading

255.3 Prohibition on proprietary trading.
255.4 Permitted underwriting and market making-related activities.
255.5 Permitted risk-mitigating hedging activities.
255.6 Other permitted proprietary trading activities.
255.7 Limitations on permitted proprietary trading activities.
255.8-255.9 [Reserved]

            Subpart C_Covered Fund Activities and Investments

255.10 Prohibition on acquiring or retaining an ownership interest in 
          and having certain relationships with a covered fund.
255.11 Permitted organizing and offering, underwriting, and market 
          making with respect to a covered fund.

[[Page 302]]

255.12 Permitted investment in a covered fund.
255.13 Other permitted covered fund activities and investments.
255.14 Limitations on relationships with a covered fund.
255.15 Other limitations on permitted covered fund activities and 
          investments.
255.16 Ownership of interests in and sponsorship of issuers of certain 
          collateralized debt obligations backed by trust-preferred 
          securities.
255.17-255.19 [Reserved]

          Subpart D_Compliance Program Requirement; Violations

255.20 Program for compliance; reporting.
255.21 Termination of activities or investments; penalties for 
          violations.

Appendix A to Part 255--Reporting and Recordkeeping Requirements for 
          Covered Trading Activities

    Authority: 12 U.S.C. 1851.

    Source: 79 FR 5779, 5805, Jan. 31, 2014, unless otherwise noted.



                   Subpart A_Authority and Definitions



Sec.  255.1  Authority, purpose, scope, and relationship to other
authorities.

    (a) Authority. This part is issued by the SEC under section 13 of 
the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1851).
    (b) Purpose. Section 13 of the Bank Holding Company Act establishes 
prohibitions and restrictions on proprietary trading and investments in 
or relationships with covered funds by certain banking entities, 
including registered broker-dealers, registered investment advisers, and 
registered security-based swap dealers, among others identified in 
section 2(12)(B) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 (12 U.S.C. 5301(12)(B)). This part implements 
section 13 of the Bank Holding Company Act by defining terms used in the 
statute and related terms, establishing prohibitions and restrictions on 
proprietary trading and investments in or relationships with covered 
funds, and explaining the statute's requirements.
    (c) Scope. This part implements section 13 of the Bank Holding 
Company Act with respect to banking entities for which the SEC is the 
primary financial regulatory agency, as defined in this part, but does 
not include such entities to the extent they are not within the 
definition of banking entity in Sec.  255.2(c).
    (d) Relationship to other authorities. Except as otherwise provided 
under section 13 of the Bank Holding Company Act, and notwithstanding 
any other provision of law, the prohibitions and restrictions under 
section 13 of Bank Holding Company Act shall apply to the activities and 
investments of a banking entity identified in paragraph (c) of this 
section, even if such activities and investments are authorized for the 
banking entity under other applicable provisions of law.
    (e) Preservation of authority. Nothing in this part limits in any 
way the authority of the SEC to impose on a banking entity identified in 
paragraph (c) of this section additional requirements or restrictions 
with respect to any activity, investment, or relationship covered under 
section 13 of the Bank Holding Company Act or this part, or additional 
penalties for violation of this part provided under any other applicable 
provision of law.

[79 FR 5805, Jan. 31, 2014, as amended at 84 FR 35022, July 22, 2019]



Sec.  255.2  Definitions.

    Unless otherwise specified, for purposes of this part:
    (a) Affiliate has the same meaning as in section 2(k) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(k)).
    (b) Bank holding company has the same meaning as in section 2 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1841).
    (c) Banking entity. (1) Except as provided in paragraph (c)(2) of 
this section, banking entity means:
    (i) Any insured depository institution;
    (ii) Any company that controls an insured depository institution;
    (iii) Any company that is treated as a bank holding company for 
purposes of section 8 of the International Banking Act of 1978 (12 
U.S.C. 3106); and
    (iv) Any affiliate or subsidiary of any entity described in 
paragraph (c)(1)(i), (ii), or (iii) of this section.
    (2) Banking entity does not include:

[[Page 303]]

    (i) A covered fund that is not itself a banking entity under 
paragraph (c)(1)(i), (ii), or (iii) of this section;
    (ii) A portfolio company held under the authority contained in 
section 4(k)(4)(H) or (I) of the BHC Act (12 U.S.C. 1843(k)(4)(H), (I)), 
or any portfolio concern, as defined under 13 CFR 107.50, that is 
controlled by a small business investment company, as defined in section 
103(3) of the Small Business Investment Act of 1958 (15 U.S.C. 662), so 
long as the portfolio company or portfolio concern is not itself a 
banking entity under paragraph (c)(1)(i), (ii), or (iii) of this 
section; or
    (iii) The FDIC acting in its corporate capacity or as conservator or 
receiver under the Federal Deposit Insurance Act or Title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act.
    (d) Board means the Board of Governors of the Federal Reserve 
System.
    (e) CFTC means the Commodity Futures Trading Commission.
    (f) Dealer has the same meaning as in section 3(a)(5) of the 
Exchange Act (15 U.S.C. 78c(a)(5)).
    (g) Depository institution has the same meaning as in section 3(c) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
    (h) Derivative. (1) Except as provided in paragraph (h)(2) of this 
section, derivative means:
    (i) Any swap, as that term is defined in section 1a(47) of the 
Commodity Exchange Act (7 U.S.C. 1a(47)), or security-based swap, as 
that term is defined in section 3(a)(68) of the Exchange Act (15 U.S.C. 
78c(a)(68));
    (ii) Any purchase or sale of a commodity, that is not an excluded 
commodity, for deferred shipment or delivery that is intended to be 
physically settled;
    (iii) Any foreign exchange forward (as that term is defined in 
section 1a(24) of the Commodity Exchange Act (7 U.S.C. 1a(24)) or 
foreign exchange swap (as that term is defined in section 1a(25) of the 
Commodity Exchange Act (7 U.S.C. 1a(25));
    (iv) Any agreement, contract, or transaction in foreign currency 
described in section 2(c)(2)(C)(i) of the Commodity Exchange Act (7 
U.S.C. 2(c)(2)(C)(i));
    (v) Any agreement, contract, or transaction in a commodity other 
than foreign currency described in section 2(c)(2)(D)(i) of the 
Commodity Exchange Act (7 U.S.C. 2(c)(2)(D)(i)); and
    (vi) Any transaction authorized under section 19 of the Commodity 
Exchange Act (7 U.S.C. 23(a) or (b));
    (2) A derivative does not include:
    (i) Any consumer, commercial, or other agreement, contract, or 
transaction that the CFTC and SEC have further defined by joint 
regulation, interpretation, or other action as not within the definition 
of swap, as that term is defined in section 1a(47) of the Commodity 
Exchange Act (7 U.S.C. 1a(47)), or security-based swap, as that term is 
defined in section 3(a)(68) of the Exchange Act (15 U.S.C. 78c(a)(68)); 
or
    (ii) Any identified banking product, as defined in section 402(b) of 
the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(b)), that 
is subject to section 403(a) of that Act (7 U.S.C. 27a(a)).
    (i) Employee includes a member of the immediate family of the 
employee.
    (j) Exchange Act means the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.).
    (k) Excluded commodity has the same meaning as in section 1a(19) of 
the Commodity Exchange Act (7 U.S.C. 1a(19)).
    (l) FDIC means the Federal Deposit Insurance Corporation.
    (m) Federal banking agencies means the Board, the Office of the 
Comptroller of the Currency, and the FDIC.
    (n) Foreign banking organization has the same meaning as in Sec.  
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)), but does not 
include a foreign bank, as defined in section 1(b)(7) of the 
International Banking Act of 1978 (12 U.S.C. 3101(7)), that is organized 
under the laws of the Commonwealth of Puerto Rico, Guam, American Samoa, 
the United States Virgin Islands, or the Commonwealth of the Northern 
Mariana Islands.
    (o) Foreign insurance regulator means the insurance commissioner, or 
a similar official or agency, of any country other than the United 
States that is engaged in the supervision of insurance companies under 
foreign insurance law.

[[Page 304]]

    (p) General account means all of the assets of an insurance company 
except those allocated to one or more separate accounts.
    (q) Insurance company means a company that is organized as an 
insurance company, primarily and predominantly engaged in writing 
insurance or reinsuring risks underwritten by insurance companies, 
subject to supervision as such by a state insurance regulator or a 
foreign insurance regulator, and not operated for the purpose of evading 
the provisions of section 13 of the BHC Act (12 U.S.C. 1851).
    (r) Insured depository institution has the same meaning as in 
section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)), 
but does not include:
    (1) An insured depository institution that is described in section 
2(c)(2)(D) of the BHC Act (12 U.S.C. 1841(c)(2)(D)); or
    (2) An insured depository institution if it has, and if every 
company that controls it has, total consolidated assets of $10 billion 
or less and total trading assets and trading liabilities, on a 
consolidated basis, that are 5 percent or less of total consolidated 
assets.
    (s) Limited trading assets and liabilities means with respect to a 
banking entity that:
    (1)(i) The banking entity has, together with its affiliates and 
subsidiaries, trading assets and liabilities (excluding trading assets 
and liabilities attributable to trading activities permitted pursuant to 
Sec.  255.6(a)(1) and (2) of subpart B) the average gross sum of which 
over the previous consecutive four quarters, as measured as of the last 
day of each of the four previous calendar quarters, is less than $1 
billion; and
    (ii) The SEC has not determined pursuant to Sec.  255.20(g) or (h) 
of this part that the banking entity should not be treated as having 
limited trading assets and liabilities.
    (2) With respect to a banking entity other than a banking entity 
described in paragraph (s)(3) of this section, trading assets and 
liabilities for purposes of this paragraph (s) means trading assets and 
liabilities (excluding trading assets and liabilities attributable to 
trading activities permitted pursuant to Sec.  255.6(a)(1) and (2) of 
subpart B) on a worldwide consolidated basis.
    (3)(i) With respect to a banking entity that is a foreign banking 
organization or a subsidiary of a foreign banking organization, trading 
assets and liabilities for purposes of this paragraph (s) means the 
trading assets and liabilities (excluding trading assets and liabilities 
attributable to trading activities permitted pursuant to Sec.  
255.6(a)(1) and (2) of subpart B) of the combined U.S. operations of the 
top-tier foreign banking organization (including all subsidiaries, 
affiliates, branches, and agencies of the foreign banking organization 
operating, located, or organized in the United States).
    (ii) For purposes of paragraph (s)(3)(i) of this section, a U.S. 
branch, agency, or subsidiary of a banking entity is located in the 
United States; however, the foreign bank that operates or controls that 
branch, agency, or subsidiary is not considered to be located in the 
United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary. For purposes of paragraph (s)(3)(i) of 
this section, all foreign operations of a U.S. agency, branch, or 
subsidiary of a foreign banking organization are considered to be 
located in the United States, including branches outside the United 
States that are managed or controlled by a U.S. branch or agency of the 
foreign banking organization, for purposes of calculating the banking 
entity's U.S. trading assets and liabilities.
    (t) Loan means any loan, lease, extension of credit, or secured or 
unsecured receivable that is not a security or derivative.
    (u) Moderate trading assets and liabilities means, with respect to a 
banking entity, that the banking entity does not have significant 
trading assets and liabilities or limited trading assets and 
liabilities.
    (v) Primary financial regulatory agency has the same meaning as in 
section 2(12) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5301(12)).
    (w) Purchase includes any contract to buy, purchase, or otherwise 
acquire. For security futures products, purchase includes any contract, 
agreement, or transaction for future delivery. With

[[Page 305]]

respect to a commodity future, purchase includes any contract, 
agreement, or transaction for future delivery. With respect to a 
derivative, purchase includes the execution, termination (prior to its 
scheduled maturity date), assignment, exchange, or similar transfer or 
conveyance of, or extinguishing of rights or obligations under, a 
derivative, as the context may require.
    (x) Qualifying foreign banking organization means a foreign banking 
organization that qualifies as such under Sec.  211.23(a), (c) or (e) of 
the Board's Regulation K (12 CFR 211.23(a), (c), or (e)).
    (y) SEC means the Securities and Exchange Commission.
    (z) Sale and sell each include any contract to sell or otherwise 
dispose of. For security futures products, such terms include any 
contract, agreement, or transaction for future delivery. With respect to 
a commodity future, such terms include any contract, agreement, or 
transaction for future delivery. With respect to a derivative, such 
terms include the execution, termination (prior to its scheduled 
maturity date), assignment, exchange, or similar transfer or conveyance 
of, or extinguishing of rights or obligations under, a derivative, as 
the context may require.
    (aa) Security has the meaning specified in section 3(a)(10) of the 
Exchange Act (15 U.S.C. 78c(a)(10)).
    (bb) Security-based swap dealer has the same meaning as in section 
3(a)(71) of the Exchange Act (15 U.S.C. 78c(a)(71)).
    (cc) Security future has the meaning specified in section 3(a)(55) 
of the Exchange Act (15 U.S.C. 78c(a)(55)).
    (dd) Separate account means an account established and maintained by 
an insurance company in connection with one or more insurance contracts 
to hold assets that are legally segregated from the insurance company's 
other assets, under which income, gains, and losses, whether or not 
realized, from assets allocated to such account, are, in accordance with 
the applicable contract, credited to or charged against such account 
without regard to other income, gains, or losses of the insurance 
company.
    (ee) Significant trading assets and liabilities means with respect 
to a banking entity that: (1)(i) The banking entity has, together with 
its affiliates and subsidiaries, trading assets and liabilities the 
average gross sum of which over the previous consecutive four quarters, 
as measured as of the last day of each of the four previous calendar 
quarters, equals or exceeds $20 billion; or
    (ii) The SEC has determined pursuant to Sec.  255.20(h) of this part 
that the banking entity should be treated as having significant trading 
assets and liabilities.
    (2) With respect to a banking entity, other than a banking entity 
described in paragraph (ee)(3) of this section, trading assets and 
liabilities for purposes of this paragraph (ee) means trading assets and 
liabilities (excluding trading assets and liabilities attributable to 
trading activities permitted pursuant to Sec.  255.6(a)(1) and (2) of 
subpart B) on a worldwide consolidated basis.
    (3)(i) With respect to a banking entity that is a foreign banking 
organization or a subsidiary of a foreign banking organization, trading 
assets and liabilities for purposes of this paragraph (ee) means the 
trading assets and liabilities (excluding trading assets and liabilities 
attributable to trading activities permitted pursuant to Sec.  
255.6(a)(1) and (2) of subpart B) of the combined U.S. operations of the 
top-tier foreign banking organization (including all subsidiaries, 
affiliates, branches, and agencies of the foreign banking organization 
operating, located, or organized in the United States as well as 
branches outside the United States that are managed or controlled by a 
branch or agency of the foreign banking entity operating, located or 
organized in the United States).
    (ii) For purposes of paragraph (ee)(3)(i) of this section, a U.S. 
branch, agency, or subsidiary of a banking entity is located in the 
United States; however, the foreign bank that operates or controls that 
branch, agency, or subsidiary is not considered to be located in the 
United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary. For purposes of paragraph (ee)(3)(i) of 
this section, all foreign operations of a U.S.

[[Page 306]]

agency, branch, or subsidiary of a foreign banking organization are 
considered to be located in the United States for purposes of 
calculating the banking entity's U.S. trading assets and liabilities.
    (ff) State means any State, the District of Columbia, the 
Commonwealth of Puerto Rico, Guam, American Samoa, the United States 
Virgin Islands, and the Commonwealth of the Northern Mariana Islands.
    (gg) Subsidiary has the same meaning as in section 2(d) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(d)).
    (hh) State insurance regulator means the insurance commissioner, or 
a similar official or agency, of a State that is engaged in the 
supervision of insurance companies under State insurance law.
    (ii) Swap dealer has the same meaning as in section 1(a)(49) of the 
Commodity Exchange Act (7 U.S.C. 1a(49)).

[84 FR 62237, Nov. 14, 2019]



                      Subpart B_Proprietary Trading



Sec.  255.3  Prohibition on proprietary trading.

    (a) Prohibition. Except as otherwise provided in this subpart, a 
banking entity may not engage in proprietary trading. Proprietary 
trading means engaging as principal for the trading account of the 
banking entity in any purchase or sale of one or more financial 
instruments.
    (b) Definition of trading account. (1) Trading account. Trading 
account means:
    (i) Any account that is used by a banking entity to purchase or sell 
one or more financial instruments principally for the purpose of short-
term resale, benefitting from actual or expected short-term price 
movements, realizing short-term arbitrage profits, or hedging one or 
more of the positions resulting from the purchases or sales of financial 
instruments described in this paragraph;
    (ii) Any account that is used by a banking entity to purchase or 
sell one or more financial instruments that are both market risk capital 
rule covered positions and trading positions (or hedges of other market 
risk capital rule covered positions), if the banking entity, or any 
affiliate with which the banking entity is consolidated for regulatory 
reporting purposes, calculates risk-based capital ratios under the 
market risk capital rule; or
    (iii) Any account that is used by a banking entity to purchase or 
sell one or more financial instruments, if the banking entity:
    (A) Is licensed or registered, or is required to be licensed or 
registered, to engage in the business of a dealer, swap dealer, or 
security-based swap dealer, to the extent the instrument is purchased or 
sold in connection with the activities that require the banking entity 
to be licensed or registered as such; or
    (B) Is engaged in the business of a dealer, swap dealer, or 
security-based swap dealer outside of the United States, to the extent 
the instrument is purchased or sold in connection with the activities of 
such business.
    (2) Trading account application for certain banking entities. (i) A 
banking entity that is subject to paragraph (b)(1)(ii) of this section 
in determining the scope of its trading account is not subject to 
paragraph (b)(1)(i) of this section.
    (ii) A banking entity that does not calculate risk-based capital 
ratios under the market risk capital rule and is not a consolidated 
affiliate for regulatory reporting purposes of a banking entity that 
calculates risk based capital ratios under the market risk capital rule 
may elect to apply paragraph (b)(1)(ii) of this section in determining 
the scope of its trading account as if it were subject to that 
paragraph. A banking entity that elects under this section to apply 
paragraph (b)(1)(ii) of this section in determining the scope of its 
trading account as if it were subject to that paragraph is not required 
to apply paragraph (b)(1)(i) of this section.
    (3) Consistency of account election for certain banking entities. 
(i) Any election or change to an election under paragraph (b)(2)(ii) of 
this section must apply to the electing banking entity and all of its 
wholly owned subsidiaries. The primary financial regulatory agency of a 
banking entity that is affiliated with but is not a wholly owned

[[Page 307]]

subsidiary of such electing banking entity may require that the banking 
entity be subject to this uniform application requirement if the primary 
financial regulatory agency determines that it is necessary to prevent 
evasion of the requirements of this part after notice and opportunity 
for response as provided in subpart D.
    (ii) A banking entity that does not elect under paragraph (b)(2)(ii) 
of this section to be subject to the trading account definition in 
(b)(1)(ii) may continue to apply the trading account definition in 
paragraph (b)(1)(i) of this section for one year from the date on which 
it becomes, or becomes a consolidated affiliate for regulatory reporting 
purposes with, a banking entity that calculates risk-based capital 
ratios under the market risk capital rule.
    (4) Rebuttable presumption for certain purchases and sales. The 
purchase (or sale) of a financial instrument by a banking entity shall 
be presumed not to be for the trading account of the banking entity 
under paragraph (b)(1)(i) of this section if the banking entity holds 
the financial instrument for sixty days or longer and does not transfer 
substantially all of the risk of the financial instrument within sixty 
days of the purchase (or sale).
    (c) Financial instrument. (1) Financial instrument means:
    (i) A security, including an option on a security;
    (ii) A derivative, including an option on a derivative; or
    (iii) A contract of sale of a commodity for future delivery, or 
option on a contract of sale of a commodity for future delivery.
    (2) A financial instrument does not include:
    (i) A loan;
    (ii) A commodity that is not:
    (A) An excluded commodity (other than foreign exchange or currency);
    (B) A derivative;
    (C) A contract of sale of a commodity for future delivery; or
    (D) An option on a contract of sale of a commodity for future 
delivery; or
    (iii) Foreign exchange or currency.
    (d) Proprietary trading. Proprietary trading does not include:
    (1) Any purchase or sale of one or more financial instruments by a 
banking entity that arises under a repurchase or reverse repurchase 
agreement pursuant to which the banking entity has simultaneously 
agreed, in writing, to both purchase and sell a stated asset, at stated 
prices, and on stated dates or on demand with the same counterparty;
    (2) Any purchase or sale of one or more financial instruments by a 
banking entity that arises under a transaction in which the banking 
entity lends or borrows a security temporarily to or from another party 
pursuant to a written securities lending agreement under which the 
lender retains the economic interests of an owner of such security, and 
has the right to terminate the transaction and to recall the loaned 
security on terms agreed by the parties;
    (3) Any purchase or sale of a security, foreign exchange forward (as 
that term is defined in section 1a(24) of the Commodity Exchange Act (7 
U.S.C. 1a(24)), foreign exchange swap (as that term is defined in 
section 1a(25) of the Commodity Exchange Act (7 U.S.C. 1a(25)), or 
cross-currency swap by a banking entity for the purpose of liquidity 
management in accordance with a documented liquidity management plan of 
the banking entity that:
    (i) Specifically contemplates and authorizes the particular 
financial instruments to be used for liquidity management purposes, the 
amount, types, and risks of these financial instruments that are 
consistent with liquidity management, and the liquidity circumstances in 
which the particular financial instruments may or must be used;
    (ii) Requires that any purchase or sale of financial instruments 
contemplated and authorized by the plan be principally for the purpose 
of managing the liquidity of the banking entity, and not for the purpose 
of short-term resale, benefitting from actual or expected short-term 
price movements, realizing short-term arbitrage profits, or hedging a 
position taken for such short-term purposes;

[[Page 308]]

    (iii) Requires that any financial instruments purchased or sold for 
liquidity management purposes be highly liquid and limited to financial 
instruments the market, credit, and other risks of which the banking 
entity does not reasonably expect to give rise to appreciable profits or 
losses as a result of short-term price movements;
    (iv) Limits any financial instruments purchased or sold for 
liquidity management purposes, together with any other financial 
instruments purchased or sold for such purposes, to an amount that is 
consistent with the banking entity's near-term funding needs, including 
deviations from normal operations of the banking entity or any affiliate 
thereof, as estimated and documented pursuant to methods specified in 
the plan;
    (v) Includes written policies and procedures, internal controls, 
analysis, and independent testing to ensure that the purchase and sale 
of financial instruments that are not permitted under Sec.  255.6(a) or 
(b) of this subpart are for the purpose of liquidity management and in 
accordance with the liquidity management plan described in this 
paragraph (d)(3); and
    (vi) Is consistent with the SEC's regulatory requirements regarding 
liquidity management;
    (4) Any purchase or sale of one or more financial instruments by a 
banking entity that is a derivatives clearing organization or a clearing 
agency in connection with clearing financial instruments;
    (5) Any excluded clearing activities by a banking entity that is a 
member of a clearing agency, a member of a derivatives clearing 
organization, or a member of a designated financial market utility;
    (6) Any purchase or sale of one or more financial instruments by a 
banking entity, so long as:
    (i) The purchase (or sale) satisfies an existing delivery obligation 
of the banking entity or its customers, including to prevent or close 
out a failure to deliver, in connection with delivery, clearing, or 
settlement activity; or
    (ii) The purchase (or sale) satisfies an obligation of the banking 
entity in connection with a judicial, administrative, self-regulatory 
organization, or arbitration proceeding;
    (7) Any purchase or sale of one or more financial instruments by a 
banking entity that is acting solely as agent, broker, or custodian;
    (8) Any purchase or sale of one or more financial instruments by a 
banking entity through a deferred compensation, stock-bonus, profit-
sharing, or pension plan of the banking entity that is established and 
administered in accordance with the law of the United States or a 
foreign sovereign, if the purchase or sale is made directly or 
indirectly by the banking entity as trustee for the benefit of persons 
who are or were employees of the banking entity;
    (9) Any purchase or sale of one or more financial instruments by a 
banking entity in the ordinary course of collecting a debt previously 
contracted in good faith, provided that the banking entity divests the 
financial instrument as soon as practicable, and in no event may the 
banking entity retain such instrument for longer than such period 
permitted by the SEC;
    (10) Any purchase or sale of one or more financial instruments that 
was made in error by a banking entity in the course of conducting a 
permitted or excluded activity or is a subsequent transaction to correct 
such an error;
    (11) Contemporaneously entering into a customer-driven swap or 
customer-driven security-based swap and a matched swap or security-based 
swap if:
    (i) The banking entity retains no more than minimal price risk; and
    (ii) The banking entity is not a registered dealer, swap dealer, or 
security-based swap dealer;
    (12) Any purchase or sale of one or more financial instruments that 
the banking entity uses to hedge mortgage servicing rights or mortgage 
servicing assets in accordance with a documented hedging strategy; or
    (13) Any purchase or sale of a financial instrument that does not 
meet the definition of trading asset or trading liability under the 
applicable reporting form for a banking entity as of January 1, 2020.
    (e) Definition of other terms related to proprietary trading. For 
purposes of this subpart:

[[Page 309]]

    (1) Anonymous means that each party to a purchase or sale is unaware 
of the identity of the other party(ies) to the purchase or sale.
    (2) Clearing agency has the same meaning as in section 3(a)(23) of 
the Exchange Act (15 U.S.C. 78c(a)(23)).
    (3) Commodity has the same meaning as in section 1a(9) of the 
Commodity Exchange Act (7 U.S.C. 1a(9)), except that a commodity does 
not include any security;
    (4) Contract of sale of a commodity for future delivery means a 
contract of sale (as that term is defined in section 1a(13) of the 
Commodity Exchange Act (7 U.S.C. 1a(13)) for future delivery (as that 
term is defined in section 1a(27) of the Commodity Exchange Act (7 
U.S.C. 1a(27))).
    (5) Cross-currency swap means a swap in which one party exchanges 
with another party principal and interest rate payments in one currency 
for principal and interest rate payments in another currency, and the 
exchange of principal occurs on the date the swap is entered into, with 
a reversal of the exchange of principal at a later date that is agreed 
upon when the swap is entered into.
    (6) Derivatives clearing organization means:
    (i) A derivatives clearing organization registered under section 5b 
of the Commodity Exchange Act (7 U.S.C. 7a-1);
    (ii) A derivatives clearing organization that, pursuant to CFTC 
regulation, is exempt from the registration requirements under section 
5b of the Commodity Exchange Act (7 U.S.C. 7a-1); or
    (iii) A foreign derivatives clearing organization that, pursuant to 
CFTC regulation, is permitted to clear for a foreign board of trade that 
is registered with the CFTC.
    (7) Exchange, unless the context otherwise requires, means any 
designated contract market, swap execution facility, or foreign board of 
trade registered with the CFTC, or, for purposes of securities or 
security-based swaps, an exchange, as defined under section 3(a)(1) of 
the Exchange Act (15 U.S.C. 78c(a)(1)), or security-based swap execution 
facility, as defined under section 3(a)(77) of the Exchange Act (15 
U.S.C. 78c(a)(77)).
    (8) Excluded clearing activities means:
    (i) With respect to customer transactions cleared on a derivatives 
clearing organization, a clearing agency, or a designated financial 
market utility, any purchase or sale necessary to correct trading errors 
made by or on behalf of a customer provided that such purchase or sale 
is conducted in accordance with, for transactions cleared on a 
derivatives clearing organization, the Commodity Exchange Act, CFTC 
regulations, and the rules or procedures of the derivatives clearing 
organization, or, for transactions cleared on a clearing agency, the 
rules or procedures of the clearing agency, or, for transactions cleared 
on a designated financial market utility that is neither a derivatives 
clearing organization nor a clearing agency, the rules or procedures of 
the designated financial market utility;
    (ii) Any purchase or sale in connection with and related to the 
management of a default or threatened imminent default of a customer 
provided that such purchase or sale is conducted in accordance with, for 
transactions cleared on a derivatives clearing organization, the 
Commodity Exchange Act, CFTC regulations, and the rules or procedures of 
the derivatives clearing organization, or, for transactions cleared on a 
clearing agency, the rules or procedures of the clearing agency, or, for 
transactions cleared on a designated financial market utility that is 
neither a derivatives clearing organization nor a clearing agency, the 
rules or procedures of the designated financial market utility;
    (iii) Any purchase or sale in connection with and related to the 
management of a default or threatened imminent default of a member of a 
clearing agency, a member of a derivatives clearing organization, or a 
member of a designated financial market utility;
    (iv) Any purchase or sale in connection with and related to the 
management of the default or threatened default of a clearing agency, a 
derivatives clearing organization, or a designated financial market 
utility; and
    (v) Any purchase or sale that is required by the rules or procedures 
of a clearing agency, a derivatives clearing organization, or a 
designated financial

[[Page 310]]

market utility to mitigate the risk to the clearing agency, derivatives 
clearing organization, or designated financial market utility that would 
result from the clearing by a member of security-based swaps that 
reference the member or an affiliate of the member.
    (9) Designated financial market utility has the same meaning as in 
section 803(4) of the Dodd-Frank Act (12 U.S.C. 5462(4)).
    (10) Issuer has the same meaning as in section 2(a)(4) of the 
Securities Act of 1933 (15 U.S.C. 77b(a)(4)).
    (11) Market risk capital rule covered position and trading position 
means a financial instrument that meets the criteria to be a covered 
position and a trading position, as those terms are respectively 
defined, without regard to whether the financial instrument is reported 
as a covered position or trading position on any applicable regulatory 
reporting forms:
    (i) In the case of a banking entity that is a bank holding company, 
savings and loan holding company, or insured depository institution, 
under the market risk capital rule that is applicable to the banking 
entity; and
    (ii) In the case of a banking entity that is affiliated with a bank 
holding company or savings and loan holding company, other than a 
banking entity to which a market risk capital rule is applicable, under 
the market risk capital rule that is applicable to the affiliated bank 
holding company or savings and loan holding company.
    (12) Market risk capital rule means the market risk capital rule 
that is contained in 12 CFR part 3, subpart F, with respect to a banking 
entity for which the OCC is the primary financial regulatory agency, 12 
CFR part 217 with respect to a banking entity for which the Board is the 
primary financial regulatory agency, or 12 CFR part 324 with respect to 
a banking entity for which the FDIC is the primary financial regulatory 
agency.
    (13) Municipal security means a security that is a direct obligation 
of or issued by, or an obligation guaranteed as to principal or interest 
by, a State or any political subdivision thereof, or any agency or 
instrumentality of a State or any political subdivision thereof, or any 
municipal corporate instrumentality of one or more States or political 
subdivisions thereof.
    (14) Trading desk means a unit of organization of a banking entity 
that purchases or sells financial instruments for the trading account of 
the banking entity or an affiliate thereof that is:
    (i)(A) Structured by the banking entity to implement a well-defined 
business strategy;
    (B) Organized to ensure appropriate setting, monitoring, and 
management review of the desk's trading and hedging limits, current and 
potential future loss exposures, and strategies; and
    (C) Characterized by a clearly defined unit that:
    (1) Engages in coordinated trading activity with a unified approach 
to its key elements;
    (2) Operates subject to a common and calibrated set of risk metrics, 
risk levels, and joint trading limits;
    (3) Submits compliance reports and other information as a unit for 
monitoring by management; and
    (4) Books its trades together; or
    (ii) For a banking entity that calculates risk-based capital ratios 
under the market risk capital rule, or a consolidated affiliate for 
regulatory reporting purposes of a banking entity that calculates risk-
based capital ratios under the market risk capital rule, established by 
the banking entity or its affiliate for purposes of market risk capital 
calculations under the market risk capital rule.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62239, Nov. 14, 
2019]



Sec.  255.4  Permitted underwriting and market making-related activities.

    (a) Underwriting activities--(1) Permitted underwriting activities. 
The prohibition contained in Sec.  255.3(a) does not apply to a banking 
entity's underwriting activities conducted in accordance with this 
paragraph (a).
    (2) Requirements. The underwriting activities of a banking entity 
are permitted under paragraph (a)(1) of this section only if:
    (i) The banking entity is acting as an underwriter for a 
distribution of securities and the trading desk's underwriting position 
is related to such distribution;

[[Page 311]]

    (ii)(A) The amount and type of the securities in the trading desk's 
underwriting position are designed not to exceed the reasonably expected 
near term demands of clients, customers, or counterparties, taking into 
account the liquidity, maturity, and depth of the market for the 
relevant types of securities; and
    (B) Reasonable efforts are made to sell or otherwise reduce the 
underwriting position within a reasonable period, taking into account 
the liquidity, maturity, and depth of the market for the relevant types 
of securities;
    (iii) In the case of a banking entity with significant trading 
assets and liabilities, the banking entity has established and 
implements, maintains, and enforces an internal compliance program 
required by subpart D of this part that is reasonably designed to ensure 
the banking entity's compliance with the requirements of paragraph (a) 
of this section, including reasonably designed written policies and 
procedures, internal controls, analysis and independent testing 
identifying and addressing:
    (A) The products, instruments or exposures each trading desk may 
purchase, sell, or manage as part of its underwriting activities;
    (B) Limits for each trading desk, in accordance with paragraph 
(a)(2)(ii)(A) of this section;
    (C) Written authorization procedures, including escalation 
procedures that require review and approval of any trade that would 
exceed a trading desk's limit(s), demonstrable analysis of the basis for 
any temporary or permanent increase to a trading desk's limit(s), and 
independent review of such demonstrable analysis and approval; and
    (D) Internal controls and ongoing monitoring and analysis of each 
trading desk's compliance with its limits.
    (iv) A banking entity with significant trading assets and 
liabilities may satisfy the requirements in paragraphs (a)(2)(iii)(B) 
and (C) of this section by complying with the requirements set forth 
below in paragraph (c) of this section;
    (v) The compensation arrangements of persons performing the 
activities described in this paragraph (a) are designed not to reward or 
incentivize prohibited proprietary trading; and
    (vi) The banking entity is licensed or registered to engage in the 
activity described in this paragraph (a) in accordance with applicable 
law.
    (3) Definition of distribution. For purposes of this paragraph (a), 
a distribution of securities means:
    (i) An offering of securities, whether or not subject to 
registration under the Securities Act of 1933, that is distinguished 
from ordinary trading transactions by the presence of special selling 
efforts and selling methods; or
    (ii) An offering of securities made pursuant to an effective 
registration statement under the Securities Act of 1933.
    (4) Definition of underwriter. For purposes of this paragraph (a), 
underwriter means:
    (i) A person who has agreed with an issuer or selling security 
holder to:
    (A) Purchase securities from the issuer or selling security holder 
for distribution;
    (B) Engage in a distribution of securities for or on behalf of the 
issuer or selling security holder; or
    (C) Manage a distribution of securities for or on behalf of the 
issuer or selling security holder; or
    (ii) A person who has agreed to participate or is participating in a 
distribution of such securities for or on behalf of the issuer or 
selling security holder.
    (5) Definition of selling security holder. For purposes of this 
paragraph (a), selling security holder means any person, other than an 
issuer, on whose behalf a distribution is made.
    (6) Definition of underwriting position. For purposes of this 
section, underwriting position means the long or short positions in one 
or more securities held by a banking entity or its affiliate, and 
managed by a particular trading desk, in connection with a particular 
distribution of securities for which such banking entity or affiliate is 
acting as an underwriter.
    (7) Definition of client, customer, and counterparty. For purposes 
of this paragraph (a), the terms client, customer, and counterparty, on 
a collective or individual basis, refer to market participants that may 
transact with the

[[Page 312]]

banking entity in connection with a particular distribution for which 
the banking entity is acting as underwriter.
    (b) Market making-related activities--(1) Permitted market making-
related activities. The prohibition contained in Sec.  255.3(a) does not 
apply to a banking entity's market making-related activities conducted 
in accordance with this paragraph (b).
    (2) Requirements. The market making-related activities of a banking 
entity are permitted under paragraph (b)(1) of this section only if:
    (i) The trading desk that establishes and manages the financial 
exposure, routinely stands ready to purchase and sell one or more types 
of financial instruments related to its financial exposure, and is 
willing and available to quote, purchase and sell, or otherwise enter 
into long and short positions in those types of financial instruments 
for its own account, in commercially reasonable amounts and throughout 
market cycles on a basis appropriate for the liquidity, maturity, and 
depth of the market for the relevant types of financial instruments;
    (ii) The trading desk's market-making related activities are 
designed not to exceed, on an ongoing basis, the reasonably expected 
near term demands of clients, customers, or counterparties, taking into 
account the liquidity, maturity, and depth of the market for the 
relevant types of financial instruments;
    (iii) In the case of a banking entity with significant trading 
assets and liabilities, the banking entity has established and 
implements, maintains, and enforces an internal compliance program 
required by subpart D of this part that is reasonably designed to ensure 
the banking entity's compliance with the requirements of paragraph (b) 
of this section, including reasonably designed written policies and 
procedures, internal controls, analysis and independent testing 
identifying and addressing:
    (A) The financial instruments each trading desk stands ready to 
purchase and sell in accordance with paragraph (b)(2)(i) of this 
section;
    (B) The actions the trading desk will take to demonstrably reduce or 
otherwise significantly mitigate promptly the risks of its financial 
exposure consistent with the limits required under paragraph 
(b)(2)(iii)(C) of this section; the products, instruments, and exposures 
each trading desk may use for risk management purposes; the techniques 
and strategies each trading desk may use to manage the risks of its 
market making-related activities and positions; and the process, 
strategies, and personnel responsible for ensuring that the actions 
taken by the trading desk to mitigate these risks are and continue to be 
effective;
    (C) Limits for each trading desk, in accordance with paragraph 
(b)(2)(ii) of this section;
    (D) Written authorization procedures, including escalation 
procedures that require review and approval of any trade that would 
exceed a trading desk's limit(s), demonstrable analysis of the basis for 
any temporary or permanent increase to a trading desk's limit(s), and 
independent review of such demonstrable analysis and approval; and
    (E) Internal controls and ongoing monitoring and analysis of each 
trading desk's compliance with its limits.
    (iv) A banking entity with significant trading assets and 
liabilities may satisfy the requirements in paragraphs (b)(2)(iii)(C) 
and (D) of this section by complying with the requirements set forth 
below in paragraph (c) of this section;
    (v) The compensation arrangements of persons performing the 
activities described in this paragraph (b) are designed not to reward or 
incentivize prohibited proprietary trading; and
    (vi) The banking entity is licensed or registered to engage in 
activity described in this paragraph (b) in accordance with applicable 
law.
    (3) Definition of client, customer, and counterparty. For purposes 
of paragraph (b) of this section, the terms client, customer, and 
counterparty, on a collective or individual basis refer to market 
participants that make use of the banking entity's market making-related 
services by obtaining such services, responding to quotations, or 
entering into a continuing relationship with respect to such services, 
provided that:

[[Page 313]]

    (i) A trading desk or other organizational unit of another banking 
entity is not a client, customer, or counterparty of the trading desk if 
that other entity has trading assets and liabilities of $50 billion or 
more as measured in accordance with the methodology described in Sec.  
255.2(ee) of this part, unless:
    (A) The trading desk documents how and why a particular trading desk 
or other organizational unit of the entity should be treated as a 
client, customer, or counterparty of the trading desk for purposes of 
paragraph (b)(2) of this section; or
    (B) The purchase or sale by the trading desk is conducted 
anonymously on an exchange or similar trading facility that permits 
trading on behalf of a broad range of market participants.
    (ii) [Reserved]
    (4) Definition of financial exposure. For purposes of this section, 
financial exposure means the aggregate risks of one or more financial 
instruments and any associated loans, commodities, or foreign exchange 
or currency, held by a banking entity or its affiliate and managed by a 
particular trading desk as part of the trading desk's market making-
related activities.
    (5) Definition of market-maker positions. For the purposes of this 
section, market-maker positions means all of the positions in the 
financial instruments for which the trading desk stands ready to make a 
market in accordance with paragraph (b)(2)(i) of this section, that are 
managed by the trading desk, including the trading desk's open positions 
or exposures arising from open transactions.
    (c) Rebuttable presumption of compliance--(1) Internal limits. (i) A 
banking entity shall be presumed to meet the requirement in paragraph 
(a)(2)(ii)(A) or (b)(2)(ii) of this section with respect to the purchase 
or sale of a financial instrument if the banking entity has established 
and implements, maintains, and enforces the internal limits for the 
relevant trading desk as described in paragraph (c)(1)(ii) of this 
section.
    (ii)(A) With respect to underwriting activities conducted pursuant 
to paragraph (a) of this section, the presumption described in paragraph 
(c)(1)(i) of this section shall be available to each trading desk that 
establishes, implements, maintains, and enforces internal limits that 
should take into account the liquidity, maturity, and depth of the 
market for the relevant types of securities and are designed not to 
exceed the reasonably expected near term demands of clients, customers, 
or counterparties, based on the nature and amount of the trading desk's 
underwriting activities, on the:
    (1) Amount, types, and risk of its underwriting position;
    (2) Level of exposures to relevant risk factors arising from its 
underwriting position; and
    (3) Period of time a security may be held.
    (B) With respect to market making-related activities conducted 
pursuant to paragraph (b) of this section, the presumption described in 
paragraph (c)(1)(i) of this section shall be available to each trading 
desk that establishes, implements, maintains, and enforces internal 
limits that should take into account the liquidity, maturity, and depth 
of the market for the relevant types of financial instruments and are 
designed not to exceed the reasonably expected near term demands of 
clients, customers, or counterparties, based on the nature and amount of 
the trading desk's market-making related activities, that address the:
    (1) Amount, types, and risks of its market-maker positions;
    (2) Amount, types, and risks of the products, instruments, and 
exposures the trading desk may use for risk management purposes;
    (3) Level of exposures to relevant risk factors arising from its 
financial exposure; and
    (4) Period of time a financial instrument may be held.
    (2) Supervisory review and oversight. The limits described in 
paragraph (c)(1) of this section shall be subject to supervisory review 
and oversight by the SEC on an ongoing basis.
    (3) Limit breaches and increases. (i) With respect to any limit set 
pursuant to paragraphs (c)(1)(ii)(A) or (c)(1)(ii)(B) of this section, a 
banking entity shall maintain and make available to the SEC upon request 
records regarding any limit that is exceeded

[[Page 314]]

and any temporary or permanent increase to any limit(s), in each case in 
the form and manner as directed by the SEC.
    (ii) In the event of a breach or increase of any limit set pursuant 
to paragraph (c)(1)(ii)(A) or (B) of this section, the presumption 
described in paragraph (c)(1)(i) of this section shall continue to be 
available only if the banking entity:
    (A) Takes action as promptly as possible after a breach to bring the 
trading desk into compliance; and
    (B) Follows established written authorization procedures, including 
escalation procedures that require review and approval of any trade that 
exceeds a trading desk's limit(s), demonstrable analysis of the basis 
for any temporary or permanent increase to a trading desk's limit(s), 
and independent review of such demonstrable analysis and approval.
    (4) Rebutting the presumption. The presumption in paragraph 
(c)(1)(i) of this section may be rebutted by the SEC if the SEC 
determines, taking into account the liquidity, maturity, and depth of 
the market for the relevant types of financial instruments and based on 
all relevant facts and circumstances, that a trading desk is engaging in 
activity that is not based on the reasonably expected near term demands 
of clients, customers, or counterparties. The SEC's rebuttal of the 
presumption in paragraph (c)(1)(i) must be made in accordance with the 
notice and response procedures in subpart D of this part.

[84 FR 62241, Nov. 14, 2019]



Sec.  255.5  Permitted risk-mitigating hedging activities.

    (a) Permitted risk-mitigating hedging activities. The prohibition 
contained in Sec.  255.3(a) does not apply to the risk-mitigating 
hedging activities of a banking entity in connection with and related to 
individual or aggregated positions, contracts, or other holdings of the 
banking entity and designed to reduce the specific risks to the banking 
entity in connection with and related to such positions, contracts, or 
other holdings.
    (b) Requirements. (1) The risk-mitigating hedging activities of a 
banking entity that has significant trading assets and liabilities are 
permitted under paragraph (a) of this section only if:
    (i) The banking entity has established and implements, maintains and 
enforces an internal compliance program required by subpart D of this 
part that is reasonably designed to ensure the banking entity's 
compliance with the requirements of this section, including:
    (A) Reasonably designed written policies and procedures regarding 
the positions, techniques and strategies that may be used for hedging, 
including documentation indicating what positions, contracts or other 
holdings a particular trading desk may use in its risk-mitigating 
hedging activities, as well as position and aging limits with respect to 
such positions, contracts or other holdings;
    (B) Internal controls and ongoing monitoring, management, and 
authorization procedures, including relevant escalation procedures; and
    (C) The conduct of analysis and independent testing designed to 
ensure that the positions, techniques and strategies that may be used 
for hedging may reasonably be expected to reduce or otherwise 
significantly mitigate the specific, identifiable risk(s) being hedged;
    (ii) The risk-mitigating hedging activity:
    (A) Is conducted in accordance with the written policies, 
procedures, and internal controls required under this section;
    (B) At the inception of the hedging activity, including, without 
limitation, any adjustments to the hedging activity, is designed to 
reduce or otherwise significantly mitigate one or more specific, 
identifiable risks, including market risk, counterparty or other credit 
risk, currency or foreign exchange risk, interest rate risk, commodity 
price risk, basis risk, or similar risks, arising in connection with and 
related to identified positions, contracts, or other holdings of the 
banking entity, based upon the facts and circumstances of the identified 
underlying and hedging positions, contracts or other holdings and the 
risks and liquidity thereof;
    (C) Does not give rise, at the inception of the hedge, to any 
significant

[[Page 315]]

new or additional risk that is not itself hedged contemporaneously in 
accordance with this section;
    (D) Is subject to continuing review, monitoring and management by 
the banking entity that:
    (1) Is consistent with the written hedging policies and procedures 
required under paragraph (b)(1)(i) of this section;
    (2) Is designed to reduce or otherwise significantly mitigate the 
specific, identifiable risks that develop over time from the risk-
mitigating hedging activities undertaken under this section and the 
underlying positions, contracts, and other holdings of the banking 
entity, based upon the facts and circumstances of the underlying and 
hedging positions, contracts and other holdings of the banking entity 
and the risks and liquidity thereof; and
    (3) Requires ongoing recalibration of the hedging activity by the 
banking entity to ensure that the hedging activity satisfies the 
requirements set out in paragraph (b)(1)(ii) of this section and is not 
prohibited proprietary trading; and
    (iii) The compensation arrangements of persons performing risk-
mitigating hedging activities are designed not to reward or incentivize 
prohibited proprietary trading.
    (2) The risk-mitigating hedging activities of a banking entity that 
does not have significant trading assets and liabilities are permitted 
under paragraph (a) of this section only if the risk-mitigating hedging 
activity:
    (i) At the inception of the hedging activity, including, without 
limitation, any adjustments to the hedging activity, is designed to 
reduce or otherwise significantly mitigate one or more specific, 
identifiable risks, including market risk, counterparty or other credit 
risk, currency or foreign exchange risk, interest rate risk, commodity 
price risk, basis risk, or similar risks, arising in connection with and 
related to identified positions, contracts, or other holdings of the 
banking entity, based upon the facts and circumstances of the identified 
underlying and hedging positions, contracts or other holdings and the 
risks and liquidity thereof; and
    (ii) Is subject, as appropriate, to ongoing recalibration by the 
banking entity to ensure that the hedging activity satisfies the 
requirements set out in paragraph (b)(2) of this section and is not 
prohibited proprietary trading.
    (c) Documentation requirement. (1) A banking entity that has 
significant trading assets and liabilities must comply with the 
requirements of paragraphs (c)(2) and (3) of this section, unless the 
requirements of paragraph (c)(4) of this section are met, with respect 
to any purchase or sale of financial instruments made in reliance on 
this section for risk-mitigating hedging purposes that is:
    (i) Not established by the specific trading desk establishing or 
responsible for the underlying positions, contracts, or other holdings 
the risks of which the hedging activity is designed to reduce;
    (ii) Established by the specific trading desk establishing or 
responsible for the underlying positions, contracts, or other holdings 
the risks of which the purchases or sales are designed to reduce, but 
that is effected through a financial instrument, exposure, technique, or 
strategy that is not specifically identified in the trading desk's 
written policies and procedures established under paragraph (b)(1) of 
this section or under Sec.  255.4(b)(2)(iii)(B) of this subpart as a 
product, instrument, exposure, technique, or strategy such trading desk 
may use for hedging; or
    (iii) Established to hedge aggregated positions across two or more 
trading desks.
    (2) In connection with any purchase or sale identified in paragraph 
(c)(1) of this section, a banking entity must, at a minimum, and 
contemporaneously with the purchase or sale, document:
    (i) The specific, identifiable risk(s) of the identified positions, 
contracts, or other holdings of the banking entity that the purchase or 
sale is designed to reduce;
    (ii) The specific risk-mitigating strategy that the purchase or sale 
is designed to fulfill; and
    (iii) The trading desk or other business unit that is establishing 
and responsible for the hedge.
    (3) A banking entity must create and retain records sufficient to 
demonstrate compliance with the requirements of this paragraph (c) for a 
period

[[Page 316]]

that is no less than five years in a form that allows the banking entity 
to promptly produce such records to the SEC on request, or such longer 
period as required under other law or this part.
    (4) The requirements of paragraphs (c)(2) and (3) of this section do 
not apply to the purchase or sale of a financial instrument described in 
paragraph (c)(1) of this section if:
    (i) The financial instrument purchased or sold is identified on a 
written list of pre-approved financial instruments that are commonly 
used by the trading desk for the specific type of hedging activity for 
which the financial instrument is being purchased or sold; and
    (ii) At the time the financial instrument is purchased or sold, the 
hedging activity (including the purchase or sale of the financial 
instrument) complies with written, pre-approved limits for the trading 
desk purchasing or selling the financial instrument for hedging 
activities undertaken for one or more other trading desks. The limits 
shall be appropriate for the:
    (A) Size, types, and risks of the hedging activities commonly 
undertaken by the trading desk;
    (B) Financial instruments purchased and sold for hedging activities 
by the trading desk; and
    (C) Levels and duration of the risk exposures being hedged.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62243, Nov. 14, 
2019]



Sec.  255.6  Other permitted proprietary trading activities.

    (a) Permitted trading in domestic government obligations. The 
prohibition contained in Sec.  255.3(a) does not apply to the purchase 
or sale by a banking entity of a financial instrument that is:
    (1) An obligation of, or issued or guaranteed by, the United States;
    (2) An obligation, participation, or other instrument of, or issued 
or guaranteed by, an agency of the United States, the Government 
National Mortgage Association, the Federal National Mortgage 
Association, the Federal Home Loan Mortgage Corporation, a Federal Home 
Loan Bank, the Federal Agricultural Mortgage Corporation or a Farm 
Credit System institution chartered under and subject to the provisions 
of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.);
    (3) An obligation of any State or any political subdivision thereof, 
including any municipal security; or
    (4) An obligation of the FDIC, or any entity formed by or on behalf 
of the FDIC for purpose of facilitating the disposal of assets acquired 
or held by the FDIC in its corporate capacity or as conservator or 
receiver under the Federal Deposit Insurance Act or Title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act.
    (b) Permitted trading in foreign government obligations--(1) 
Affiliates of foreign banking entities in the United States. The 
prohibition contained in Sec.  255.3(a) does not apply to the purchase 
or sale of a financial instrument that is an obligation of, or issued or 
guaranteed by, a foreign sovereign (including any multinational central 
bank of which the foreign sovereign is a member), or any agency or 
political subdivision of such foreign sovereign, by a banking entity, so 
long as:
    (i) The banking entity is organized under or is directly or 
indirectly controlled by a banking entity that is organized under the 
laws of a foreign sovereign and is not directly or indirectly controlled 
by a top-tier banking entity that is organized under the laws of the 
United States;
    (ii) The financial instrument is an obligation of, or issued or 
guaranteed by, the foreign sovereign under the laws of which the foreign 
banking entity referred to in paragraph (b)(1)(i) of this section is 
organized (including any multinational central bank of which the foreign 
sovereign is a member), or any agency or political subdivision of that 
foreign sovereign; and
    (iii) The purchase or sale as principal is not made by an insured 
depository institution.
    (2) Foreign affiliates of a U.S. banking entity. The prohibition 
contained in Sec.  255.3(a) does not apply to the purchase or sale of a 
financial instrument that is an obligation of, or issued or guaranteed 
by, a foreign sovereign (including any multinational central bank of

[[Page 317]]

which the foreign sovereign is a member), or any agency or political 
subdivision of that foreign sovereign, by a foreign entity that is owned 
or controlled by a banking entity organized or established under the 
laws of the United States or any State, so long as:
    (i) The foreign entity is a foreign bank, as defined in section 
211.2(j) of the Board's Regulation K (12 CFR 211.2(j)), or is regulated 
by the foreign sovereign as a securities dealer;
    (ii) The financial instrument is an obligation of, or issued or 
guaranteed by, the foreign sovereign under the laws of which the foreign 
entity is organized (including any multinational central bank of which 
the foreign sovereign is a member), or any agency or political 
subdivision of that foreign sovereign; and
    (iii) The financial instrument is owned by the foreign entity and is 
not financed by an affiliate that is located in the United States or 
organized under the laws of the United States or of any State.
    (c) Permitted trading on behalf of customers--(1) Fiduciary 
transactions. The prohibition contained in Sec.  255.3(a) does not apply 
to the purchase or sale of financial instruments by a banking entity 
acting as trustee or in a similar fiduciary capacity, so long as:
    (i) The transaction is conducted for the account of, or on behalf 
of, a customer; and
    (ii) The banking entity does not have or retain beneficial ownership 
of the financial instruments.
    (2) Riskless principal transactions. The prohibition contained in 
Sec.  255.3(a) does not apply to the purchase or sale of financial 
instruments by a banking entity acting as riskless principal in a 
transaction in which the banking entity, after receiving an order to 
purchase (or sell) a financial instrument from a customer, purchases (or 
sells) the financial instrument for its own account to offset a 
contemporaneous sale to (or purchase from) the customer.
    (d) Permitted trading by a regulated insurance company. The 
prohibition contained in Sec.  255.3(a) does not apply to the purchase 
or sale of financial instruments by a banking entity that is an 
insurance company or an affiliate of an insurance company if:
    (1) The insurance company or its affiliate purchases or sells the 
financial instruments solely for:
    (i) The general account of the insurance company; or
    (ii) A separate account established by the insurance company;
    (2) The purchase or sale is conducted in compliance with, and 
subject to, the insurance company investment laws, regulations, and 
written guidance of the State or jurisdiction in which such insurance 
company is domiciled; and
    (3) The appropriate Federal banking agencies, after consultation 
with the Financial Stability Oversight Council and the relevant 
insurance commissioners of the States and foreign jurisdictions, as 
appropriate, have not jointly determined, after notice and comment, that 
a particular law, regulation, or written guidance described in paragraph 
(d)(2) of this section is insufficient to protect the safety and 
soundness of the covered banking entity, or the financial stability of 
the United States.
    (e) Permitted trading activities of foreign banking entities. (1) 
The prohibition contained in Sec.  255.3(a) does not apply to the 
purchase or sale of financial instruments by a banking entity if:
    (i) The banking entity is not organized or directly or indirectly 
controlled by a banking entity that is organized under the laws of the 
United States or of any State;
    (ii) The purchase or sale by the banking entity is made pursuant to 
paragraph (9) or (13) of section 4(c) of the BHC Act; and
    (iii) The purchase or sale meets the requirements of paragraph 
(e)(3) of this section.
    (2) A purchase or sale of financial instruments by a banking entity 
is made pursuant to paragraph (9) or (13) of section 4(c) of the BHC Act 
for purposes of paragraph (e)(1)(ii) of this section only if:
    (i) The purchase or sale is conducted in accordance with the 
requirements of paragraph (e) of this section; and
    (ii)(A) With respect to a banking entity that is a foreign banking 
organization, the banking entity meets the qualifying foreign banking 
organization requirements of section 211.23(a), (c) or (e) of the 
Board's Regulation K

[[Page 318]]

(12 CFR 211.23(a), (c) or (e)), as applicable; or
    (B) With respect to a banking entity that is not a foreign banking 
organization, the banking entity is not organized under the laws of the 
United States or of any State and the banking entity, on a fully-
consolidated basis, meets at least two of the following requirements:
    (1) Total assets of the banking entity held outside of the United 
States exceed total assets of the banking entity held in the United 
States;
    (2) Total revenues derived from the business of the banking entity 
outside of the United States exceed total revenues derived from the 
business of the banking entity in the United States; or
    (3) Total net income derived from the business of the banking entity 
outside of the United States exceeds total net income derived from the 
business of the banking entity in the United States.
    (3) A purchase or sale by a banking entity is permitted for purposes 
of this paragraph (e) if:
    (i) The banking entity engaging as principal in the purchase or sale 
(including relevant personnel) is not located in the United States or 
organized under the laws of the United States or of any State;
    (ii) The banking entity (including relevant personnel) that makes 
the decision to purchase or sell as principal is not located in the 
United States or organized under the laws of the United States or of any 
State; and
    (iii) The purchase or sale, including any transaction arising from 
risk-mitigating hedging related to the instruments purchased or sold, is 
not accounted for as principal directly or on a consolidated basis by 
any branch or affiliate that is located in the United States or 
organized under the laws of the United States or of any State.
    (4) For purposes of this paragraph (e), a U.S. branch, agency, or 
subsidiary of a foreign banking entity is considered to be located in 
the United States; however, the foreign bank that operates or controls 
that branch, agency, or subsidiary is not considered to be located in 
the United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary.
    (f) Permitted trading activities of qualifying foreign excluded 
funds. The prohibition contained in Sec.  255.3(a) does not apply to the 
purchase or sale of a financial instrument by a qualifying foreign 
excluded fund. For purposes of this paragraph (f), a qualifying foreign 
excluded fund means a banking entity that:
    (1) Is organized or established outside the United States, and the 
ownership interests of which are offered and sold solely outside the 
United States;
    (2)(i) Would be a covered fund if the entity were organized or 
established in the United States, or
    (ii) Is, or holds itself out as being, an entity or arrangement that 
raises money from investors primarily for the purpose of investing in 
financial instruments for resale or other disposition or otherwise 
trading in financial instruments;
    (3) Would not otherwise be a banking entity except by virtue of the 
acquisition or retention of an ownership interest in, sponsorship of, or 
relationship with the entity, by another banking entity that meets the 
following:
    (i) The banking entity is not organized, or directly or indirectly 
controlled by a banking entity that is organized, under the laws of the 
United States or of any State; and
    (ii) The banking entity's acquisition or retention of an ownership 
interest in or sponsorship of the fund meets the requirements for 
permitted covered fund activities and investments solely outside the 
United States, as provided in Sec.  255.13(b);
    (4) Is established and operated as part of a bona fide asset 
management business; and
    (5) Is not operated in a manner that enables the banking entity that 
sponsors or controls the qualifying foreign excluded fund, or any of its 
affiliates, to evade the requirements of section 13 of the BHC Act or 
this part.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62244, Nov. 14, 
2019; 85 FR 46522, July 31, 2020]



Sec.  255.7  Limitations on permitted proprietary trading activities.

    (a) No transaction, class of transactions, or activity may be deemed 
permissible under Sec. Sec.  255.4 through 255.6 if

[[Page 319]]

the transaction, class of transactions, or activity would:
    (1) Involve or result in a material conflict of interest between the 
banking entity and its clients, customers, or counterparties;
    (2) Result, directly or indirectly, in a material exposure by the 
banking entity to a high-risk asset or a high-risk trading strategy; or
    (3) Pose a threat to the safety and soundness of the banking entity 
or to the financial stability of the United States.
    (b) Definition of material conflict of interest. (1) For purposes of 
this section, a material conflict of interest between a banking entity 
and its clients, customers, or counterparties exists if the banking 
entity engages in any transaction, class of transactions, or activity 
that would involve or result in the banking entity's interests being 
materially adverse to the interests of its client, customer, or 
counterparty with respect to such transaction, class of transactions, or 
activity, and the banking entity has not taken at least one of the 
actions in paragraph (b)(2) of this section.
    (2) Prior to effecting the specific transaction or class or type of 
transactions, or engaging in the specific activity, the banking entity:
    (i) Timely and effective disclosure. (A) Has made clear, timely, and 
effective disclosure of the conflict of interest, together with other 
necessary information, in reasonable detail and in a manner sufficient 
to permit a reasonable client, customer, or counterparty to meaningfully 
understand the conflict of interest; and
    (B) Such disclosure is made in a manner that provides the client, 
customer, or counterparty the opportunity to negate, or substantially 
mitigate, any materially adverse effect on the client, customer, or 
counterparty created by the conflict of interest; or
    (ii) Information barriers. Has established, maintained, and enforced 
information barriers that are memorialized in written policies and 
procedures, such as physical separation of personnel, or functions, or 
limitations on types of activity, that are reasonably designed, taking 
into consideration the nature of the banking entity's business, to 
prevent the conflict of interest from involving or resulting in a 
materially adverse effect on a client, customer, or counterparty. A 
banking entity may not rely on such information barriers if, in the case 
of any specific transaction, class or type of transactions or activity, 
the banking entity knows or should reasonably know that, notwithstanding 
the banking entity's establishment of information barriers, the conflict 
of interest may involve or result in a materially adverse effect on a 
client, customer, or counterparty.
    (c) Definition of high-risk asset and high-risk trading strategy. 
For purposes of this section:
    (1) High-risk asset means an asset or group of related assets that 
would, if held by a banking entity, significantly increase the 
likelihood that the banking entity would incur a substantial financial 
loss or would pose a threat to the financial stability of the United 
States.
    (2) High-risk trading strategy means a trading strategy that would, 
if engaged in by a banking entity, significantly increase the likelihood 
that the banking entity would incur a substantial financial loss or 
would pose a threat to the financial stability of the United States.



Sec. Sec.  255.8-255.9  [Reserved]



           Subpart C_Covered Funds Activities and Investments



Sec.  255.10  Prohibition on acquiring or retaining an ownership interest
in and having certain relationships with a covered fund.

    (a) Prohibition. (1) Except as otherwise provided in this subpart, a 
banking entity may not, as principal, directly or indirectly, acquire or 
retain any ownership interest in or sponsor a covered fund.
    (2) Paragraph (a)(1) of this section does not include acquiring or 
retaining an ownership interest in a covered fund by a banking entity:
    (i) Acting solely as agent, broker, or custodian, so long as;
    (A) The activity is conducted for the account of, or on behalf of, a 
customer; and

[[Page 320]]

    (B) The banking entity and its affiliates do not have or retain 
beneficial ownership of such ownership interest;
    (ii) Through a deferred compensation, stock-bonus, profit-sharing, 
or pension plan of the banking entity (or an affiliate thereof) that is 
established and administered in accordance with the law of the United 
States or a foreign sovereign, if the ownership interest is held or 
controlled directly or indirectly by the banking entity as trustee for 
the benefit of persons who are or were employees of the banking entity 
(or an affiliate thereof);
    (iii) In the ordinary course of collecting a debt previously 
contracted in good faith, provided that the banking entity divests the 
ownership interest as soon as practicable, and in no event may the 
banking entity retain such ownership interest for longer than such 
period permitted by the SEC; or
    (iv) On behalf of customers as trustee or in a similar fiduciary 
capacity for a customer that is not a covered fund, so long as:
    (A) The activity is conducted for the account of, or on behalf of, 
the customer; and
    (B) The banking entity and its affiliates do not have or retain 
beneficial ownership of such ownership interest.
    (b) Definition of covered fund. (1) Except as provided in paragraph 
(c) of this section, covered fund means:
    (i) An issuer that would be an investment company, as defined in the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), but for 
section 3(c)(1) or 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or (7));
    (ii) Any commodity pool under section 1a(10) of the Commodity 
Exchange Act (7 U.S.C. 1a(10)) for which:
    (A) The commodity pool operator has claimed an exemption under 17 
CFR 4.7; or
    (B)(1) A commodity pool operator is registered with the CFTC as a 
commodity pool operator in connection with the operation of the 
commodity pool;
    (2) Substantially all participation units of the commodity pool are 
owned by qualified eligible persons under 17 CFR 4.7(a)(2) and (3); and
    (3) Participation units of the commodity pool have not been publicly 
offered to persons who are not qualified eligible persons under 17 CFR 
4.7(a)(2) and (3); or
    (iii) For any banking entity that is, or is controlled directly or 
indirectly by a banking entity that is, located in or organized under 
the laws of the United States or of any State, an entity that:
    (A) Is organized or established outside the United States and the 
ownership interests of which are offered and sold solely outside the 
United States;
    (B) Is, or holds itself out as being, an entity or arrangement that 
raises money from investors primarily for the purpose of investing in 
securities for resale or other disposition or otherwise trading in 
securities; and
    (C)(1) Has as its sponsor that banking entity (or an affiliate 
thereof); or
    (2) Has issued an ownership interest that is owned directly or 
indirectly by that banking entity (or an affiliate thereof).
    (2) An issuer shall not be deemed to be a covered fund under 
paragraph (b)(1)(iii) of this section if, were the issuer subject to 
U.S. securities laws, the issuer could rely on an exclusion or exemption 
from the definition of ``investment company'' under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) other than the exclusions 
contained in section 3(c)(1) and 3(c)(7) of that Act.
    (3) For purposes of paragraph (b)(1)(iii) of this section, a U.S. 
branch, agency, or subsidiary of a foreign banking entity is located in 
the United States; however, the foreign bank that operates or controls 
that branch, agency, or subsidiary is not considered to be located in 
the United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary.
    (c) Notwithstanding paragraph (b) of this section, unless the 
appropriate Federal banking agencies, the SEC, and the CFTC jointly 
determine otherwise, a covered fund does not include:
    (1) Foreign public funds. (i) Subject to paragraphs (c)(1)(ii) and 
(iii) of this section, an issuer that:
    (A) Is organized or established outside of the United States; and
    (B) Is authorized to offer and sell ownership interests, and such 
interests

[[Page 321]]

are offered and sold, through one or more public offerings.
    (ii) With respect to a banking entity that is, or is controlled 
directly or indirectly by a banking entity that is, located in or 
organized under the laws of the United States or of any State and any 
issuer for which such banking entity acts as sponsor, the sponsoring 
banking entity may not rely on the exemption in paragraph (c)(1)(i) of 
this section for such issuer unless more than 75 percent of the 
ownership interests in the issuer are sold to persons other than:
    (A) Such sponsoring banking entity;
    (B) Such issuer;
    (C) Affiliates of such sponsoring banking entity or such issuer; and
    (D) Directors and senior executive officers as defined in Sec.  
225.71(c) of the Board's Regulation Y (12 CFR 225.71(c)) of such 
entities.
    (iii) For purposes of paragraph (c)(1)(i)(B) of this section, the 
term ``public offering'' means a distribution (as defined in Sec.  
255.4(a)(3)) of securities in any jurisdiction outside the United States 
to investors, including retail investors, provided that:
    (A) The distribution is subject to substantive disclosure and retail 
investor protection laws or regulations;
    (B) With respect to an issuer for which the banking entity serves as 
the investment manager, investment adviser, commodity trading advisor, 
commodity pool operator, or sponsor, the distribution complies with all 
applicable requirements in the jurisdiction in which such distribution 
is being made;
    (C) The distribution does not restrict availability to investors 
having a minimum level of net worth or net investment assets; and
    (D) The issuer has filed or submitted, with the appropriate 
regulatory authority in such jurisdiction, offering disclosure documents 
that are publicly available.
    (2) Wholly-owned subsidiaries. An entity, all of the outstanding 
ownership interests of which are owned directly or indirectly by the 
banking entity (or an affiliate thereof), except that:
    (i) Up to five percent of the entity's outstanding ownership 
interests, less any amounts outstanding under paragraph (c)(2)(ii) of 
this section, may be held by employees or directors of the banking 
entity or such affiliate (including former employees or directors if 
their ownership interest was acquired while employed by or in the 
service of the banking entity); and
    (ii) Up to 0.5 percent of the entity's outstanding ownership 
interests may be held by a third party if the ownership interest is 
acquired or retained by the third party for the purpose of establishing 
corporate separateness or addressing bankruptcy, insolvency, or similar 
concerns.
    (3) Joint ventures. A joint venture between a banking entity or any 
of its affiliates and one or more unaffiliated persons, provided that 
the joint venture:
    (i) Is composed of no more than 10 unaffiliated co-venturers;
    (ii) Is in the business of engaging in activities that are 
permissible for the banking entity or affiliate, other than investing in 
securities for resale or other disposition; and
    (iii) Is not, and does not hold itself out as being, an entity or 
arrangement that raises money from investors primarily for the purpose 
of investing in securities for resale or other disposition or otherwise 
trading in securities.
    (4) Acquisition vehicles. An issuer:
    (i) Formed solely for the purpose of engaging in a bona fide merger 
or acquisition transaction; and
    (ii) That exists only for such period as necessary to effectuate the 
transaction.
    (5) Foreign pension or retirement funds. A plan, fund, or program 
providing pension, retirement, or similar benefits that is:
    (i) Organized and administered outside the United States;
    (ii) A broad-based plan for employees or citizens that is subject to 
regulation as a pension, retirement, or similar plan under the laws of 
the jurisdiction in which the plan, fund, or program is organized and 
administered; and
    (iii) Established for the benefit of citizens or residents of one or 
more foreign sovereigns or any political subdivision thereof.
    (6) Insurance company separate accounts. A separate account, 
provided that no banking entity other than the

[[Page 322]]

insurance company participates in the account's profits and losses.
    (7) Bank owned life insurance. A separate account that is used 
solely for the purpose of allowing one or more banking entities to 
purchase a life insurance policy for which the banking entity or 
entities is beneficiary, provided that no banking entity that purchases 
the policy:
    (i) Controls the investment decisions regarding the underlying 
assets or holdings of the separate account; or
    (ii) Participates in the profits and losses of the separate account 
other than in compliance with applicable requirements regarding bank 
owned life insurance.
    (8) Loan securitizations. (i) Scope. An issuing entity for asset-
backed securities that satisfies all the conditions of this paragraph 
(c)(8) and the assets or holdings of which are composed solely of:
    (A) Loans as defined in Sec.  255.2(t);
    (B) Rights or other assets designed to assure the servicing or 
timely distribution of proceeds to holders of such securities and rights 
or other assets that are related or incidental to purchasing or 
otherwise acquiring and holding the loans, provided that each asset that 
is a security (other than special units of beneficial interest and 
collateral certificates meeting the requirements of paragraph (c)(8)(v) 
of this section) meets the requirements of paragraph (c)(8)(iii) of this 
section;
    (C) Interest rate or foreign exchange derivatives that meet the 
requirements of paragraph (c)(8)(iv) of this section;
    (D) Special units of beneficial interest and collateral certificates 
that meet the requirements of paragraph (c)(8)(v) of this section; and
    (E) Debt securities, other than asset-backed securities and 
convertible securities, provided that:
    (1) The aggregate value of such debt securities does not exceed five 
percent of the aggregate value of loans held under paragraph 
(c)(8)(i)(A) of this section, cash and cash equivalents held under 
paragraph (c)(8)(iii)(A) of this section, and debt securities held under 
this paragraph (c)(8)(i)(E); and
    (2) The aggregate value of the loans, cash and cash equivalents, and 
debt securities for purposes of this paragraph is calculated at par 
value at the most recent time any such debt security is acquired, except 
that the issuing entity may instead determine the value of any such 
loan, cash equivalent, or debt security based on its fair market value 
if:
    (i) The issuing entity is required to use the fair market value of 
such assets for purposes of calculating compliance with concentration 
limitations or other similar calculations under its transaction 
agreements, and
    (ii) The issuing entity's valuation methodology values similarly 
situated assets consistently.
    (ii) Impermissible assets. For purposes of this paragraph (c)(8), 
except as permitted under paragraph (c)(8)(i)(E) of this section, the 
assets or holdings of the issuing entity shall not include any of the 
following:
    (A) A security, including an asset-backed security, or an interest 
in an equity or debt security other than as permitted in paragraphs 
(c)(8)(iii), (iv), or (v) of this section;
    (B) A derivative, other than a derivative that meets the 
requirements of paragraph (c)(8)(iv) of this section; or
    (C) A commodity forward contract.
    (iii) Permitted securities. Notwithstanding paragraph (c)(8)(ii)(A) 
of this section, the issuing entity may hold securities, other than debt 
securities permitted under paragraph (c)(8)(i)(E) of this section, if 
those securities are:
    (A) Cash equivalents--which, for the purposes of this paragraph, 
means high quality, highly liquid investments whose maturity corresponds 
to the securitization's expected or potential need for funds and whose 
currency corresponds to either the underlying loans or the asset-backed 
securities--for purposes of the rights and assets in paragraph 
(c)(8)(i)(B) of this section; or
    (B) Securities received in lieu of debts previously contracted with 
respect to the loans supporting the asset-backed securities.
    (iv) Derivatives. The holdings of derivatives by the issuing entity 
shall be limited to interest rate or foreign exchange derivatives that 
satisfy all of the following conditions:
    (A) The written terms of the derivatives directly relate to the 
loans, the

[[Page 323]]

asset-backed securities, the contractual rights or other assets 
described in paragraph (c)(8)(i)(B) of this section, or the debt 
securities described in paragraph (c)(8)(i)(E) of this section; and
    (B) The derivatives reduce the interest rate and/or foreign exchange 
risks related to the loans, the asset-backed securities, the contractual 
rights or other assets described in paragraph (c)(8)(i)(B) of this 
section, or the debt securities described in paragraph (c)(8)(i)(E) of 
this section.
    (v) Special units of beneficial interest and collateral 
certificates. The assets or holdings of the issuing entity may include 
collateral certificates and special units of beneficial interest issued 
by a special purpose vehicle, provided that:
    (A) The special purpose vehicle that issues the special unit of 
beneficial interest or collateral certificate meets the requirements in 
this paragraph (c)(8);
    (B) The special unit of beneficial interest or collateral 
certificate is used for the sole purpose of transferring to the issuing 
entity for the loan securitization the economic risks and benefits of 
the assets that are permissible for loan securitizations under this 
paragraph (c)(8) and does not directly or indirectly transfer any 
interest in any other economic or financial exposure;
    (C) The special unit of beneficial interest or collateral 
certificate is created solely to satisfy legal requirements or otherwise 
facilitate the structuring of the loan securitization; and
    (D) The special purpose vehicle that issues the special unit of 
beneficial interest or collateral certificate and the issuing entity are 
established under the direction of the same entity that initiated the 
loan securitization.
    (9) Qualifying asset-backed commercial paper conduits. (i) An 
issuing entity for asset-backed commercial paper that satisfies all of 
the following requirements:
    (A) The asset-backed commercial paper conduit holds only:
    (1) Loans and other assets permissible for a loan securitization 
under paragraph (c)(8)(i) of this section; and
    (2) Asset-backed securities supported solely by assets that are 
permissible for loan securitizations under paragraph (c)(8)(i) of this 
section and acquired by the asset-backed commercial paper conduit as 
part of an initial issuance either directly from the issuing entity of 
the asset-backed securities or directly from an underwriter in the 
distribution of the asset-backed securities;
    (B) The asset-backed commercial paper conduit issues only asset-
backed securities, comprised of a residual interest and securities with 
a legal maturity of 397 days or less; and
    (C) A regulated liquidity provider has entered into a legally 
binding commitment to provide full and unconditional liquidity coverage 
with respect to all of the outstanding asset-backed securities issued by 
the asset-backed commercial paper conduit (other than any residual 
interest) in the event that funds are required to redeem maturing asset-
backed securities.
    (ii) For purposes of this paragraph (c)(9), a regulated liquidity 
provider means:
    (A) A depository institution, as defined in section 3(c) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(c));
    (B) A bank holding company, as defined in section 2(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(a)), or a subsidiary 
thereof;
    (C) A savings and loan holding company, as defined in section 10a of 
the Home Owners' Loan Act (12 U.S.C. 1467a), provided all or 
substantially all of the holding company's activities are permissible 
for a financial holding company under section 4(k) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1843(k)), or a subsidiary thereof;
    (D) A foreign bank whose home country supervisor, as defined in 
Sec.  211.21(q) of the Board's Regulation K (12 CFR 211.21(q)), has 
adopted capital standards consistent with the Capital Accord for the 
Basel Committee on banking Supervision, as amended, and that is subject 
to such standards, or a subsidiary thereof; or
    (E) The United States or a foreign sovereign.
    (10) Qualifying covered bonds--(i) Scope. An entity owning or 
holding a dynamic or fixed pool of loans or other assets as provided in 
paragraph (c)(8) of this section for the benefit of the holders of 
covered bonds, provided that the

[[Page 324]]

assets in the pool are composed solely of assets that meet the 
conditions in paragraph (c)(8)(i) of this section.
    (ii) Covered bond. For purposes of this paragraph (c)(10), a covered 
bond means:
    (A) A debt obligation issued by an entity that meets the definition 
of foreign banking organization, the payment obligations of which are 
fully and unconditionally guaranteed by an entity that meets the 
conditions set forth in paragraph (c)(10)(i) of this section; or
    (B) A debt obligation of an entity that meets the conditions set 
forth in paragraph (c)(10)(i) of this section, provided that the payment 
obligations are fully and unconditionally guaranteed by an entity that 
meets the definition of foreign banking organization and the entity is a 
wholly-owned subsidiary, as defined in paragraph (c)(2) of this section, 
of such foreign banking organization.
    (11) SBICs and public welfare investment funds. An issuer:
    (i) That is a small business investment company, as defined in 
section 103(3) of the Small Business Investment Act of 1958 (15 U.S.C. 
662), or that has received from the Small Business Administration notice 
to proceed to qualify for a license as a small business investment 
company, which notice or license has not been revoked, or that has 
voluntarily surrendered its license to operate as a small business 
investment company in accordance with 13 CFR 107.1900 and does not make 
any new investments (other than investments in cash equivalents, which, 
for the purposes of this paragraph, means high quality, highly liquid 
investments whose maturity corresponds to the issuer's expected or 
potential need for funds and whose currency corresponds to the issuer's 
assets) after such voluntary surrender;
    (ii) The business of which is to make investments that are:
    (A) Designed primarily to promote the public welfare, of the type 
permitted under paragraph (11) of section 5136 of the Revised Statutes 
of the United States (12 U.S.C. 24), including the welfare of low- and 
moderate-income communities or families (such as providing housing, 
services, or jobs) and including investments that qualify for 
consideration under the regulations implementing the Community 
Reinvestment Act (12 U.S.C. 2901 et seq.); or
    (B) Qualified rehabilitation expenditures with respect to a 
qualified rehabilitated building or certified historic structure, as 
such terms are defined in section 47 of the Internal Revenue Code of 
1986 or a similar State historic tax credit program;
    (iii) That has elected to be regulated or is regulated as a rural 
business investment company, as described in 15 U.S.C. 80b-3(b)(8)(A) or 
(B), or that has terminated its participation as a rural business 
investment company in accordance with 7 CFR 4290.1900 and does not make 
any new investments (other than investments in cash equivalents, which, 
for the purposes of this paragraph, means high quality, highly liquid 
investments whose maturity corresponds to the issuer's expected or 
potential need for funds and whose currency corresponds to the issuer's 
assets) after such termination; or
    (iv) That is a qualified opportunity fund, as defined in 26 U.S.C. 
1400Z-2(d).
    (12) Registered investment companies and excluded entities. An 
issuer:
    (i) That is registered as an investment company under section 8 of 
the Investment Company Act of 1940 (15 U.S.C. 80a-8), or that is formed 
and operated pursuant to a written plan to become a registered 
investment company as described in Sec.  255.20(e)(3) of subpart D and 
that complies with the requirements of section 18 of the Investment 
Company Act of 1940 (15 U.S.C. 80a-18);
    (ii) That may rely on an exclusion or exemption from the definition 
of ``investment company'' under the Investment Company Act of 1940 (15 
U.S.C. 80a-1 et seq.) other than the exclusions contained in section 
3(c)(1) and 3(c)(7) of that Act; or
    (iii) That has elected to be regulated as a business development 
company pursuant to section 54(a) of that Act (15 U.S.C. 80a-53) and has 
not withdrawn its election, or that is formed and operated pursuant to a 
written plan to become a business development company as described in 
Sec.  255.20(e)(3) of subpart

[[Page 325]]

D and that complies with the requirements of section 61 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-60).
    (13) Issuers in conjunction with the FDIC's receivership or 
conservatorship operations. An issuer that is an entity formed by or on 
behalf of the FDIC for the purpose of facilitating the disposal of 
assets acquired in the FDIC's capacity as conservator or receiver under 
the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act.
    (14) Other excluded issuers. (i) Any issuer that the appropriate 
Federal banking agencies, the SEC, and the CFTC jointly determine the 
exclusion of which is consistent with the purposes of section 13 of the 
BHC Act.
    (ii) A determination made under paragraph (c)(14)(i) of this section 
will be promptly made public.
    (15) Credit funds. Subject to paragraphs (c)(15)(iii), (iv), and (v) 
of this section, an issuer that satisfies the asset and activity 
requirements of paragraphs (c)(15)(i) and (ii) of this section.
    (i) Asset requirements. The issuer's assets must be composed solely 
of:
    (A) Loans as defined in Sec.  255.2(t);
    (B) Debt instruments, subject to paragraph (c)(15)(iv) of this 
section;
    (C) Rights and other assets that are related or incidental to 
acquiring, holding, servicing, or selling such loans or debt 
instruments, provided that:
    (1) Each right or asset held under this paragraph (c)(15)(i)(C) that 
is a security is either:
    (i) A cash equivalent (which, for the purposes of this paragraph, 
means high quality, highly liquid investments whose maturity corresponds 
to the issuer's expected or potential need for funds and whose currency 
corresponds to either the underlying loans or the debt instruments);
    (ii) A security received in lieu of debts previously contracted with 
respect to such loans or debt instruments; or
    (iii) An equity security (or right to acquire an equity security) 
received on customary terms in connection with such loans or debt 
instruments; and
    (2) Rights or other assets held under this paragraph (c)(15)(i)(C) 
of this section may not include commodity forward contracts or any 
derivative; and
    (D) Interest rate or foreign exchange derivatives, if:
    (1) The written terms of the derivative directly relate to the 
loans, debt instruments, or other rights or assets described in 
paragraph (c)(15)(i)(C) of this section; and
    (2) The derivative reduces the interest rate and/or foreign exchange 
risks related to the loans, debt instruments, or other rights or assets 
described in paragraph (c)(15)(i)(C) of this section.
    (ii) Activity requirements. To be eligible for the exclusion of 
paragraph (c)(15) of this section, an issuer must:
    (A) Not engage in any activity that would constitute proprietary 
trading under Sec.  255.3(b)(l)(i), as if the issuer were a banking 
entity; and
    (B) Not issue asset-backed securities.
    (iii) Requirements for a sponsor, investment adviser, or commodity 
trading advisor. A banking entity that acts as a sponsor, investment 
adviser, or commodity trading advisor to an issuer that meets the 
conditions in paragraphs (c)(15)(i) and (ii) of this section may not 
rely on this exclusion unless the banking entity:
    (A) Provides in writing to any prospective and actual investor in 
the issuer the disclosures required under Sec.  255.11(a)(8) of this 
subpart, as if the issuer were a covered fund;
    (B) Ensures that the activities of the issuer are consistent with 
safety and soundness standards that are substantially similar to those 
that would apply if the banking entity engaged in the activities 
directly; and
    (C) Complies with the limitations imposed in Sec.  255.14, as if the 
issuer were a covered fund, except the banking entity may acquire and 
retain any ownership interest in the issuer.
    (iv) Additional Banking Entity Requirements. A banking entity may 
not rely on this exclusion with respect to an issuer that meets the 
conditions in paragraphs (c)(15)(i) and (ii) of this section unless:
    (A) The banking entity does not, directly or indirectly, guarantee, 
assume, or otherwise insure the obligations or performance of the issuer 
or of

[[Page 326]]

any entity to which such issuer extends credit or in which such issuer 
invests; and
    (B) Any assets the issuer holds pursuant to paragraphs (c)(15)(i)(B) 
or (i)(C)(1)(iii) of this section would be permissible for the banking 
entity to acquire and hold directly under applicable federal banking 
laws and regulations.
    (v) Investment and Relationship Limits. A banking entity's 
investment in, and relationship with, the issuer must:
    (A) Comply with the limitations imposed in Sec.  255.15, as if the 
issuer were a covered fund; and
    (B) Be conducted in compliance with, and subject to, applicable 
banking laws and regulations, including applicable safety and soundness 
standards.
    (16) Qualifying venture capital funds. (i) Subject to paragraphs 
(c)(16)(ii) through (iv) of this section, an issuer that:
    (A) Is a venture capital fund as defined in 17 CFR 275.203(l)-1; and
    (B) Does not engage in any activity that would constitute 
proprietary trading under Sec.  255.3(b)(1)(i), as if the issuer were a 
banking entity.
    (ii) A banking entity that acts as a sponsor, investment adviser, or 
commodity trading advisor to an issuer that meets the conditions in 
paragraph (c)(16)(i) of this section may not rely on this exclusion 
unless the banking entity:
    (A) Provides in writing to any prospective and actual investor in 
the issuer the disclosures required under Sec.  255.11(a)(8), as if the 
issuer were a covered fund;
    (B) Ensures that the activities of the issuer are consistent with 
safety and soundness standards that are substantially similar to those 
that would apply if the banking entity engaged in the activities 
directly; and
    (C) Complies with the restrictions in Sec.  255.14 as if the issuer 
were a covered fund (except the banking entity may acquire and retain 
any ownership interest in the issuer).
    (iii) The banking entity must not, directly or indirectly, 
guarantee, assume, or otherwise insure the obligations or performance of 
the issuer.
    (iv) A banking entity's ownership interest in or relationship with 
the issuer must:
    (A) Comply with the limitations imposed in Sec.  255.15, as if the 
issuer were a covered fund; and
    (B) Be conducted in compliance with, and subject to, applicable 
banking laws and regulations, including applicable safety and soundness 
standards.
    (17) Family wealth management vehicles. (i) Subject to paragraph 
(c)(17)(ii) of this section, any entity that is not, and does not hold 
itself out as being, an entity or arrangement that raises money from 
investors primarily for the purpose of investing in securities for 
resale or other disposition or otherwise trading in securities, and:
    (A) If the entity is a trust, the grantor(s) of the entity are all 
family customers; and
    (B) If the entity is not a trust:
    (1) A majority of the voting interests in the entity are owned 
(directly or indirectly) by family customers;
    (2) A majority of the interests in the entity are owned (directly or 
indirectly) by family customers;
    (3) The entity is owned only by family customers and up to 5 closely 
related persons of the family customers; and
    (C) Notwithstanding paragraph (c)(17)(i)(A) and (B) of this section, 
up to an aggregate 0.5 percent of the entity's outstanding ownership 
interests may be acquired or retained by one or more entities that are 
not family customers or closely related persons if the ownership 
interest is acquired or retained by such parties for the purpose of and 
to the extent necessary for establishing corporate separateness or 
addressing bankruptcy, insolvency, or similar concerns.
    (ii) A banking entity may rely on the exclusion in paragraph 
(c)(17)(i) of this section with respect to an entity provided that the 
banking entity (or an affiliate):
    (A) Provides bona fide trust, fiduciary, investment advisory, or 
commodity trading advisory services to the entity;
    (B) Does not, directly or indirectly, guarantee, assume, or 
otherwise insure the obligations or performance of such entity;

[[Page 327]]

    (C) Complies with the disclosure obligations under Sec.  
255.11(a)(8), as if such entity were a covered fund, provided that the 
content may be modified to prevent the disclosure from being misleading 
and the manner of disclosure may be modified to accommodate the specific 
circumstances of the entity;
    (D) Does not acquire or retain, as principal, an ownership interest 
in the entity, other than as described in paragraph (c)(17)(i)(C) of 
this section;
    (E) Complies with the requirements of Sec. Sec.  255.14(b) and 
255.15, as if such entity were a covered fund; and
    (F) Except for riskless principal transactions as defined in 
paragraph (d)(11) of this section, complies with the requirements of 12 
CFR 223.15(a), as if such banking entity and its affiliates were a 
member bank and the entity were an affiliate thereof.
    (iii) For purposes of paragraph (c)(17) of this section, the 
following definitions apply:
    (A) Closely related person means a natural person (including the 
estate and estate planning vehicles of such person) who has longstanding 
business or personal relationships with any family customer.
    (B) Family customer means:
    (1) A family client, as defined in Rule 202(a)(11)(G)-1(d)(4) of the 
Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1(d)(4)); or
    (2) Any natural person who is a father-in-law, mother-in-law, 
brother-in-law, sister-in-law, son-in-law or daughter-in-law of a family 
client, or a spouse or a spousal equivalent of any of the foregoing.
    (18) Customer facilitation vehicles. (i) Subject to paragraph 
(c)(18)(ii) of this section, an issuer that is formed by or at the 
request of a customer of the banking entity for the purpose of providing 
such customer (which may include one or more affiliates of such 
customer) with exposure to a transaction, investment strategy, or other 
service provided by the banking entity.
    (ii) A banking entity may rely on the exclusion in paragraph 
(c)(18)(i) of this section with respect to an issuer provided that:
    (A) All of the ownership interests of the issuer are owned by the 
customer (which may include one or more of its affiliates) for whom the 
issuer was created;
    (B) Notwithstanding paragraph (c)(18)(ii)(A) of this section, up to 
an aggregate 0.5 percent of the issuer's outstanding ownership interests 
may be acquired or retained by one or more entities that are not 
customers if the ownership interest is acquired or retained by such 
parties for the purpose of and to the extent necessary for establishing 
corporate separateness or addressing bankruptcy, insolvency, or similar 
concerns; and
    (C) The banking entity and its affiliates:
    (1) Maintain documentation outlining how the banking entity intends 
to facilitate the customer's exposure to such transaction, investment 
strategy, or service;
    (2) Do not, directly or indirectly, guarantee, assume, or otherwise 
insure the obligations or performance of such issuer;
    (3) Comply with the disclosure obligations under Sec.  255.11(a)(8), 
as if such issuer were a covered fund, provided that the content may be 
modified to prevent the disclosure from being misleading and the manner 
of disclosure may be modified to accommodate the specific circumstances 
of the issuer;
    (4) Do not acquire or retain, as principal, an ownership interest in 
the issuer, other than as described in paragraph (c)(18)(ii)(B) of this 
section;
    (5) Comply with the requirements of Sec. Sec.  255.14(b) and 255.15, 
as if such issuer were a covered fund; and
    (6) Except for riskless principal transactions as defined in 
paragraph (d)(11) of this section, comply with the requirements of 12 
CFR 223.15(a), as if such banking entity and its affiliates were a 
member bank and the issuer were an affiliate thereof.
    (d) Definition of other terms related to covered funds. For purposes 
of this subpart:
    (1) Applicable accounting standards means U.S. generally accepted 
accounting principles, or such other accounting standards applicable to 
a banking entity that the SEC determines are appropriate and that the 
banking entity uses in the ordinary course of its business in preparing 
its consolidated financial statements.

[[Page 328]]

    (2) Asset-backed security has the meaning specified in Section 
3(a)(79) of the Exchange Act (15 U.S.C. 78c(a)(79).
    (3) Director has the same meaning as provided in section 215.2(d)(1) 
of the Board's Regulation O (12 CFR 215.2(d)(1)).
    (4) Issuer has the same meaning as in section 2(a)(22) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(22)).
    (5) Issuing entity means with respect to asset-backed securities the 
special purpose vehicle that owns or holds the pool assets underlying 
asset-backed securities and in whose name the asset-backed securities 
supported or serviced by the pool assets are issued.
    (6) Ownership interest. (i) Ownership interest means any equity, 
partnership, or other similar interest. An ``other similar interest'' 
means an interest that:
    (A) Has the right to participate in the selection or removal of a 
general partner, managing member, member of the board of directors or 
trustees, investment manager, investment adviser, or commodity trading 
advisor of the covered fund, excluding:
    (1) The rights of a creditor to exercise remedies upon the 
occurrence of an event of default or an acceleration event; and
    (2) The right to participate in the removal of an investment manager 
for ``cause'' or participate in the selection of a replacement manager 
upon an investment manager's resignation or removal. For purposes of 
this paragraph (d)(6)(i)(A)(2), ``cause'' for removal of an investment 
manager means one or more of the following events:
    (i) The bankruptcy, insolvency, conservatorship or receivership of 
the investment manager;
    (ii) The breach by the investment manager of any material provision 
of the covered fund's transaction agreements applicable to the 
investment manager;
    (iii) The breach by the investment manager of material 
representations or warranties;
    (iv) The occurrence of an act that constitutes fraud or criminal 
activity in the performance of the investment manager's obligations 
under the covered fund's transaction agreements;
    (v) The indictment of the investment manager for a criminal offense, 
or the indictment of any officer, member, partner or other principal of 
the investment manager for a criminal offense materially related to his 
or her investment management activities;
    (vi) A change in control with respect to the investment manager;
    (vii) The loss, separation or incapacitation of an individual 
critical to the operation of the investment manager or primarily 
responsible for the management of the covered fund's assets; or
    (viii) Other similar events that constitute ``cause'' for removal of 
an investment manager, provided that such events are not solely related 
to the performance of the covered fund or the investment manager's 
exercise of investment discretion under the covered fund's transaction 
agreements;
    (B) Has the right under the terms of the interest to receive a share 
of the income, gains or profits of the covered fund;
    (C) Has the right to receive the underlying assets of the covered 
fund after all other interests have been redeemed and/or paid in full 
(excluding the rights of a creditor to exercise remedies upon the 
occurrence of an event of default or an acceleration event);
    (D) Has the right to receive all or a portion of excess spread (the 
positive difference, if any, between the aggregate interest payments 
received from the underlying assets of the covered fund and the 
aggregate interest paid to the holders of other outstanding interests);
    (E) Provides under the terms of the interest that the amounts 
payable by the covered fund with respect to the interest could be 
reduced based on losses arising from the underlying assets of the 
covered fund, such as allocation of losses, write-downs or charge-offs 
of the outstanding principal balance, or reductions in the amount of 
interest due and payable on the interest;
    (F) Receives income on a pass-through basis from the covered fund, 
or has a rate of return that is determined by reference to the 
performance of the underlying assets of the covered fund; or

[[Page 329]]

    (G) Any synthetic right to have, receive, or be allocated any of the 
rights in paragraphs (d)(6)(i)(A) through (F) of this section.
    (ii) Ownership interest does not include:
    (A) Restricted profit interest, which is an interest held by an 
entity (or an employee or former employee thereof) in a covered fund for 
which the entity (or employee thereof) serves as investment manager, 
investment adviser, commodity trading advisor, or other service 
provider, so long as:
    (1) The sole purpose and effect of the interest is to allow the 
entity (or employee or former employee thereof) to share in the profits 
of the covered fund as performance compensation for the investment 
management, investment advisory, commodity trading advisory, or other 
services provided to the covered fund by the entity (or employee or 
former employee thereof), provided that the entity (or employee or 
former employee thereof) may be obligated under the terms of such 
interest to return profits previously received;
    (2) All such profit, once allocated, is distributed to the entity 
(or employee or former employee thereof) promptly after being earned or, 
if not so distributed, is retained by the covered fund for the sole 
purpose of establishing a reserve amount to satisfy contractual 
obligations with respect to subsequent losses of the covered fund and 
such undistributed profit of the entity (or employee or former employee 
thereof) does not share in the subsequent investment gains of the 
covered fund;
    (3) Any amounts invested in the covered fund, including any amounts 
paid by the entity in connection with obtaining the restricted profit 
interest, are within the limits of Sec.  255.12 of this subpart; and
    (4) The interest is not transferable by the entity (or employee or 
former employee thereof) except to an affiliate thereof (or an employee 
of the banking entity or affiliate), to immediate family members, or 
through the intestacy, of the employee or former employee, or in 
connection with a sale of the business that gave rise to the restricted 
profit interest by the entity (or employee or former employee thereof) 
to an unaffiliated party that provides investment management, investment 
advisory, commodity trading advisory, or other services to the fund.
    (B) Any senior loan or senior debt interest that has the following 
characteristics:
    (1) Under the terms of the interest the holders of such interest do 
not have the right to receive a share of the income, gains, or profits 
of the covered fund, but are entitled to receive only:
    (i) Interest at a stated interest rate, as well as commitment fees 
or other fees, which are not determined by reference to the performance 
of the underlying assets of the covered fund; and
    (ii) Repayment of a fixed principal amount, on or before a maturity 
date, in a contractually-determined manner (which may include prepayment 
premiums intended solely to reflect, and compensate holders of the 
interest for, forgone income resulting from an early prepayment);
    (2) The entitlement to payments under the terms of the interest are 
absolute and could not be reduced based on losses arising from the 
underlying assets of the covered fund, such as allocation of losses, 
write-downs or charge-offs of the outstanding principal balance, or 
reductions in the amount of interest due and payable on the interest; 
and
    (3) The holders of the interest are not entitled to receive the 
underlying assets of the covered fund after all other interests have 
been redeemed or paid in full (excluding the rights of a creditor to 
exercise remedies upon the occurrence of an event of default or an 
acceleration event).
    (7) Prime brokerage transaction means any transaction that would be 
a covered transaction, as defined in section 23A(b)(7) of the Federal 
Reserve Act (12 U.S.C. 371c(b)(7)), that is provided in connection with 
custody, clearance and settlement, securities borrowing or lending 
services, trade execution, financing, or data, operational, and 
administrative support.
    (8) Resident of the United States means a person that is a ``U.S. 
person'' as defined in rule 902(k) of the SEC's Regulation S (17 CFR 
230.902(k)).
    (9) Sponsor means, with respect to a covered fund:

[[Page 330]]

    (i) To serve as a general partner, managing member, or trustee of a 
covered fund, or to serve as a commodity pool operator with respect to a 
covered fund as defined in (b)(1)(ii) of this section;
    (ii) In any manner to select or to control (or to have employees, 
officers, or directors, or agents who constitute) a majority of the 
directors, trustees, or management of a covered fund; or
    (iii) To share with a covered fund, for corporate, marketing, 
promotional, or other purposes, the same name or a variation of the same 
name, except as permitted under Sec.  255.11(a)(6).
    (10) Trustee. (i) For purposes of paragraph (d)(9) of this section 
and Sec.  255.11 of subpart C, a trustee does not include:
    (A) A trustee that does not exercise investment discretion with 
respect to a covered fund, including a trustee that is subject to the 
direction of an unaffiliated named fiduciary who is not a trustee 
pursuant to section 403(a)(1) of the Employee's Retirement Income 
Security Act (29 U.S.C. 1103(a)(1)); or
    (B) A trustee that is subject to fiduciary standards imposed under 
foreign law that are substantially equivalent to those described in 
paragraph (d)(10)(i)(A) of this section;
    (ii) Any entity that directs a person described in paragraph 
(d)(10)(i) of this section, or that possesses authority and discretion 
to manage and control the investment decisions of a covered fund for 
which such person serves as trustee, shall be considered to be a trustee 
of such covered fund.
    (11) Riskless principal transaction. Riskless principal transaction 
means a transaction in which a banking entity, after receiving an order 
from a customer to buy (or sell) a security, purchases (or sells) the 
security in the secondary market for its own account to offset a 
contemporaneous sale to (or purchase from) the customer.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 35022, July 22, 
2019; 84 FR 62244, Nov. 14, 2019; 85 FR 46523, July 31, 2020]



Sec.  255.11  Permitted organizing and offering, underwriting, and
market making with respect to a covered fund.

    (a) Organizing and offering a covered fund in general. 
Notwithstanding Sec.  255.10(a) of this subpart, a banking entity is not 
prohibited from acquiring or retaining an ownership interest in, or 
acting as sponsor to, a covered fund in connection with, directly or 
indirectly, organizing and offering a covered fund, including serving as 
a general partner, managing member, trustee, or commodity pool operator 
of the covered fund and in any manner selecting or controlling (or 
having employees, officers, directors, or agents who constitute) a 
majority of the directors, trustees, or management of the covered fund, 
including any necessary expenses for the foregoing, only if:
    (1) The banking entity (or an affiliate thereof) provides bona fide 
trust, fiduciary, investment advisory, or commodity trading advisory 
services;
    (2) The covered fund is organized and offered only in connection 
with the provision of bona fide trust, fiduciary, investment advisory, 
or commodity trading advisory services and only to persons that are 
customers of such services of the banking entity (or an affiliate 
thereof), pursuant to a written plan or similar documentation outlining 
how the banking entity or such affiliate intends to provide advisory or 
similar services to its customers through organizing and offering such 
fund;
    (3) The banking entity and its affiliates do not acquire or retain 
an ownership interest in the covered fund except as permitted under 
Sec.  255.12 of this subpart;
    (4) The banking entity and its affiliates comply with the 
requirements of Sec.  255.14 of this subpart;
    (5) The banking entity and its affiliates do not, directly or 
indirectly, guarantee, assume, or otherwise insure the obligations or 
performance of the covered fund or of any covered fund in which such 
covered fund invests;
    (6) The covered fund, for corporate, marketing, promotional, or 
other purposes:
    (i) Does not share the same name or a variation of the same name 
with the

[[Page 331]]

banking entity (or an affiliate thereof) except that a covered fund may 
share the same name or a variation of the same name with a banking 
entity that is an investment adviser to the covered fund if:
    (A) The investment adviser is not an insured depository institution, 
a company that controls an insured depository institution, or a company 
that is treated as a bank holding company for purposes of section 8 of 
the International Banking Act of 1978 (12 U.S.C. 3106); and
    (B) The investment adviser does not share the same name or a 
variation of the same name as an insured depository institution, a 
company that controls an insured depository institution, or a company 
that is treated as a bank holding company for purposes of section 8 of 
the International Banking Act of 1978 (12 U.S.C. 3106); and
    (ii) Does not use the word ``bank'' in its name;
    (7) No director or employee of the banking entity (or an affiliate 
thereof) takes or retains an ownership interest in the covered fund, 
except for any director or employee of the banking entity or such 
affiliate who is directly engaged in providing investment advisory, 
commodity trading advisory, or other services to the covered fund at the 
time the director or employee takes the ownership interest; and
    (8) The banking entity:
    (i) Clearly and conspicuously discloses, in writing, to any 
prospective and actual investor in the covered fund (such as through 
disclosure in the covered fund's offering documents):
    (A) That ``any losses in [such covered fund] will be borne solely by 
investors in [the covered fund] and not by [the banking entity] or its 
affiliates; therefore, [the banking entity's] losses in [such covered 
fund] will be limited to losses attributable to the ownership interests 
in the covered fund held by [the banking entity] and any affiliate in 
its capacity as investor in the [covered fund] or as beneficiary of a 
restricted profit interest held by [the banking entity] or any 
affiliate'';
    (B) That such investor should read the fund offering documents 
before investing in the covered fund;
    (C) That the ``ownership interests in the covered fund are not 
insured by the FDIC, and are not deposits, obligations of, or endorsed 
or guaranteed in any way, by any banking entity'' (unless that happens 
to be the case); and
    (D) The role of the banking entity and its affiliates and employees 
in sponsoring or providing any services to the covered fund; and
    (ii) Complies with any additional rules of the appropriate Federal 
banking agencies, the SEC, or the CFTC, as provided in section 13(b)(2) 
of the BHC Act, designed to ensure that losses in such covered fund are 
borne solely by investors in the covered fund and not by the covered 
banking entity and its affiliates.
    (b) Organizing and offering an issuing entity of asset-backed 
securities. (1) Notwithstanding Sec.  255.10(a) of this subpart, a 
banking entity is not prohibited from acquiring or retaining an 
ownership interest in, or acting as sponsor to, a covered fund that is 
an issuing entity of asset-backed securities in connection with, 
directly or indirectly, organizing and offering that issuing entity, so 
long as the banking entity and its affiliates comply with all of the 
requirements of paragraph (a)(3) through (8) of this section.
    (2) For purposes of this paragraph (b), organizing and offering a 
covered fund that is an issuing entity of asset-backed securities means 
acting as the securitizer, as that term is used in section 15G(a)(3) of 
the Exchange Act (15 U.S.C. 78o-11(a)(3)) of the issuing entity, or 
acquiring or retaining an ownership interest in the issuing entity as 
required by section 15G of that Act (15 U.S.C.78o-11) and the 
implementing regulations issued thereunder.
    (c) Underwriting and market making in ownership interests of a 
covered fund. The prohibition contained in Sec.  255.10(a) of this 
subpart does not apply to a banking entity's underwriting activities or 
market making-related activities involving a covered fund so long as:
    (1) Those activities are conducted in accordance with the 
requirements of Sec.  255.4(a) or Sec.  255.4(b) of subpart B, 
respectively; and
    (2) With respect to any banking entity (or any affiliate thereof) 
that: Acts

[[Page 332]]

as a sponsor, investment adviser or commodity trading advisor to a 
particular covered fund or otherwise acquires and retains an ownership 
interest in such covered fund in reliance on paragraph (a) of this 
section; or acquires and retains an ownership interest in such covered 
fund and is either a securitizer, as that term is used in section 
15G(a)(3) of the Exchange Act (15 U.S.C. 78o-11(a)(3)), or is acquiring 
and retaining an ownership interest in such covered fund in compliance 
with section 15G of that Act (15 U.S.C.78o-11) and the implementing 
regulations issued thereunder each as permitted by paragraph (b) of this 
section, then in each such case any ownership interests acquired or 
retained by the banking entity and its affiliates in connection with 
underwriting and market making related activities for that particular 
covered fund are included in the calculation of ownership interests 
permitted to be held by the banking entity and its affiliates under the 
limitations of Sec.  255.12(a)(2)(ii); Sec.  255.12(a)(2)(iii), and 
Sec.  255.12(d) of this subpart.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 35022, July 22, 
2019; 84 FR 62244, Nov. 14, 2019]



Sec.  255.12  Permitted investment in a covered fund.

    (a) Authority and limitations on permitted investments in covered 
funds. (1) Notwithstanding the prohibition contained in Sec.  255.10(a) 
of this subpart, a banking entity may acquire and retain an ownership 
interest in a covered fund that the banking entity or an affiliate 
thereof organizes and offers pursuant to Sec.  255.11, for the purposes 
of:
    (i) Establishment. Establishing the fund and providing the fund with 
sufficient initial equity for investment to permit the fund to attract 
unaffiliated investors, subject to the limits contained in paragraphs 
(a)(2)(i) and (iii) of this section; or
    (ii) De minimis investment. Making and retaining an investment in 
the covered fund subject to the limits contained in paragraphs 
(a)(2)(ii) and (iii) of this section.
    (2) Investment limits--(i) Seeding period. With respect to an 
investment in any covered fund made or held pursuant to paragraph 
(a)(1)(i) of this section, the banking entity and its affiliates:
    (A) Must actively seek unaffiliated investors to reduce, through 
redemption, sale, dilution, or other methods, the aggregate amount of 
all ownership interests of the banking entity in the covered fund to the 
amount permitted in paragraph (a)(2)(i)(B) of this section; and
    (B) Must, no later than 1 year after the date of establishment of 
the fund (or such longer period as may be provided by the Board pursuant 
to paragraph (e) of this section), conform its ownership interest in the 
covered fund to the limits in paragraph (a)(2)(ii) of this section;
    (ii) Per-fund limits. (A) Except as provided in paragraph 
(a)(2)(ii)(B) of this section, an investment by a banking entity and its 
affiliates in any covered fund made or held pursuant to paragraph 
(a)(1)(ii) of this section may not exceed 3 percent of the total number 
or value of the outstanding ownership interests of the fund.
    (B) An investment by a banking entity and its affiliates in a 
covered fund that is an issuing entity of asset-backed securities may 
not exceed 3 percent of the total fair market value of the ownership 
interests of the fund measured in accordance with paragraph (b)(3) of 
this section, unless a greater percentage is retained by the banking 
entity and its affiliates in compliance with the requirements of section 
15G of the Exchange Act (15 U.S.C. 78o-11) and the implementing 
regulations issued thereunder, in which case the investment by the 
banking entity and its affiliates in the covered fund may not exceed the 
amount, number, or value of ownership interests of the fund required 
under section 15G of the Exchange Act and the implementing regulations 
issued thereunder.
    (iii) Aggregate limit. The aggregate value of all ownership 
interests of the banking entity and its affiliates in all covered funds 
acquired or retained under this section may not exceed 3 percent of the 
tier 1 capital of the banking entity, as provided under paragraph (c) of 
this section, and shall be calculated as of the last day of each 
calendar quarter.

[[Page 333]]

    (iv) Date of establishment. For purposes of this section, the date 
of establishment of a covered fund shall be:
    (A) In general. The date on which the investment adviser or similar 
entity to the covered fund begins making investments pursuant to the 
written investment strategy for the fund;
    (B) Issuing entities of asset-backed securities. In the case of an 
issuing entity of asset-backed securities, the date on which the assets 
are initially transferred into the issuing entity of asset-backed 
securities.
    (b) Rules of construction--(1) Attribution of ownership interests to 
a covered banking entity. (i) For purposes of paragraph (a)(2) of this 
section, the amount and value of a banking entity's permitted investment 
in any single covered fund shall include any ownership interest held 
under Sec.  255.12 directly by the banking entity, including any 
affiliate of the banking entity.
    (ii) Treatment of registered investment companies, SEC-regulated 
business development companies, and foreign public funds. For purposes 
of paragraph (b)(1)(i) of this section, a registered investment company, 
SEC-regulated business development companies, or foreign public fund as 
described in Sec.  255.10(c)(1) will not be considered to be an 
affiliate of the banking entity so long as:
    (A) The banking entity, together with its affiliates, does not own, 
control, or hold with the power to vote 25 percent or more of the voting 
shares of the company or fund; and
    (B) The banking entity, or an affiliate of the banking entity, 
provides investment advisory, commodity trading advisory, 
administrative, and other services to the company or fund in compliance 
with the limitations under applicable regulation, order, or other 
authority.
    (iii) Covered funds. For purposes of paragraph (b)(1)(i) of this 
section, a covered fund will not be considered to be an affiliate of a 
banking entity so long as the covered fund is held in compliance with 
the requirements of this subpart.
    (iv) Treatment of employee and director investments financed by the 
banking entity. For purposes of paragraph (b)(1)(i) of this section, an 
investment by a director or employee of a banking entity who acquires an 
ownership interest in his or her personal capacity in a covered fund 
sponsored by the banking entity will be attributed to the banking entity 
if the banking entity, directly or indirectly, extends financing for the 
purpose of enabling the director or employee to acquire the ownership 
interest in the fund and the financing is used to acquire such ownership 
interest in the covered fund.
    (2) Calculation of permitted ownership interests in a single covered 
fund. Except as provided in paragraph (b)(3) or (4), for purposes of 
determining whether an investment in a single covered fund complies with 
the restrictions on ownership interests under paragraphs (a)(2)(i)(B) 
and (a)(2)(ii)(A) of this section:
    (i) The aggregate number of the outstanding ownership interests held 
by the banking entity shall be the total number of ownership interests 
held under this section by the banking entity in a covered fund divided 
by the total number of ownership interests held by all entities in that 
covered fund, as of the last day of each calendar quarter (both measured 
without regard to committed funds not yet called for investment);
    (ii) The aggregate value of the outstanding ownership interests held 
by the banking entity shall be the aggregate fair market value of all 
investments in and capital contributions made to the covered fund by the 
banking entity, divided by the value of all investments in and capital 
contributions made to that covered fund by all entities, as of the last 
day of each calendar quarter (all measured without regard to committed 
funds not yet called for investment). If fair market value cannot be 
determined, then the value shall be the historical cost basis of all 
investments in and contributions made by the banking entity to the 
covered fund;
    (iii) For purposes of the calculation under paragraph (b)(2)(ii) of 
this section, once a valuation methodology is chosen, the banking entity 
must calculate the value of its investment and the investments of all 
others in the covered fund in the same manner and according to the same 
standards.

[[Page 334]]

    (3) Issuing entities of asset-backed securities. In the case of an 
ownership interest in an issuing entity of asset-backed securities, for 
purposes of determining whether an investment in a single covered fund 
complies with the restrictions on ownership interests under paragraphs 
(a)(2)(i)(B) and (a)(2)(ii)(B) of this section:
    (i) For securitizations subject to the requirements of section 15G 
of the Exchange Act (15 U.S.C. 78o-11), the calculations shall be made 
as of the date and according to the valuation methodology applicable 
pursuant to the requirements of section 15G of the Exchange Act (15 
U.S.C. 78o-11) and the implementing regulations issued thereunder; or
    (ii) For securitization transactions completed prior to the 
compliance date of such implementing regulations (or as to which such 
implementing regulations do not apply), the calculations shall be made 
as of the date of establishment as defined in paragraph (a)(2)(iv)(B) of 
this section or such earlier date on which the transferred assets have 
been valued for purposes of transfer to the covered fund, and thereafter 
only upon the date on which additional securities of the issuing entity 
of asset-backed securities are priced for purposes of the sales of 
ownership interests to unaffiliated investors.
    (iii) For securitization transactions completed prior to the 
compliance date of such implementing regulations (or as to which such 
implementing regulations do not apply), the aggregate value of the 
outstanding ownership interests in the covered fund shall be the fair 
market value of the assets transferred to the issuing entity of the 
securitization and any other assets otherwise held by the issuing entity 
at such time, determined in a manner that is consistent with its 
determination of the fair market value of those assets for financial 
statement purposes.
    (iv) For purposes of the calculation under paragraph (b)(3)(iii) of 
this section, the valuation methodology used to calculate the fair 
market value of the ownership interests must be the same for both the 
ownership interests held by a banking entity and the ownership interests 
held by all others in the covered fund in the same manner and according 
to the same standards.
    (4) Multi-tier fund investments--(i) Master-feeder fund investments. 
If the principal investment strategy of a covered fund (the ``feeder 
fund'') is to invest substantially all of its assets in another single 
covered fund (the ``master fund''), then for purposes of the investment 
limitations in paragraphs (a)(2)(i)(B) and (a)(2)(ii) of this section, 
the banking entity's permitted investment in such funds shall be 
measured only by reference to the value of the master fund. The banking 
entity's permitted investment in the master fund shall include any 
investment by the banking entity in the master fund, as well as the 
banking entity's pro-rata share of any ownership interest in the master 
fund that is held through the feeder fund; and
    (ii) Fund-of-funds investments. If a banking entity organizes and 
offers a covered fund pursuant to Sec.  255.11 for the purpose of 
investing in other covered funds (a ``fund of funds'') and that fund of 
funds itself invests in another covered fund that the banking entity is 
permitted to own, then the banking entity's permitted investment in that 
other fund shall include any investment by the banking entity in that 
other fund, as well as the banking entity's pro-rata share of any 
ownership interest in the fund that is held through the fund of funds. 
The investment of the banking entity may not represent more than 3 
percent of the amount or value of any single covered fund.
    (5) Parallel Investments and Co-Investments. (i) A banking entity 
shall not be required to include in the calculation of the investment 
limits under paragraph (a)(2) of this section any investment the banking 
entity makes alongside a covered fund as long as the investment is made 
in compliance with applicable laws and regulations, including applicable 
safety and soundness standards.
    (ii) A banking entity shall not be restricted under this section in 
the amount of any investment the banking entity makes alongside a 
covered fund as long as the investment is made in compliance with 
applicable laws and regulations, including applicable safety and 
soundness standards.

[[Page 335]]

    (c) Aggregate permitted investments in all covered funds. (1)(i) For 
purposes of paragraph (a)(2)(iii) of this section, the aggregate value 
of all ownership interests held by a banking entity shall be the sum of 
all amounts paid or contributed by the banking entity in connection with 
acquiring or retaining an ownership interest in covered funds (together 
with any amounts paid by the entity in connection with obtaining a 
restricted profit interest under Sec.  255.10(d)(6)(ii)), on a 
historical cost basis;
    (ii) Treatment of employee and director restricted profit interests 
financed by the banking entity. For purposes of paragraph (c)(1)(i) of 
this section, an investment by a director or employee of a banking 
entity who acquires a restricted profit interest in his or her personal 
capacity in a covered fund sponsored by the banking entity will be 
attributed to the banking entity if the banking entity, directly or 
indirectly, extends financing for the purpose of enabling the director 
or employee to acquire the restricted profit interest in the fund and 
the financing is used to acquire such ownership interest in the covered 
fund.
    (2) Calculation of tier 1 capital. For purposes of paragraph 
(a)(2)(iii) of this section:
    (i) Entities that are required to hold and report tier 1 capital. If 
a banking entity is required to calculate and report tier 1 capital, the 
banking entity's tier 1 capital shall be equal to the amount of tier 1 
capital of the banking entity as of the last day of the most recent 
calendar quarter, as reported to its primary financial regulatory 
agency; and
    (ii) If a banking entity is not required to calculate and report 
tier 1 capital, the banking entity's tier 1 capital shall be determined 
to be equal to:
    (A) In the case of a banking entity that is controlled, directly or 
indirectly, by a depository institution that calculates and reports tier 
1 capital, be equal to the amount of tier 1 capital reported by such 
controlling depository institution in the manner described in paragraph 
(c)(2)(i) of this section;
    (B) In the case of a banking entity that is not controlled, directly 
or indirectly, by a depository institution that calculates and reports 
tier 1 capital:
    (1) Bank holding company subsidiaries. If the banking entity is a 
subsidiary of a bank holding company or company that is treated as a 
bank holding company, be equal to the amount of tier 1 capital reported 
by the top-tier affiliate of such covered banking entity that calculates 
and reports tier 1 capital in the manner described in paragraph 
(c)(2)(i) of this section; and
    (2) Other holding companies and any subsidiary or affiliate thereof. 
If the banking entity is not a subsidiary of a bank holding company or a 
company that is treated as a bank holding company, be equal to the total 
amount of shareholders' equity of the top-tier affiliate within such 
organization as of the last day of the most recent calendar quarter that 
has ended, as determined under applicable accounting standards.
    (iii) Treatment of foreign banking entities--(A) Foreign banking 
entities. Except as provided in paragraph (c)(2)(iii)(B) of this 
section, with respect to a banking entity that is not itself, and is not 
controlled directly or indirectly by, a banking entity that is located 
or organized under the laws of the United States or of any State, the 
tier 1 capital of the banking entity shall be the consolidated tier 1 
capital of the entity as calculated under applicable home country 
standards.
    (B) U.S. affiliates of foreign banking entities. With respect to a 
banking entity that is located or organized under the laws of the United 
States or of any State and is controlled by a foreign banking entity 
identified under paragraph (c)(2)(iii)(A) of this section, the banking 
entity's tier 1 capital shall be as calculated under paragraphs 
(c)(2)(i) or (ii) of this section.
    (d) Capital treatment for a permitted investment in a covered fund. 
For purposes of calculating compliance with the applicable regulatory 
capital requirements, a banking entity shall deduct from the banking 
entity's tier 1 capital (as determined under paragraph (c)(2) of this 
section) the greater of:
    (1)(i) The sum of all amounts paid or contributed by the banking 
entity in connection with acquiring or retaining an ownership interest 
(together with any amounts paid by the entity in connection with 
obtaining a restricted

[[Page 336]]

profit interest under Sec.  255.10(d)(6)(ii) of subpart C of this part), 
on a historical cost basis, plus any earnings received; and
    (ii) The fair market value of the banking entity's ownership 
interests in the covered fund as determined under paragraph (b)(2)(ii) 
or (b)(3) of this section (together with any amounts paid by the entity 
in connection with obtaining a restricted profit interest under Sec.  
255.10(d)(6)(ii) of subpart C of this part), if the banking entity 
accounts for the profits (or losses) of the fund investment in its 
financial statements.
    (2) Treatment of employee and director restricted profit interests 
financed by the banking entity. For purposes of paragraph (d)(1) of this 
section, an investment by a director or employee of a banking entity who 
acquires a restricted profit interest in his or her personal capacity in 
a covered fund sponsored by the banking entity will be attributed to the 
banking entity if the banking entity, directly or indirectly, extends 
financing for the purpose of enabling the director or employee to 
acquire the restricted profit interest in the fund and the financing is 
used to acquire such ownership interest in the covered fund.
    (e) Extension of time to divest an ownership interest. (1) Extension 
period. Upon application by a banking entity, the Board may extend the 
period under paragraph (a)(2)(i) of this section for up to 2 additional 
years if the Board finds that an extension would be consistent with 
safety and soundness and not detrimental to the public interest.
    (2) Application requirements. An application for extension must:
    (i) Be submitted to the Board at least 90 days prior to the 
expiration of the applicable time period;
    (ii) Provide the reasons for application, including information that 
addresses the factors in paragraph (e)(3) of this section; and
    (iii) Explain the banking entity's plan for reducing the permitted 
investment in a covered fund through redemption, sale, dilution or other 
methods as required in paragraph (a)(2) of this section.
    (3) Factors governing the Board determinations. In reviewing any 
application under paragraph (e)(1) of this section, the Board may 
consider all the facts and circumstances related to the permitted 
investment in a covered fund, including:
    (i) Whether the investment would result, directly or indirectly, in 
a material exposure by the banking entity to high-risk assets or high-
risk trading strategies;
    (ii) The contractual terms governing the banking entity's interest 
in the covered fund;
    (iii) The date on which the covered fund is expected to have 
attracted sufficient investments from investors unaffiliated with the 
banking entity to enable the banking entity to comply with the 
limitations in paragraph (a)(2)(i) of this section;
    (iv) The total exposure of the covered banking entity to the 
investment and the risks that disposing of, or maintaining, the 
investment in the covered fund may pose to the banking entity and the 
financial stability of the United States;
    (v) The cost to the banking entity of divesting or disposing of the 
investment within the applicable period;
    (vi) Whether the investment or the divestiture or conformance of the 
investment would involve or result in a material conflict of interest 
between the banking entity and unaffiliated parties, including clients, 
customers, or counterparties to which it owes a duty;
    (vii) The banking entity's prior efforts to reduce through 
redemption, sale, dilution, or other methods its ownership interests in 
the covered fund, including activities related to the marketing of 
interests in such covered fund;
    (viii) Market conditions; and
    (ix) Any other factor that the Board believes appropriate.
    (4) Authority to impose restrictions on activities or investment 
during any extension period. The Board may impose such conditions on any 
extension approved under paragraph (e)(1) of this section as the Board 
determines are necessary or appropriate to protect the safety and 
soundness of the banking entity or the financial stability of the United 
States, address material conflicts of interest or other unsound banking 
practices, or

[[Page 337]]

otherwise further the purposes of section 13 of the BHC Act and this 
part.
    (5) Consultation. In the case of a banking entity that is primarily 
regulated by another Federal banking agency, the SEC, or the CFTC, the 
Board will consult with such agency prior to acting on an application by 
the banking entity for an extension under paragraph (e)(1) of this 
section.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62244, Nov. 14, 
2019; 85 FR 46527, July 31, 2020]



Sec.  255.13  Other permitted covered fund activities and investments.

    (a) Permitted risk-mitigating hedging activities. (1) The 
prohibition contained in Sec.  255.10(a) of this subpart does not apply 
with respect to an ownership interest in a covered fund acquired or 
retained by a banking entity that is designed to reduce or otherwise 
significantly mitigate the specific, identifiable risks to the banking 
entity in connection with:
    (i) A compensation arrangement with an employee of the banking 
entity or an affiliate thereof that directly provides investment 
advisory, commodity trading advisory or other services to the covered 
fund; or
    (ii) A position taken by the banking entity when acting as 
intermediary on behalf of a customer that is not itself a banking entity 
to facilitate the exposure by the customer to the profits and losses of 
the covered fund.
    (2) The risk-mitigating hedging activities of a banking entity are 
permitted under this paragraph (a) only if:
    (i) The banking entity has established and implements, maintains and 
enforces an internal compliance program in accordance with subpart D of 
this part that is reasonably designed to ensure the banking entity's 
compliance with the requirements of this section, including:
    (A) Reasonably designed written policies and procedures; and
    (B) Internal controls and ongoing monitoring, management, and 
authorization procedures, including relevant escalation procedures; and
    (ii) The acquisition or retention of the ownership interest:
    (A) Is made in accordance with the written policies, procedures, and 
internal controls required under this section;
    (B) At the inception of the hedge, is designed to reduce or 
otherwise significantly mitigate one or more specific, identifiable 
risks arising:
    (1) Out of a transaction conducted solely to accommodate a specific 
customer request with respect to the covered fund; or
    (2) In connection with the compensation arrangement with the 
employee that directly provides investment advisory, commodity trading 
advisory, or other services to the covered fund;
    (C) Does not give rise, at the inception of the hedge, to any 
significant new or additional risk that is not itself hedged 
contemporaneously in accordance with this section; and
    (D) Is subject to continuing review, monitoring and management by 
the banking entity.
    (iii) With respect to risk-mitigating hedging activity conducted 
pursuant to paragraph (a)(1)(i) of this section, the compensation 
arrangement relates solely to the covered fund in which the banking 
entity or any affiliate has acquired an ownership interest pursuant to 
paragraph (a)(1)(i) and such compensation arrangement provides that any 
losses incurred by the banking entity on such ownership interest will be 
offset by corresponding decreases in amounts payable under such 
compensation arrangement.
    (b) Certain permitted covered fund activities and investments 
outside of the United States. (1) The prohibition contained in Sec.  
255.10(a) of this subpart does not apply to the acquisition or retention 
of any ownership interest in, or the sponsorship of, a covered fund by a 
banking entity only if:
    (i) The banking entity is not organized or directly or indirectly 
controlled by a banking entity that is organized under the laws of the 
United States or of one or more States;
    (ii) The activity or investment by the banking entity is pursuant to 
paragraph (9) or (13) of section 4(c) of the BHC Act;
    (iii) No ownership interest in the covered fund is offered for sale 
or sold to a resident of the United States; and

[[Page 338]]

    (iv) The activity or investment occurs solely outside of the United 
States.
    (2) An activity or investment by the banking entity is pursuant to 
paragraph (9) or (13) of section 4(c) of the BHC Act for purposes of 
paragraph (b)(1)(ii) of this section only if:
    (i) The activity or investment is conducted in accordance with the 
requirements of this section; and
    (ii)(A) With respect to a banking entity that is a foreign banking 
organization, the banking entity meets the qualifying foreign banking 
organization requirements of section 211.23(a), (c) or (e) of the 
Board's Regulation K (12 CFR 211.23(a), (c) or (e)), as applicable; or
    (B) With respect to a banking entity that is not a foreign banking 
organization, the banking entity is not organized under the laws of the 
United States or of one or more States and the banking entity, on a 
fully-consolidated basis, meets at least two of the following 
requirements:
    (1) Total assets of the banking entity held outside of the United 
States exceed total assets of the banking entity held in the United 
States;
    (2) Total revenues derived from the business of the banking entity 
outside of the United States exceed total revenues derived from the 
business of the banking entity in the United States; or
    (3) Total net income derived from the business of the banking entity 
outside of the United States exceeds total net income derived from the 
business of the banking entity in the United States.
    (3) An ownership interest in a covered fund is not offered for sale 
or sold to a resident of the United States for purposes of paragraph 
(b)(1)(iii) of this section only if it is not sold and has not been sold 
pursuant to an offering that targets residents of the United States in 
which the banking entity or any affiliate of the banking entity 
participates. If the banking entity or an affiliate sponsors or serves, 
directly or indirectly, as the investment manager, investment adviser, 
commodity pool operator or commodity trading advisor to a covered fund, 
then the banking entity or affiliate will be deemed for purposes of this 
paragraph (b)(3) to participate in any offer or sale by the covered fund 
of ownership interests in the covered fund.
    (4) An activity or investment occurs solely outside of the United 
States for purposes of paragraph (b)(1)(iv) of this section only if:
    (i) The banking entity acting as sponsor, or engaging as principal 
in the acquisition or retention of an ownership interest in the covered 
fund, is not itself, and is not controlled directly or indirectly by, a 
banking entity that is located in the United States or organized under 
the laws of the United States or of any State;
    (ii) The banking entity (including relevant personnel) that makes 
the decision to acquire or retain the ownership interest or act as 
sponsor to the covered fund is not located in the United States or 
organized under the laws of the United States or of any State; and
    (iii) The investment or sponsorship, including any transaction 
arising from risk-mitigating hedging related to an ownership interest, 
is not accounted for as principal directly or indirectly on a 
consolidated basis by any branch or affiliate that is located in the 
United States or organized under the laws of the United States or of any 
State.
    (5) For purposes of this section, a U.S. branch, agency, or 
subsidiary of a foreign bank, or any subsidiary thereof, is located in 
the United States; however, a foreign bank of which that branch, agency, 
or subsidiary is a part is not considered to be located in the United 
States solely by virtue of operation of the U.S. branch, agency, or 
subsidiary.
    (c) Permitted covered fund interests and activities by a regulated 
insurance company. The prohibition contained in Sec.  255.10(a) of this 
subpart does not apply to the acquisition or retention by an insurance 
company, or an affiliate thereof, of any ownership interest in, or the 
sponsorship of, a covered fund only if:
    (1) The insurance company or its affiliate acquires and retains the 
ownership interest solely for the general account of the insurance 
company or for one or more separate accounts established by the 
insurance company;

[[Page 339]]

    (2) The acquisition and retention of the ownership interest is 
conducted in compliance with, and subject to, the insurance company 
investment laws and regulations of the State or jurisdiction in which 
such insurance company is domiciled; and
    (3) The appropriate Federal banking agencies, after consultation 
with the Financial Stability Oversight Council and the relevant 
insurance commissioners of the States and foreign jurisdictions, as 
appropriate, have not jointly determined, after notice and comment, that 
a particular law or regulation described in paragraph (c)(2) of this 
section is insufficient to protect the safety and soundness of the 
banking entity, or the financial stability of the United States.
    (d) Permitted covered fund activities and investments of qualifying 
foreign excluded funds. (1) The prohibition contained in Sec.  255.10(a) 
does not apply to a qualifying foreign excluded fund.
    (2) For purposes of this paragraph (d), a qualifying foreign 
excluded fund means a banking entity that:
    (i) Is organized or established outside the United States, and the 
ownership interests of which are offered and sold solely outside the 
United States;
    (ii)(A) Would be a covered fund if the entity were organized or 
established in the United States, or
    (B) Is, or holds itself out as being, an entity or arrangement that 
raises money from investors primarily for the purpose of investing in 
financial instruments for resale or other disposition or otherwise 
trading in financial instruments;
    (iii) Would not otherwise be a banking entity except by virtue of 
the acquisition or retention of an ownership interest in, sponsorship 
of, or relationship with the entity, by another banking entity that 
meets the following:
    (A) The banking entity is not organized, or directly or indirectly 
controlled by a banking entity that is organized, under the laws of the 
United States or of any State; and
    (B) The banking entity's acquisition of an ownership interest in or 
sponsorship of the fund by the foreign banking entity meets the 
requirements for permitted covered fund activities and investments 
solely outside the United States, as provided in Sec.  255.13(b);
    (iv) Is established and operated as part of a bona fide asset 
management business; and
    (v) Is not operated in a manner that enables the banking entity that 
sponsors or controls the qualifying foreign excluded fund, or any of its 
affiliates, to evade the requirements of section 13 of the BHC Act or 
this part.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62244, Nov. 14, 
2019; 85 FR 46528, July 31, 2020]



Sec.  255.14  Limitations on relationships with a covered fund.

    (a) Relationships with a covered fund. (1) Except as provided for in 
paragraph (a)(2) of this section, no banking entity that serves, 
directly or indirectly, as the investment manager, investment adviser, 
commodity trading advisor, or sponsor to a covered fund, that organizes 
and offers a covered fund pursuant to Sec.  255.11 of this subpart, or 
that continues to hold an ownership interest in accordance with Sec.  
255.11(b) of this subpart, and no affiliate of such entity, may enter 
into a transaction with the covered fund, or with any other covered fund 
that is controlled by such covered fund, that would be a covered 
transaction as defined in section 23A of the Federal Reserve Act (12 
U.S.C. 371c(b)(7)), as if such banking entity and the affiliate thereof 
were a member bank and the covered fund were an affiliate thereof.
    (2) Notwithstanding paragraph (a)(1) of this section, a banking 
entity may:
    (i) Acquire and retain any ownership interest in a covered fund in 
accordance with the requirements of Sec. Sec.  255.11, 255.12, or 
255.13;
    (ii) Enter into any prime brokerage transaction with any covered 
fund in which a covered fund managed, sponsored, or advised by such 
banking entity (or an affiliate thereof) has taken an ownership 
interest, if:
    (A) The banking entity is in compliance with each of the limitations 
set forth in Sec.  255.11 of this subpart with respect to a covered fund 
organized and offered by such banking entity (or an affiliate thereof);

[[Page 340]]

    (B) The chief executive officer (or equivalent officer) of the 
banking entity certifies in writing annually no later than March 31 to 
the SEC (with a duty to update the certification if the information in 
the certification materially changes) that the banking entity does not, 
directly or indirectly, guarantee, assume, or otherwise insure the 
obligations or performance of the covered fund or of any covered fund in 
which such covered fund invests; and
    (C) The Board has not determined that such transaction is 
inconsistent with the safe and sound operation and condition of the 
banking entity; and
    (iii) Enter into a transaction with a covered fund that would be an 
exempt covered transaction under 12 U.S.C. 371c(d) or Sec.  223.42 of 
the Board's Regulation W (12 CFR 223.42) subject to the limitations 
specified under 12 U.S.C. 371c(d) or Sec.  223.42 of the Board's 
Regulation W (12 CFR 223.42), as applicable,
    (iv) Enter into a riskless principal transaction with a covered 
fund; and
    (v) Extend credit to or purchase assets from a covered fund, 
provided:
    (A) Each extension of credit or purchase of assets is in the 
ordinary course of business in connection with payment transactions; 
settlement services; or futures, derivatives, and securities clearing;
    (B) Each extension of credit is repaid, sold, or terminated by the 
end of five business days; and
    (C) The banking entity making each extension of credit meets the 
requirements of Sec.  223.42(l)(1)(i) and (ii) of the Board's Regulation 
W (12 CFR 223.42(l)(1)(i) and(ii)), as if the extension of credit was an 
intraday extension of credit, regardless of the duration of the 
extension of credit.
    (3) Any transaction or activity permitted under paragraphs 
(a)(2)(iii), (iv) or (v) must comply with the limitations in Sec.  
255.15.
    (b) Restrictions on transactions with covered funds. A banking 
entity that serves, directly or indirectly, as the investment manager, 
investment adviser, commodity trading advisor, or sponsor to a covered 
fund, or that organizes and offers a covered fund pursuant to Sec.  
255.11 of this subpart, or that continues to hold an ownership interest 
in accordance with Sec.  255.11(b) of this subpart, shall be subject to 
section 23B of the Federal Reserve Act (12 U.S.C. 371c-1), as if such 
banking entity were a member bank and such covered fund were an 
affiliate thereof.
    (c) Restrictions on other permitted transactions. Any transaction 
permitted under paragraphs (a)(2)(ii), (iii), or (iv) of this section 
shall be subject to section 23B of the Federal Reserve Act (12 U.S.C. 
371c-1) as if the counterparty were an affiliate of the banking entity 
under section 23B.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62245, Nov. 14, 
2019; 85 FR 46528, Oct. 1, 2020]



Sec.  255.15  Other limitations on permitted covered fund activities.

    (a) No transaction, class of transactions, or activity may be deemed 
permissible under Sec. Sec.  255.11 through 255.13 of this subpart if 
the transaction, class of transactions, or activity would:
    (1) Involve or result in a material conflict of interest between the 
banking entity and its clients, customers, or counterparties;
    (2) Result, directly or indirectly, in a material exposure by the 
banking entity to a high-risk asset or a high-risk trading strategy; or
    (3) Pose a threat to the safety and soundness of the banking entity 
or to the financial stability of the United States.
    (b) Definition of material conflict of interest. (1) For purposes of 
this section, a material conflict of interest between a banking entity 
and its clients, customers, or counterparties exists if the banking 
entity engages in any transaction, class of transactions, or activity 
that would involve or result in the banking entity's interests being 
materially adverse to the interests of its client, customer, or 
counterparty with respect to such transaction, class of transactions, or 
activity, and the banking entity has not taken at least one of the 
actions in paragraph (b)(2) of this section.
    (2) Prior to effecting the specific transaction or class or type of 
transactions, or engaging in the specific activity, the banking entity:
    (i) Timely and effective disclosure. (A) Has made clear, timely, and 
effective disclosure of the conflict of interest,

[[Page 341]]

together with other necessary information, in reasonable detail and in a 
manner sufficient to permit a reasonable client, customer, or 
counterparty to meaningfully understand the conflict of interest; and
    (B) Such disclosure is made in a manner that provides the client, 
customer, or counterparty the opportunity to negate, or substantially 
mitigate, any materially adverse effect on the client, customer, or 
counterparty created by the conflict of interest; or
    (ii) Information barriers. Has established, maintained, and enforced 
information barriers that are memorialized in written policies and 
procedures, such as physical separation of personnel, or functions, or 
limitations on types of activity, that are reasonably designed, taking 
into consideration the nature of the banking entity's business, to 
prevent the conflict of interest from involving or resulting in a 
materially adverse effect on a client, customer, or counterparty. A 
banking entity may not rely on such information barriers if, in the case 
of any specific transaction, class or type of transactions or activity, 
the banking entity knows or should reasonably know that, notwithstanding 
the banking entity's establishment of information barriers, the conflict 
of interest may involve or result in a materially adverse effect on a 
client, customer, or counterparty.
    (c) Definition of high-risk asset and high-risk trading strategy. 
For purposes of this section:
    (1) High-risk asset means an asset or group of related assets that 
would, if held by a banking entity, significantly increase the 
likelihood that the banking entity would incur a substantial financial 
loss or would pose a threat to the financial stability of the United 
States.
    (2) High-risk trading strategy means a trading strategy that would, 
if engaged in by a banking entity, significantly increase the likelihood 
that the banking entity would incur a substantial financial loss or 
would pose a threat to the financial stability of the United States.



Sec.  255.16  Ownership of interests in and sponsorship of issuers of 
certain collateralized debt obligations backed by trust-preferred
securities.

    (a) The prohibition contained in Sec.  255.10(a)(1) does not apply 
to the ownership by a banking entity of an interest in, or sponsorship 
of, any issuer if:
    (1) The issuer was established, and the interest was issued, before 
May 19, 2010;
    (2) The banking entity reasonably believes that the offering 
proceeds received by the issuer were invested primarily in Qualifying 
TruPS Collateral; and
    (3) The banking entity acquired such interest on or before December 
10, 2013 (or acquired such interest in connection with a merger with or 
acquisition of a banking entity that acquired the interest on or before 
December 10, 2013).
    (b) For purposes of this Sec.  255.16, Qualifying TruPS Collateral 
shall mean any trust preferred security or subordinated debt instrument 
issued prior to May 19, 2010 by a depository institution holding company 
that, as of the end of any reporting period within 12 months immediately 
preceding the issuance of such trust preferred security or subordinated 
debt instrument, had total consolidated assets of less than 
$15,000,000,000 or issued prior to May 19, 2010 by a mutual holding 
company.
    (c) Notwithstanding paragraph (a)(3) of this section, a banking 
entity may act as a market maker with respect to the interests of an 
issuer described in paragraph (a) of this section in accordance with the 
applicable provisions of Sec. Sec.  255.4 and 255.11.
    (d) Without limiting the applicability of paragraph (a) of this 
section, the Board, the FDIC and the OCC will make public a non-
exclusive list of issuers that meet the requirements of paragraph (a). A 
banking entity may rely on the list published by the Board, the FDIC and 
the OCC.

[79 FR 5228, Jan. 31, 2014]

[[Page 342]]



Sec. Sec.  255.17-255.19  [Reserved]



          Subpart D_Compliance Program Requirement; Violations



Sec.  255.20  Program for compliance; reporting.

    (a) Program requirement. Each banking entity (other than a banking 
entity with limited trading assets and liabilities or a qualifying 
foreign excluded fund under section 255.6(f) or 255.13(d)) shall develop 
and provide for the continued administration of a compliance program 
reasonably designed to ensure and monitor compliance with the 
prohibitions and restrictions on proprietary trading and covered fund 
activities and investments set forth in section 13 of the BHC Act and 
this part. The terms, scope, and detail of the compliance program shall 
be appropriate for the types, size, scope, and complexity of activities 
and business structure of the banking entity.
    (b) Banking entities with significant trading assets and 
liabilities. With respect to a banking entity with significant trading 
assets and liabilities, the compliance program required by paragraph (a) 
of this section, at a minimum, shall include:
    (1) Written policies and procedures reasonably designed to document, 
describe, monitor and limit trading activities subject to subpart B 
(including those permitted under Sec. Sec.  255.3 to 255.6 of subpart 
B), including setting, monitoring and managing required limits set out 
in Sec.  2554 and Sec.  2555, and activities and investments with 
respect to a covered fund subject to subpart C (including those 
permitted under Sec. Sec.  255.11 through 255.14 of subpart C) conducted 
by the banking entity to ensure that all activities and investments 
conducted by the banking entity that are subject to section 13 of the 
BHC Act and this part comply with section 13 of the BHC Act and this 
part;
    (2) A system of internal controls reasonably designed to monitor 
compliance with section 13 of the BHC Act and this part and to prevent 
the occurrence of activities or investments that are prohibited by 
section 13 of the BHC Act and this part;
    (3) A management framework that clearly delineates responsibility 
and accountability for compliance with section 13 of the BHC Act and 
this part and includes appropriate management review of trading limits, 
strategies, hedging activities, investments, incentive compensation and 
other matters identified in this part or by management as requiring 
attention;
    (4) Independent testing and audit of the effectiveness of the 
compliance program conducted periodically by qualified personnel of the 
banking entity or by a qualified outside party;
    (5) Training for trading personnel and managers, as well as other 
appropriate personnel, to effectively implement and enforce the 
compliance program; and
    (6) Records sufficient to demonstrate compliance with section 13 of 
the BHC Act and this part, which a banking entity must promptly provide 
to the SEC upon request and retain for a period of no less than 5 years 
or such longer period as required by the SEC.
    (c) CEO attestation. The CEO of a banking entity that has 
significant trading assets and liabilities must, based on a review by 
the CEO of the banking entity, attest in writing to the SEC, each year 
no later than March 31, that the banking entity has in place processes 
to establish, maintain, enforce, review, test and modify the compliance 
program required by paragraph (b) of this section in a manner reasonably 
designed to achieve compliance with section 13 of the BHC Act and this 
part. In the case of a U.S. branch or agency of a foreign banking 
entity, the attestation may be provided for the entire U.S. operations 
of the foreign banking entity by the senior management officer of the 
U.S. operations of the foreign banking entity who is located in the 
United States.
    (d) Reporting requirements under appendix A to this part. (1) A 
banking entity (other than a qualifying foreign excluded fund under 
section 255.6(f) or 255.13(d)) engaged in proprietary trading activity 
permitted under subpart B shall comply with the reporting requirements 
described in appendix A to this part, if:
    (i) The banking entity has significant trading assets and 
liabilities; or
    (ii) The SEC notifies the banking entity in writing that it must 
satisfy the

[[Page 343]]

reporting requirements contained in appendix A to this part.
    (2) Frequency of reporting: Unless the SEC notifies the banking 
entity in writing that it must report on a different basis, a banking 
entity subject to appendix A to this part shall report the information 
required by appendix A for each quarter within 30 days of the end of the 
quarter.
    (e) Additional documentation for covered funds. A banking entity 
with significant trading assets and liabilities (other than a qualifying 
foreign excluded fund under section 255.6(f) or 255.13(d)) shall 
maintain records that include:
    (1) Documentation of the exclusions or exemptions other than 
sections 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 
relied on by each fund sponsored by the banking entity (including all 
subsidiaries and affiliates) in determining that such fund is not a 
covered fund;
    (2) For each fund sponsored by the banking entity (including all 
subsidiaries and affiliates) for which the banking entity relies on one 
or more of the exclusions from the definition of covered fund provided 
by Sec. Sec.  255.10(c)(1),255.10(c)(5), 255.10(c)(8), 255.10(c)(9), or 
255.10(c)(10) of subpart C, documentation supporting the banking 
entity's determination that the fund is not a covered fund pursuant to 
one or more of those exclusions;
    (3) For each seeding vehicle described in Sec.  255.10(c)(12)(i) or 
(iii) of subpart C that will become a registered investment company or 
SEC-regulated business development company, a written plan documenting 
the banking entity's determination that the seeding vehicle will become 
a registered investment company or SEC-regulated business development 
company; the period of time during which the vehicle will operate as a 
seeding vehicle; and the banking entity's plan to market the vehicle to 
third-party investors and convert it into a registered investment 
company or SEC-regulated business development company within the time 
period specified in Sec.  255.12(a)(2)(i)(B) of subpart C;
    (4) For any banking entity that is, or is controlled directly or 
indirectly by a banking entity that is, located in or organized under 
the laws of the United States or of any State, if the aggregate amount 
of ownership interests in foreign public funds that are described in 
Sec.  255.10(c)(1) of subpart C owned by such banking entity (including 
ownership interests owned by any affiliate that is controlled directly 
or indirectly by a banking entity that is located in or organized under 
the laws of the United States or of any State) exceeds $50 million at 
the end of two or more consecutive calendar quarters, beginning with the 
next succeeding calendar quarter, documentation of the value of the 
ownership interests owned by the banking entity (and such affiliates) in 
each foreign public fund and each jurisdiction in which any such foreign 
public fund is organized, calculated as of the end of each calendar 
quarter, which documentation must continue until the banking entity's 
aggregate amount of ownership interests in foreign public funds is below 
$50 million for two consecutive calendar quarters; and
    (5) For purposes of paragraph (e)(4) of this section, a U.S. branch, 
agency, or subsidiary of a foreign banking entity is located in the 
United States; however, the foreign bank that operates or controls that 
branch, agency, or subsidiary is not considered to be located in the 
United States solely by virtue of operating or controlling the U.S. 
branch, agency, or subsidiary.
    (f) Simplified programs for less active banking entities--(1) 
Banking entities with no covered activities. A banking entity that does 
not engage in activities or investments pursuant to subpart B or subpart 
C (other than trading activities permitted pursuant to Sec.  255.6(a) of 
subpart B) may satisfy the requirements of this section by establishing 
the required compliance program prior to becoming engaged in such 
activities or making such investments (other than trading activities 
permitted pursuant to Sec.  255.6(a) of subpart B).
    (2) Banking entities with moderate trading assets and liabilities. A 
banking entity with moderate trading assets and liabilities may satisfy 
the requirements of this section by including in its existing compliance 
policies and procedures appropriate references to the requirements of 
section 13 of the BHC Act and

[[Page 344]]

this part and adjustments as appropriate given the activities, size, 
scope, and complexity of the banking entity.
    (g) Rebuttable presumption of compliance for banking entities with 
limited trading assets and liabilities--(1) Rebuttable presumption. 
Except as otherwise provided in this paragraph, a banking entity with 
limited trading assets and liabilities shall be presumed to be compliant 
with subpart B and subpart C of this part and shall have no obligation 
to demonstrate compliance with this part on an ongoing basis.
    (2) Rebuttal of presumption. If upon examination or audit, the SEC 
determines that the banking entity has engaged in proprietary trading or 
covered fund activities that are otherwise prohibited under subpart B or 
subpart C of this part, the SEC may require the banking entity to be 
treated under this part as if it did not have limited trading assets and 
liabilities. The SEC's rebuttal of the presumption in this paragraph 
must be made in accordance with the notice and response procedures in 
paragraph (i) of this section.
    (h) Reservation of authority. Notwithstanding any other provision of 
this part, the SEC retains its authority to require a banking entity 
without significant trading assets and liabilities to apply any 
requirements of this part that would otherwise apply if the banking 
entity had significant or moderate trading assets and liabilities if the 
SEC determines that the size or complexity of the banking entity's 
trading or investment activities, or the risk of evasion of subpart B or 
subpart C of this part, does not warrant a presumption of compliance 
under paragraph (g) of this section or treatment as a banking entity 
with moderate trading assets and liabilities, as applicable. The SEC's 
exercise of this reservation of authority must be made in accordance 
with the notice and response procedures in paragraph (i) of this 
section.
    (i) Notice and response procedures--(1) Notice. The SEC will notify 
the banking entity in writing of any determination requiring notice 
under this part and will provide an explanation of the determination.
    (2) Response. The banking entity may respond to any or all items in 
the notice described in paragraph (i)(1) of this section. The response 
should include any matters that the banking entity would have the SEC 
consider in deciding whether to make the determination. The response 
must be in writing and delivered to the designated SEC official within 
30 days after the date on which the banking entity received the notice. 
The SEC may shorten the time period when, in the opinion of the SEC, the 
activities or condition of the banking entity so requires, provided that 
the banking entity is informed of the time period at the time of notice, 
or with the consent of the banking entity. In its discretion, the SEC 
may extend the time period for good cause.
    (3) Waiver. Failure to respond within 30 days or such other time 
period as may be specified by the SEC shall constitute a waiver of any 
objections to the SEC's determination.
    (4) Decision. The SEC will notify the banking entity of the decision 
in writing. The notice will include an explanation of the decision.

[79 FR 5779, 5805, Jan. 31, 2014, as amended at 84 FR 62245, Nov. 14, 
2019; 85 FR 46529, July 31, 2020]



Sec.  255.21  Termination of activities or investments; penalties for
violations.

    (a) Any banking entity that engages in an activity or makes an 
investment in violation of section 13 of the BHC Act or this part, or 
acts in a manner that functions as an evasion of the requirements of 
section 13 of the BHC Act or this part, including through an abuse of 
any activity or investment permitted under subparts B or C, or otherwise 
violates the restrictions and requirements of section 13 of the BHC Act 
or this part, shall, upon discovery, promptly terminate the activity 
and, as relevant, dispose of the investment.
    (b) Whenever the SEC finds reasonable cause to believe any banking 
entity has engaged in an activity or made an investment in violation of 
section 13 of the BHC Act or this part, or engaged in any activity or 
made any investment that functions as an evasion of the requirements of 
section 13 of the BHC Act or this part, the SEC may take any action 
permitted by law to enforce compliance with section 13 of the BHC Act 
and this part, including

[[Page 345]]

directing the banking entity to restrict, limit, or terminate any or all 
activities under this part and dispose of any investment.





 Sec. Appendix A to Part 255--Reporting and Recordkeeping Requirements 
                     for Covered Trading Activities

                               I. Purpose

    a. This appendix sets forth reporting and recordkeeping requirements 
that certain banking entities must satisfy in connection with the 
restrictions on proprietary trading set forth in subpart B 
(``proprietary trading restrictions''). Pursuant to Sec.  255.20(d), 
this appendix applies to a banking entity that, together with its 
affiliates and subsidiaries, has significant trading assets and 
liabilities. These entities are required to (i) furnish periodic reports 
to the SEC regarding a variety of quantitative measurements of their 
covered trading activities, which vary depending on the scope and size 
of covered trading activities, and (ii) create and maintain records 
documenting the preparation and content of these reports. The 
requirements of this appendix must be incorporated into the banking 
entity's internal compliance program under Sec.  255.20.
    b. The purpose of this appendix is to assist banking entities and 
the SEC in:
    (1) Better understanding and evaluating the scope, type, and profile 
of the banking entity's covered trading activities;
    (2) Monitoring the banking entity's covered trading activities;
    (3) Identifying covered trading activities that warrant further 
review or examination by the banking entity to verify compliance with 
the proprietary trading restrictions;
    (4) Evaluating whether the covered trading activities of trading 
desks engaged in market making-related activities subject to Sec.  
255.4(b) are consistent with the requirements governing permitted market 
making-related activities;
    (5) Evaluating whether the covered trading activities of trading 
desks that are engaged in permitted trading activity subject to Sec.  
255.4, Sec.  255.5, or Sec.  255.6(a) and (b) (i.e., underwriting and 
market making-related activity, risk-mitigating hedging, or trading in 
certain government obligations) are consistent with the requirement that 
such activity not result, directly or indirectly, in a material exposure 
to high-risk assets or high-risk trading strategies;
    (6) Identifying the profile of particular covered trading activities 
of the banking entity, and the individual trading desks of the banking 
entity, to help establish the appropriate frequency and scope of 
examination by SEC of such activities; and
    (7) Assessing and addressing the risks associated with the banking 
entity's covered trading activities.
    c. Information that must be furnished pursuant to this appendix is 
not intended to serve as a dispositive tool for the identification of 
permissible or impermissible activities.
    d. In addition to the quantitative measurements required in this 
appendix, a banking entity may need to develop and implement other 
quantitative measurements in order to effectively monitor its covered 
trading activities for compliance with section 13 of the BHC Act and 
this part and to have an effective compliance program, as required by 
Sec.  255.20. The effectiveness of particular quantitative measurements 
may differ based on the profile of the banking entity's businesses in 
general and, more specifically, of the particular trading desk, 
including types of instruments traded, trading activities and 
strategies, and history and experience (e.g., whether the trading desk 
is an established, successful market maker or a new entrant to a 
competitive market). In all cases, banking entities must ensure that 
they have robust measures in place to identify and monitor the risks 
taken in their trading activities, to ensure that the activities are 
within risk tolerances established by the banking entity, and to monitor 
and examine for compliance with the proprietary trading restrictions in 
this part.
    e. On an ongoing basis, banking entities must carefully monitor, 
review, and evaluate all furnished quantitative measurements, as well as 
any others that they choose to utilize in order to maintain compliance 
with section 13 of the BHC Act and this part. All measurement results 
that indicate a heightened risk of impermissible proprietary trading, 
including with respect to otherwise-permitted activities under 
Sec. Sec.  255.4 through 255.6(a) and (b), or that result in a material 
exposure to high-risk assets or high-risk trading strategies, must be 
escalated within the banking entity for review, further analysis, 
explanation to SEC, and remediation, where appropriate. The quantitative 
measurements discussed in this appendix should be helpful to banking 
entities in identifying and managing the risks related to their covered 
trading activities.

                             II. Definitions

    The terms used in this appendix have the same meanings as set forth 
in Sec. Sec.  255.2 and 255.3. In addition, for purposes of this 
appendix, the following definitions apply:
    Applicability identifies the trading desks for which a banking 
entity is required to calculate and report a particular quantitative 
measurement based on the type of covered

[[Page 346]]

trading activity conducted by the trading desk.
    Calculation period means the period of time for which a particular 
quantitative measurement must be calculated.
    Comprehensive profit and loss means the net profit or loss of a 
trading desk's material sources of trading revenue over a specific 
period of time, including, for example, any increase or decrease in the 
market value of a trading desk's holdings, dividend income, and interest 
income and expense.
    Covered trading activity means trading conducted by a trading desk 
under Sec.  255.4, Sec.  255.5, Sec.  255.6(a), or Sec.  255.6(b). A 
banking entity may include in its covered trading activity trading 
conducted under Sec.  255.3(d), Sec.  255.6(c), Sec.  255.6(d), or Sec.  
255.6(e).
    Measurement frequency means the frequency with which a particular 
quantitative metric must be calculated and recorded.
    Trading day means a calendar day on which a trading desk is open for 
trading.

                    III. Reporting and Recordkeeping

                     a. Scope of Required Reporting

    1. Quantitative measurements. Each banking entity made subject to 
this appendix by Sec.  255.20 must furnish the following quantitative 
measurements, as applicable, for each trading desk of the banking entity 
engaged in covered trading activities and calculate these quantitative 
measurements in accordance with this appendix:
    i. Internal Limits and Usage;
    ii. Value-at-Risk;
    iii. Comprehensive Profit and Loss Attribution;
    iv. Positions; and
    v. Transaction Volumes.
    2. Trading desk information. Each banking entity made subject to 
this appendix by Sec.  255.20 must provide certain descriptive 
information, as further described in this appendix, regarding each 
trading desk engaged in covered trading activities.
    3. Quantitative measurements identifying information. Each banking 
entity made subject to this appendix by Sec.  255.20 must provide 
certain identifying and descriptive information, as further described in 
this appendix, regarding its quantitative measurements.
    4. Narrative statement. Each banking entity made subject to this 
appendix by Sec.  255.20 may provide an optional narrative statement, as 
further described in this appendix.
    5. File identifying information. Each banking entity made subject to 
this appendix by Sec.  255.20 must provide file identifying information 
in each submission to the SEC pursuant to this appendix, including the 
name of the banking entity, the RSSD ID assigned to the top-tier banking 
entity by the Board, and identification of the reporting period and 
creation date and time.

                       b. Trading Desk Information

    1. Each banking entity must provide descriptive information 
regarding each trading desk engaged in covered trading activities, 
including:
    i. Name of the trading desk used internally by the banking entity 
and a unique identification label for the trading desk;
    ii. Identification of each type of covered trading activity in which 
the trading desk is engaged;
    iii. Brief description of the general strategy of the trading desk;
    v. A list identifying each Agency receiving the submission of the 
trading desk;
    2. Indication of whether each calendar date is a trading day or not 
a trading day for the trading desk; and
    3. Currency reported and daily currency conversion rate.

          c. Quantitative Measurements Identifying Information

    Each banking entity must provide the following information regarding 
the quantitative measurements:
    1. An Internal Limits Information Schedule that provides identifying 
and descriptive information for each limit reported pursuant to the 
Internal Limits and Usage quantitative measurement, including the name 
of the limit, a unique identification label for the limit, a description 
of the limit, the unit of measurement for the limit, the type of limit, 
and identification of the corresponding risk factor attribution in the 
particular case that the limit type is a limit on a risk factor 
sensitivity and profit and loss attribution to the same risk factor is 
reported; and
    2. A Risk Factor Attribution Information Schedule that provides 
identifying and descriptive information for each risk factor attribution 
reported pursuant to the Comprehensive Profit and Loss Attribution 
quantitative measurement, including the name of the risk factor or other 
factor, a unique identification label for the risk factor or other 
factor, a description of the risk factor or other factor, and the risk 
factor or other factor's change unit.

                         d. Narrative Statement

    Each banking entity made subject to this appendix by Sec.  255.20 
may submit in a separate electronic document a Narrative Statement to 
the SEC with any information the banking entity views as relevant for 
assessing the information reported. The Narrative Statement may include 
further description of or changes to calculation methods, identification 
of material events, description of and reasons for changes in the 
banking entity's trading desk structure or trading desk strategies, and 
when any such changes occurred.

[[Page 347]]

      e. Frequency and Method of Required Calculation and Reporting

    A banking entity must calculate any applicable quantitative 
measurement for each trading day. A banking entity must report the 
Trading Desk Information, the Quantitative Measurements Identifying 
Information, and each applicable quantitative measurement electronically 
to the SEC on the reporting schedule established in Sec.  255.20 unless 
otherwise requested by the SEC. A banking entity must report the Trading 
Desk Information, the Quantitative Measurements Identifying Information, 
and each applicable quantitative measurement to the SEC in accordance 
with the XML Schema specified and published on the SEC's website.

                            f. Recordkeeping

    A banking entity must, for any quantitative measurement furnished to 
the SEC pursuant to this appendix and Sec.  255.20(d), create and 
maintain records documenting the preparation and content of these 
reports, as well as such information as is necessary to permit the SEC 
to verify the accuracy of such reports, for a period of five years from 
the end of the calendar year for which the measurement was taken. A 
banking entity must retain the Narrative Statement, the Trading Desk 
Information, and the Quantitative Measurements Identifying Information 
for a period of five years from the end of the calendar year for which 
the information was reported to the SEC.

                      IV. Quantitative Measurements

                     a. Risk-Management Measurements

                      1. Internal Limits and Usage

    i. Description: For purposes of this appendix, Internal Limits are 
the constraints that define the amount of risk and the positions that a 
trading desk is permitted to take at a point in time, as defined by the 
banking entity for a specific trading desk. Usage represents the value 
of the trading desk's risk or positions that are accounted for by the 
current activity of the desk. Internal limits and their usage are key 
compliance and risk management tools used to control and monitor risk 
taking and include, but are not limited to, the limits set out in 
Sec. Sec.  255.4 and 255.5. A trading desk's risk limits, commonly 
including a limit on ``Value-at-Risk,'' are useful in the broader 
context of the trading desk's overall activities, particularly for the 
market making activities under Sec.  255.4(b) and hedging activity under 
Sec.  255.5. Accordingly, the limits required under Sec. Sec.  
255.4(b)(2)(iii)(C) and 255.5(b)(1)(i)(A) must meet the applicable 
requirements under Sec. Sec.  255.4(b)(2)(iii)(C) and 255.5(b)(1)(i)(A) 
and also must include appropriate metrics for the trading desk limits 
including, at a minimum, ``Value-at-Risk'' except to the extent the 
``Value-at-Risk'' metric is demonstrably ineffective for measuring and 
monitoring the risks of a trading desk based on the types of positions 
traded by, and risk exposures of, that desk.
    A. A banking entity must provide the following information for each 
limit reported pursuant to this quantitative measurement: The unique 
identification label for the limit reported in the Internal Limits 
Information Schedule, the limit size (distinguishing between an upper 
and a lower limit), and the value of usage of the limit.
    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks engaged in covered trading 
activities.

                            2. Value-at-Risk

    i. Description: For purposes of this appendix, Value-at-Risk 
(``VaR'') is the measurement of the risk of future financial loss in the 
value of a trading desk's aggregated positions at the ninety-nine 
percent confidence level over a one-day period, based on current market 
conditions.
    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks engaged in covered trading 
activities.

                    b. Source-of-Revenue Measurements

              1. Comprehensive Profit and Loss Attribution

    i. Description: For purposes of this appendix, Comprehensive Profit 
and Loss Attribution is an analysis that attributes the daily 
fluctuation in the value of a trading desk's positions to various 
sources. First, the daily profit and loss of the aggregated positions is 
divided into two categories: (i) Profit and loss attributable to a 
trading desk's existing positions that were also positions held by the 
trading desk as of the end of the prior day (``existing positions''); 
and (ii) profit and loss attributable to new positions resulting from 
the current day's trading activity (``new positions'').
    A. The comprehensive profit and loss associated with existing 
positions must reflect changes in the value of these positions on the 
applicable day. The comprehensive profit and loss from existing 
positions must be further attributed, as applicable, to (i) changes in 
the specific risk factors and other factors that are monitored and 
managed as part of the trading desk's overall risk management policies 
and procedures; and (ii) any other applicable elements, such as cash 
flows, carry, changes in reserves, and the correction, cancellation, or 
exercise of a trade.

[[Page 348]]

    B. For the attribution of comprehensive profit and loss from 
existing positions to specific risk factors and other factors, a banking 
entity must provide the following information for the factors that 
explain the preponderance of the profit or loss changes due to risk 
factor changes: The unique identification label for the risk factor or 
other factor listed in the Risk Factor Attribution Information Schedule, 
and the profit or loss due to the risk factor or other factor change.
    C. The comprehensive profit and loss attributed to new positions 
must reflect commissions and fee income or expense and market gains or 
losses associated with transactions executed on the applicable day. New 
positions include purchases and sales of financial instruments and other 
assets/liabilities and negotiated amendments to existing positions. The 
comprehensive profit and loss from new positions may be reported in the 
aggregate and does not need to be further attributed to specific 
sources.
    D. The portion of comprehensive profit and loss from existing 
positions that is not attributed to changes in specific risk factors and 
other factors must be allocated to a residual category. Significant 
unexplained profit and loss must be escalated for further investigation 
and analysis.
    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks engaged in covered trading 
activities.

            c. Positions and Transaction Volumes Measurements

                              1. Positions

    i. Description: For purposes of this appendix, Positions is the 
value of securities and derivatives positions managed by the trading 
desk. For purposes of the Positions quantitative measurement, do not 
include in the Positions calculation for ``securities'' those securities 
that are also ``derivatives,'' as those terms are defined under subpart 
A; instead, report those securities that are also derivatives as 
``derivatives.'' \1\ A banking entity must separately report the trading 
desk's market value of long securities positions, short securities 
positions, derivatives receivables, and derivatives payables.
---------------------------------------------------------------------------

    \1\ See Sec.  255.2(h), (aa). For example, under this part, a 
security-based swap is both a ``security'' and a ``derivative.'' For 
purposes of the Positions quantitative measurement, security-based swaps 
are reported as derivatives rather than securities.
---------------------------------------------------------------------------

    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks that rely on Sec.  255.4(a) or 
(b) to conduct underwriting activity or market-making-related activity, 
respectively.

                         2. Transaction Volumes

    i. Description: For purposes of this appendix, Transaction Volumes 
measures three exclusive categories of covered trading activity 
conducted by a trading desk. A banking entity is required to report the 
value and number of security and derivative transactions conducted by 
the trading desk with: (i) Customers, excluding internal transactions; 
(ii) non-customers, excluding internal transactions; and (iii) trading 
desks and other organizational units where the transaction is booked 
into either the same banking entity or an affiliated banking entity. For 
securities, value means gross market value. For derivatives, value means 
gross notional value. For purposes of calculating the Transaction 
Volumes quantitative measurement, do not include in the Transaction 
Volumes calculation for ``securities'' those securities that are also 
``derivatives,'' as those terms are defined under subpart A; instead, 
report those securities that are also derivatives as ``derivatives.'' 
\2\ Further, for purposes of the Transaction Volumes quantitative 
measurement, a customer of a trading desk that relies on Sec.  255.4(a) 
to conduct underwriting activity is a market participant identified in 
Sec.  255.4(a)(7), and a customer of a trading desk that relies on Sec.  
255.4(b) to conduct market making-related activity is a market 
participant identified in Sec.  255.4(b)(3).
---------------------------------------------------------------------------

    \2\ See Sec.  255.2(h), (aa).
---------------------------------------------------------------------------

    ii. Calculation Period: One trading day.
    iii. Measurement Frequency: Daily.
    iv. Applicability: All trading desks that rely on Sec.  255.4(a) or 
(b) to conduct underwriting activity or market-making-related activity, 
respectively.

[84 FR 62246, Nov. 14, 2019]

                        PARTS 256	259 [RESERVED]



PART 260_GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF 1939-
-Table of Contents



                 Terms Used in the Rules and Regulations

Sec.
260.0-1 Application of definitions contained in the act.
260.0-2 Definitions of terms used in the rules and regulations.
260.0-3 Definition of ``rules and regulations'' as used in certain 
          sections of the Act.
260.0-4 Sequential numbering of documents filed with the Commission.

                        Office of the Commission

260.0-5 Business hours of the Commission.

[[Page 349]]

260.0-6 Nondisclosure of information obtained in the course of 
          examinations and investigations.
260.0-7 Small entities for purposes of the Regulatory Flexibility Act.
260.0-11 Liability for certain statements by issuers.

                         Rules Under Section 303

260.3(4)-1 Definition of ``commission from an underwriter or dealer not 
          in excess of the usual and customary distributors' or sellers' 
          commissions'' in section 303(4), for certain transactions.
260.3(4)-2 Definition of ``distribution'' in section 303(4) for certain 
          transactions.
260.3(4)-3 Definitions of ``participates'' and ``participation'' as used 
          in section 303(4), in relation to certain transactions.

                         Rules Under Section 304

260.4a-1 Exempted securities under section 304(a)(8).
260.4a-2 Exempted securities under section 304(d).
260.4a-3 Exempted securities under section 304(a)(9).
260.4c-1 Form for applications under section 304(c).
260.4c-2 General requirements as to form and content of applications.
260.4c-3 Number of copies; filing; signatures; binding.
260.4c-4 Applications under section 304(c)(1).
260.4c-5 Applications under section 304(c)(2).
260.4d-7 Application for exemption from one or more provisions of the 
          Act.
260.4d-8 Content.
260.4d-9 Exemption for Canadian Trust Indentures from Specified 
          Provisions of the Act.
260.4d-10 Exemption for securities issued pursuant to Sec.  230.802 of 
          this chapter.
260.4d-11 Exemption for security-based swaps offered and sold in 
          reliance on Rule 239 under the Securities Act of 1933 (17 CFR 
          230.239).
260.4d-12 Exemption for security-based swaps offered and sold in 
          reliance on Securities Act of 1933 Rule 240 (Sec.  230.240).

                         Rules Under Section 305

260.5a-1 Forms for statements of eligibility and qualification.
260.5a-2 General requirements as to form and content of statements of 
          eligibility and qualification.
260.5a-3 Number of copies; filing; signatures; binding.
260.5b-1 Application pursuant to section 305(b)(2) of the Trust 
          Indenture Act for determining eligibility of a person 
          designated as trustee for offerings on a delayed basis.
260.5b-2 General requirements as to form and content of applications.
260.5b-3 Number of copies--Filing--Signatures.

                         Rules Under Section 307

              Applications for Qualification of Indentures

260.7a-1 Form for application.
260.7a-2 Powers of agent for service named in application.
260.7a-3 Number of copies; filing; signatures; binding.
260.7a-4 Calculation of time.
260.7a-5 Filing of amendments; number of copies.
260.7a-6 Telegraphic delaying amendments.
260.7a-7 Effective date of amendment filed under section 8(a) of the 
          Securities Act with the consent of the Commission.
260.7a-8 Effective date of amendment filed under section 8(a) of the 
          Securities Act pursuant to order of Commission.
260.7a-9 Delaying amendments.

General Requirements as to Form and Content of Applications, Statements 
                               and Reports

                                 General

260.7a-15 Scope of Sec. Sec.  260.7a-15 to 260.7a-37.

                           Formal Requirements

260.7a-16 Inclusion of items, differentiation between items and answers, 
          omission of instructions.
260.7a-17 Quality, color and size of paper.
260.7a-18 Legibility.
260.7a-19 Margin for binding.
260.7a-20 Riders; inserts.

                   General Requirements as to Contents

260.7a-21 Clarity.
260.7a-22 Information unknown or not reasonably available.
260.7a-23 Statements required where item is inapplicable or where answer 
          is ``none''.
260.7a-24 Words relating to periods of time in the past.
260.7a-25 Words relating to the future.
260.7a-26 Disclaimer of control.
260.7a-27 Title of securities.

                       Incorporation by Reference

260.7a-28 Incorporation of matter in application, statement or report, 
          other than exhibits, as answer to item.
260.7a-29 Incorporation of exhibits as such.
260.7a-30 Identification of material incorporated; form of 
          incorporation.
260.7a-31 Incorporation by reference of contested material.
260.7a-32 Incorporation by reference rendering document incomplete, 
          unclear, or confusing.

[[Page 350]]

                                Exhibits

260.7a-33 Additional exhibits.
260.7a-34 Omission of substantially identical documents.

                               Amendments

260.7a-35 Formal requirements as to amendments.
260.7a-36 Signatures to amendments.

   Inspection and Publication of Applications, Statements and Reports

260.7a-37 Inspection of applications, statements and reports.

                         Rules Under Section 310

260.10a-1 Application for determining eligibility of a foreign person to 
          act as sole trustee pursuant to section 310(a)(1) of the Act.
260.10a-2 General requirements as to form and content of applications.
260.10a-3 Number of copies--Filing--Signatures.
260.10a-4 Consent of trustee to service of process.
260.10a-5 Eligibility of Canadian Trustees.
260.10b-1 Calculation of percentages.
260.10b-2 Applications under section 310(b)(1)(ii).
260.10b-3 Applications relative to affiliations between trustees and 
          underwriters.
260.10b-4 Application for stay of trustee's duty to resign pursuant to 
          section 310(b) of the Act.
260.10b-5 Content.
260.10b-6 Notices--Exemptive Application Procedure.

                         Rules Under Section 311

260.11b-4 Definition of ``cash transaction'' in section 311(b)(4).
260.11b-6 Definition of ``self-liquidating paper'' in section 311(b)(6).

                         Rules Under Section 314

                            Periodic Reports

260.14a-1 Application of Sec. Sec.  260.7a-15 to 260.7a-38.
260.19a-1 Compliance with Section 314(a)(1) of the Trust Indenture Act 
          for certain eligible indenture obligors.

    Authority: 15 U.S.C. 77c, 77ddd, 77eee, 77ggg, 77nnn, 77sss, 78ll 
(d), 80b-3, 80b-4, and 80b-11, unless otherwise noted.

    Source: 5 FR 293, Jan. 25, 1940, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 260 appear at 57 FR 
36501, Aug. 13, 1992, and 57 FR 47409, Oct. 16, 1992.
    Note: In Sec. Sec.  260.0-1 to 260.14a-1 the numbers to the right of 
the decimal point correspond with the respective rule number of the 
general rules and regulations under the Trust Indenture Act of 1939.

                       ATTENTION ELECTRONIC FILERS

THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.

                 Terms Used in the Rules and Regulations



Sec.  260.0-1  Application of definitions contained in the act.

    Unless the context otherwise requires, the terms defined in the act 
shall, when used in the rules and regulations, have the respective 
meanings given in the act.



Sec.  260.0-2  Definitions of terms used in the rules and regulations.

    Unless the context otherwise requires, the following terms, when 
used in this part, shall have the respective meanings indicated in this 
section:
    (a) Act. The term ``act'' means the Trust Indenture Act of 1939. (53 
Stat. 1149; 15 U.S.C. 77aaa)
    (b) Affiliate. The term ``affiliate'' means a person controlling, 
controlled by, or under common control with, another person. The terms 
``affiliated'' and ``affiliation'' have meanings correlative to the 
foregoing.
    (c) Agent for service. The term ``agent for service'' means the 
person authorized to receive notices and communications from the 
Commission.
    (d) Amount. The term ``amount'' when used in regard to securities, 
shall have the meaning given in Sec.  260.10b-1(c).
    (e) Class. The term ``class'', when used in regard to securities, 
shall have the meaning given in Sec.  260.10b-1(e).
    (f) Control. The term ``control'' means the power to direct the 
management and policies of a person, directly or through one or more 
intermediaries,

[[Page 351]]

whether through the ownership of voting securities, by contract, or 
otherwise. The terms ``controlling'' and ``controlled'' have meanings 
correlative to the foregoing. (See Sec.  260.a-26.)
    (g) Electronic filer. The term electronic filer means a person or an 
entity that submits filings electronically pursuant to Rules 100 and 101 
of Regulation S-T (Sec. Sec.  232.100 and 232.101 of this chapter, 
respectively).
    (h) Electronic filing. The term electronic filing means a document 
under the federal securities laws that is transmitted or delivered to 
the Commission in electronic format.
    (i) Outstanding. The term ``outstanding'', when used in regard to 
securities, shall have the meaning given in Sec.  260.10b-1(d).
    (j) Parent. The term ``parent'' means a person controlling one or 
more other persons.
    (k) Rules and regulations. The term ``rules and regulations'' means 
all rules and regulations adopted by the Commission pursuant to the act, 
including the forms and instructions thereto.
    (l) Section. The term ``section'' means a section of the act. \1\
---------------------------------------------------------------------------

    \1\ References to ``this section'' or to section number preceded by 
a section symbol are to sections in the Code of Federal Regulations.
---------------------------------------------------------------------------

    (m) Subsidiary. The term ``subsidiary'' means a person controlled by 
another person.

[5 FR 293, Jan. 25, 1940, as amended at 58 FR 14686, Mar. 18, 1993; 62 
FR 36459, July 8, 1997]



Sec.  260.0-3  Definition of ``rules and regulations'' as used in certain
sections of the Act.

    (a) The term rules and regulations as used in section 305 of the Act 
shall include the forms for registration of securities under the 
Securities Act of 1933 and the related instructions thereto, and the 
forms for information, documents and statements under section 305 of the 
Act.
    (b) The term rules and regulations as used in section 307 of the Act 
shall include the forms for applications under section 307 of the Act 
and the related instructions thereto.

[21 FR 1046, Feb. 15, 1956]



Sec.  260.0-4  Sequential numbering of documents filed with the Commission.

    The manually signed original (or in the case of duplicate originals, 
one duplicate original) of all registrations, applications, statements, 
reports, or other documents filed under the Trust Indenture Act of 1939 
shall be numbered sequentially (in addition to any internal numbering 
which otherwise may be present) by handwritten, typed, printed, or other 
legible form of notation from the facing page of the document through 
the last page of that document and any exhibits or attachments thereto. 
Further, the total number of pages contained in a numbered original 
shall be set forth on the first page of the document.

[44 FR 4666, Jan. 23, 1979, as amended at 76 FR 71877, Nov. 21, 2011]

                        Office of the Commission



Sec.  260.0-5  Business hours of the Commission.

    (a) General. The principal office of the Commission, at 100 F 
Street, NE., Washington, DC 20549, is open each day, except Saturdays, 
Sundays and federal holidays, from 9 a.m. to 5:30 p.m., Eastern Standard 
Time or Eastern Daylight Saving Time, whichever is currently in effect, 
provided that the hours for the filing of documents with the Commission 
are as set forth in paragraphs (b) and (c) of this section.
    (b) Submissions made in paper. Paper documents filed with or 
otherwise furnished to the Commission may be submitted to the Commission 
each day, except Saturdays, Sundays and federal holidays, from 8 a.m. to 
5:30 p.m., Eastern Standard Time or Eastern Daylight Saving Time, 
whichever is currently in effect.
    (c) Electronic filings. Filings made by direct transmission may be 
submitted to the Commission each day, except Saturdays, Sundays, and 
Federal holidays, from 6 a.m. to 10 p.m., Eastern Standard Time or 
Eastern Daylight Saving Time, whichever is currently in effect.

[58 FR 14687, Mar. 18, 1993, as amended at 65 FR 24802, Apr. 27, 2000; 
68 FR 25800, May 13, 2003; 73 FR 32228, June 5, 2008; 88 FR 12209, Feb. 
27, 2023]

[[Page 352]]



Sec.  260.0-6  Nondisclosure of information obtained in the course of
examinations and investigations.

    Information or documents obtained by officers or employees of the 
Commission in the course of any examination or investigation under 
section 8(e) of the Securities Act of 1933 (48 Stat. 79; 15 U.S.C. 77h), 
pursuant to section 307(c) of the Trust Indenture Act of 1939 (53 Stat. 
1156; 15 U.S.C. 77ggg), or any examination or investigation under 
section 20(a) of the Securities Act of 1933 (48 Stat. 86; 15 U.S.C. 
77t), pursuant to section 321(a) of the Trust Indenture Act of 1939 (53 
Stat. 1174; 15 U.S.C. 77uuu), shall, unless made a matter of public 
record, be deemed confidential. Except as provided by 17 CFR 203.2, 
officers and employees are hereby prohibited from making such 
confidential information or documents or any other non-public records of 
the Commission available to anyone other than a member, officer or 
employee of the Commission, unless the Commission or the General 
Counsel, pursuant to delegated authority, authorizes the disclosure of 
such information or the production of such documents as not being 
contrary to the public interest. Any officer or employee who is served 
with a subpoena requiring the disclosure of such information or the 
production of such documents shall appear in court and, unless the 
authorization described in the preceding sentence shall have been given, 
shall respectfully decline to disclose the information or produce the 
documents called for, basing his or her refusal upon this section. Any 
officer or employee who is served with such a subpoena shall promptly 
advise the General Counsel of the service of such subpoena, the nature 
of the information or documents sought, and any circumstances which may 
bear upon the desirability of making available such information or 
documents.

[44 FR 50836, Aug. 30, 1979, as amended at 53 FR 17459, May 17, 1988; 54 
FR 33501, Aug. 15, 1989; 76 FR 71877, Nov. 21, 2011]



Sec.  260.0-7  Small entities for purposes of the Regulatory Flexibility
Act.

    For purposes of Commission rulemaking in accordance with the 
provisions of Chapter Six of the Administrative Procedure Act (5 U.S.C. 
601 et seq.), and unless otherwise defined for purposes of a particular 
rulemaking proceeding, the term ``small business'' or ``small 
organization,'' for purposes of the Trust Indenture Act of 1939 shall 
mean an issuer whose total assets on the last day of its most recent 
fiscal year were $5 million or less that is engaged or proposing to 
engage in small business financing. An issuer is considered to be 
engaged or proposing to be engaged in small business financing under 
this section if it is conducting or proposing to conduct an offering of 
securities which does not exceed the dollar limitation prescribed by 
Sec.  260.4a-2.

[47 FR 5223, Feb. 4, 1982, as amended at 51 FR 25362, July 14, 1986]



Sec.  260.0-11  Liability for certain statements by issuers.

    (a) A statement within the coverage of paragraph (b) below which is 
made by or on behalf of an issuer or by an outside reviewer retained by 
the issuer shall be deemed not to be a fraudulent statement (as defined 
in paragraph (d) of this section), unless it is shown that such 
statement was made or reaffirmed without a reasonable basis or was 
disclosed other than in good faith.
    (b) This rule applies to the following statements:
    (1) A forward-looking statement (as defined in paragraph (c) of this 
section) made in a document filed with the Commission, in Part I of a 
quarterly report on Form 10-Q, Sec.  249.308a of this chapter, or in an 
annual report to security holders meeting the requirements of Rules 14a-
3(b) and (c) or 14c-3(a) and (b) under the Securities Exchange Act of 
1934 (Sec.  240.14a-3(b) and (c) or Sec.  240.14c-3(a) and (b) of this 
chapter), a statement reaffirming such forward-looking statement after 
the date the document was filed or the annual report was made publicly 
available, or a forward-looking statement made before the date the 
document was filed or the date the annual report was made publicly 
available if such statement is reaffirmed in a filed document, in Part I 
of a quarterly report on Form 10-Q, or in an annual report made publicly 
available within a reasonable time after the making of such forward-
looking statement; Provided, that:

[[Page 353]]

    (i) At the time such statements are made or reaffirmed, either the 
issuer is subject to the reporting requirements of section 13(a) or 
15(d) of the Securities Exchange Act of 1934 and has complied with the 
requirements of Rule 13a-1 or 15d-1 (Sec.  240.13a-1 or Sec.  240.15d-1 
of this chapter) thereunder, if applicable, to file its most recent 
annual report on Form 10-K, Form 20-F, or Form 40-F; or if the issuer is 
not subject to the reporting requirements of section 13(a) or 15(d) of 
the Securities Exchange Act of 1934, the statements are made in a 
registration statement filed under the Securities Act of 1933 or 
pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934; 
and
    (ii) The statements are not made by or on behalf of an issuer that 
is an investment company registered under the Investment Company Act of 
1940; and
    (2) Information relating to the effects of changing prices on the 
business enterprise presented voluntarily or pursuant to Item 303 of 
Regulation S-K (Sec.  229.303 of this chapter), Item 5 of Form 20-F 
(Sec.  249.220f of this chapter), ``Operating and Financial Review and 
Prospects,'' Item 302 of Regulation S-K (Sec.  229.302 of this chapter), 
``Supplementary Financial Information,'' or Rule 3-20(c) of Regulation 
S-X (Sec.  210.3-20(c) of this chapter), and disclosed in a document 
filed with the Commission, in Part I of a quarterly report on Form 10-Q, 
or in an annual report to shareholders meeting the requirements of Rules 
14a-3(b) and (c) or 14c-3(a) and (b) (Sec.  240.14a-3(b) and (c) or 
Sec.  240.14c-3(a) and (b)) under the Securities Exchange Act of 1934.
    (c) For the purpose of this rule, the term forward-looking statement 
shall mean and shall be limited to:
    (1) A statement containing a projection of revenues, income (loss), 
earnings (loss) per share, capital expenditures, dividends, capital 
structure or other financial items;
    (2) A statement of management's plans and objectives for future 
operations;
    (3) A statement of future economic performance contained in 
management's discussion and analysis of financial condition and results 
of operations included pursuant to Item 303 of Regulation S-K (Sec.  
229.303 of this chapter) or Item 5 of Form 20-F; or
    (4) Disclosed statements of the assumptions underlying or relating 
to any of the statements described in paragraphs (c) (1), (2), or (3) of 
this section.
    (d) For the purpose of this rule the term fraudulent statement shall 
mean a statement which is an untrue statement of a material fact, a 
statement false or misleading with respect to any material fact, an 
omission to state a material fact necessary to make a statement not 
misleading, or which constitutes the employment of a manipulative, 
deceptive, or fraudulent device, contrivance, scheme, transaction, act, 
practice, course of business, or an artifice to defraud, as those terms 
are used in the Trust Indenture Act of 1939 and other acts referred to 
in section 323(b) thereof or the rules or regulations promulgated 
thereunder.

[46 FR 19458, Mar. 31, 1981, as amended at 47 FR 54790, Dec. 26, 1982; 
56 FR 30077, July 1, 1991; 64 FR 53925, Oct. 5, 1999; 73 FR 982, Jan. 4, 
2008]

                         Rules Under Section 303



Sec.  260.3(4)-1  Definition of ``commission from an underwriter or 
dealer not in excess of the usual and customary distributors' or sellers'
commissions'' in section 303(4), for certain transactions.

    (a) The term commission in section 303(4) shall include such 
remuneration, commonly known as a spread, as may be received by a 
distributor or dealer as a consequence of reselling securities bought 
from an underwriter or dealer at a price below the offering price of 
such securities, where such resales afford the distributor or dealer a 
margin of profit not in excess of what is usual and customary in such 
transactions.
    (b) The term commission from an underwriter or dealer in section 
303(4) shall include commissions paid by an underwriter or dealer 
affiliated with the issuer.
    (c) The term usual and customary distributors' or sellers' 
commission in section 303(4) shall mean a commission or remuneration, 
commonly known as a spread, paid to or received by any person selling 
securities either for his own account or for the account of others,

[[Page 354]]

which is not in excess of the amount usual and customary in the 
distribution and sale of issues of similar type and size, and not in 
excess of the amount allowed to other persons, if any, for comparable 
service in the distribution of the particular issue; but such term shall 
not include amounts paid to any person whose function is the management 
of the distribution of all of a substantial part of the particular 
issue, or who performs the functions normally performed by an 
underwriter or underwriting syndicate.



Sec.  260.3(4)-2  Definition of ``distribution'' in section 303(4) for
certain transactions.

    A person, the chief part of the business of which consists in the 
purchase of the securities of any one issuer and/or its affiliate and in 
the sale of its own securities to furnish the proceeds with which to 
acquire the securities of such issuer and/or affiliate, is to be 
regarded as engaged in the distribution of the securities of such issuer 
and/or affiliate within the meaning of section 303(4).



Sec.  260.3(4)-3  Definitions of ``participates'' and ``participation''
as used in section 303(4), in relation to certain transactions.

    (a) The terms participates and participation in section 303(4) shall 
not include the interest of a person (1) who is neither in privity of 
contract with the issuer nor affiliated with the issuer, and (2) who has 
no association with any principal underwriter of the securities being 
distributed, and (3) whose function in the distribution is confined to 
an undertaking to purchase all or some specified proportion of the 
securities remaining unsold after the lapse of some specified period of 
time, and (4) who purchases such securities for investment and not with 
a view to distribution.
    (b) As used in this section:
    (1) The term association shall include a relationship between two 
persons under which one (i) is affiliated with the other, or (ii) has, 
in common with the other, one or more partners, directors, officers, 
trustees, branch managers, or other persons occupying a similar status 
or performing similar functions or (iii) has a participation, direct or 
indirect, in the profits of the other, or has a financial stake, by 
debtor-creditor relationship, stock ownership, contract or otherwise, in 
the income or business of the other.
    (2) The term principal underwriter means an underwriter in privity 
of contract with the issuer of the securities as to which he is 
underwriter.

                         Rules Under Section 304



Sec.  260.4a-1  Exempted securities under section 304(a)(8).

    The provisions of the Trust Indenture Act of 1939 shall not apply to 
any security that has been or will be issued otherwise than under an 
indenture. The same issuer may not claim this exemption within a period 
of twelve consecutive months for more than $50,000,000 aggregate 
principal amount of any securities.

[80 FR 21925, Apr. 20, 2015]



Sec.  260.4a-2  Exempted securities under section 304(d).

    The provisions of the Trust Indenture Act of 1939 shall not apply to 
any security that has been issued or will be issued in accordance with 
the provisions of Regulation A (17 CFR 230.251 et seq.) under the 
Securities Act of 1933.

[57 FR 36501, Aug. 13, 1992]



Sec.  260.4a-3  Exempted securities under section 304(a)(9).

    The provisions of the Trust Indenture Act of 1939 shall not apply to 
any security which has been or is to be issued under an indenture which 
limits the aggregate principal amount of securities at any time 
outstanding thereunder to $10,000,000 or less, but this exemption shall 
not be applied within a period of thirty-six consecutive months to more 
than $10,000,000 aggregate principal amount of securities of the same 
issuer.

(Secs. 304(a)(8) and 304(a)(9) of the Trust Indenture Act of 1939, (sec. 
302, Pub. L. 96-477; secs. 304(a)(8), 304(a)(9), 53 Stat. 1153; 15 
U.S.C. 77ddd(a)(8), 77ddd(a)(9)))

[46 FR 63256, Dec. 31, 1981. Redesignated and amended at 57 FR 36501, 
Aug. 13, 1992]

[[Page 355]]



Sec.  260.4c-1  Form for applications under section 304(c).

    Form T-4 shall be used for applications for exemption filed pursuant 
to section 304(c) of the act.

[6 FR 981, Feb. 15, 1941]



Sec.  260.4c-2  General requirements as to form and content of applications.

    Sections 260.7a-15 to 260.7a-38 shall be applicable to applications 
on Form T-4.

[6 FR 981, Feb. 15, 1941]



Sec.  260.4c-3  Number of copies; filing; signatures; binding.

    (a) Three copies of every application and of every amendment thereto 
shall be filed with the Commission at its principal office.
    (b) At least the original of each application or amendment filed 
with the Commission shall be signed in the manner prescribed by Form T-4 
(Sec.  269.4 of this chapter).
    (c) The application proper and the exhibits thereto shall be bound 
on the left side in one or more parts, but without stiff covers.

[16 FR 8737, Aug. 29, 1951]



Sec.  260.4c-4  Applications under section 304(c)(1).

    (a) An applicant under section 304(c)(1) may, if it so desires, 
waive a hearing and request the Commission to decide the application 
without a formal hearing on the basis of the application and such other 
information and documents as the Commission shall designate as a part of 
the record. However, a hearing may be called upon order of the 
Commission notwithstanding that the applicant shall have filed such a 
waiver and request whenever, in the judgment of the Commission, such a 
hearing is necessary or appropriate in the public interest.
    (b) If the applicant waives a hearing and requests the Commission to 
decide the application without a hearing and if no hearing has been 
ordered by the Commission:
    (1) The applicant shall, at the request of the Commission, furnish 
such additional information or documents as the Commission may deem 
necessary to decide the application.
    (2) The Commission may, with the consent of the applicant, make a 
part of the record any pertinent information or documents filed with the 
Commission by the applicant or by any other person.
    (3) The Commission shall, in its order deciding the application, 
designate and describe the information and documents comprising the 
record on which the decision is based.

[6 FR 981, Feb. 15, 1941]



Sec.  260.4c-5  Applications under section 304(c)(2).

    A hearing shall be held upon every application filed pursuant to 
section 304(c)(2).

[6 FR 981, Feb. 15, 1941]



Sec.  260.4d-7  Application for exemption from one or more provisions
of the Act.

    (a) Three copies of every application for an order under section 
304(d) of the Act (15 U.S.C. 77ddd(d)) and of every amendment thereto 
shall be filed with the Commission at its principal office.
    (b) One copy shall be manually signed by a duly authorized officer 
of the applicant (or individual customarily performing similar functions 
with respect to an organization, whether incorporated or 
unincorporated), or by a natural person seeking exemption under section 
304(d) of the Act.
    (c) Such applications shall be on paper no larger 8\1/2\ x 11 inches 
in size. If reduction of large documents would render them illegible, 
such documents may be filed on paper larger than 8\1/2\ x 11 inches in 
size. The left margin shall be at least 1\1/2\ inches wide and if the 
application is bound, it shall be bound on the left side.
    (d) The application shall be typed, printed, copied, or prepared by 
a process which produces copies suitable for repeated photocopying and 
microfilming. All typewritten or printed matter shall be set forth in 
black ink to permit photocopying. If printed, the application shall be 
in type not smaller than 10-point, roman type, at least two points 
leaded.
    (e) Rules 7a-28 through 7a-32 (Sec. Sec.  260.7a-28 through 260.7a-
32 of this chapter) relating to incorporation by

[[Page 356]]

reference shall be applicable to applications for exemption pursuant to 
section 304(d) of the Act.

[56 FR 22319, May 15, 1991]



Sec.  260.4d-8  Content.

    (a) Each application for an order under section 304(d) of the Act 
(15 U.S.C. 77ddd(d)) shall contain the name, address, and telephone 
number of each applicant and the name, address, and telephone number of 
any person to which such applicant wishes any questions regarding the 
application to be directed.
    (b) Each application shall contain a statement of the relevant facts 
on which the request for relief is based, including a justification for 
the exemption(s) requested and a discussion of any benefit expected for 
security holders, trustees and/or obligors.

[56 FR 22319, May 15, 1991]



Sec.  260.4d-9  Exemption for Canadian Trust Indentures from Specified 
Provisions of the Act.

    Any trust indenture filed in connection with offerings on a 
registration statement on Form S-1, (Sec.  239.1 of this chapter) F-7, 
F-8, F-9, F-10 or F-80 (Sec. Sec.  239.37 through 239.41 of this 
chapter) shall be exempt from the operation of sections 310(a)(3) and 
310(a)(4), sections 310(b) through 316(a), and sections 316(c) through 
318(a) of the Act; provided that the trust indenture is subject to:
    (a) The Canada Business Corporations Act, R. S. C. 1985;
    (b) The Bank Act, R. S. C. 1985;
    (c) The Business Corporations Act, 1982 (Ontario), S. O. 1982; or
    (d) The Company Act, R.S.B.C. 1979, C. 59.

[56 FR 30077, July 1, 1991, as amended at 57 FR 36501, Aug. 13, 1992; 58 
FR 33190, June 16, 1993; 73 FR 983, Jan. 4, 2008]



Sec.  260.4d-10  Exemption for securities issued pursuant to Sec. 230.802
of this chapter.

    Any debt security, whether or not issued under an indenture, is 
exempt from the Act if made in compliance with Sec.  230.802 of this 
chapter.

[64 FR 61406, Nov. 10, 1999]



Sec.  260.4d-11  Exemption for security-based swaps offered and sold in
reliance on Rule 239 under the Securities Act of 1933 (17 CFR 230.239).

    Any security-based swap offered and sold in reliance on Rule 239 
under the Securities Act of 1933 (17 CFR 230.239), whether or not issued 
under an indenture, is exempt from the Act.

[77 FR 20549, Apr. 5, 2012]



Sec.  260.4d-12  Exemption for security-based swaps offered and sold in
reliance on Securities Act of 1933 Rule 240 (Sec.  230.240).

    Any security-based swap offered and sold in reliance on Sec.  
230.240 of this chapter, whether or not issued under an indenture, is 
exempt from the Act. This section will expire on February 11, 2018.

[82 FR 10707, Feb. 15, 2017]

                         Rules Under Section 305



Sec.  260.5a-1  Forms for statements of eligibility and qualification.

    (a) Form T-1 shall be used for statements of eligibility and 
qualification of corporations designated to act as trustees under trust 
indentures to be qualified pursuant to section 305 or 307 of the Act.
    (b) Form T-2 shall be used for statements of eligibility and 
qualification of individuals designated to act as trustees under trust 
indentures to be qualified pursuant to section 305 or 307 of the Act.



Sec.  260.5a-2  General requirements as to form and content of statements
of eligibility and qualification.

    Rules 7a-15 through 7a-37 (Sec. Sec.  260.7a-15 through 260.7a-37 of 
this chapter) under section 307 under the Trust Indenture Act shall be 
applicable to statements filed on Forms T-1, T-2, and T-6.

[56 FR 22320, May 15, 1991]



Sec.  260.5a-3  Number of copies; filing; signatures; binding.

    (a) Three copies of each statement of eligibility and qualification 
shall be filed with the registration statement or application for 
qualification.
    (b) At least the original of each statement of eligibility and 
qualification filed with the Commission shall be

[[Page 357]]

signed in the manner prescribed by the particular form.
    (c) Each statement of eligibility and qualification and the exhibits 
thereto shall be bound on the left-hand side in one or more parts, 
without stiff covers. The binding shall be made in such manner as to 
leave the reading matter legible.
    (d) The statement or statements shall be filed by the obligor upon 
the indenture securities as a separate part of the registration 
statement or application for qualification, as the case may be.

[6 FR 667, Jan. 30, 1941, as amended at 16 FR 8737, Aug. 29, 1951]



Sec.  260.5b-1  Application pursuant to section 305(b)(2) of the Trust
Indenture Act for determining eligibility of a person designated as 
trustee for offerings on a delayed basis.

    Forms T-1 and T-2 (17 CFR 269.1 and 269.2) shall be used for 
applications filed for the purpose of determining the eligibility under 
section 310(a) of the Act of a person designated as trustee for debt 
securities registered under the Securities Act of 1933 which are 
eligible to be issued, offered, or sold on a delayed basis by or on 
behalf of the registrant.

[56 FR 22320, May 15, 1991]



Sec.  260.5b-2  General requirements as to form and content of
applications.

    Rule 5a-2 (Sec.  260.5a-2 of this chapter) and rules 7a-15 through 
7a-37 [Sec. Sec.  260.7a-15 through 260.7a-37 of this chapter] shall be 
applicable to applications pursuant to rule 5b-1 (Sec.  260.56b-1 of 
this chapter).

[56 FR 22320, May 15, 1991]



Sec.  260.5b-3  Number of copies--Filing--Signatures.

    (a) Three copies of every application pursuant to rule 5b-1 (Sec.  
260.5b-1 of this chapter) and of every amendment thereto shall be filed 
with the Commission at its principal office by the issuer upon the 
indenture securities. Such application shall be filed no later than the 
second business day following the initial date of public offering or 
sales after effectiveness of the registration statement with respect to 
such securities, or transmitted by a means reasonably calculated to 
result in filing with the Commission by that date.
    (b) One copy shall be manually signed by the applicant's duly 
authorized officer (or individual customarily performing similar 
functions with respect to any organization, whether incorporated or 
unincorporated), or by the individual trustee, as applicable.

[56 FR 22320, May 15, 1991]

                         Rules Under Section 307

              Applications for Qualification of Indentures



Sec.  260.7a-1  Form for application.

    Form T-3 shall be used for applications for qualification of 
indentures pursuant to section 307(a).



Sec.  260.7a-2  Powers of agent for service named in application.

    Every applicant shall be deemed, in the absence of a statement to 
the contrary, to confer upon the agent for service the following powers:
    (a) A power to amend the application for qualification by altering 
the date of the proposed offering of the indenture securities.
    (b) A power to make application pursuant to Sec.  260.7 for the 
Commission's consent to the filing of an amendment.
    (c) A power to withdraw the application for qualification or any 
amendment thereto.
    (d) A power to consent to the entry of an order under section 8(b) 
of the Securities Act of 1933 (48 Stat. 79; 15 U.S.C. 77l), waiving 
notice and hearing, such order being entered without prejudice to the 
right of the applicant thereafter to have the order vacated upon a 
showing to the Commission that the application for qualification, as 
amended, is no longer incomplete or inaccurate on its face in any 
material respect.



Sec.  260.7a-3  Number of copies; filing; signatures; binding.

    (a) Three copies of the complete application shall be filed with the 
Commission at its principal office.
    (b) At least the original of each application filed with the 
Commission shall be signed in the manner prescribed by Form T-3 (Sec.  
269.3 of this chapter).

[[Page 358]]

    (c) The application proper and the exhibits thereto shall be bound 
on the left side in one or more parts, but without stiff covers. The 
binding shall be made in such manner as to leave the reading matter 
legible.

[16 FR 8737, Aug. 29, 1951]



Sec.  260.7a-4  Calculation of time.

    Saturdays, Sundays and holidays shall be counted in computing the 
effective date of applications for qualification filed under section 
307(a) of the Act. The twentieth day shall be deemed to begin at the 
expiration of nineteen periods of twenty-four hours each from 5:30 p.m., 
eastern standard time or eastern daylight-saving time, whichever is in 
effect at the principal office of the Commission on the date of filing.

[12 FR 2941, May 2, 1947]



Sec.  260.7a-5  Filing of amendments; number of copies.

    Except as provided in Sec.  260.7a-6, three copies of every 
amendment to an application shall be filed with the Commission.

[16 FR 8737, Aug. 29, 1951]



Sec.  260.7a-6  Telegraphic delaying amendments.

    An amendment altering the proposed date of the public offering may 
be made by the agent for service by telegram. In each case, such 
telegraphic amendment shall be confirmed within a reasonable time by the 
filing of three copies, one of which shall be signed by the agent for 
service. Such confirmation shall not be deemed an amendment.



Sec.  260.7a-7  Effective date of amendment filed under section 8(a)
of the Securities Act with the consent of the Commission.

    An applicant desiring the Commission's consent to the filing of an 
amendment with the effect provided in section 8(a) of the Securities Act 
of 1933 may apply for such consent at or before the time of filing the 
amendment. The application shall be signed by the applicant or the agent 
for service and shall state fully the grounds upon which made. The 
Commission's consent shall be deemed to be given and the amendment shall 
be treated as a part of the application for qualification upon the 
sending of written or telegraphic notice to that effect.



Sec.  260.7a-8  Effective date of amendment filed under section 8(a) 
of the Securities Act pursuant to order of Commission.

    An amendment made prior to the effective date of the application of 
qualification shall be deemed to be made pursuant to an order of the 
Commission within the meaning of section 8(a) of the Securities Act of 
1933 so as to be treated as part of the application for qualification 
only when the Commission shall, after the filing of such amendment, find 
that it has been filed pursuant to its order.



Sec.  260.7a-9  Delaying amendments.

    (a) An amendment in the following form filed with an application for 
qualification, or as an amendment to such an application which has not 
become effective, shall be deemed to be filed on such date or dates as 
may be necessary to delay the effective date of such application for the 
period specified in such amendment:

    The obligor hereby amends this application for qualification on such 
date or dates as may be necessary to delay its effectiveness until (i) 
the 20th day after the filing of a further amendment which specifically 
states that it shall supersede this amendment, or (ii) such date as the 
Commission, acting pursuant to section 307(c) of the Act, may determine 
upon the written request of the obligor.

    (b) An amendment pursuant to paragraph (a) of this section which is 
filed with an application for qualification shall be set forth on the 
facing page thereof. Any such amendment filed after the filing of the 
application may be made by letter or telegram and may be signed by the 
agent for service. Any amendment filed to supersede an amendment filed 
pursuant to paragraph (a) of this section may also be made by letter or 
telegram. Every such telegraphic amendment shall be confirmed in writing 
within a reasonable time by filing a signed copy of the amendment. Such 
confirmation shall not be deemed an amendment.

[30 FR 12387, Sept. 29, 1965]

[[Page 359]]

General Requirements as to Form and Content of Applications, Statements 
                               and Reports

                                 General



Sec.  260.7a-15  Scope of Sec. Sec.  260.7a-15 to 260.7a-37.

    The rules contained in Sec. Sec.  260.7a-15 to 260.7a-37 shall 
govern applications for exemption filed pursuant to section 304(c) or 
304(d) of the Act, applications for qualification of indentures filed 
pursuant to section 307, statements of eligibility and qualifications of 
trustees filed pursuant to section 305, 307, or 310(a) of the Act, 
applications for the stay of the trustee's duty to resign filed pursuant 
to section 310(b) of the Act, and reports filed pursuant to section 
314(a) of the Act.

[56 FR 22320, May 15, 1991]

                           Formal Requirements



Sec.  260.7a-16  Inclusion of items, differentiation between items and
answers, omission of instructions.

    Except as expressly provided otherwise in the particular form, the 
application, statement, or report shall contain all of the items of the 
form as well as the answers thereto. The items shall be made to stand 
out from the answers by variation in margin or type or by other means. 
All instructions shall be omitted.

[6 FR 981, Feb. 15, 1941]



Sec.  260.7a-17  Quality, color and size of paper.

    The application, statement or report, including all amendments and, 
where practicable, all papers and documents filed as a part thereof, 
shall be on good quality, unglazed, white paper, no larger than 8\1/2\ x 
11 inches in size. To the extent that the reduction of larger documents 
would render them illegible, such documents may be filed on paper larger 
than 8\1/2\ x 11 inches in size.

[47 FR 58239, Dec. 30, 1982]



Sec.  260.7a-18  Legibility.

    (a) The application, statement or report, including all amendments 
and, where practicable, all papers and documents filed as a part 
thereof, shall be clear, easily readable and shall be typewritten, 
mimeographed, printed or prepared by any similar process which, in the 
opinion of the Commission, produces copies suitable for repeated 
photocopying and microfilming.
    (b) If printed, the application, statement or report shall be in 
type not smaller than 10-point, roman type, at least two points leaded.
    (c) All printing, mimeographing, typing or other markings shall be 
in black ink, except that debits in credit categories and credits in 
debit categories may be set forth in red or black ink, but shall in all 
cases be designated in such manner as to be clearly distinguishable as 
such on photocopies.

[5 FR 293, Jan. 25, 1940, as amended at 47 FR 58239, Dec. 30, 1982]



Sec.  260.7a-19  Margin for binding.

    The application, statement or report, including all amendments and, 
where practicable, all papers and documents filed as a part thereof, 
shall have a back or stitching margin of at least 1\1/2\ inches for 
binding.



Sec.  260.7a-20  Riders; inserts.

    Riders shall not be used. If the application, statement or report is 
typed on a printed form, and the space provided for the answer to any 
given item is insufficient, reference shall be made in such space to a 
full insert page or pages on which the item number and item shall be 
restated and a complete answer given.

                   General Requirements as to Contents



Sec.  260.7a-21  Clarity.

    The answer to each item of the particular form shall be so worded as 
to be intelligible without the necessity of referring to the 
instructions or to this part.



Sec.  260.7a-22  Information unknown or not reasonably available.

    Information required shall be given insofar as it is known or can be 
obtained by reasonable investigation. Responsibility for the accuracy or 
completeness of information obtained from persons other than affiliates 
may be disclaimed. As to information which is

[[Page 360]]

unknown and is unavailable after reasonable investigation, there shall 
be included a statement as to the nature of the investigation.



Sec.  260.7a-23  Statements required where item is inapplicable or where 
answer is ``none''.

    If any item is inapplicable or the answer is ``none'', a statement 
to such effect shall be made.



Sec.  260.7a-24  Words relating to periods of time in the past.

    Unless the context clearly shows otherwise, wherever any fixed 
period of time in the past is indicated, such period shall be computed 
from the date of filing with the Commission.



Sec.  260.7a-25  Words relating to the future.

    Unless the context clearly shows otherwise, whenever words relate to 
the future, they have reference solely to present intention.



Sec.  260.7a-26  Disclaimer of control.

    If the existence of control is open to reasonable doubt in any 
instance, the applicant or the trustee, as the case may be, may disclaim 
the existence of control and any admission thereof; in such case, 
however, a statement shall be made of the material facts pertinent to 
the possible existence of control.



Sec.  260.7a-27  Title of securities.

    Where the title of securities is required to be furnished in an 
application, statement or report, the following requirements shall be 
met:
    (a) In the case of shares, there shall be given the full designation 
of the class of shares and, if not included therein, the par or stated 
value, if any, and the rate of dividends, if fixed, and whether 
cumulative or non-cumulative.
    (b) In the case of funded debt, there shall be given the full 
designation of the issue and, if not included therein, the rate of 
interest and the date of maturity. If the issue matures serially, a 
brief indication shall be given of the serial maturities: For example, 
``maturing serially from 1950 to 1960''. If the payment of interest or 
principal is contingent, such contingency shall be appropriately 
indicated. The rate of interest, however, may be omitted from the title 
of indenture securities on the facing page of Form T-1 and Form T-2, if 
the rate of interest is not determined at the time these forms are 
filed.
    (c) In the case of other securities, a similar designation shall be 
given.

[5 FR 293, Jan. 25, 1940, as amended at 9 FR 750, Jan. 20, 1944]

                       Incorporation by Reference



Sec.  260.7a-28  Incorporation of matter in application, statement or
report, other than exhibits, as answer to item.

    Matter contained in any part of the application, statement or 
report, other than exhibits, may be incorporated by reference as answer, 
or partial answer, to any item in the same application, statement or 
report.



Sec.  260.7a-29  Incorporation of exhibits as such.

    (a) Any exhibit or part thereof previously or concurrently filed 
with the Commission pursuant to any Act administered by the Commission, 
may, subject to the limitations of Sec.  228.10(f) and Sec.  229.10(d) 
of this chapter, be incorporated by reference as an exhibit to any 
application, statement or report filed with the Commission by the same 
or any other person. Any exhibit or part thereof so filed with a trustee 
pursuant to the Trust Indenture Act of 1939 may be incorporated by 
reference as an exhibit to any report filed with such trustee pursuant 
to section 314(a) of that Act by the same or any other person.
    (b) If any modification has occurred in the text of any exhibit 
incorporated by reference since the filing thereof, there shall be filed 
with the reference a statement containing the text of any such 
modification and the date thereof.
    (c) If the number of copies of any exhibit previously or 
concurrently filed is less than the number required to be filed with the 
application, statement or report which incorporates such exhibit, there 
shall be filed with the application, statement or report as many 
additional copies of the exhibit as may be

[[Page 361]]

necessary to meet the requirements of such application, statement or 
report.

[6 FR 667, Jan. 30, 1941, as amended at 29 FR 2421, Feb. 13, 1964; 60 FR 
32825, June 23, 1995; 76 FR 71877, Nov. 21, 2011]



Sec.  260.7a-30  Identification of material incorporated; form of
incorporation.

    In each case of incorporation by reference, the matter incorporated 
shall be clearly identified in the reference. An express statement shall 
be made to the effect that the specified matter is incorporated in the 
application, statement or report at the particular place where the 
information is required.



Sec.  260.7a-31  Incorporation by reference of contested material.

    Notwithstanding any particular provision permitting incorporation by 
reference, no application, statement or report shall incorporate by 
reference any matter which is subject, at the time of filing the 
application, statement or report, to pending proceedings under section 
8(b) or 8(d) of the Securities Act of 1933 (whether pursuant to the 
provisions of the Trust Indenture Act of 1939, or otherwise) or to an 
order entered under either of those sections.



Sec.  260.7a-32  Incorporation by reference rendering document incomplete,
unclear, or confusing.

    Notwithstanding any particular provision permitting incorporation by 
reference, the Commission may refuse to permit such incorporation in any 
case in which in its judgment such incorporation would render the 
application, statement or report incomplete, unclear or confusing.

                                Exhibits



Sec.  260.7a-33  Additional exhibits.

    Any application, statement or report may include exhibits in 
addition to those required by the particular form. Such additional 
exhibits shall be so marked as to indicate clearly the items to which 
they refer.



Sec.  260.7a-34  Omission of substantially identical documents.

    In any case where two or more documents required to be filed as 
exhibits are substantially identical in all material respects except as 
to the parties thereto, dates of execution or other details, a copy of 
only one of such documents need be filed, with a schedule identifying 
the documents omitted and setting forth the material details in which 
such documents differ from the document, a copy of which is filed: 
Provided, however, That the Commission may at any time in its discretion 
require the filing of copies of any documents so omitted.

                               Amendments



Sec.  260.7a-35  Formal requirements as to amendments.

    (a) Amendments to an application, statement or report shall comply 
with Sec. Sec.  260.7a-17 to 260.7a-19.
    (b) All amendments relating to a particular application, statements 
or report shall be numbered consecutively in the order in which they are 
filed with the Commission. Amendments shall be numbered separately for 
each separate application, statement or report.
    (c) Every amendment to an item of an application, statement or 
report shall contain the item number, the caption and the text of the 
item being amended and the complete amended answer thereto.
    (d) If at any time the application, statement or report becomes 
unclear or confusing because of the number of amendments filed or the 
length or complexity thereof, there may be filed, and at the written 
request of the Commission there shall be filed, a complete new 
application, statement or report, as amended, but no additional copies 
of exhibits need be filed.



Sec.  260.7a-36  Signatures to amendments.

    Subject to Sec.  260.7a-2, at least the original of every amendment 
to an application, statement or report shall be signed in the manner 
prescribed by the particular form on which the application, statement or 
report was filed.

[16 FR 8737, Aug. 29, 1951]

[[Page 362]]

   Inspection and Publication of Applications, Statements and Reports



Sec.  260.7a-37  Inspection of applications, statements and reports.

    All applications, statements and reports are available for public 
inspection during business hours at the principal office of the 
Commission.

[16 FR 8737, Aug. 29, 1951]

                         Rule Under Section 310



Sec.  260.10a-1  Application for determining eligibility of a foreign
person to act as sole trustee pursuant to section 310(a)(1) of the Act.

    Form T-6 (17 CFR 269.9 of this chapter) shall be used for an 
application filed to obtain authorization for a corporation or other 
person organized and doing business under the laws of a foreign 
government to act as sole trustee under an indenture qualified or to be 
qualified under the Act.

[56 FR 22320, May 15, 1991]



Sec.  260.10a-2  General requirements as to form and content of 
applications.

    Rule 5a-2 (Sec.  260.5a-2 of this chapter) and rules 7a-15 through 
7a-37 [Sec. Sec.  260.7a-15 through 260.7a-37 of this chapter] under 
section 307 of the Act shall be applicable to applications on Form T-6 
pursuant to section 310(a)(1) of the Act and Rule 10a-1 (Sec.  260.10a-1 
of this chapter).

[56 FR 22320, May 15, 1991]



Sec.  260.10a-3  Number of copies--Filing--Signatures.

    (a) Three copies of every application pursuant to rule 10a-1 (Sec.  
260.10a-1 of this chapter) and of every amendment thereto shall be filed 
with the Commission at its principal office.
    (b) One copy shall be manually signed by the applicant's duly 
authorized officer (or individual customarily performing similar 
functions with respect to any organization, whether incorporated or 
unincorporated).

[56 FR 22320, May 15, 1991]



Sec.  260.10a-4  Consent of trustee to service of process.

    At the time of filing an application pursuant to Rule 10a-1 (Sec.  
260.10a-1 of this chapter) and at such time as it files a statement of 
eligibility to act as trustee under an indenture qualified under the 
Act, an indenture trustee organized and doing business under the laws of 
a foreign government shall furnish to the Commission on Form F-X (Sec.  
249.250 of this chapter) a written consent of the trustee and power of 
attorney designating a U. S. person with an address in the United States 
as agent upon whom may be served any process, pleadings, subpoenas or 
other papers in any Commission investigation or administrative 
proceeding and any civil suit or action brought against the trustee or 
to which the trustee has been joined as defendant or respondent, in any 
appropriate court in any place subject to the jurisdiction of any state 
or of the United States, or of the District of Columbia or Puerto Rico, 
where the investigation, proceeding or cause of action arises out of or 
relates to or concerns the securities in relation to which the indenture 
trustee proposes to act as trustee pursuant to any rule or order under 
section 310(a) of the Act and stipulates and agrees that any such suit, 
action or proceeding may be commenced by the service of process upon 
said agent for service of process, and that such service shall be taken 
and held in all courts to be as valid and binding as if due personal 
service thereof had been made.

[56 FR 30077, July 1, 1991]



Sec.  260.10a-5  Eligibility of Canadian Trustees.

    (a) Subject to paragraph (b) of this section, any trust company, 
acting as trustee under an indenture qualified or to be qualified under 
the Act and filed in connection with offerings on a registration 
statement on Form S-1 (Sec.  239.11 of this chapter) F-7, F-8, F-9, F-10 
or F-80 (Sec. Sec.  239.37 through 239.41 of this chapter) that is 
incorporated and regulated as a trust company under the laws of Canada 
or any of its political subdivisions and that is subject to supervision 
or examination pursuant to the Trust Companies Act (Canada), R.S.C. 
1985, or the Canada Deposit Insurance Corporation Act, R.S.C. 1985 shall 
not be subject to the requirement of domicile in the United States under

[[Page 363]]

section 310(a) of the Act (15 U.S.C. 77jjj(a)).
    (b) Each trustee eligible for appointment under this section (17 CFR 
260.10a-5) shall file as part of the registration statement for the 
securities to which the trusteeship relates a consent to service of 
process and power of attorney on Form F-X (Sec.  269.5 of this chapter).

[56 FR 30077, July 1, 1991, as amended at 57 FR 36501, Aug. 13, 1992; 58 
FR 33191, June 16, 1993; 73 FR 983, Jan. 4, 2008]



Sec.  260.10b-1  Calculation of percentages.

    The percentages of voting securities and other securities specified 
in section 310(b) of the Act shall be calculated in accordance with the 
following provisions:
    (a) A specified percentage of the voting securities of a person 
means such amount of the outstanding voting securities of such person as 
entitles the holder or holders thereof to cast such specified percentage 
of the aggregate votes which the holders of all the outstanding voting 
securities of such person are entitled to cast in the direction or 
management of the affairs of such person.
    (b) A specified percentage of a class of securities of a person 
means such percentage of the aggregate amount of securities of the class 
outstanding.
    (c) The term amount, when used in regard to securities, means the 
principal amount if relating to evidences of indebtedness, the number of 
shares if relating to capital shares, and the number of units if 
relating to any other kind of security.
    (d) The term outstanding means issued and not held by or for the 
account of the issuer. The following securities shall not be deemed 
outstanding within the meaning of this definition:
    (1) Securities of an issuer held in a sinking fund relating to 
securities of the issuer of the same class;
    (2) Securities of an issuer held in a sinking fund relating to 
another class of securities of the issuer, if the obligation evidenced 
by such other class of securities is not in default as to principal or 
interest or otherwise;
    (3) Securities pledged by the issuer thereof as security for an 
obligation of the issuer not in default as to principal or interest or 
otherwise;
    (4) Securities held in escrow is placed in escrow by the issuer 
otherwise;

Provided, however, That any voting securities of an issuer shall be 
deemed outstanding if any person other than the issuer is entitled to 
exercise the voting rights thereof.
    (e) A security shall be deemed to be of the same class as another 
security if both securities confer upon the holder or holders thereof 
substantially the same rights and privileges: Provided, however, That, 
in the case of secured evidences of indebtedness, all of which are 
issued under a single indenture, differences in the interest rates or 
maturity dates of various series thereof shall not be deemed sufficient 
to constitute such series different classes: And, provided further, 
That, in the case of unsecured evidences of indebtedness, differences in 
the interest rates or maturity dates thereof shall not be deemed 
sufficient to constitute them securities of different classes, whether 
or not they are issued under a single indenture.



Sec.  260.10b-2  Applications under section 310(b)(1)(ii).

    If an application filed with the Commission pursuant to clause (ii) 
of section 310(b)(1) (53 Stat. 1157; 15 U.S.C. 77jjj) of the Act is 
based upon the claim that no material conflict of interest will be 
involved because prior to or concurrently with the delivery of the 
securities to be issued under the indenture to be qualified all 
securities outstanding under the other indenture or indentures, under 
which the person designated to act as indenture trustee is also a 
trustee, will be discharged or:
    (a) Funds sufficient to discharge the securities will be deposited 
in trust for that purpose.
    (b) The securities, if not presently maturing, will be called for 
redemption or irrevocable power to make the call will be given to some 
third person.
    (c) All liens securing the securities will be released or all steps 
necessary to effect the release at the maturity or redemption date will 
be taken.

The application shall be deemed to have been granted unless, within 7 
days

[[Page 364]]

after it is filed, the Commission orders a hearing thereon.

[6 FR 808, Feb. 7, 1941]



Sec.  260.10b-3  Applications relative to affiliations between trustees
and underwriters.

    (a) Any person proposing to act as trustee under indentures to be 
qualified under the act may make application for a finding by the 
Commission as to whether such person is or is not an affiliate of any 
specified person who may be named as an underwriter for an obligor in 
any registration statement or application for qualification subsequently 
filed with the Commission.
    (b) Every application pursuant to this section shall be filed in 
triplicate and shall contain a statement of the material facts necessary 
to enable the Commission to make the finding request. The applicant may 
incorporate by reference in the application any information or documents 
contained in a statement of eligibility and qualification of the 
applicant filed with the Commission. The Commission may with the consent 
of the applicant or at the applicant's request, make a part of the 
record the record in any prior proceeding in which the same issues were 
involved.
    (c) A hearing will be held, after confirmed telegraphic notice to 
the applicant, upon every application filed pursuant to this section.
    (d) Every finding by the Commission pursuant to this section shall 
be limited to the facts disclosed in the application and in the hearing 
thereon, and shall be made solely for the purposes of sections 305(b) 
and 307(c) of the Act.

[6 FR 2376, May 13, 1941]



Sec.  260.10b-4  Application for stay of trustee's duty to resign pursuant
to section 310(b) of the Act.

    (a) Three copies of every application for a stay of a trustee's duty 
to resign under section 310(b) of the Act and of every amendment thereto 
shall be filed with the Commission at its principal office.
    (b) One copy shall be manually signed by a duly authorized officer 
of the applicant (or individual customarily performing similar functions 
with respect to an organization, whether incorporated or unincorporated) 
or by a natural person seeking a stay under section 310(b) of the Act.
    (c) Such applications shall be on paper no larger than 8\1/2\ x 11 
inches in size. If reduction of large documents would render them 
illegible, such documents may be filed on paper larger than 8\1/2\ x 11 
inches in size. The left margin shall be at least 1\1/2\ inches wide and 
if the application is bound, it shall be bound on the left side.
    (d) The application shall be typed, printed, copied, or prepared by 
a process which produces copies suitable for repeated photocopying and 
microfilming. All typewritten or printed matter shall be set forth in 
black ink to permit photocopying. If printed, the application shall be 
in type not smaller than 10-point, roman type, at least two points 
leaded.
    (e) Rules 7a-28 through 7a-32 [Sec. Sec.  260.7a-28 through 260.7a-
32 of this chapter] relating to incorporation by reference shall be 
applicable to applications for stay pursuant to section 310(b) of the 
Act.

[56 FR 22320, May 15, 1991]



Sec.  260.10b-5  Content.

    (a) Each application for a stay of a trustee's duty to resign under 
section 310(b) of the Act shall contain the name, address, and telephone 
number of each applicant and the name, address, and telephone number of 
any person to which such applicant wishes any questions regarding the 
application to be directed.
    (b) Each application shall contain a statement of the reasons why 
the applicant is deemed to be entitled to a stay of resignation with 
reference to the provisions of section 310(b) of the Act. The statement 
shall address the nature of the default, the reasonableness of the 
period before the default will be cured or waived, the procedures to be 
used to cure or obtain a waiver of the default, and the reasons why a 
stay will not be inconsistent with the interests of the holders of the 
indenture securities.

[56 FR 22321, May 15, 1991]

[[Page 365]]



Sec.  260.10b-6  Notices--Exemptive Application Procedure.

    (a) A proposed notice of the proceeding indicated by the filing of 
the application shall accompany each application for a stay of a 
trustee's duty to resign under section 310(b) as an exhibit thereto and 
if necessary shall be modified to reflect any amendments to such 
application.
    (b) Notice of the initiation of the proceeding will be published in 
the Federal Register and will indicate the earliest date upon which an 
order disposing of the matter may be entered. The notice will also 
provide that any interested person may, within the period specified 
therein, submit to the Commission in writing any facts bearing upon the 
desirability of a hearing on the matter, and may request that a hearing 
be held stating the person's reasons therefore and the nature of his or 
her interest in the matter.
    (c) An order disposing of the matter will be issued following the 
expiration of the period of time referred to in paragraph (b) of this 
section, unless the Commission thereafter orders a hearing on the 
matter.
    (d) The Commission will order a hearing on the matter, if it appears 
that a hearing is necessary or appropriate in the public interest or for 
the protection of investors:
    (1) Upon the request of any interested person, or
    (2) Upon its own motion.

[56 FR 22321, May 15, 1991]

                         Rules Under Section 311



Sec.  260.11b-4  Definition of ``cash transaction'' in section 311(b)(4).

    The term ``cash transaction'', as used in section 311(b)(4), means 
any transaction in which full payment for goods or securities sold is 
made within 7 days after delivery of the goods or securities in currency 
or in checks or other orders drawn upon banks or bankers and payable 
upon demand.



Sec.  260.11b-6  Definition of ``self-liquidating paper'' in 
section 311(b)(6).

    The term self-liquidating paper, as used in section 311(b)(6) of the 
Act, means any draft, bill of exchange, acceptance or obligation which 
is made, drawn, negotiated or incurred by the obligor for the purpose of 
financing the purchase, processing, manufacture, shipment, storage or 
sale of goods, wares or merchandise and which is secured by documents 
evidencing title to, possession of or a lien upon the goods, wares or 
merchandise or the receivables or proceeds arising from the sale of the 
goods, wares or merchandise previously constituting the security: 
Provided, The security is received by the trustee simultaneously with 
the creation of the creditor relationship with the obligor arising from 
the making, drawing, negotiating or incurring of the draft, bill of 
exchange, acceptance or obligation.

                         Rules Under Section 314

                            Periodic Reports



Sec.  260.14a-1  Application of Sec. Sec.  260.7a-15 to 260.7a-38.

    Sections 260.7a-15 to 260.7a-38 shall be applicable to annual 
reports under section 314(a).



Sec.  260.19a-1  Compliance with Section 314(a)(1) of the Trust Indenture
Act for certain eligible indenture obligors.

    (a) This section is applicable only to an ``eligible indenture 
obligor'' as defined in paragraph (b) of this section.
    (b) For purposes of paragraph (c) of this section, an ``eligible 
indenture obligor'' is any obligor that:
    (1) Is required to file reports with the Commission pursuant to 
Section 13 or Section 15(d) of the Securities Exchange of 1934 (15 
U.S.C. Sec. Sec.  78m or 78o(d)) (the ``Exchange Act''); and
    (2) May rely on any of the provisions of Release No. 34-45589 (March 
18, 2002) (which may be viewed on the Commission's website at 
www.sec.gov) with regard to the filing of reports with the Commission 
pursuant to Section 13 or Section 15(d) of the Exchange Act (14 U.S.C. 
78m or 78o(d)).
    (c) An ``eligible indenture obligor'' that files with the indenture 
trustee those Exchange Act reports filed with the Commission in 
accordance with the Release referred to in paragraph (b)(2) of this 
section has met its duty under Section 314(a)(1) of the Act (15 U.S.C. 
77nnn(a)(1)) to file with the indenture

[[Page 366]]

trustee all reports required to be filed with the Commission pursuant to 
Section 13 or Section 15(d) of the Securities Exchange Act of 1934.

[67 FR 13538, Mar. 22, 2002, as amended at 76 FR 71877, Nov. 21, 2011]



          PART 261_INTERPRETATIVE RELEASES RELATING TO THE TRUST INDENTURE 
          ACT OF 1939 AND GENERAL RULES AND REGULATIONS THEREUNDER--Table of Contents

----------------------------------------------------------------------------------------------------------------
                                                      Release
                      Subject                           No.         Date            Fed. Reg. Vol. and Page
----------------------------------------------------------------------------------------------------------------
Opinion of the General Counsel relating to                 16   Nov. 14, 1941  11 FR 10989.
 application of section 310(b) where trustee under
 one indenture is trustee under another indenture
 for securities of an affiliate of the obligor.
Opinion of the Chief Counsel to the Corporation            30   Aug. 28, 1944   Do.
 Finance Division relating to when-issued trading
 of securities the issuance of which is subject to
 approval by a Federal district court under Chapter
 X of the Bankruptcy Act.
Opinion of the Chief Counsel to the Corporation            31    Jan. 4, 1945  11 FR 10990.
 Finance Division relating to when-issued trading
 of securities the issuance of which has already
 been approved by a Federal district court under
 Chapter X of the Bankruptcy Act.
Interpretation with reference to the securities of         37   June 25, 1947  12 FR 4450.
 the International Bank for Reconstruction and
 Development.
Statement of the Commission to clarify the meaning        227   Jan. 25, 1966  31 FR 1005.
 of ``beneficial ownership of securities'' as
 relates to beneficial ownership of securities held
 by family members.
Statement of the Commission setting the date of May       229   Feb. 14, 1966  31 FR 3175.
 1, 1966 after which filings must reflect
 beneficial ownership of securities held by family
 members.
Commissions statement re exemption of certain             284    Nov. 6, 1970  35 FR 17990.
 industrial revenue bonds from registration, etc.
 requirements in view of amendment of Securities
 Act of 1933 and of Securities Exchange Act of 1934
 by ``section 401'' (Pub. L. 91-1037).
Publication of the Commission's procedure to be           289   Jan. 25, 1971  36 FR 2600.
 followed if requests are to be met for no action
 or interpretative letters and responses thereto to
 be made available for public use.
Offerings of debt securities pursuant to trust            524   Apr. 25, 1979  44 FR 26739.
 indentures.
No-action position respecting public offerings of         542   Oct. 16, 1979  44 FR 61941.
 debt securities registered on Form SB-2 without
 qualification of an indenture under the Trust
 Indenture Act.
Simplified form of trust indenture.................       605    Jan. 8, 1981  46 FR 3500.
Retail repurchase agreements by banks and Savings         658  Sept. 25, 1981  46 FR 48637.
 and Loan Associations.
Application of the registration provisions of the        2038  Sept. 23, 1986  51 FR 34462.
 Securities Act of 1933 to the offer and sale of
 securities by United States branches and agencies
 of foreign banks.
----------------------------------------------------------------------------------------------------------------



PART 269_FORMS PRESCRIBED UNDER THE TRUST INDENTURE ACT OF 1939--Table of Contents



Sec.
269.0-1 Availability of forms.
269.1 Form T-1, for statement of eligibility and qualification for 
          corporate trustees.
269.2 Form T-2, for statement of eligibility and qualification for 
          individual trustees.
269.3 Form T-3, for application for qualification of trust indentures.
269.4 Form T-4, for application for exemption pursuant to section 304(c) 
          of the Act.
269.5 Form F-X, for appointment of agent for service of process by 
          issuers registering securities on Form F-8, F-9, F-10 or F-80 
          (Sec. Sec.  239.38, 239.39, 239.40 or 239.41 of this chapter), 
          or registering securities or filing periodic reports on Form 
          40-F (Sec.  249.240f of this chapter), or by any issuer or 
          other non-U.S. person filing tender offer documents on 
          Schedule 13E-4F, 14D-1F or 14D-9F (Sec. Sec.  240.13e-102, 
          240.14d-102 or 240.14d-103 of this chapter), or by any non-
          U.S. person acting as trustee with respect to securities 
          registered on Form F-7 (Sec.  239.37 of this chapter), F-8, F-
          9, F-10 or F-80.
269.6 [Reserved]
269.7 Form ID, uniform application for access codes to file on EDGAR.
269.8 Form SE, form for submission of paper format exhibits by 
          electronic filers.
269.9 Form T-6 for application under section 310(a)(1) of the Trust 
          Indenture Act for determination of the eligibility of a 
          foreign person to act as institutional trustee.
269.10 Form TH--Notification of reliance on temporary hardship 
          exemption.


[[Page 367]]


    Authority: 15 U.S.C. 77ddd(c), 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77sss, and 78ll(d), unless otherwise noted.

    Source: 33 FR 19002, Dec. 20, 1968, unless otherwise noted.



Sec.  269.0-1  Availability of forms.

    (a) This part identifies and describes the forms prescribed for use 
under the Trust Indenture Act of 1939.
    (b) Any person may obtain a copy of any form prescribed for use in 
this part by written request to the Securities and Exchange Commission, 
100 F Street, NE., Washington, DC 20549. Any person may inspect the 
forms at this address and at the Commission's regional offices. (See 
Sec.  200.11 of this chapter for the addresses of SEC regional offices.)

[46 FR 17757, Mar. 20, 1981, as amended at 47 FR 26820, June 22, 1982; 
59 FR 5946, Feb. 9, 1994; 73 FR 983, Jan. 4, 2008]



Sec.  269.1  Form T-1, for statement of eligibility and qualification 
for corporate trustees.

    This form shall be filed pursuant to Rule 5a-1(a) (Sec.  260.5a-1(a) 
of this chapter) for statements of eligibility and qualification of 
corporations designated to act as trustees under thrust indentures to be 
qualified pursuant to section 305 or 307 of the Trust Indenture Act of 
1939.

    Editorial Note: For Federal Register citations affecting Form T-1, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.2  Form T-2, for statement of eligibility and qualification 
for individual trustees.

    This form shall be filed pursuant to Rule 5a-1(b) (Sec.  260.5a-1(b) 
of this chapter) for statements of eligibility and qualification of 
individuals designated to act as trustees under trust indentures to be 
qualified pursuant to section 305 or 307 of the Trust Indenture Act of 
1939. Under sections 307, 308, 309, 310 and 319 of the Trust Indenture 
Act of 1939 (17 CFR part 260), the Commission is authorized to solicit 
the information required to be supplied by this form for statements of 
eligibility and qualification of individuals designated to act as 
trustees. Disclosure of the information specified in this form is 
mandatory before processing statements of eligibility and qualification. 
The information will be used for the primary purpose of determining 
relationships of trustees and whether there are any conflicting 
interests. This statement will be made a matter of public record. 
Therefore, any information given will be available for inspection by any 
member of the public. Because of the public nature of the information, 
the Commission can utilize it for a variety of purposes, including 
referral to other governmental authorities or securities self-regulatory 
organizations for investigatory purposes or in connection with 
litigation involving the Federal securities laws or other civil, 
criminal or regulatory statutes or provisions. Failure to disclose the 
information requested by this form may result in enforcement action by 
the Commission to compel compliance with the Federal securities laws.

[40 FR 55320, Nov. 28, 1975, as amended at 62 FR 35342, July 1, 1997]

    Editorial Note: For Federal Register citations affecting Form T-2, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.3  Form T-3, for application for qualification of trust
indentures.

    This form shall be filed pursuant to Rule 7a-1 (Sec.  260.7a-1 of 
this chapter) for applications for qualification of indentures pursuant 
to section 307(a) of the Trust Indenture Act of 1939, but only when 
securities to be issued thereunder are not required to be registered 
under the Securities Act of 1933 (15 U.S.C. 77a et seq.).

    Editorial Note: For Federal Register citations affecting Form T-3, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.4  Form T-4, for application for exemption pursuant to 
section 304(c) of the Act.

    This form shall be filed pursuant to Rule 4c-1 (Sec.  260.4c-1 of 
this chapter) for applications for exemption filed pursuant to section 
304(c) of the Trust Indenture Act of 1939.

[[Page 368]]


    Editorial Note: For Federal Register citations affecting Form T-4, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.5  Form F-X, for appointment of agent for service of process 
by issuers registering securities on Form F-8, F-9, F-10 or F-80 (Sec. Sec.  239.38, 
          239.39, 239.40 or 239.41 of this chapter) , or registering 
          securities or filing periodic reports on Form 40-F (Sec.  
          249.240f of this chapter) , or by any issuer or other non-U.S. 
          person filing tender offer documents on Schedule 13E-4F, 14D-
          1F or 14D-9F (Sec. Sec.  240.13e-102, 240.14d-102 or 240.14d-
          103 of this chapter), or by any non-U.S. person acting as 
          trustee with respect to securities registered on Form F-7 
          (Sec.  239.37 of this chapter) , F-8, F-9, F-10 or F-80.

    Form F-X shall be filed with the Commission:
    (a) By any issuer registering securities on Form F-8, F-9, F-10 or 
F-80 under the Securities Act of 1933;
    (b) By any issuer registering securities on Form 40-F under the 
Securities Exchange Act of 1934;
    (c) By any issuer filing a periodic report on Form 40-F, if it has 
not previously filed a Form F-X in connection with the class of 
securities in relation to which the obligation to file a report on Form 
40-F arises;
    (d) By any issuer or other non-U.S. person filing tender offer 
documents on Schedule 13E-4F, 14D-1F or 14D-9F; and
    (e) By non-U.S. person acting as trustee with respect to securities 
registered on Form F-7, F-8, F-9, F-10 or F-80.

[56 FR 30078, July 1, 1991]

    Editorial Note: For Federal Register citations affecting Form F-X, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.6  [Reserved]



Sec.  269.7  Form ID, uniform application for access codes to file on EDGAR.

    Form ID must be filed by registrants, third party filers, or their 
agents, to request the following access codes to permit filing on EDGAR:
    (a) Central Index Key (CIK)--uniquely identifies each filer, filing 
agent, and training agent.
    (b) CIK Confirmation Code (CCC)--used in the header of a filing in 
conjunction with the CIK of the filer to ensure that the filing has been 
authorized by the filer.
    (c) Password (PW)--allows a filer, filing agent or training agent to 
log on to the EDGAR system, submit filings, and change its CCC.
    (d) Password Modification Authorization Code (PMAC)--allows a filer, 
filing agent or training agent to change its Password.

[69 FR 22710, Apr. 26, 2004, as amended at 86 FR 25805, May 11, 2021]

    Editorial Note: For Federal Register citations affecting Form ID, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.8  Form SE, form for submission of paper format exhibits by
electronic filers.

    This form shall be used by an electronic filer for the submission of 
any paper format document relating to an otherwise electronic filing, as 
provided in Rule 311 of Regulation S-T (Sec.  232.311 of this chapter).

[58 FR 14687, Mar. 18, 1993]

    Editorial Note: For Federal Register citations affecting Form SE, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  269.9  Form T-6 for application under section 310(a)(1) of the 
Trust Indenture Act for determination of the eligibility of a foreign 
person to act as institutional trustee.

    This form shall be used for the filing of an application pursuant to 
rule 10a-1 [Sec.  260.10a-1 of this chapter] to obtain authorization for 
a corporation or other person organized and doing business under the 
laws of a foreign government to act as sole trustee under an indenture 
qualified or to be qualified under the Act.

[56 FR 22321, May 15, 1991]

    Editorial Note: For Federal Register citations affecting Form T-6, 
see the List of CFR Sections Affected, which appears in the

[[Page 369]]

Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  269.10  Form TH--Notification of reliance on temporary hardship 
exemption.

    Form TH shall be filed by any electronic filer who submits to the 
Commission, pursuant to a temporary hardship exemption, a document in 
paper format that otherwise would be required to be submitted 
electronically, as prescribed by Rule 201(a) of Regulation S-T (Sec.  
232.201(a) of this chapter).

[58 FR 14687, Mar. 18, 1993]

    Editorial Note: For Federal Register citations affecting Form TH, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



PART 270_RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940-
-Table of Contents



Sec.
270.0-1 Definition of terms used in this part.
270.0-2 General requirements of papers and applications.
270.0-3 Amendments to registration statements and reports.
270.0-4 Incorporation by reference.
270.0-5 Procedure with respect to applications and other matters.
270.0-8 Payment of filing fees.
270.0-9 [Reserved]
270.0-10 Small entities under the Investment Company Act for purposes of 
          the Regulatory Flexibility Act.
270.0-11 Customer identification programs.
270.2a-1 Valuation of portfolio securities in special cases.
270.2a-2 Effect of eliminations upon valuation of portfolio securities.
270.2a3-1 Investment company limited partners not deemed affiliated 
          persons.
270.2a-4 Definition of ``current net asset value'' for use in computing 
          periodically the current price of redeemable security.
270.2a-5 Fair value determination and readily available market 
          quotations.
270.2a-6 Certain transactions not deemed assignments.
270.2a-7 Money market funds.
270.2a19-2 Investment company general partners not deemed interested 
          persons.
270.2a19-3 Certain investment company directors not considered 
          interested persons because of ownership of index fund 
          securities.
270.2a41-1 Valuation of standby commitments by registered investment 
          companies.
270.2a-46 Certain issuers as eligible portfolio companies.
270.2a51-1 Definition of investments for purposes of section 2(a)(51) 
          (definition of ``qualified purchaser''); certain calculations.
270.2a51-2 Definitions of beneficial owner for certain purposes under 
          sections 2(a)(51) and 3(c)(7) and determining indirect 
          ownership interests.
270.2a51-3 Certain companies as qualified purchasers.
270.3a-1 Certain prima facie investment companies.
270.3a-2 Transient investment companies.
270.3a-3 Certain investment companies owned by companies which are not 
          investment companies.
270.3a-4 Status of investment advisory programs.
270.3a-5 Exemption for subsidiaries organized to finance the operations 
          of domestic or foreign companies.
270.3a-6 Foreign banks and foreign insurance companies.
270.3a-7 Issuers of asset-backed securities.
270.3a-8 Certain research and development companies.
270.3a-9 Crowdfunding vehicle.
270.3c-1 Definition of beneficial ownership for certain section 3(c)(1) 
          funds.
270.3c-2 Definition of beneficial ownership in small business investment 
          companies.
270.3c-3 Definition of certain terms used in section 3(c)(1) of the Act 
          with respect to certain debt securities offered by small 
          business investment companies.
270.3c-4 Definition of ``common trust fund'' as used in section 3(c)(3) 
          of the Act.
270.3c-5 Beneficial ownership by knowledgeable employees and certain 
          other persons.
270.3c-6 Certain transfers of interests in section 3(c)(1) and section 
          3(c)(7) funds.
270.5b-1 Definition of ``total assets.''
270.5b-2 Exclusion of certain guarantees as securities of the guarantor.
270.5b-3 Acquisition of repurchase agreement or refunded security 
          treated as acquisition of underlying securities.
270.6a-5 Purchase of certain debt securities by companies relying on 
          section 6(a)(5) of the Act.
270.6b-1 Exemption of employees' securities company pending 
          determination of application.
270.6c-3 Exemptions for certain registered variable life insurance 
          separate accounts.
270.6c-6 Exemption for certain registered separate accounts and other 
          persons.
270.6c-7 Exemptions from certain provisions of sections 22(e) and 27 for 
          registered separate accounts offering variable annuity 
          contracts to participants in the Texas Optional Retirement 
          Program.

[[Page 370]]

270.6c-8 Exemptions for registered separate accounts to impose a 
          deferred sales load and to deduct certain administrative 
          charges.
270.6c-10 Exemption for certain open-end management investment companies 
          to impose deferred sales loads.
270.6c-11 Exchange-traded funds.
270.6d-1 Exemption for certain closed-end investment companies.
270.6e-2 Exemptions for certain variable life insurance separate 
          accounts.
270.6e-3 Exemptions for flexible premium variable life insurance 
          separate accounts.
270.7d-1 Specification of conditions and arrangements for Canadian 
          management investment companies requesting order permitting 
          registration.
270.7d-2 Definition of ``public offering'' as used in section 7(d) of 
          the Act with respect to certain Canadian tax-deferred 
          retirement savings accounts.
270.8b-1 Scope of Sec. Sec.  270.8b-1 to 270.8b-31.
270.8b-2 Definitions.
270.8b-3 Title of securities.
270.8b-4 Interpretation of requirements.
270.8b-5 Time of filing original registration statement.
270.8b-6 [Reserved]
270.8b-10 Requirements as to proper form.
270.8b-11 Number of copies; signatures; binding.
270.8b-12 Requirements as to paper, printing and language.
270.8b-13 Preparation of registration statement or report.
270.8b-14 Riders; inserts.
270.8b-15 Amendments.
270.8b-16 Amendments to registration statement.
270.8b-20 Additional information.
270.8b-21 Information unknown or not available.
270.8b-22 Disclaimer of control.
270.8b-23--270.8b-24 [Reserved]
270.8b-25 Extension of time for furnishing information.
270.8b-30 Additional exhibits.
270.8b-31 Omission of substantially identical documents.
270.8b-32 [Reserved]
270.8f-1 Deregistration of certain registered investment companies.
270.10b-1 Definition of regular broker or dealer.
270.10e-1 Death, disqualification, or bona fide resignation of 
          directors.
270.10f-1 Conditional exemption of certain underwriting transactions.
270.10f-2 Exercise of warrants or rights received on portfolio 
          securities.
270.10f-3 Exemption for the acquisition of securities during the 
          existence of an underwriting or selling syndicate.
270.11a-1 Definition of ``exchange'' for purposes of section 11 of the 
          Act.
270.11a-2 Offers of exchange by certain registered separate accounts or 
          others the terms of which do not require prior Commission 
          approval.
270.11a-3 Offers of exchange by open-end investment companies other than 
          separate accounts.
270.12b-1 Distribution of shares by registered open-end management 
          investment company.
270.12d1-1 Exemptions for investments in money market funds.
270.12d1-2 [Reserved]
270.12d1-3 Exemptions for investment companies relying on section 
          12(d)(1)(F) of the Act.
270.12d1-4 Exemptions for investments in certain investment companies.
270.12d2-1 Definition of insurance company for purposes of sections 
          12(d)(2) and 12(g) of the Act.
270.12d3-1 Exemption of acquisitions of securities issued by persons 
          engaged in securities related businesses.
270.13a-1 Exemption for change of status by temporarily diversified 
          company.
270.14a-1 Use of notification pursuant to regulation E under the 
          Securities Act of 1933.
270.14a-2 Exemption from section 14(a) of the Act for certain registered 
          separate accounts and their principal underwriters.
270.14a-3 Exemption from section 14(a) of the Act for certain registered 
          unit investment trusts and their principal underwriters.
270.15a-1 Exemption from stockholders' approval of certain small 
          investment advisory contracts.
270.15a-2 Annual continuance of contracts.
270.15a-3 Exemption for initial period of investment adviser of certain 
          registered separate accounts from requirement of security 
          holder approval of investment advisory contract.
270.15a-4 Temporary exemption for certain investment advisers.
270.16a-1 Exemption for initial period of directors of certain 
          registered accounts from requirements of election by security 
          holders.
270.17a-1 Exemption of certain underwriting transactions exempted by 
          Sec.  270.10f-1.
270.17a-2 Exemption of certain purchase, sale, or borrowing 
          transactions.
270.17a-3 Exemption of transactions with fully owned subsidiaries.
270.17a-4 Exemption of transactions pursuant to certain contracts.
270.17a-5 Pro rata distribution neither ``sale'' nor ``purchase.''
270.17a-6 Exemption for transactions with portfolio affiliates.
270.17a-7 Exemption of certain purchase or sale transactions between an 
          investment

[[Page 371]]

          company and certain affiliated persons thereof.
270.17a-8 Mergers of affiliated companies.
270.17a-9 Purchase of certain securities from a money market fund by an 
          affiliate, or an affiliate of an affiliate.
270.17a-10 Exemption for transactions with certain subadvisory 
          affiliates.
270.17d-1 Applications regarding joint enterprises or arrangements and 
          certain profit-sharing plans.
270.17d-2 Form for report by small business investment company and 
          affiliated bank.
270.17d-3 Exemption relating to certain joint enterprises or 
          arrangements concerning payment for distribution of shares of 
          a registered open-end management investment company.
270.17e-1 Brokerage transactions on a securities exchange.
270.17f-1 Custody of securities with members of national securities 
          exchanges.
270.17f-2 Custody of investments by registered management investment 
          company.
270.17f-3 Free cash accounts for investment companies with bank 
          custodians.
270.17f-4 Custody of investment company assets with a securities 
          depository.
270.17f-5 Custody of investment company assets outside the United 
          States.
270.17f-6 Custody of investment company assets with Futures Commission 
          Merchants and Commodity Clearing Organizations.
270.17f-7 Custody of investment company assets with a foreign securities 
          depository.
270.17g-1 Bonding of officers and employees of registered management 
          investment companies.
270.17j-1 Personal investment activities of investment company 
          personnel.
270.18c-1 Exemption of privately held indebtedness.
270.18c-2 Exemptions of certain debentures issued by small business 
          investment companies.
270.18f-1 Exemption from certain requirements of section 18(f)(1) (of 
          the Act) for registered open-end investment companies which 
          have the right to redeem in kind.
270.18f-2 Fair and equitable treatment for holders of each class or 
          series of stock of series investment companies.
270.18f-3 Multiple class companies.
270.18f-4 Exemption from the requirements of section 18 and section 61 
          for certain senior securities transactions.
270.19a-1 Written statement to accompany dividend payments by management 
          companies.
270.19b-1 Frequency of distribution of capital gains.
270.20a-1 Solicitation of proxies, consents and authorizations.
270.20a-2--270.20a-4 [Reserved]
270.22c-1 Pricing of redeemable securities for distribution, redemption 
          and repurchase.
270.22c-2 Redemption fees for redeemable securities.
270.22d-1 Exemption from section 22(d) to permit sales of redeemable 
          securities at prices which reflect sales loads set pursuant to 
          a schedule.
270.22d-2 Exemption from section 22(d) for certain registered separate 
          accounts.
270.22e-1 Exemption from section 22(e) of the Act during annuity payment 
          period of variable annuity contracts participating in certain 
          registered separate accounts.
270.22e-2 Pricing of redemption requests in accordance with Rule 22c-1.
270.22e-3 Exemption for liquidation of money market funds.
270.22e-4 Liquidity risk management programs.
270.23c-1 Repurchase of securities by closed-end companies.
270.23c-2 Call and redemption of securities issued by registered closed-
          end companies.
270.23c-3 Repurchase offers by closed-end companies.
270.24b-1 Definitions.
270.24b-2 Filing copies of sales literature.
270.24b-3 Sales literature deemed filed.
270.24b-4 Filing copies of covered investment fund research reports.
270.24e-1 Filing of certain prospectuses as post-effective amendments to 
          registration statements under the Securities Act of 1933.
270.24f-2 Registration under the Securities Act of 1933 of certain 
          investment company securities.
270.26a-1 Payment of administrative fees to the depositor or principal 
          underwriter of a unit investment trust; exemptive relief for 
          separate accounts.
270.26a-2 Exemptions from certain provisions of sections 26 and 27 for 
          registered separate accounts and others regarding 
          custodianship of and deduction of certain fees and charges 
          from the assets of such accounts.
270.27c-1 [Reserved]
270.27d-1 Reserve requirements for principal underwriters and depositors 
          to carry out the obligations to refund charges required by 
          section 27(d) and section 27(f) of the Act.
270.27d-2 [Reserved]
270.27e-1 [Reserved]
270.27f-1 [Reserved]
270.27g-1 [Reserved]
270.27h-1 [Reserved]

[[Page 372]]

270.27i-1 Exemption from Section 27(i)(2)(A) of the Act during annuity 
          payment period of variable annuity contracts participating in 
          certain registered separate accounts.
270.28b-1 Investment in loans partially or wholly guaranteed under the 
          Servicemen's Readjustment Act of 1944, as amended.
270.30a-1 Annual report for registered investment companies.
270.30a-2 Certification of Form N-CSR.
270.30a-3 Controls and procedures.
270.30a-4 Annual report for wholly-owned registered management 
          investment company subsidiary of registered management 
          investment company.
270.30b1-1--270.30b1-3 [Reserved]
270.30b1-4 Report of proxy voting record.
270.30b1-5 [Reserved]
270.30b1-7 Monthly report for money market funds.
270.30b1-8 Current report for money market funds.
270.30b1-9 Monthly report.
270.30b1-9(T) Temporary rule regarding monthly report.
270.30b1-10 Current report for open-end and closed-end management 
          investment companies.
270.30b2-1 Filing of reports to stockholders.
270.30d-1 Filing of copies of reports to shareholders.
270.30e-1 Reports to stockholders of management companies.
270.30e-2 Reports to shareholders of unit investment trusts.
270.30e-3 Internet availability of reports to shareholders.
270.30h-1 Applicability of section 16 of the Exchange Act to section 
          30(h).
270.31a-1 Records to be maintained by registered investment companies, 
          certain majority-owned subsidiaries thereof, and other persons 
          having transactions with registered investment companies.
270.31a-2 Records to be preserved by registered investment companies, 
          certain majority-owned subsidiaries thereof, and other persons 
          having transactions with registered investment companies.
270.31a-3 Records prepared or maintained by other than person required 
          to maintain and preserve them.
270.31a-4 Records to be maintained and preserved by registered 
          investment companies relating to fair value determinations.
270.32a-1 Exemption of certain companies from affiliation provisions of 
          section 32(a).
270.32a-2 Exemption for initial period from vote of security holders on 
          independent public accountant for certain registered separate 
          accounts.
270.32a-3 Exemption from provision of section 32(a)(1) regarding the 
          time period during which a registered management investment 
          company must select an independent public accountant.
270.32a-4 Independent audit committees.
270.34b-1 Sales literature deemed to be misleading.
270.35d-1 Investment company names.
270.38a-1 Compliance procedures and practices of certain investment 
          companies.
270.45a-1 Confidential treatment of names and addresses of dealers of 
          registered investment company securities.
270.55a-1 Investment activities of business development companies.
270.57b-1 Exemption for downstream affiliates of business development 
          companies.
270.60a-1 Exemption for certain business development companies.

    Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, and 
Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise 
noted.
    Section 270.0-1 also issued under sec. 38(a) (15 U.S.C. 80a-37(a));
    Section 270.0-1(a)(7) is also issued under 15 U.S.C. 80a-10(e);
    Section 270.0-11 also issued under secs. 8, 24, 30 and 38, 
Investment Company Act (15 U.S.C. 80a-8, 80a-24, 80a-29 and 80a-37), 
secs. 6, 7, 8, 10 and 19(a), Securities Act (15 U.S.C. 77f, 77g, 77h, 
77j, 77s(a)) and secs. 3(b), 12, 13, 14, 15(d) and 23(a), Exchange Act 
(15 U.S.C. 78c(b), 78l, 78m, 78n, 78o(d) and 78w(a));
    Section 270.6a-5 is also issued under 15 U.S.C. 80a-
6(a)(5)(A)(iv)(I).
    Section 270.6c-9 is also issued under secs. 6(c) (15 U.S.C. 80a-
6(c)) and 38(a) (15 U.S.C. 80a-37(a));
    Section 270.6c-10 is also issued under sec. 6(c) (15 U.S.C. 80a-
6(c));
    Section 270.6c-11 is also issued under 15 U.S.C. 80a-6(c) and 80a-
37(a).
    Section 270.6e-3 is also issued under 15 U.S.C. 80a-5(e);
    Section 270.8b-11 is also issued under 15 U.S.C. 77s, 80a-8, and 
80a-37;
    Section 270.10e-1 is also issued under 15 U.S.C. 80a-10(e);
    Sections 270.12d1-1, 270.12d1-2, and 270.12d1-3 are also issued 
under 15 U.S.C. 80a-6(c), 80a-12(d)(1)(J), and 80a-37(a).
    Section 270.12d3-1 is also issued under 15 U.S.C. 80a-6(c);
    Section 270.17a-8 is also issued under 15 U.S.C. 80a-6(c) and 80a-
37(a);
    Section 270.17d-1 is also issued under 15 U.S.C. 80a-6(c), 80a-
17(d), and 80a-37(a);
    Section 270.17e-1 is also issued under 15 U.S.C. 80a-6(c), 80a-
30(a), and 80a-37(a);
    Section 270.17f-5 also issued under sec. 6(c) (15 U.S.C. 80a-6(c);
    Section 270.17g-1 is also issued under 15 U.S.C. 80a-6(c), 80a-
17(d), 80a-17(g), and 80a-37(a);
    Section 270.17j-1 is also issued under secs. 206(4) and 211(a), 
Investment Advisers Act (15 U.S.C. 80b-6(4) and 80b-11(a));

[[Page 373]]

    Section 270.19b-1 is also issued under secs. 6(c) (15 U.S.C. 80a-
6(c)), 19 (a) and (b) (15 U.S.C 80a-19 (a) and (b)), and 38(a) (15 
U.S.C. 80a-37(a));
    Section 270.22c-1 also issued under secs. 6(c), 22(c), and 38(a) (15 
U.S.C. 80a-6(c), 80a-22(c), and 80a-37(a));
    Section 270.23c-3 also issued under 15 U.S.C. 80a-23(c).
    Section 270.24f-2 also issued under 15 U.S.C. 80a-24(f)(4).
    Section 270.30a-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, 
and 80a-29.
    Section 270.30a-2 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, 
80a-29, 7202, and 7241; and 18 U.S.C. 1350, unless otherwise noted.
    Section 270.30a-3 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, 
and 80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745.
    Section 270.30b1-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-
8, and 80a-29.
    Section 270.30b2-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-
8, and 80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745.
    Section 270.30d-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, 
and 80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745.
    Section 270.30e-1 is also issued under 15 U.S.C. 77f, 77g, 77h, 77j, 
77s, 78l, 78m, 78n, 78o(d), 78w(a), 80a-8, 80a-29, and 80a-37;
    Section 270.31a-2 is also issued under 15 U.S.C. 80a-30.

                       ATTENTION ELECTRONIC FILERS

THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.



Sec.  270.0-1  Definition of terms used in this part.

    (a) As used in the rules and regulations prescribed by the 
Commission pursuant to the Investment Company Act of 1940, unless the 
context otherwise requires:
    (1) The term Commission means the Securities and Exchange 
Commission.
    (2) The term act means the Investment Company Act of 1940.
    (3) The term section refers to a section of the act.
    (4) The terms rule and regulations refer to the rules and 
regulations adopted by the Commission pursuant to the Act, including the 
forms for registration and reports and the accompanying instructions 
thereto.
    (5) The term administrator means any person who provides significant 
administrative or business affairs management services to an investment 
company.
    (6)(i) A person is an independent legal counsel with respect to the 
directors who are not interested persons of an investment company 
(``disinterested directors'') if:
    (A) A majority of the disinterested directors reasonably determine 
in the exercise of their judgment (and record the basis for that 
determination in the minutes of their meeting) that any representation 
by the person of the company's investment adviser, principal 
underwriter, administrator (``management organizations''), or any of 
their control persons, since the beginning of the fund's last two 
completed fiscal years, is or was sufficiently limited that it is 
unlikely to adversely affect the professional judgment of the person in 
providing legal representation to the disinterested directors; and
    (B) The disinterested directors have obtained an undertaking from 
such person to provide them with information necessary to make their 
determination and to update promptly that information when the person 
begins to represent, or materially increases his representation of, a 
management organization or control person.
    (ii) The disinterested directors are entitled to rely on the 
information obtained from the person, unless they know or have reason to 
believe that the information is materially false or incomplete. The 
disinterested directors must re-evaluate their determination no less 
frequently than annually (and record the basis accordingly), except as 
provided in paragraph (iii) of this section.
    (iii) After the disinterested directors obtain information that the 
person has begun to represent, or has materially increased his 
representation of, a management organization (or any of its control 
persons), the person may continue to be an independent legal counsel, 
for purposes of paragraph (a)(6)(i) of this section, for no longer than 
three months unless during that period the

[[Page 374]]

disinterested directors make a new determination under that paragraph.
    (iv) For purposes of paragraphs (a)(6)(i)-(iii) of this section:
    (A) The term person has the same meaning as in section 2(a)(28) of 
the Act (15 U.S.C. 80a-2(a)(28)) and, in addition, includes a partner, 
co-member, or employee of any person; and
    (B) The term control person means any person (other than an 
investment company) directly or indirectly controlling, controlled by, 
or under common control with any of the investment company's management 
organizations.
    (7) Fund governance standards. The board of directors of an 
investment company (``fund'') satisfies the fund governance standards 
if:
    (i) At least seventy-five percent of the directors of the fund are 
not interested persons of the fund (``disinterested directors'') or, if 
the fund has three directors, all but one are disinterested directors;
    (ii) The disinterested directors of the fund select and nominate any 
other disinterested director of the fund;
    (iii) Any person who acts as legal counsel for the disinterested 
directors of the fund is an independent legal counsel as defined in 
paragraph (a)(6) of this section;
    (iv) A disinterested director serves as chairman of the board of 
directors of the fund, presides over meetings of the board of directors 
and has substantially the same responsibilities as would a chairman of a 
board of directors;
    (v) The board of directors evaluates at least once annually the 
performance of the board of directors and the committees of the board of 
directors, which evaluation must include a consideration of the 
effectiveness of the committee structure of the fund board and the 
number of funds on whose boards each director serves;
    (vi) The disinterested directors meet at least once quarterly in a 
session at which no directors who are interested persons of the fund are 
present; and
    (vii) The disinterested directors have been authorized to hire 
employees and to retain advisers and experts necessary to carry out 
their duties.
    (b) Unless otherwise specifically provided, the terms used in the 
rules and regulations in this part shall have the meaning defined in the 
Act. The terms ``EDGAR,'' ``EDGAR Filer Manual,'' ``electronic filer,'' 
``electronic filing,'' ``electronic format,'' ``electronic submission,'' 
``paper format,'' and ``signature'' shall have the meanings assigned to 
such terms in Regulation S-T--General Rules for Electronic Filings (Part 
232 of this chapter).
    (c) A rule or regulation which defines a term without express 
reference to the act or to the rules and regulations, or to a portion 
thereof, defines such terms for all purposes as used both in the act and 
in the rules and regulations in this part, unless the context otherwise 
requires.
    (d) Unless otherwise specified or the context otherwise requires, 
the term ``prospectus'' means a prospectus meeting the requirements of 
section 10(a) of the Securities Act of 1933 as amended.
    (e) Definition of separate account and conditions for availability 
of exemption under Sec. Sec.  270.6c-6, 270.6c-7, 270.6c-8, 270.11a-2, 
270.14a-2, 270.15a-3, 270.16a-1, 270.22c-1, 270.22d-2, 270.22e-1, 
270.26a-1, 270.27i-1, and 270.32a-2 (Rules 6c-6, 6c-7, 6c-8, 11a-2, 14a-
2, 15a-3, 16a-1, 22c-1, 22d-2, 22e-1, 26a-1, 27i-1, and 32a-2).
    (1) As used in the rules and regulations prescribed by the 
Commission pursuant to the Investment Company Act of 1940, unless 
otherwise specified or the context otherwise requires, the term 
``separate account'' shall mean an account established and maintained by 
an insurance company pursuant to the laws of any state or territory of 
the United States, or of Canada or any province thereof, under which 
income, gains and losses, whether or not realized, from assets allocated 
to such account, are, in accordance with the applicable contract, 
credited to or charged against such account without regard to other 
income, gains or losses of the insurance company and the term ``variable 
annuity contract'' shall mean any accumulation or annuity contract, any 
portion thereof, or any unit of interest or participation therein 
pursuant to which the value of the contract, either prior or subsequent 
to annuitization, or both, varies according to the investment experience 
of the

[[Page 375]]

separate account in which the contract participates.
    (2) As conditions to the availability of exemptive Rules 6c-6, 6c-7, 
6c-8, 11a-2, 14a-2, 15a-3, 16a-1, 22c-1, 22d-2, 22e-1, 26a-1, 27i-1, and 
32a-2, the separate account shall be legally segregated, the assets of 
the separate account shall, at the time during the year that adjustments 
in the reserves are made, have a value at least equal to the reserves 
and other contract liabilities with respect to such account, and at all 
other times, shall have a value approximately equal to or in excess of 
such reserves and liabilities; and that portion of such assets having a 
value equal to, or approximately equal to, such reserves and contract 
liabilities shall not be chargeable with liabilities arising out of any 
other business which the insurance company may conduct.

[Rule N-1, 5 FR 4316, Oct. 31, 1940, as amended at 19 FR 6730, Oct. 20, 
1954; 30 FR 829, Jan. 27, 1965; 48 FR 36098, Aug. 9, 1983; 50 FR 42682, 
Oct. 22, 1985; 58 FR 14859, Mar. 18, 1993; 66 FR 3757, Jan. 16, 2001; 69 
FR 46389, Aug. 2, 2004; 85 FR 26101, May 1, 2020]



Sec.  270.0-2  General requirements of papers and applications.

    (a) Filing of papers. All papers required to be filed with the 
Commission pursuant to the Act or the rules and regulations thereunder 
shall, unless otherwise provided by the rules and regulations in this 
part, be delivered through the mails or otherwise to the Secretary of 
the Securities and Exchange Commission, Washington, DC 20549. Except as 
otherwise provided by the rules and regulations, the date on which 
papers are actually received by the Commission shall be the date of 
filing thereof. If the last day for the timely filing of such papers 
falls on a Saturday, Sunday, or holiday, such papers may be filed on the 
first business day following.
    (b) Formal specifications respecting applications. Every application 
for an order under any provision of the Act, for which a form with 
instructions is not specifically prescribed, and every amendment to such 
application shall be filed in quintuplicate. One copy shall be signed by 
the applicant but the other four copies may have facsimile or typed 
signatures. Such applications should be on paper no larger than 8\1/2\ x 
11 inches in size. To the extent that the reduction of larger documents 
would render them illegible, such documents may be filed on paper larger 
than 8\1/2\ x 11 inches in size. The left margin should be at least 1\1/
2\ inches wide and, if the application is bound, it should be bound on 
the left side. All typewritten or printed matter (including deficits in 
financial statements) should be set forth in black so as to permit 
photocopying.
    (c) Authorizations respecting applications. (1) Every application 
for an order under any provision of the act, for which a form with 
instructions is not specifically prescribed and which is executed by a 
corporation, partnership, or other company and filed with the 
Commission, shall contain a concise statement of the applicable 
provisions of the articles of incorporation, bylaws, or similar 
documents, relating to the right of the person signing and filing such 
application to take such action on behalf of the applicant, and a 
statement that all such requirements have been complied with and that 
the person signing and filing the same is fully authorized to do so. If 
such authorization is dependent on resolutions of stockholders, 
directors, or other bodies, such resolutions shall be attached as an 
exhibit to, or the pertinent provisions thereof shall be quoted in, the 
application.
    (2) If an amendment to any such application shall be filed, such 
amendment shall contain a similar statement or, in lieu thereof, shall 
state that the authorization described in the original application is 
applicable to the individual who signs such amendment and that such 
authorization still remains in effect.
    (3) When any such application or amendment is signed by an agent or 
attorney, the power of attorney evidencing his authority to sign shall 
contain similar statements and shall be filed with the Commission.
    (d) Verification of applications and statements of fact. Every 
application for an order under any provision of the Act, for which a 
form with instructions is not specifically prescribed and every 
amendment to such application, and every statement of fact formally 
filed

[[Page 376]]

in support of, or in opposition to, any application or declaration shall 
be verified by the person executing the same. An instrument executed on 
behalf of a corporation shall be verified in substantially the following 
form, but suitable changes may be made in such form for other kinds of 
companies and for individuals:

    The undersigned states that he or she has duly executed the attached 
____________ dated ____________, 20 ______ for and on behalf of (name of 
company); that he or she is (title of officer) of such company; and that 
all action by stockholders, directors, and other bodies necessary to 
authorize the undersigned to execute and file such instrument has been 
taken. The undersigned further states that he or she is familiar with 
such instrument, and the contents thereof, and that the facts therein 
set forth are true to the best of his or her knowledge, information and 
belief.
________________________________________________________________________

(Signature)

    (e) Statement of grounds for application. Each application should 
contain a brief statement of the reasons why the applicant is deemed to 
be entitled to the action requested with a reference to the provisions 
of the act and of the rules and regulations under which application is 
made.
    (f) Name and address. Every application shall contain the name and 
address of each applicant and the name and address of any person to whom 
any applicant wishes any question regarding the application to be 
directed.
    (g) The manually signed original (or in the case of duplicate 
originals, one duplicate original) of all registrations, applications, 
statements, reports, or other documents filed under the Investment 
Company Act of 1940, as amended, shall be numbered sequentially (in 
addition to any internal numbering which otherwise may be present) by 
handwritten, typed, printed, or other legible form of notation from the 
facing page of the document through the last page of that document and 
any exhibits or attachments thereto. Further, the total number of pages 
contained in a numbered original shall be set forth on the first page of 
the document.

[Rule N-2, 5 FR 4316, Oct. 31, 1940, as amended at 33 FR 9391, June 27, 
1968; 33 FR 23325, Aug. 29, 1973; 44 FR 4666, Jan. 23, 1979; 47 FR 
58239, Dec. 30, 1982; 48 FR 17065, Apr. 21, 1983; 58 FR 14859, Mar. 18, 
1993; 73 FR 65525, Nov. 4, 2008; 87 FR 38976, June 30, 2022; 87 FR 
41060, July 11, 2022]



Sec.  270.0-3  Amendments to registration statements and reports.

    Registration statements filed with the Commission pursuant to 
section 8 (54 Stat. 803; 15 U.S.C. 80a-8) and reports filed with the 
Commission pursuant to section 30 (54 Stat. 836; 15 U.S.C. 80a-35) may 
be amended in the following manner:
    (a) Each amendment shall conform to the requirements for the 
registration statement or report it amends with regard to filing, number 
of copies filed, size, paper, ink, margins, binding, and similar formal 
matters.
    (b) Each amendment to a particular statement or report shall have a 
facing sheet as follows:

                   Securities and Exchange Commission

                          Washington, DC 20549

    Amendment No.__________

                                   to

    Form____________
    File No.____________
(Describe the nature of the statement or report)
    Dated ____________________, 19____,
    Pursuant to Section __________ of the Investment Company Act of 1940
________________________________________________________________________
                                                      Name of Registrant
________________________________________________________________________
    Address of Principal Office of Registrant


The facing sheet shall contain in addition any other information 
required on the facing sheet of the form for the statement or report 
which is being amended. Amendments to a particular statement or report 
which is being consecutively in the order in which filed with the 
Commission.
    (c) Each amendment shall contain in the manner required in the 
original statement or report the text of every item to which it relates 
and shall set out a complete amended answer to each such item. However, 
amendments to financial statements may contain

[[Page 377]]

only the particular statements or schedules in fact amended.
    (d) Each amendment shall have a signature sheet containing the form 
of signature required in the statement or report it amends.

(Secs. 8, 30, 54 Stat. 803, 74 Stat. 201; 15 U.S.C. 80a-8, 80a-29)

[Rule N-3, 6 FR 3966, Aug. 8, 1941, as amended at 33 FR 3217, Feb. 21, 
1968]



Sec.  270.0-4  Incorporation by reference.

    (a) Registration statements and reports. Except as provided by this 
section or in the appropriate form, information may be incorporated by 
reference in answer, or partial answer, to any item of a registration 
statement or report. Where an item requires a summary or outline of the 
provisions of any document, the summary or outline may incorporate by 
reference particular items, sections, or paragraphs of any exhibit and 
may be qualified in its entirety by such reference.
    (b) Financial information. Except as provided in the Commission's 
rules, financial information required to be given in comparative form 
for two or more fiscal years or periods must not be incorporated by 
reference unless the information incorporated by reference includes the 
entire period for which the comparative data is given. In the financial 
statements, incorporating by reference, or cross-referencing to, 
information outside of the financial statements is not permitted unless 
otherwise specifically permitted or required by the Commission's rules 
or by U.S. Generally Accepted Accounting Principles or International 
Financial Reporting Standards as issued by the International Accounting 
Standards Board, whichever is applicable.
    (c) Exhibits. Any document or part thereof, including any financial 
statement or part thereof, filed with the Commission pursuant to any Act 
administered by the Commission may be incorporated by reference as an 
exhibit to any registration statement, application, or report filed with 
the Commission by the same or any other person. If any modification has 
occurred in the text of any document incorporated by reference since the 
filing thereof, the registrant must file with the reference a statement 
containing the text of any such modification and the date thereof.
    (d) Hyperlinks. Include an active hyperlink to information 
incorporated into a registration statement, application, or report by 
reference if such information is publicly available on the Commission's 
Electronic Data Gathering, Analysis and Retrieval System (``EDGAR'') at 
the time the registration statement, application, or report is filed. 
For hyperlinking to exhibits, please refer to the appropriate form.
    (e) General. Include an express statement clearly describing the 
specific location of the information you are incorporating by reference. 
The statement must identify the document where the information was 
originally filed or submitted and the location of the information within 
that document. The statement must be made at the particular place where 
the information is required, if applicable. Information must not be 
incorporated by reference in any case where such incorporation would 
render the disclosure incomplete, unclear, or confusing. For example, 
unless expressly permitted or required, disclosure must not be 
incorporated by reference from a second document if that second document 
incorporates information pertinent to such disclosure by reference to a 
third document.

[84 FR 12732, Apr. 2, 2019]



Sec.  270.0-5  Procedure with respect to applications and other matters.

    The procedure herein below set forth will be followed with respect 
to any proceeding initiated by the filing of an application, or upon the 
Commission's own motion, pursuant to any section of the Act or any rule 
or regulation thereunder, unless in the particular case a different 
procedure is provided:
    (a) Notice of the initiation of the proceeding will be published in 
the Federal Register and will indicate the earliest date upon which an 
order disposing of the matter may be entered. The notice will also 
provide that any interested person may, within the period of time 
specified therein, submit to the Commission in writing any facts bearing 
upon the desirability of a hearing on the matter and may request

[[Page 378]]

that a hearing be held, stating his reasons therefor and the nature of 
his interest in the matter.
    (b) An order disposing of the matter will be issued as of course, 
following the expiration of the period of time referred to in paragraph 
(a) of this section, unless the Commission thereafter orders a hearing 
on the matter.
    (c) The Commission will order a hearing on the matter, if it appears 
that a hearing is necessary or appropriate in the public interest or for 
the protection of investors, (1) upon the request of an interested 
person or (2) upon its own motion.
    (d)(1) An applicant may request expedited review of an application 
if such application is substantially identical to two other applications 
for which an order granting the requested relief has been issued within 
three years of the date of the application's initial filing.
    (2) For purposes of this section, ``substantially identical'' 
applications are applications requesting relief from the same sections 
of the Act and this part, containing identical terms and conditions, and 
differing only with respect to factual differences that are not material 
to the relief requested.
    (e) An application submitted for expedited review must include:
    (1) A notation on the cover page of the application that states 
prominently, ``EXPEDITED REVIEW REQUESTED UNDER 17 CFR 270.0-5(d)'';
    (2) Exhibits with marked copies of the application showing changes 
from the final versions of the two applications identified as 
substantially identical under paragraph (e)(3) of this section; and
    (3) An accompanying cover letter, signed, on behalf of the 
applicant, by the person executing the application:
    (i) Identifying two substantially identical applications and 
explaining why the applicant chose those particular applications, and if 
more recent applications of the same type have been approved, why the 
applications chosen, rather than the more recent applications, are 
appropriate; and
    (ii) Certifying that the applicant believes the application meets 
the requirements of paragraph (d) of this section and that the marked 
copies required by paragraph (e)(2) of this section are complete and 
accurate.
    (f)(1) No later than 45 days from the date of filing of an 
application for which expedited review is requested:
    (i) Notice of an application will be issued in accordance with 
paragraph (a) of this section; or
    (ii) The applicant will be notified that the application is not 
eligible for expedited review because it does not meet the criteria set 
forth in paragraph (d) or (e) of this section or because additional time 
is necessary for appropriate consideration of the application.
    (2) For purposes of paragraph (f)(1) of this section:
    (i) The 45-day period will stop running upon:
    (A) Any request for modification of an application and will resume 
running on the 14th day after the applicant has filed an amended 
application responsive to such request, including a marked copy showing 
any changes made and a certification signed by the person executing the 
application that such marked copy is complete and accurate;
    (B) Any unsolicited amendment of the application and will resume 
running on the 30th day after such an amendment, provided that the 
amendment includes a marked copy showing changes made and a 
certification signed by the person executing the application that such 
marked copy is complete and accurate; and
    (C) Any irregular closure of the Commission's Washington, DC office 
to the public for normal business, including, but not limited to, 
closure due to a lapse in Federal appropriations, national emergency, 
inclement weather, or ad hoc Federal holiday, and will resume upon the 
reopening of the Commission's Washington, DC office to the public for 
normal business.
    (ii) If the applicant does not file an amendment responsive to any 
request for modification within 30 days of receiving such request, 
including a marked copy showing any changes made and a certification 
signed by the person executing the application that such marked copy is 
complete and accurate, the application will be deemed withdrawn.

[[Page 379]]

    (g) If an applicant has not responded in writing to any request for 
clarification or modification of an application filed under this 
section, other than an application that is under expedited review under 
paragraphs (d) and (e) of this section, within 120 days after the 
request, the application will be deemed withdrawn.

[38 FR 23325, Aug. 29, 1973, as amended at 61 FR 49961, Sept. 24, 1996; 
86 FR 57107, Sept. 15, 2020]



Sec.  270.0-8  Payment of filing fees.

    All payment of filing fees shall be made by wire transfer, debit 
card, credit card, or via the Automated Clearing House Network. Payment 
of filing fees required by this section shall be made in accordance with 
the directions set forth in Sec.  202.3a of this chapter.

[86 FR 70262, Dec. 9, 2021]



Sec.  270.0-9  [Reserved]



Sec.  270.0-10  Small entities under the Investment Company Act for
purposes of the Regulatory Flexibility Act.

    (a) General. For purposes of Commission rulemaking in accordance 
with the provisions of Chapter Six of the Administrative Procedure Act 
(5 U.S.C. 601 et seq.) and unless otherwise defined for purposes of a 
particular rulemaking, the term small business or small organization for 
purposes of the Investment Company Act of 1940 shall mean an investment 
company that, 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. For purposes of this 
section:
    (1) In the case of a management company, the term group of related 
investment companies shall mean two or more management companies 
(including series thereof) that:
    (i) Hold themselves out to investors as related companies for 
purposes of investment and investor services; and
    (ii) Either:
    (A) Have a common investment adviser or have investment advisers 
that are affiliated persons of each other; or
    (B) Have a common administrator; and
    (2) In the case of a unit investment trust, the term group of 
related investment companies shall mean two or more unit investment 
trusts (including series thereof) that have a common sponsor.
    (b) Special rule for insurance company separate accounts. In 
determining whether an insurance company separate account is a small 
business or small entity pursuant to paragraph (a) of this section, the 
assets of the separate account shall be cumulated with the assets of the 
general account and all other separate accounts of the insurance 
company.
    (c) Determination of net assets. The Commission may calculate its 
determination of the net assets of a group of related investment 
companies based on the net assets of each investment company in the 
group as of the end of such company's fiscal year.

[63 FR 35514, June 30, 1998]



Sec.  270.0-11  Customer identification programs.

    Each registered open-end company is subject to the requirements of 
31 U.S.C. 5318(l) and the implementing regulation at 31 CFR 103.131, 
which requires a customer identification program to be implemented as 
part of the anti-money laundering program required under subchapter II 
of chapter 53 of title 31, United States Code and the implementing 
regulations issued by the Department of the Treasury at 31 CFR part 103. 
Where 31 CFR 103.131 and this chapter use different definitions for the 
same term, the definition in 31 CFR 103.131 shall be used for the 
purpose of compliance with 31 CFR 103.131. Where 31 CFR 103.131 and this 
chapter require the same records to be preserved for different periods 
of time, such records shall be preserved for the longer period of time.

[68 FR 25146, May 9, 2003]



Sec.  270.2a-1  Valuation of portfolio securities in special cases.

    (a) Any investment company whose securities are qualified for sale, 
or for whose securities application for such qualification has been 
made, in any State in which the securities owned by

[[Page 380]]

such company are required by applicable State law or regulations to be 
valued at cost or on some other basis different from that prescribed by 
clause (A) of section 2(a)(41) of the Act for the purpose of determining 
the percentage of its assets invested in any particular type or 
classification of securities or in the securities of any one issuer, 
may, in valuing its securities for the purposes of sections 5 and 12 of 
the Act, use the same basis of valuation as that used in complying with 
such State law or regulations in lieu of the method of valuation 
prescribed by clause (A) of section 2(a)(41) of the Act.
    (b) Any open-end company which has heretofore valued its securities 
at cost for the purpose of qualifying as a ``mutual investment company'' 
under the Internal Revenue Code, prior to its amendment by the Revenue 
Act of 1942, shall henceforth, for the purposes of sections 5 and 12 of 
the Act, value its securities in accordance with the method prescribed 
in clause (A) of section 2(a)(41) of the Act unless such company is 
permitted under paragraph (a) of this section to use a different method 
of valuation.
    (c) A registered investment company which has adopted for the 
purposes of sections 5 and 12 of the Act a method of valuation permitted 
by paragraph (a) of this section, shall state in its registration 
statement filed pursuant to section 8 (54 Stat. 803; 15 U.S.C. 80a-8) of 
the Act, or in a report filed pursuant to section 30 (54 Stat. 836; 15 
U.S.C. 80a-30) of the Act, the method of valuation adopted and the facts 
which justify the adoption of such method. A registered investment 
company which has adopted for the purposes of sections 5 and 12 of the 
Act a method of valuation permitted by paragraph (a) of this section, 
unless it shall have adopted such method for the purpose or partly for 
the purpose of qualifying as a ``mutual investment company'' under the 
Internal Revenue Code, shall continue to use that method until it has 
notified the Commission of its desire to use a different method, and has 
received from the Commission permission for such change. Such permission 
may be made effective on a fixed date or within such reasonable time 
thereafter as may be deemed advisable under the circumstances.
    (d) If at any time it appears that the method of valuation adopted 
by any company pursuant to paragraph (a) of this section is no longer 
justified by the facts, the Commission may require a change in the 
method of valuation within a reasonable period of time either to the 
method prescribed in clause (A) of section 2(a)(41) of the Act or to 
some other method permitted by paragraph (a) of this section which is 
justified by the existing facts.

[Rule N-2A-1, 8 FR 3567, Mar. 24, 1943, as amended at 38 FR 8593, Apr. 
4, 1973]



Sec.  270.2a-2  Effect of eliminations upon valuation of portfolio 
securities.

    During any fiscal quarter in which elimination of securities from 
the portfolio of an investment company occur, the securities remaining 
in the portfolio shall, for the purpose of sections 5 and 12 of the Act 
(54 Stat. 800, 808; 15 U.S.C. 80a-5, 80a-12), be so valued as to give 
effect to the eliminations in accordance with one of the following 
methods:
    (a) Specific certificate,
    (b) First in--first out,
    (c) Last in--first out, or
    (d) Average value.

For these purposes, a single method of elimination shall be used 
consistently with respect to all portfolio securities. In giving effect 
to eliminations pursuant to this section values shall be computed in 
accordance with section 2(a)(41)(A) of the Act (54 Stat. 790; 15 U.S.C. 
80a-2(a)(41)(A)).

[38 FR 8593, Apr. 4, 1973]



Sec.  270.2a3-1  Investment company limited partners not deemed 
affiliated persons.

    Preliminary Note to Sec.  270.2a3-1: This Sec.  270.2a3-1 excepts 
from the definition of affiliated person in section 2(a)(3)) (15 U.S.C. 
80a-2(a)(3)) those limited partners of investment companies organized in 
limited partnership form that are affiliated persons solely because they 
are partners under section 2(a)(3)(D) (15 U.S.C. 80a-2(a)(3)(D)). 
Reliance on this Sec.  270.2a3-1 does not except a limited partner that 
is an affiliated person by virtue of any other provision.
    No limited partner of a registered management company or a business 
development company, organized as a limited partnership

[[Page 381]]

and relying on Sec.  270.2a19-2, shall be deemed to be an affiliated 
person of such company, or any other partner of such company, solely by 
reason of being a limited partner of such company.

[58 FR 45838, Aug. 31, 1993]



Sec.  270.2a-4  Definition of ``current net asset value'' for use in 
computing periodically the current price of redeemable security.

    (a) The current net asset value of any redeemable security issued by 
a registered investment company used in computing periodically the 
current price for the purpose of distribution, redemption, and 
repurchase means an amount which reflects calculations, whether or not 
recorded in the books of account, made substantially in accordance with 
the following, with estimates used where necessary or appropriate.
    (1) Portfolio securities with respect to which market quotations are 
readily available shall be valued at current market value, and other 
securities and assets shall be valued at fair value as determined in 
good faith by the board of directors of the registered company.
    (2) Changes in holdings of portfolio securities shall be reflected 
no later than in the first calculation on the first business day 
following the trade date.
    (3) Changes in the number of outstanding shares of the registered 
company resulting from distributions, redemptions, and repurchases shall 
be reflected no later than in the first calculation on the first 
business day following such change.
    (4) Expenses, including any investment advisory fees, shall be 
included to date of calculation. Appropriate provision shall be made for 
Federal income taxes if required. Investment companies which retain 
realized capital gains designated as a distribution to shareholders 
shall comply with paragraph (h) of Sec.  210.6-03 of Regulation S-X.
    (5) Dividends receivable shall be included to date of calculation 
either at ex-dividend dates or record dates, as appropriate.
    (6) Interest income and other income shall be included to date of 
calculation.
    (b) The items which would otherwise be required to be reflected by 
paragraphs (a) (4) and (6) of this section need not be so reflected if 
cumulatively, when netted, they do not amount to as much as one cent per 
outstanding share.
    (c) Notwithstanding the requirements of paragraph (a) of this 
section, any interim determination of current net asset value between 
calculations made as of the close of the New York Stock Exchange on the 
preceding business day and the current business day may be estimated so 
as to reflect any change in current net asset value since the closing 
calculation on the preceding business day.

(Secs. 7, 19(a), 48 Stat. 78, 85, 908, 15 U.S.C. 77g, 77s(a); secs. 12, 
13, 15(d), 23(a), 48 Stat. 892, 894, 895, 901; secs. 3, 8, 49 Stat. 
1377, 1379, secs. 3, 4, 78 Stat. 569, 570, secs. 1, 2, 82 Stat. 454, 15 
U.S.C. 78l, 78m, 78o(d), 78w(a); secs. 8, 22, 30, 31(c), 38(a), 54 Stat. 
803, 823, 836, 838, 841, 15 U.S.C. 80a-8, 80a-22, 80a-29, 80a-30(c))

[29 FR 19101, Dec. 30, 1964, as amended at 35 FR 314, Jan. 8, 1970; 47 
FR 56844, Dec. 21, 1982]



Sec.  270.2a-5  Fair value determination and readily available market
quotations.

    (a) Fair value determination. For purposes of section 2(a)(41) of 
the Act (15 U.S.C. 80a-2(a)(41)) and Sec.  270.2a-4, determining fair 
value in good faith with respect to a fund requires:
    (1) Assess and manage risks. Periodically assessing any material 
risks associated with the determination of the fair value of fund 
investments (``valuation risks''), including material conflicts of 
interest, and managing those identified valuation risks;
    (2) Establish and apply fair value methodologies. Performing each of 
the following, taking into account the fund's valuation risks:
    (i) Selecting and applying in a consistent manner an appropriate 
methodology or methodologies for determining (and calculating) the fair 
value of fund investments, provided that a selected methodology may be 
changed if a different methodology is equally or more representative of 
the fair value of fund investments, including specifying the key inputs 
and assumptions specific to each asset class or portfolio holding;

[[Page 382]]

    (ii) Periodically reviewing the appropriateness and accuracy of the 
methodologies selected and making any necessary changes or adjustments 
thereto; and
    (iii) Monitoring for circumstances that may necessitate the use of 
fair value;
    (3) Test fair value methodologies. Testing the appropriateness and 
accuracy of the fair value methodologies that have been selected, 
including identifying the testing methods to be used and the minimum 
frequency with which such testing methods are to be used; and
    (4) Evaluate pricing services. Overseeing pricing service providers, 
if used, including establishing the process for approving, monitoring, 
and evaluating each pricing service provider and initiating price 
challenges as appropriate.
    (b) Performance of fair value determinations. The board of the fund 
must determine fair value in good faith for any or all fund investments 
by carrying out the functions required in paragraph (a) of this section. 
The board may choose to designate the valuation designee to perform the 
fair value determination relating to any or all fund investments, which 
shall carry out all of the functions required in paragraph (a) of this 
section, subject to the requirements of this paragraph (b).
    (1) Oversight and reporting. The board oversees the valuation 
designee, and the valuation designee reports to the fund's board, in 
writing, including such information as may be reasonably necessary for 
the board to evaluate the matters covered in the report, as follows:
    (i) Periodic reporting. (A) At least quarterly:
    (1) Any reports or materials requested by the board related to the 
fair value of designated investments or the valuation designee's process 
for fair valuing fund investments; and
    (2) A summary or description of material fair value matters that 
occurred in the prior quarter, including:
    (i) Any material changes in the assessment and management of 
valuation risks required under paragraph (a)(1) of this section, 
including any material changes in conflicts of interest of the valuation 
designee (and any other service provider);
    (ii) Any material changes to, or material deviations from, the fair 
value methodologies established under paragraph (a)(2) of this section; 
and
    (iii) Any material changes to the valuation designee's process for 
selecting and overseeing pricing services, as well as any material 
events related to the valuation designee's oversight of pricing 
services; and
    (B) At least annually, an assessment of the adequacy and 
effectiveness of the valuation designee's process for determining the 
fair value of the designated portfolio of investments, including, at a 
minimum:
    (1) A summary of the results of the testing of fair value 
methodologies required under paragraph (a)(3) of this section; and
    (2) An assessment of the adequacy of resources allocated to the 
process for determining the fair value of designated investments, 
including any material changes to the roles or functions of the persons 
responsible for determining fair value under paragraph (b)(2) of this 
section; and
    (ii) Prompt board notification and reporting. The valuation designee 
notifies the board of the occurrence of matters that materially affect 
the fair value of the designated portfolio of investments, including a 
significant deficiency or material weakness in the design or 
effectiveness of the valuation designee's fair value determination 
process, or material errors in the calculation of net asset value, (any 
such matter or error, a ``material matter'') within a time period 
determined by the board (but in no event later than five business days 
after the valuation designee becomes aware of the material matter), with 
such timely follow-on reporting as the board may determine appropriate; 
and
    (2) Specify responsibilities. The valuation designee specifies the 
titles of the persons responsible for determining the fair value of the 
designated investments, including by specifying the particular functions 
for which they are responsible, and reasonably segregates fair value 
determinations from the portfolio management of the fund such that the 
portfolio manager(s) may not

[[Page 383]]

determine, or effectively determine by exerting substantial influence 
on, the fair values ascribed to portfolio investments.
    (c) Readily available market quotations. For purposes of section 
2(a)(41) of the Act (15 U.S.C. 80a-2(a)(41)), a market quotation is 
readily available only when that quotation is a quoted price 
(unadjusted) in active markets for identical investments that the fund 
can access at the measurement date, provided that a quotation will not 
be readily available if it is not reliable.
    (d) Unit investment trusts. If the fund is a unit investment trust, 
and the initial deposit of portfolio securities into the unit investment 
trust occurs after March 8, 2021, the fund's trustee or depositor must 
carry out the requirements of paragraph (a) of this section. If the 
initial deposit of portfolio securities into the unit investment trust 
occurred before March 8, 2021, and an entity other than the fund's 
trustee or depositor has been designated to carry out the fair value 
determination, that entity must carry out the requirements of paragraph 
(a) of this section.
    (e) Definitions. For purposes of this section:
    (1) Fund means a registered investment company or business 
development company.
    (2) Fair value means the value of a portfolio investment for which 
market quotations are not readily available under paragraph (c) of this 
section.
    (3) Board means either the fund's entire board of directors or a 
designated committee of such board composed of a majority of directors 
who are not interested persons of the fund.
    (4) Valuation designee means the investment adviser, other than a 
sub-adviser, of a fund or, if the fund does not have an investment 
adviser, an officer or officers of the fund.

[86 FR 807, Jan. 6, 2021]



Sec.  270.2a-6  Certain transactions not deemed assignments.

    A transaction which does not result in a change of actual control or 
management of the investment adviser to, or principal underwriter of, an 
investment company is not an assignment for purposes of section 15(a)(4) 
or section 15(b)(2) of the act, respectively.

(Secs. 6(c) and 38(a) (15 U.S.C. 80a-6(c) and 80a-37(a)))

[45 FR 1861, Jan. 9, 1980]



Sec.  270.2a-7  Money market funds.

    (a) Definitions--(1) Acquisition (or acquire) means any purchase or 
subsequent rollover (but does not include the failure to exercise a 
demand feature).
    (2) Amortized cost method of valuation means the method of 
calculating an investment company's net asset value whereby portfolio 
securities are valued at the fund's acquisition cost as adjusted for 
amortization of premium or accretion of discount rather than at their 
value based on current market factors.
    (3) Asset-backed security means a fixed income security (other than 
a government security) issued by a special purpose entity (as defined in 
this paragraph (a)(3)), substantially all of the assets of which consist 
of qualifying assets (as defined in this paragraph (a)(3)). Special 
purpose entity means a trust, corporation, partnership or other entity 
organized for the sole purpose of issuing securities that entitle their 
holders to receive payments that depend primarily on the cash flow from 
qualifying assets, but does not include a registered investment company. 
Qualifying assets means financial assets, either fixed or revolving, 
that by their terms convert into cash within a finite time period, plus 
any rights or other assets designed to assure the servicing or timely 
distribution of proceeds to security holders.
    (4) Business day means any day, other than Saturday, Sunday, or any 
customary business holiday.
    (5) Collateralized fully has the same meaning as defined in Sec.  
270.5b-3(c)(1) except that Sec.  270.5b-3(c)(1)(iv)(C) shall not apply.
    (6) Conditional demand feature means a demand feature that is not an 
unconditional demand feature. A conditional demand feature is not a 
guarantee.
    (7) Conduit security means a security issued by a municipal issuer 
(as defined in this paragraph (a)(7)) involving an arrangement or 
agreement entered

[[Page 384]]

into, directly or indirectly, with a person other than a municipal 
issuer, which arrangement or agreement provides for or secures repayment 
of the security. Municipal issuer means a state or territory of the 
United States (including the District of Columbia), or any political 
subdivision or public instrumentality of a state or territory of the 
United States. A conduit security does not include a security that is:
    (i) Fully and unconditionally guaranteed by a municipal issuer;
    (ii) Payable from the general revenues of the municipal issuer or 
other municipal issuers (other than those revenues derived from an 
agreement or arrangement with a person who is not a municipal issuer 
that provides for or secures repayment of the security issued by the 
municipal issuer);
    (iii) Related to a project owned and operated by a municipal issuer; 
or
    (iv) Related to a facility leased to and under the control of an 
industrial or commercial enterprise that is part of a public project 
which, as a whole, is owned and under the control of a municipal issuer.
    (8) Daily liquid assets means:
    (i) Cash;
    (ii) Direct obligations of the U.S. Government;
    (iii) Securities that will mature, as determined without reference 
to the exceptions in paragraph (i) of this section regarding interest 
rate readjustments, or are subject to a demand feature that is 
exercisable and payable, within one business day; or
    (iv) Amounts receivable and due unconditionally within one business 
day on pending sales of portfolio securities.
    (9) Demand feature means a feature permitting the holder of a 
security to sell the security at an exercise price equal to the 
approximate amortized cost of the security plus accrued interest, if 
any, at the later of the time of exercise or the settlement of the 
transaction, paid within 397 calendar days of exercise.
    (10) Demand feature issued by a non-controlled person means a demand 
feature issued by:
    (i) A person that, directly or indirectly, does not control, and is 
not controlled by or under common control with the issuer of the 
security subject to the demand feature (control means ``control'' as 
defined in section 2(a)(9) of the Act) (15 U.S.C. 80a-2(a)(9)); or
    (ii) A sponsor of a special purpose entity with respect to an asset-
backed security.
    (11) Eligible security means a security:
    (i) With a remaining maturity of 397 calendar days or less that the 
fund's board of directors determines presents minimal credit risks to 
the fund, which determination must include an analysis of the capacity 
of the security's issuer or guarantor (including for this paragraph 
(a)(11)(i) the provider of a conditional demand feature, when 
applicable) to meet its financial obligations, and such analysis must 
include, to the extent appropriate, consideration of the following 
factors with respect to the security's issuer or guarantor:
    (A) Financial condition;
    (B) Sources of liquidity;
    (C) Ability to react to future market-wide and issuer- or guarantor-
specific events, including ability to repay debt in a highly adverse 
situation; and
    (D) Strength of the issuer or guarantor's industry within the 
economy and relative to economic trends, and issuer or guarantor's 
competitive position within its industry.
    (ii) That is issued by a registered investment company that is a 
money market fund; or
    (iii) That is a government security.
    Note to paragraph (a)(11): For a discussion of additional factors 
that may be relevant in evaluating certain specific asset types see 
Investment Company Act Release No. IC-31828 (9/16/15).
    (12) Event of insolvency has the same meaning as defined in Sec.  
270.5b-3(c)(2).
    (13) Floating rate security means a security the terms of which 
provide for the adjustment of its interest rate whenever a specified 
interest rate changes and that, at any time until the final maturity of 
the instrument or the period remaining until the principal amount can be 
recovered through demand, can reasonably be expected to have a market 
value that approximates its amortized cost.
    (14) Government money market fund means a money market fund that 
invests 99.5 percent or more of its total assets in cash, government 
securities,

[[Page 385]]

and/or repurchase agreements that are collateralized fully.
    (15) Government security has the same meaning as defined in section 
2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16)).
    (16) Guarantee:
    (i) Means an unconditional obligation of a person other than the 
issuer of the security to undertake to pay, upon presentment by the 
holder of the guarantee (if required), the principal amount of the 
underlying security plus accrued interest when due or upon default, or, 
in the case of an unconditional demand feature, an obligation that 
entitles the holder to receive upon the later of exercise or the 
settlement of the transaction the approximate amortized cost of the 
underlying security or securities, plus accrued interest, if any. A 
guarantee includes a letter of credit, financial guaranty (bond) 
insurance, and an unconditional demand feature (other than an 
unconditional demand feature provided by the issuer of the security).
    (ii) The sponsor of a special purpose entity with respect to an 
asset-backed security shall be deemed to have provided a guarantee with 
respect to the entire principal amount of the asset-backed security for 
purposes of this section, except paragraphs (a)(11) (definition of 
eligible security), (d)(2)(ii) (credit substitution), (d)(3)(iv)(A) 
(fractional guarantees) and (e) (guarantees not relied on) of this 
section, unless the money market fund's board of directors has 
determined that the fund is not relying on the sponsor's financial 
strength or its ability or willingness to provide liquidity, credit or 
other support to determine the quality (pursuant to paragraph (d)(2) of 
this section) or liquidity (pursuant to paragraph (d)(4) of this 
section) of the asset-backed security, and maintains a record of this 
determination (pursuant to paragraphs (g)(7) and (h)(6) of this 
section).
    (17) Guarantee issued by a non-controlled person means a guarantee 
issued by:
    (i) A person that, directly or indirectly, does not control, and is 
not controlled by or under common control with the issuer of the 
security subject to the guarantee (control means ``control'' as defined 
in section 2(a)(9) of the Act) (15 U.S.C. 80a-2(a)(9))); or
    (ii) A sponsor of a special purpose entity with respect to an asset-
backed security.
    (18) Illiquid security means a security that cannot be sold or 
disposed of in the ordinary course of business within seven calendar 
days at approximately the value ascribed to it by the fund.
    (19) Penny-rounding method of pricing means the method of computing 
an investment company's price per share for purposes of distribution, 
redemption and repurchase whereby the current net asset value per share 
is rounded to the nearest one percent.
    (20) Refunded security has the same meaning as defined in Sec.  
270.5b-3(c)(4).
    (21) Retail money market fund means a money market fund that has 
policies and procedures reasonably designed to limit all beneficial 
owners of the fund to natural persons.
    (22) Single state fund means a tax exempt fund that holds itself out 
as seeking to maximize the amount of its distributed income that is 
exempt from the income taxes or other taxes on investments of a 
particular state and, where applicable, subdivisions thereof.
    (23) Tax exempt fund means any money market fund that holds itself 
out as distributing income exempt from regular federal income tax.
    (24) Total assets means, with respect to a money market fund using 
the Amortized Cost Method, the total amortized cost of its assets and, 
with respect to any other money market fund, means the total value of 
the money market fund's assets, as defined in section 2(a)(41) of the 
Act (15 U.S.C. 80a-2(a)(41)) and the rules thereunder.
    (25) Unconditional demand feature means a demand feature that by its 
terms would be readily exercisable in the event of a default in payment 
of principal or interest on the underlying security or securities.
    (26) United States dollar-denominated means, with reference to a 
security, that all principal and interest payments on such security are 
payable to security holders in United States dollars under all 
circumstances and that the interest rate of, the principal amount to be 
repaid, and the timing of payments related to such security do

[[Page 386]]

not vary or float with the value of a foreign currency, the rate of 
interest payable on foreign currency borrowings, or with any other 
interest rate or index expressed in a currency other than United States 
dollars.
    (27) Variable rate security means a security the terms of which 
provide for the adjustment of its interest rate on set dates (such as 
the last day of a month or calendar quarter) and that, upon each 
adjustment until the final maturity of the instrument or the period 
remaining until the principal amount can be recovered through demand, 
can reasonably be expected to have a market value that approximates its 
amortized cost.
    (28) Weekly liquid assets means:
    (i) Cash;
    (ii) Direct obligations of the U.S. Government;
    (iii) Government securities that are issued by a person controlled 
or supervised by and acting as an instrumentality of the government of 
the United States pursuant to authority granted by the Congress of the 
United States that:
    (A) Are issued at a discount to the principal amount to be repaid at 
maturity without provision for the payment of interest; and
    (B) Have a remaining maturity date of 60 days or less.
    (iv) Securities that will mature, as determined without reference to 
the exceptions in paragraph (i) of this section regarding interest rate 
readjustments, or are subject to a demand feature that is exercisable 
and payable, within five business days; or
    (v) Amounts receivable and due unconditionally within five business 
days on pending sales of portfolio securities.
    (b) Holding out and use of names and titles--(1) Holding out. It 
shall be an untrue statement of material fact within the meaning of 
section 34(b) of the Act (15 U.S.C. 80a-33(b)) for a registered 
investment company, in any registration statement, application, report, 
account, record, or other document filed or transmitted pursuant to the 
Act, including any advertisement, pamphlet, circular, form letter, or 
other sales literature addressed to or intended for distribution to 
prospective investors that is required to be filed with the Commission 
by section 24(b) of the Act (15 U.S.C. 80a-24(b)), to hold itself out to 
investors as a money market fund or the equivalent of a money market 
fund, unless such registered investment company complies with this 
section.
    (2) Names. It shall constitute the use of a materially deceptive or 
misleading name or title within the meaning of section 35(d) of the Act 
(15 U.S.C. 80a-34(d)) for a registered investment company to adopt the 
term ``money market'' as part of its name or title or the name or title 
of any redeemable securities of which it is the issuer, or to adopt a 
name that suggests that it is a money market fund or the equivalent of a 
money market fund, unless such registered investment company complies 
with this section.
    (3) Titles. For purposes of paragraph (b)(2) of this section, a name 
that suggests that a registered investment company is a money market 
fund or the equivalent thereof includes one that uses such terms as 
``cash,'' ``liquid,'' ``money,'' ``ready assets'' or similar terms.
    (c) Pricing and Redeeming Shares--(1) Share price calculation. (i) 
The current price per share, for purposes of distribution, redemption 
and repurchase, of any redeemable security issued by a government money 
market fund or retail money market fund, notwithstanding the 
requirements of section 2(a)(41) of the Act (15 U.S.C. 80a-2(a)(41)) and 
of Sec. Sec.  270.2a-4 and 270.22c-1 thereunder, may be computed by use 
of the amortized cost method and/or the penny-rounding method. To use 
these methods, the board of directors of the government or retail money 
market fund must determine, in good faith, that it is in the best 
interests of the fund and its shareholders to maintain a stable net 
asset value per share or stable price per share, by virtue of either the 
amortized cost method and/or the penny-rounding method. The government 
or retail money market fund may continue to use such methods only so 
long as the board of directors believes that they fairly reflect the 
market-based net asset value per share and the fund complies with the 
other requirements of this section.
    (ii) Any money market fund that is not a government money market 
fund

[[Page 387]]

or a retail money market fund must compute its price per share for 
purposes of distribution, redemption and repurchase by rounding the 
fund's current net asset value per share to a minimum of the fourth 
decimal place in the case of a fund with a $1.0000 share price or an 
equivalent or more precise level of accuracy for money market funds with 
a different share price (e.g. $10.000 per share, or $100.00 per share).
    (2) Liquidity fees. Except as provided in paragraph (c)(2)(v) of 
this section, and notwithstanding section 27(i) of the Act (15 U.S.C. 
80a-27(i)) and Sec.  270.22c-1:
    (i) Discretionary liquidity fees. If the fund's board of directors, 
including a majority of the directors who are not interested persons of 
the fund, determines that a liquidity fee is in the best interests of 
the fund, the fund must institute a liquidity fee (not to exceed two 
percent of the value of the shares redeemed).
    (A) Duration and application of discretionary liquidity fee. Once 
imposed, a discretionary liquidity fee must be applied to all shares 
redeemed and must remain in effect until the money market fund's board 
of directors, including a majority of the directors who are not 
interested persons of the fund, determines that imposing such liquidity 
fee is no longer in the best interests of the fund.
    (B) Government money market funds. The requirements of this 
paragraph (c)(2)(i) do not apply to a government money market fund. A 
government money market fund may, however, choose to rely on the ability 
to impose discretionary liquidity fees consistent with the requirements 
of this paragraph (c)(2)(i) and any other requirements that apply to 
liquidity fees (e.g., Item 4(b)(1)(ii) of Form N-1A (Sec.  274.11A of 
this chapter)).
    (ii) Determination, duration, and application of mandatory liquidity 
fees. If a money market fund that is not a government money market fund 
or a retail money market fund has total daily net redemptions that 
exceed five percent of the fund's net assets, or such smaller amount of 
net redemptions as the board determines, based on flow information 
available within a reasonable period after the last computation of the 
fund's net asset value on that day, the fund must apply a liquidity fee 
to all shares that are redeemed at a price computed on that day, in an 
amount determined pursuant to paragraph (c)(2)(iii) of this section.
    (iii) Amount of mandatory liquidity fees. The amount of a mandatory 
liquidity fee must be determined pursuant to paragraph (c)(2)(iii)(A) of 
this section, except as provided in paragraph (c)(2)(iii)(C) or (D) of 
this section.
    (A) Good faith estimate of liquidity costs. The fee amount must be 
based on a good faith estimate, supported by data, of the costs the fund 
would incur if it sold a pro rata amount of each security in its 
portfolio to satisfy the amount of net redemptions, including:
    (1) Spread costs, such that the fund is valuing each security at its 
bid price, and any other charges, fees, and taxes associated with 
portfolio security sales; and
    (2) Market impacts for each security. The fund must determine market 
impacts by first establishing a market impact factor for each security, 
which is a good faith estimate of the percentage change in the value of 
the security if it were sold, per dollar of the amount of the security 
that would be sold if the fund sold a pro rata amount of each security 
in its portfolio to satisfy the amount of net redemptions under current 
market conditions and, second, multiplying the market impact factor by 
the dollar amount of the security that would be sold. A fund may assume 
a market impact of zero for its daily liquid assets and weekly liquid 
assets.
    (B) Cost estimates by type of security. For purposes of paragraph 
(c)(2)(iii)(A) of this section, a fund may estimate costs and market 
impacts for each type of security with the same or substantially similar 
characteristics and apply those estimates to all securities of that type 
rather than analyze each security separately.
    (C) Default fee amount. If the costs of selling a pro rata amount of 
each portfolio security cannot be estimated in good faith and supported 
by data, the liquidity fee amount is one percent of the value of shares 
redeemed.
    (D) De minimis exception. A fund is not required to apply a 
liquidity fee if the

[[Page 388]]

amount of the fee determined under paragraph (c)(2)(iii)(A) of this 
section is less than 0.01% of the value of the shares redeemed.
    (iv) Variable contracts. Notwithstanding section 27(i) of the Act 
(15 U.S.C. 80a-27(i)), a variable insurance contract issued by a 
registered separate account funding variable insurance contracts or the 
sponsoring insurance company of such separate account may apply a 
liquidity fee pursuant to paragraph (c)(2) of this section to contract 
owners who allocate all or a portion of their contract value to a 
subaccount of the separate account that is either a money market fund or 
that invests all of its assets in shares of a money market fund.
    (v) Master feeder funds. Any money market fund (``feeder fund'') 
that owns, pursuant to section 12(d)(1)(E) of the Act (15 U.S.C. 80a-
12(d)(1)(E)), shares of another money market fund (``master fund'') may 
not impose liquidity fees under paragraph (c)(2) of this section, 
provided however, that if a master fund, in which the feeder fund 
invests, imposes a liquidity fee pursuant to paragraph (c)(2) of this 
section, then the feeder fund shall pass through to its investors the 
fee on the same terms and conditions as imposed by the master fund.
    (3) Share cancellation. A money market fund may not reduce the 
number of its shares outstanding to seek to maintain a stable net asset 
value per share or stable price per share unless:
    (i) The money market fund calculates its share price pursuant to 
paragraph (c)(1)(i) of this section;
    (ii) The fund has negative gross yield as a result of negative 
interest rates (``negative interest rate event'');
    (iii) The board of directors determines that reducing the number of 
the fund's shares outstanding is in the best interests of the fund and 
its shareholders; and
    (iv) Timely, concise, and plain English disclosure is provided to 
investors about the fund's share cancellation practices and their 
effects on investors, including:
    (A) Advance notification to investors in the fund's prospectus that 
the fund plans to use share cancellation in a negative interest rate 
event and the potential effects on investors; and
    (B) When the fund is cancelling shares, information in each account 
statement or in a separate writing accompanying each account statement 
identifying that such practice is in use and explaining its effects on 
investors.
    (d) Risk-limiting conditions--(1) Portfolio maturity. The money 
market fund must maintain a dollar-weighted average portfolio maturity 
appropriate to its investment objective; provided, however, that the 
money market fund must not:
    (i) Acquire any instrument with a remaining maturity of greater than 
397 calendar days;
    (ii) Maintain a dollar-weighted average portfolio maturity (``WAM'') 
that exceeds 60 calendar days, with the dollar-weighted average based on 
the percentage of each security's market value in the portfolio; or
    (iii) Maintain a dollar-weighted average portfolio maturity that 
exceeds 120 calendar days, determined without reference to the 
exceptions in paragraph (i) of this section regarding interest rate 
readjustments (``WAL'') and with the dollar-weighted average based on 
the percentage of each security's market value in the portfolio.
    (2) Portfolio quality--(i) General. The money market fund must limit 
its portfolio investments to those United States dollar-denominated 
securities that at the time of acquisition are eligible securities.
    (ii) Securities subject to guarantees. A security that is subject to 
a guarantee may be determined to be an eligible security based solely on 
whether the guarantee is an eligible security, provided however, that 
the issuer of the guarantee, or another institution, has undertaken to 
promptly notify the holder of the security in the event the guarantee is 
substituted with another guarantee (if such substitution is permissible 
under the terms of the guarantee).
    (iii) Securities subject to conditional demand features. A security 
that is subject to a conditional demand feature (``underlying 
security'') may be determined to be an eligible security only if:
    (A) The conditional demand feature is an eligible security;

[[Page 389]]

    (B) The underlying security or any guarantee of such security is an 
eligible security, except that the underlying security or guarantee may 
have a remaining maturity of more than 397 calendar days.
    (C) At the time of the acquisition of the underlying security, the 
money market fund's board of directors has determined that there is 
minimal risk that the circumstances that would result in the conditional 
demand feature not being exercisable will occur; and
    (1) The conditions limiting exercise either can be monitored readily 
by the fund or relate to the taxability, under federal, state or local 
law, of the interest payments on the security; or
    (2) The terms of the conditional demand feature require that the 
fund will receive notice of the occurrence of the condition and the 
opportunity to exercise the demand feature in accordance with its terms; 
and
    (D) The issuer of the conditional demand feature, or another 
institution, has undertaken to promptly notify the holder of the 
security in the event the conditional demand feature is substituted with 
another conditional demand feature (if such substitution is permissible 
under the terms of the conditional demand feature).
    (3) Portfolio diversification--(i) Issuer diversification. The money 
market fund must be diversified with respect to issuers of securities 
acquired by the fund as provided in paragraphs (d)(3)(i) and (ii) of 
this section, other than with respect to government securities.
    (A) Taxable and national funds. Immediately after the acquisition of 
any security, a money market fund other than a single state fund must 
not have invested more than:
    (1) Five percent of its total assets in securities issued by the 
issuer of the security, provided, however, that with respect to 
paragraph (d)(3)(i)(A) of this section, such a fund may invest up to 
twenty-five percent of its total assets in the securities of a single 
issuer for a period of up to three business days after the acquisition 
thereof; provided, further, that the fund may not invest in the 
securities of more than one issuer in accordance with the foregoing 
proviso in this paragraph (d)(3)(i)(A)(1) at any time; and
    (2) Ten percent of its total assets in securities issued by or 
subject to demand features or guarantees from the institution that 
issued the demand feature or guarantee, provided, however, that a tax 
exempt fund need only comply with this paragraph (d)(3)(i)(A)(2) with 
respect to eighty-five percent of its total assets, subject to paragraph 
(d)(3)(iii) of this section.
    (B) Single state funds. Immediately after the acquisition of any 
security, a single state fund must not have invested:
    (1) With respect to seventy-five percent of its total assets, more 
than five percent of its total assets in securities issued by the issuer 
of the security; and
    (2) With respect to seventy-five percent of its total assets, more 
than ten percent of its total assets in securities issued by or subject 
to demand features or guarantees from the institution that issued the 
demand feature or guarantee, subject to paragraph (d)(3)(iii) of this 
section.
    (ii) Issuer diversification calculations. For purposes of making 
calculations under paragraph (d)(3)(i) of this section:
    (A) Repurchase agreements. The acquisition of a repurchase agreement 
may be deemed to be an acquisition of the underlying securities, 
provided the obligation of the seller to repurchase the securities from 
the money market fund is collateralized fully and the fund's board of 
directors has evaluated the seller's creditworthiness.
    (B) Refunded securities. The acquisition of a refunded security 
shall be deemed to be an acquisition of the escrowed government 
securities.
    (C) Conduit securities. A conduit security shall be deemed to be 
issued by the person (other than the municipal issuer) ultimately 
responsible for payments of interest and principal on the security.
    (D) Asset-backed securities--(1) General. An asset-backed security 
acquired by a fund (``primary ABS'') shall be deemed to be issued by the 
special purpose entity that issued the asset-backed security, provided, 
however:
    (i) Holdings of primary ABS. Any person whose obligations constitute 
ten percent or more of the principal

[[Page 390]]

amount of the qualifying assets of the primary ABS (``ten percent 
obligor'') shall be deemed to be an issuer of the portion of the primary 
ABS such obligations represent; and
    (ii) Holdings of secondary ABS. If a ten percent obligor of a 
primary ABS is itself a special purpose entity issuing asset-backed 
securities (``secondary ABS''), any ten percent obligor of such 
secondary ABS also shall be deemed to be an issuer of the portion of the 
primary ABS that such ten percent obligor represents.
    (2) Restricted special purpose entities. A ten percent obligor with 
respect to a primary or secondary ABS shall not be deemed to have issued 
any portion of the assets of a primary ABS as provided in paragraph 
(d)(3)(ii)(D)(1) of this section if that ten percent obligor is itself a 
special purpose entity issuing asset-backed securities (``restricted 
special purpose entity''), and the securities that it issues (other than 
securities issued to a company that controls, or is controlled by or 
under common control with, the restricted special purpose entity and 
which is not itself a special purpose entity issuing asset-backed 
securities) are held by only one other special purpose entity.
    ((3) Demand features and guarantees. In the case of a ten percent 
obligor deemed to be an issuer, the fund must satisfy the 
diversification requirements of paragraph (d)(3)(iii) of this section 
with respect to any demand feature or guarantee to which the ten percent 
obligor's obligations are subject.
    (E) Shares of other money market funds. A money market fund that 
acquires shares issued by another money market fund in an amount that 
would otherwise be prohibited by paragraph (d)(3)(i) of this section 
shall nonetheless be deemed in compliance with this section if the board 
of directors of the acquiring money market fund reasonably believes that 
the fund in which it has invested is in compliance with this section.
    (F) Treatment of certain affiliated entities--(1) General. The money 
market fund, when calculating the amount of its total assets invested in 
securities issued by any particular issuer for purposes of paragraph 
(d)(3)(i) of this section, must treat as a single issuer two or more 
issuers of securities owned by the money market fund if one issuer 
controls the other, is controlled by the other issuer, or is under 
common control with the other issuer, provided that ``control'' for this 
purpose means ownership of more than 50 percent of the issuer's voting 
securities.
    (2) Equity owners of asset-backed commercial paper special purpose 
entities. The money market fund is not required to aggregate an asset-
backed commercial paper special purpose entity and its equity owners 
under paragraph (d)(3)(ii)(F)(1) of this section provided that a primary 
line of business of its equity owners is owning equity interests in 
special purpose entities and providing services to special purpose 
entities, the independent equity owners' activities with respect to the 
SPEs are limited to providing management or administrative services, and 
no qualifying assets of the special purpose entity were originated by 
the equity owners.
    (3) Ten percent obligors. For purposes of determining ten percent 
obligors pursuant to paragraph (d)(3)(ii)(D)(1)(i) of this section, the 
money market fund must treat as a single person two or more persons 
whose obligations in the aggregate constitute ten percent or more of the 
principal amount of the qualifying assets of the primary ABS if one 
person controls the other, is controlled by the other person, or is 
under common control with the person, provided that ``control'' for this 
purpose means ownership of more than 50 percent of the person's voting 
securities.
    (iii) Diversification rules for demand features and guarantees. The 
money market fund must be diversified with respect to demand features 
and guarantees acquired by the fund as provided in paragraphs (d)(3)(i), 
(iii), and (iv) of this section, other than with respect to a demand 
feature issued by the same institution that issued the underlying 
security, or with respect to a guarantee or demand feature that is 
itself a government security.
    (A) General. Immediately after the acquisition of any demand feature 
or guarantee, any security subject to a demand feature or guarantee, or 
a security directly issued by the issuer of a

[[Page 391]]

demand feature or guarantee, a money market fund must not have invested 
more than ten percent of its total assets in securities issued by or 
subject to demand features or guarantees from the institution that 
issued the demand feature or guarantee, subject to paragraphs (d)(3)(i) 
and (d)(3)(iii)(B) of this section.
    (B) Tax exempt funds. Immediately after the acquisition of any 
demand feature or guarantee, any security subject to a demand feature or 
guarantee, or a security directly issued by the issuer of a demand 
feature or guarantee (any such acquisition, a ``demand feature or 
guarantee acquisition''), a tax exempt fund, with respect to eighty-five 
percent of its total assets, must not have invested more than ten 
percent of its total assets in securities issued by or subject to demand 
features or guarantees from the institution that issued the demand 
feature or guarantee; provided that any demand feature or guarantee 
acquisition in excess of ten percent of the fund's total assets in 
accordance with this paragraph must be a demand feature or guarantee 
issued by a non-controlled person.
    (iv) Demand feature and guarantee diversification calculations--(A) 
Fractional demand features or guarantees. In the case of a security 
subject to a demand feature or guarantee from an institution by which 
the institution guarantees a specified portion of the value of the 
security, the institution shall be deemed to guarantee the specified 
portion thereof.
    (B) Layered demand features or guarantees. In the case of a security 
subject to demand features or guarantees from multiple institutions that 
have not limited the extent of their obligations as described in 
paragraph (d)(3)(iv)(A) of this section, each institution shall be 
deemed to have provided the demand feature or guarantee with respect to 
the entire principal amount of the security.
    (v) Diversification safe harbor. A money market fund that satisfies 
the applicable diversification requirements of paragraphs (d)(3) and (e) 
of this section shall be deemed to have satisfied the diversification 
requirements of section 5(b)(1) of the Act (15 U.S.C. 80a-5(b)(1)) and 
the rules adopted thereunder.
    (4) Portfolio liquidity. The money market fund must hold securities 
that are sufficiently liquid to meet reasonably foreseeable shareholder 
redemptions in light of the fund's obligations under section 22(e) of 
the Act (15 U.S.C. 80a-22(e)) and any commitments the fund has made to 
shareholders; provided, however, that:
    (i) Illiquid securities. The money market fund may not acquire any 
illiquid security if, immediately after the acquisition, the money 
market fund would have invested more than five percent of its total 
assets in illiquid securities.
    (ii) Minimum daily liquidity requirement. The money market fund may 
not acquire any security other than a daily liquid asset if, immediately 
after the acquisition, the fund would have invested less than twenty-
five percent of its total assets in daily liquid assets. This provision 
does not apply to tax exempt funds.
    (iii) Minimum weekly liquidity requirement. The money market fund 
may not acquire any security other than a weekly liquid asset if, 
immediately after the acquisition, the fund would have invested less 
than fifty percent of its total assets in weekly liquid assets.
    (e) Demand features and guarantees not relied upon. If the fund's 
board of directors has determined that the fund is not relying on a 
demand feature or guarantee to determine the quality (pursuant to 
paragraph (d)(2) of this section), or maturity (pursuant to paragraph 
(i) of this section), or liquidity of a portfolio security (pursuant to 
paragraph (d)(4) of this section), and maintains a record of this 
determination (pursuant to paragraphs (g)(3) and (h)(7) of this 
section), then the fund may disregard such demand feature or guarantee 
for all purposes of this section.
    (f) Defaults and other events--(1) Adverse events. Upon the 
occurrence of any of the events specified in paragraphs (f)(1)(i) 
through (iii) of this section with respect to a portfolio security, the 
money market fund shall dispose of such security as soon as practicable 
consistent with achieving an orderly disposition of the security, by

[[Page 392]]

sale, exercise of any demand feature or otherwise, absent a finding by 
the board of directors that disposal of the portfolio security would not 
be in the best interests of the money market fund (which determination 
may take into account, among other factors, market conditions that could 
affect the orderly disposition of the portfolio security):
    (i) The default with respect to a portfolio security (other than an 
immaterial default unrelated to the financial condition of the issuer);
    (ii) A portfolio security ceases to be an eligible security (e.g., 
no longer presents minimal credit risks); or
    (iii) An event of insolvency occurs with respect to the issuer of a 
portfolio security or the provider of any demand feature or guarantee.
    (2) Notice to the Commission. The money market fund must notify the 
Commission of the occurrence of certain material events, as specified in 
Form N-CR (Sec.  274.222 of this chapter).
    (3) Defaults for purposes of paragraphs (f)(1) and (2) of this 
section. For purposes of paragraphs (f)(1) and (2) of this section, an 
instrument subject to a demand feature or guarantee shall not be deemed 
to be in default (and an event of insolvency with respect to the 
security shall not be deemed to have occurred) if:
    (i) In the case of an instrument subject to a demand feature, the 
demand feature has been exercised and the fund has recovered either the 
principal amount or the amortized cost of the instrument, plus accrued 
interest;
    (ii) The provider of the guarantee is continuing, without protest, 
to make payments as due on the instrument; or
    (iii) The provider of a guarantee with respect to an asset-backed 
security pursuant to paragraph (a)(16)(ii) of this section is 
continuing, without protest, to provide credit, liquidity or other 
support as necessary to permit the asset-backed security to make 
payments as due.
    (4) Notice to the board of directors. (i) The money market fund must 
notify its board of directors within one business day following the 
occurrence of:
    (A) The money market fund investing less than twelve and a half 
percent of its total assets in daily liquid assets; or
    (B) The money market fund investing less than twenty-five percent of 
its total assets in weekly liquid assets.
    (ii) Following an event described in paragraph (f)(4)(i) of this 
section, the money market fund must provide its board of directors with 
a brief description of the facts and circumstances leading to such event 
within four business days after occurrence of the event.
    (g) Required procedures. The money market fund's board of directors 
must adopt written procedures including the following:
    (1) Funds using amortized cost. In the case of a government or 
retail money market fund that uses the amortized cost method of 
valuation, in supervising the money market fund's operations and 
delegating special responsibilities involving portfolio management to 
the money market fund's investment adviser, the money market fund's 
board of directors, as a particular responsibility within the overall 
duty of care owed to its shareholders, shall establish written 
procedures reasonably designed, taking into account current market 
conditions and the money market fund's investment objectives, to 
stabilize the money market fund's net asset value per share, as computed 
for the purpose of distribution, redemption and repurchase, at a single 
value.
    (i) Specific procedures. Included within the procedures adopted by 
the board of directors shall be the following:
    (A) Shadow pricing. Written procedures shall provide:
    (1) That the extent of deviation, if any, of the current net asset 
value per share calculated using available market quotations (or an 
appropriate substitute that reflects current market conditions) from the 
money market fund's amortized cost price per share, shall be calculated 
at least daily, and at such other intervals that the board of directors 
determines appropriate and reasonable in light of current market 
conditions;
    (2) For the periodic review by the board of directors of the amount 
of the deviation as well as the methods used to calculate the deviation; 
and
    (3) For the maintenance of records of the determination of deviation 
and the board's review thereof.

[[Page 393]]

    (B) Prompt consideration of deviation. In the event such deviation 
from the money market fund's amortized cost price per share exceeds \1/
2\ of 1 percent, the board of directors shall promptly consider what 
action, if any, should be initiated by the board of directors.
    (C) Material dilution or unfair results. Where the board of 
directors believes the extent of any deviation from the money market 
fund's amortized cost price per share may result in material dilution or 
other unfair results to investors or existing shareholders, it shall 
cause the fund to take such action as it deems appropriate to eliminate 
or reduce to the extent reasonably practicable such dilution or unfair 
results.
    (ii) [Reserved]
    (2) Funds using penny rounding. In the case of a government or 
retail money market fund that uses the penny rounding method of pricing, 
in supervising the money market fund's operations and delegating special 
responsibilities involving portfolio management to the money market 
fund's investment adviser, the money market fund's board of directors, 
as a particular responsibility within the overall duty of care owed to 
its shareholders, must establish written procedures reasonably designed, 
taking into account current market conditions and the money market 
fund's investment objectives, to assure to the extent reasonably 
practicable that the money market fund's price per share as computed for 
the purpose of distribution, redemption and repurchase, rounded to the 
nearest one percent, will not deviate from the single price established 
by the board of directors.
    (3) Ongoing Review of Credit Risks. The written procedures must 
require the adviser to provide ongoing review of whether each security 
(other than a government security) continues to present minimal credit 
risks. The review must:
    (i) Include an assessment of each security's credit quality, 
including the capacity of the issuer or guarantor (including conditional 
demand feature provider, when applicable) to meet its financial 
obligations; and
    (ii) Be based on, among other things, financial data of the issuer 
of the portfolio security or provider of the guarantee or demand 
feature, as the case may be, and in the case of a security subject to a 
conditional demand feature, the issuer of the security whose financial 
condition must be monitored under paragraph (d)(2)(iii) of this section, 
whether such data is publicly available or provided under the terms of 
the security's governing documents.
    (4) Securities subject to demand features or guarantees. In the case 
of a security subject to one or more demand features or guarantees that 
the fund's board of directors has determined that the fund is not 
relying on to determine the quality (pursuant to paragraph (d)(2) of 
this section), maturity (pursuant to paragraph (i) of this section) or 
liquidity (pursuant to paragraph (d)(4) of this section) of the security 
subject to the demand feature or guarantee, written procedures must 
require periodic evaluation of such determination.
    (5) Adjustable rate securities without demand features. In the case 
of a variable rate or floating rate security that is not subject to a 
demand feature and for which maturity is determined pursuant to 
paragraph (i)(1), (i)(2) or (i)(4) of this section, written procedures 
shall require periodic review of whether the interest rate formula, upon 
readjustment of its interest rate, can reasonably be expected to cause 
the security to have a market value that approximates its amortized cost 
value.
    (6) Ten percent obligors of asset-backed securities. In the case of 
an asset-backed security, written procedures must require the fund to 
periodically determine the number of ten percent obligors (as that term 
is used in paragraph (d)(3)(ii)(D) of this section) deemed to be the 
issuers of all or a portion of the asset-backed security for purposes of 
paragraph (d)(3)(ii)(D) of this section; provided, however, written 
procedures need not require periodic determinations with respect to any 
asset-backed security that a fund's board of directors has determined, 
at the time of acquisition, will not have, or is unlikely to have, ten 
percent obligors that are deemed to be issuers of all or a portion of 
that asset-backed security for purposes of paragraph (d)(3)(ii)(D) of 
this section, and maintains a record of this determination.

[[Page 394]]

    (7) Asset-backed securities not subject to guarantees. In the case 
of an asset-backed security for which the fund's board of directors has 
determined that the fund is not relying on the sponsor's financial 
strength or its ability or willingness to provide liquidity, credit or 
other support in connection with the asset-backed security to determine 
the quality (pursuant to paragraph (d)(2) of this section) or liquidity 
(pursuant to paragraph (d)(4) of this section) of the asset-backed 
security, written procedures must require periodic evaluation of such 
determination.
    (8) Stress Testing. Written procedures must provide for:
    (i) General. The periodic stress testing, at such intervals as the 
board of directors determines appropriate and reasonable in light of 
current market conditions, of the money market fund's ability to 
maintain the sufficient liquidity levels identified in its written 
procedures, and the fund's ability to minimize principal volatility 
(and, in the case of a money market fund using the amortized cost method 
of valuation or penny rounding method of pricing as provided in 
paragraph (c)(1) of this section, the fund's ability to maintain the 
stable price per share established by the board of directors for the 
purpose of distribution, redemption and repurchase), based upon 
specified hypothetical events that include, but are not limited to:
    (A) Increases in the general level of short-term interest rates, in 
combination with various levels of an increase in shareholder 
redemptions;
    (B) An event indicating or evidencing credit deterioration, such as 
a downgrade or default of particular portfolio security positions, each 
representing various portions of the fund's portfolio (with varying 
assumptions about the resulting loss in the value of the security), in 
combination with various levels of an increase in shareholder 
redemptions;
    (C) A widening of spreads compared to the indexes to which portfolio 
securities are tied in various sectors in the fund's portfolio (in which 
a sector is a logically related subset of portfolio securities, such as 
securities of issuers in similar or related industries or geographic 
region or securities of a similar security type), in combination with 
various levels of an increase in shareholder redemptions; and
    (D) Any additional combinations of events that the adviser deems 
relevant.
    (ii) A report on the results of such testing to be provided to the 
board of directors at its next regularly scheduled meeting (or sooner, 
if appropriate in light of the results), which report must include:
    (A) The date(s) on which the testing was performed and an assessment 
of the money market fund's ability to maintain the sufficient liquidity 
levels identified in its written procedures and to minimize principal 
volatility (and, in the case of a money market fund using the amortized 
cost method of valuation or penny rounding method of pricing as provided 
in paragraph (c)(1) of this section to maintain the stable price per 
share established by the board of directors); and
    (B) An assessment by the fund's adviser of the fund's ability to 
withstand the events (and concurrent occurrences of those events) that 
are reasonably likely to occur within the following year, including such 
information as may reasonably be necessary for the board of directors to 
evaluate the stress testing conducted by the adviser and the results of 
the testing. The fund adviser must include a summary of the significant 
assumptions made when performing the stress tests.
    (h) Recordkeeping and reporting--(1) Written procedures. For a 
period of not less than six years following the replacement of existing 
procedures with new procedures (the first two years in an easily 
accessible place), a written copy of the procedures (and any 
modifications thereto) described in this section must be maintained and 
preserved.
    (2) Board considerations and actions. For a period of not less than 
six years (the first two years in an easily accessible place) a written 
record must be maintained and preserved of the board of directors' 
considerations and actions taken in connection with the discharge of its 
responsibilities, as set forth in this section, to be included in the 
minutes of the board of directors' meetings.
    (3) Credit risk analysis. For a period of not less than three years 
from the date

[[Page 395]]

that the credit risks of a portfolio security were most recently 
reviewed, a written record must be maintained and preserved in an easily 
accessible place of the determination that a portfolio security is an 
eligible security, including the determination that it presents minimal 
credit risks at the time the fund acquires the security, or at such 
later times (or upon such events) that the board of directors determines 
that the investment adviser must reassess whether the security presents 
minimal credit risks.
    (4) Determinations with respect to adjustable rate securities. For a 
period of not less than three years from the date when the assessment 
was most recently made, a written record must be preserved and 
maintained, in an easily accessible place, of the determination required 
by paragraph (g)(5) of this section (that a variable rate or floating 
rate security that is not subject to a demand feature and for which 
maturity is determined pursuant to paragraph (i)(1), (i)(2) or (i)(4) of 
this section can reasonably be expected, upon readjustment of its 
interest rate at all times during the life of the instrument, to have a 
market value that approximates its amortized cost).
    (5) Determinations with respect to asset-backed securities. For a 
period of not less than three years from the date when the determination 
was most recently made, a written record must be preserved and 
maintained, in an easily accessible place, of the determinations 
required by paragraph (g)(6) of this section (the number of ten percent 
obligors (as that term is used in paragraph (d)(3)(ii)(D) of this 
section) deemed to be the issuers of all or a portion of the asset-
backed security for purposes of paragraph (d)(3)(ii)(D) of this 
section). The written record must include:
    (i) The identities of the ten percent obligors (as that term is used 
in paragraph (d)(3)(ii)(D) of this section), the percentage of the 
qualifying assets constituted by the securities of each ten percent 
obligor and the percentage of the fund's total assets that are invested 
in securities of each ten percent obligor; and
    (ii) Any determination that an asset-backed security will not have, 
or is unlikely to have, ten percent obligors deemed to be issuers of all 
or a portion of that asset-backed security for purposes of paragraph 
(d)(3)(ii)(D) of this section.
    (6) Evaluations with respect to asset-backed securities not subject 
to guarantees. For a period of not less than three years from the date 
when the evaluation was most recently made, a written record must be 
preserved and maintained, in an easily accessible place, of the 
evaluation required by paragraph (g)(7) of this section (regarding 
asset-backed securities not subject to guarantees).
    (7) Evaluations with respect to securities subject to demand 
features or guarantees. For a period of not less than three years from 
the date when the evaluation was most recently made, a written record 
must be preserved and maintained, in an easily accessible place, of the 
evaluation required by paragraph (g)(4) of this section (regarding 
securities subject to one or more demand features or guarantees).
    (8) Reports with respect to stress testing. For a period of not less 
than six years (the first two years in an easily accessible place), a 
written copy of the report required under paragraph (g)(8)(ii) of this 
section must be maintained and preserved.
    (9) Inspection of records. The documents preserved pursuant to 
paragraph (h) of this section are subject to inspection by the 
Commission in accordance with section 31(b) of the Act (15 U.S.C. 80a-
30(b)) as if such documents were records required to be maintained 
pursuant to rules adopted under section 31(a) of the Act (15 U.S.C. 80a-
30(a)).
    (10) Website disclosure of portfolio holdings and other fund 
information. The money market fund must post prominently on its website 
the following information:
    (i) For a period of not less than six months, beginning no later 
than the fifth business day of the month, a schedule of its investments, 
as of the last business day or subsequent calendar day of the preceding 
month, that includes the following information:
    (A) With respect to the money market fund and each class of 
redeemable shares thereof:
    (1) The WAM; and
    (2) The WAL.

[[Page 396]]

    (B) With respect to each security held by the money market fund:
    (1) Name of the issuer;
    (2) Category of investment (indicate the category that identifies 
the instrument from among the following: U.S. Treasury Debt; U.S. 
Government Agency Debt, if categorized as coupon-paying notes; U.S. 
Government Agency Debt, if categorized as no-coupon discount notes; Non-
U.S. Sovereign, Sub-Sovereign and Supra-National debt; Certificate of 
Deposit; Non-Negotiable Time Deposit; Variable Rate Demand Note; Other 
Municipal Security; Asset Backed Commercial Paper; Other Asset Backed 
Securities; U.S. Treasury Repurchase Agreement, if collateralized only 
by U.S. Treasuries (including Strips) and cash; U.S. Government Agency 
Repurchase Agreement, collateralized only by U.S. Government Agency 
securities, U.S. Treasuries, and cash; Other Repurchase Agreement, if 
any collateral falls outside Treasury, Government Agency and cash; 
Insurance Company Funding Agreement; Investment Company; Financial 
Company Commercial Paper; Non-Financial Company Commercial Paper; and 
Other Instrument. If Other Instrument, include a brief description);
    (3) CUSIP number (if any);
    (4) Principal amount;
    (5) The maturity date determined by taking into account the maturity 
shortening provisions in paragraph (i) of this section (i.e., the 
maturity date used to calculate WAM under paragraph (d)(1)(ii) of this 
section);
    (6) The maturity date determined without reference to the exceptions 
in paragraph (i) of this section regarding interest rate readjustments 
(i.e., the maturity used to calculate WAL under paragraph (d)(1)(iii) of 
this section);
    (7) Coupon or yield; and
    (8) Value.
    (ii) A schedule, chart, graph, or other depiction, which must be 
updated each business day as of the end of the preceding business day, 
showing, as of the end of each business day during the preceding six 
months:
    (A) The percentage of the money market fund's total assets invested 
in daily liquid assets;
    (B) The percentage of the money market fund's total assets invested 
in weekly liquid assets; and
    (C) The money market fund's net inflows or outflows.
    (iii) A schedule, chart, graph, or other depiction showing the money 
market fund's net asset value per share (which the fund must calculate 
based on current market factors before applying the amortized cost or 
penny-rounding method, if used), rounded to the fourth decimal place in 
the case of funds with a $1.0000 share price or an equivalent level of 
accuracy for funds with a different share price (e.g., $10.000 per 
share), as of the end of each business day during the preceding six 
months, which must be updated each business day as of the end of the 
preceding business day.
    (iv) A link to a website of the Securities and Exchange Commission 
where a user may obtain the most recent 12 months of publicly available 
information filed by the money market fund pursuant to Sec.  270.30b1-7.
    (v) For a period of not less than one year, beginning no later than 
the same business day on which the money market fund files an initial 
report on Form N-CR (Sec.  274.222 of this chapter) in response to the 
occurrence of any event specified in Part C of Form N-CR, the same 
information that the money market fund is required to report to the 
Commission on Part C (Items C.1, C.2, C.3, C.4, C.5, C.6, and C.7) of 
Form N-CR concerning such event, along with the following statement: 
``The Fund was required to disclose additional information about this 
event on Form N-CR and to file this form with the Securities and 
Exchange Commission. Any Form N-CR filing submitted by the Fund is 
available on the EDGAR Database on the Securities and Exchange 
Commission's internet site at https://www.sec.gov.''
    (11) Processing of transactions. A government money market fund and 
a retail money market fund (or its transfer agent) must have the 
capacity to redeem and sell securities issued by the fund at a price 
based on the current net asset value per share pursuant to Sec.  
270.22c-1. Such capacity must include

[[Page 397]]

the ability to redeem and sell securities at prices that do not 
correspond to a stable price per share.
    (i) Maturity of portfolio securities. For purposes of this section, 
the maturity of a portfolio security shall be deemed to be the period 
remaining (calculated from the trade date or such other date on which 
the fund's interest in the security is subject to market action) until 
the date on which, in accordance with the terms of the security, the 
principal amount must unconditionally be paid, or in the case of a 
security called for redemption, the date on which the redemption payment 
must be made, except as provided in paragraphs (i)(1) through (i)(8) of 
this section:
    (1) Adjustable rate government securities. A government security 
that is a variable rate security where the variable rate of interest is 
readjusted no less frequently than every 397 calendar days shall be 
deemed to have a maturity equal to the period remaining until the next 
readjustment of the interest rate. A government security that is a 
floating rate security shall be deemed to have a remaining maturity of 
one day.
    (2) Short-term variable rate securities. A variable rate security, 
the principal amount of which, in accordance with the terms of the 
security, must unconditionally be paid in 397 calendar days or less 
shall be deemed to have a maturity equal to the earlier of the period 
remaining until the next readjustment of the interest rate or the period 
remaining until the principal amount can be recovered through demand.
    (3) Long-term variable rate securities. A variable rate security, 
the principal amount of which is scheduled to be paid in more than 397 
calendar days, that is subject to a demand feature, shall be deemed to 
have a maturity equal to the longer of the period remaining until the 
next readjustment of the interest rate or the period remaining until the 
principal amount can be recovered through demand.
    (4) Short-term floating rate securities. A floating rate security, 
the principal amount of which, in accordance with the terms of the 
security, must unconditionally be paid in 397 calendar days or less 
shall be deemed to have a maturity of one day, except for purposes of 
determining WAL under paragraph (d)(1)(iii) of this section, in which 
case it shall be deemed to have a maturity equal to the period remaining 
until the principal amount can be recovered through demand.
    (5) Long-term floating rate securities. A floating rate security, 
the principal amount of which is scheduled to be paid in more than 397 
calendar days, that is subject to a demand feature, shall be deemed to 
have a maturity equal to the period remaining until the principal amount 
can be recovered through demand.
    (6) Repurchase agreements. A repurchase agreement shall be deemed to 
have a maturity equal to the period remaining until the date on which 
the repurchase of the underlying securities is scheduled to occur, or, 
where the agreement is subject to demand, the notice period applicable 
to a demand for the repurchase of the securities.
    (7) Portfolio lending agreements. A portfolio lending agreement 
shall be treated as having a maturity equal to the period remaining 
until the date on which the loaned securities are scheduled to be 
returned, or where the agreement is subject to demand, the notice period 
applicable to a demand for the return of the loaned securities.
    (8) Money market fund securities. An investment in a money market 
fund shall be treated as having a maturity equal to the period of time 
within which the acquired money market fund is required to make payment 
upon redemption, unless the acquired money market fund has agreed in 
writing to provide redemption proceeds to the investing money market 
fund within a shorter time period, in which case the maturity of such 
investment shall be deemed to be the shorter period.
    (j) Delegation. The money market fund's board of directors may 
delegate to the fund's investment adviser or officers the responsibility 
to make any determination required to be made by the board of directors 
under this section other than the determinations required by paragraphs 
(c)(1) (board findings), (c)(3) (share cancellation), (f)(1)

[[Page 398]]

(adverse events), (g)(1) and (2) (amortized cost and penny rounding 
procedures), and (g)(8) (stress testing procedures) of this section.
    (1) Written guidelines. The board of directors must establish and 
periodically review written guidelines (including guidelines for 
determining whether securities present minimal credit risks as required 
in paragraphs (d)(2) and (g)(3) of this section and guidelines for 
determining the application and size of liquidity fees as required in 
paragraph (c)(2) of this section) and procedures under which the 
delegate makes such determinations.
    (2) Oversight. The board of directors must take any measures 
reasonably necessary (through periodic reviews of fund investments and 
the delegate's procedures in connection with investment decisions, 
periodic review of the delegate's liquidity fee determinations under 
paragraph (c)(2) of this section, and prompt review of the adviser's 
actions in the event of the default of a security or event of insolvency 
with respect to the issuer of the security or any guarantee or demand 
feature to which it is subject that requires notification of the 
Commission under paragraph (f)(2) of this section by reference to Form 
N-CR (Sec.  274.222 of this chapter) to assure that the guidelines and 
procedures are being followed.

[79 FR 47958, Aug. 14, 2014, as amended at 80 FR 58153, Sept. 25, 2015; 
88 FR 51521, Aug. 3, 2023]



Sec.  270.2a19-2  Investment company general partners not deemed 
interested persons.

    Preliminary Note to Sec.  270.2a19-2: This Sec.  270.2a19-2 
conditionally excepts from the definition of interested person in 
section 2(a)(19) (15 U.S.C. 80a-2(a)(19)) general partners of investment 
companies organized in limited partnership form. Compliance with the 
conditions of this Sec.  270.2a19-2 does not relieve an investment 
company of any other requirement of this Act, or except a general 
partner that is an interested person by virtue of any other provision.

    (a) Director General Partners Not Deemed Interested Persons. A 
general partner serving as a director of a limited partnership 
investment company shall not be deemed to be an interested person of 
such company, or of any investment adviser of, or principal underwriter 
for, such company, solely by reason of being a partner of the limited 
partnership investment company, or a copartner in the limited 
partnership investment company with any investment adviser of, or 
principal underwriter for, the company, provided that the Limited 
Partnership Agreement contains in substance the following:
    (1) Only general partners who are natural persons shall serve as, 
and perform the functions of, directors of the limited partnership 
investment company, except that any general partner may act as provided 
in paragraph (a)(2)(iii) of this section.
    (2) A general partner shall not have the authority to act 
individually on behalf of, or to bind, the Limited Partnership 
Investment Company, except:
    (i) In such person's capacity as investment adviser, principal 
underwriter, or administrator;
    (ii) Within the scope of such person's authority as delegated by the 
board of directors; or
    (iii) In the event that no director of the company remains, to the 
extent necessary to continue the Limited Partnership Investment Company, 
for such limited periods as are permitted under the Act to fill director 
vacancies.
    (3) Limited partners shall have all of the rights afforded 
shareholders under the Act. If a limited partnership interest is 
transferred in a manner that is effective under the Partnership 
Agreement, the transferee shall have all of the rights afforded 
shareholders under the Act.
    (4) A general partner shall not withdraw from the Limited 
Partnership Investment Company or reduce its Federal Tax Status 
Contribution without giving at least one year's prior written notice to 
the Limited Partnership Investment Company, if such withdrawal or 
reduction is likely to cause the company to lose its partnership tax 
classification. This paragraph (a)(4) shall not apply to an investment 
adviser general partner if the company terminates its advisory agreement 
with such general partner.
    (b) Definitions. (1) ``Federal Tax Status Contribution'' shall mean 
the interest (including limited partnership interest) in each material 
item of partnership income, gain, loss, deduction,

[[Page 399]]

or credit, and other contributions, required to be held or made by 
general partners, pursuant to section 4 of Internal Revenue Service 
Revenue Procedure 89-12, or any successor provisions thereto.
    (2) ``Limited Partnership Investment Company'' shall mean a 
registered management company or a business development company that is 
organized as a limited partnership under state law.
    (3) ``Partnership Agreement'' shall mean the agreement of the 
partners of the Limited Partnership Investment Company as to the affairs 
of the limited partnership and the conduct of its business.

[58 FR 45838, Aug. 31, 1993; 58 FR 64353, Dec. 6, 1993; 59 FR 15501, 
Apr. 1, 1994]



Sec.  270.2a19-3  Certain investment company directors not considered
interested persons because of ownership of index fund securities.

    If a director of a registered investment company (``Fund'') owns 
shares of a registered investment company (including the Fund) with an 
investment objective to replicate the performance of one or more broad-
based securities indices (``Index Fund''), ownership of the Index Fund 
shares will not cause the director to be considered an ``interested 
person'' of the Fund or of the Fund's investment adviser or principal 
underwriter (as defined by section 2(a)(19)(A)(iii) and (B)(iii) of the 
Act (15 U.S.C. 80a-2(a)(19)(A)(iii) and (B)(iii)).

[66 FR 3758, Jan. 16, 2001]



Sec.  270.2a41-1  Valuation of standby commitments by registered investment
companies.

    (a) A standby commitment means a right to sell a specified 
underlying security or securities within a specified period of time and 
at an exercise price equal to the amortized cost of the underlying 
security or securities plus accrued interest, if any, at the time of 
exercise, that may be sold, transferred or assigned only with the 
underlying security or securities. A standby commitment entitles the 
holder to receive same day settlement, and will be considered to be from 
the party to whom the investment company will look for payment of the 
exercise price. A standby commitment may be assigned a fair value of 
zero, Provided, That:
    (1) The standby commitment is not used to affect the company's 
valuation of the security or securities underlying the standby 
commitment; and
    (2) Any consideration paid by the company for the standby 
commitment, whether paid in cash or by paying a premium for the 
underlying security or securities, is accounted for by the company as 
unrealized depreciation until the standby commitment is exercised or 
expires.
    (b) [Reserved]

[51 FR 9779, Mar. 21, 1986, as amended at 56 FR 8128, Feb. 27, 1991; 61 
FR 13982, Mar. 28, 1996; 62 FR 64986, Dec. 9, 1997]



Sec.  270.2a-46  Certain issuers as eligible portfolio companies.

    The term eligible portfolio company shall include any issuer that 
meets the requirements set forth in paragraphs (A) and (B) of section 
2(a)(46) of the Act (15 U.S.C. 80a-2(a)(46)(A) and (B)) and that:
    (a) Does not have any class of securities listed on a national 
securities exchange; or
    (b) Has a class of securities listed on a national securities 
exchange, but has an aggregate market value of outstanding voting and 
non-voting common equity of less than $250 million. For purposes of this 
paragraph:
    (1) The aggregate market value of an issuer's outstanding voting and 
non-voting common equity shall be computed by use of the price at which 
the common equity was last sold, or the average of the bid and asked 
prices of such common equity, in the principal market for such common 
equity as of a date within 60 days prior to the date of acquisition of 
its securities by a business development company; and
    (2) Common equity has the same meaning as in 17 CFR 230.405.

[73 FR 29051, May 20, 2008]



Sec.  270.2a51-1  Definition of investments for purposes of
section 2(a)(51) (definition of ``qualified purchaser''); certain
calculations.

    (a) Definitions. As used in this section:
    (1) The term Commodity Interests means commodity futures contracts,

[[Page 400]]

options on commodity futures contracts, and options on physical 
commodities traded on or subject to the rules of:
    (i) Any contract market designated for trading such transactions 
under the Commodity Exchange Act and the rules thereunder; or
    (ii) Any board of trade or exchange outside the United States, as 
contemplated in Part 30 of the rules under the Commodity Exchange Act 
[17 CFR 30.1 through 30.11].
    (2) The term Family Company means a company described in paragraph 
(A)(ii) of section 2(a)(51) of the Act [15 U.S.C. 80a-2(a)(51)].
    (3) The term Investment Vehicle means an investment company, a 
company that would be an investment company but for the exclusions 
provided by sections 3(c)(1) through 3(c)(9) of the Act [15 U.S.C. 80a-
3(c)(1) through 3(c)(9)] or the exemptions provided by Sec. Sec.  
270.3a-6 or 270.3a-7, or a commodity pool.
    (4) The term Investments has the meaning set forth in paragraph (b) 
of this section.
    (5) The term Physical Commodity means any physical commodity with 
respect to which a Commodity Interest is traded on a market specified in 
paragraph (a)(1) of this section.
    (6) The term Prospective Qualified Purchaser means a person seeking 
to purchase a security of a Section 3(c)(7) Company.
    (7) The term Public Company means a company that:
    (i) Files reports pursuant to section 13 or 15(d) of the Securities 
Exchange Act of 1934 [15 U.S.C. 78m or 78o(d)]; or
    (ii) Has a class of securities that are listed on a ``designated 
offshore securities market'' as such term is defined by Regulation S 
under the Securities Act of 1933 [17 CFR 230.901 through 230.904].
    (8) The term Related Person means a person who is related to a 
Prospective Qualified Purchaser as a sibling, spouse or former spouse, 
or is a direct lineal descendant or ancestor by birth or adoption of the 
Prospective Qualified Purchaser, or is a spouse of such descendant or 
ancestor, provided that, in the case of a Family Company, a Related 
Person includes any owner of the Family Company and any person who is a 
Related Person of such owner.
    (9) The term Relying Person means a Section 3(c)(7) Company or a 
person acting on its behalf.
    (10) The term Section 3(c)(7) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(7) 
of the Act [15 U.S.C. 80a-3(c)(7)].
    (b) Types of Investments. For purposes of section 2(a)(51) of the 
Act [15 U.S.C. 80a-2(a)(51)], the term Investments means:
    (1) Securities (as defined by section 2(a)(1) of the Securities Act 
of 1933 [15 U.S.C. 77b(a)(1)]), other than securities of an issuer that 
controls, is controlled by, or is under common control with, the 
Prospective Qualified Purchaser that owns such securities, unless the 
issuer of such securities is:
    (i) An Investment Vehicle;
    (ii) A Public Company; or
    (iii) A company with shareholders' equity of not less than $50 
million (determined in accordance with generally accepted accounting 
principles) as reflected on the company's most recent financial 
statements, provided that such financial statements present the 
information as of a date within 16 months preceding the date on which 
the Prospective Qualified Purchaser acquires the securities of a Section 
3(c)(7) Company;
    (2) Real estate held for investment purposes;
    (3) Commodity Interests held for investment purposes;
    (4) Physical Commodities held for investment purposes;
    (5) To the extent not securities, financial contracts (as such term 
is defined in section 3(c)(2)(B)(ii) of the Act [15 U.S.C. 80a-
3(c)(2)(B)(ii)] entered into for investment purposes;
    (6) In the case of a Prospective Qualified Purchaser that is a 
Section 3(c)(7) Company, a company that would be an investment company 
but for the exclusion provided by section 3(c)(1) of the Act [15 U.S.C. 
80a-3(c)(1)], or a commodity pool, any amounts payable to such 
Prospective Qualified Purchaser pursuant to a firm agreement or similar 
binding commitment pursuant to which a person has agreed to acquire an 
interest in, or make capital contributions to, the Prospective Qualified

[[Page 401]]

Purchaser upon the demand of the Prospective Qualified Purchaser; and
    (7) Cash and cash equivalents (including foreign currencies) held 
for investment purposes. For purposes of this section, cash and cash 
equivalents include:
    (i) Bank deposits, certificates of deposit, bankers acceptances and 
similar bank instruments held for investment purposes; and
    (ii) The net cash surrender value of an insurance policy.
    (c) Investment Purposes. For purposes of this section:
    (1) Real estate shall not be considered to be held for investment 
purposes by a Prospective Qualified Purchaser if it is used by the 
Prospective Qualified Purchaser or a Related Person for personal 
purposes or as a place of business, or in connection with the conduct of 
the trade or business of the Prospective Qualified Purchaser or a 
Related Person, provided that real estate owned by a Prospective 
Qualified Purchaser who is engaged primarily in the business of 
investing, trading or developing real estate in connection with such 
business may de deemed to be held for investment purposes. Residential 
real estate shall not be deemed to be used for personal purposes if 
deductions with respect to such real estate are not disallowed by 
section 280A of the Internal Revenue Code [26 U.S.C. 280A].
    (2) A Commodity Interest or Physical Commodity owned, or a financial 
contract entered into, by the Prospective Qualified Purchaser who is 
engaged primarily in the business of investing, reinvesting, or trading 
in Commodity Interests, Physical Commodities or financial contracts in 
connection with such business may be deemed to be held for investment 
purposes.
    (d) Valuation. For purposes of determining whether a Prospective 
Qualified Purchaser is a qualified purchaser, the aggregate amount of 
Investments owned and invested on a discretionary basis by the 
Prospective Qualified Purchaser shall be the Investments' fair market 
value on the most recent practicable date or their cost, provided that:
    (1) In the case of Commodity Interests, the amount of Investments 
shall be the value of the initial margin or option premium deposited in 
connection with such Commodity Interests; and
    (2) In each case, there shall be deducted from the amount of 
Investments owned by the Prospective Qualified Purchaser the amounts 
specified in paragraphs (e) and (f) of this section, as applicable.
    (e) Deductions. In determining whether any person is a qualified 
purchaser there shall be deducted from the amount of such person's 
Investments the amount of any outstanding indebtedness incurred to 
acquire or for the purpose of acquiring the Investments owned by such 
person.
    (f) Deductions: Family Companies. In determining whether a Family 
Company is a qualified purchaser, in addition to the amounts specified 
in paragraph (e) of this section, there shall be deducted from the value 
of such Family Company's Investments any outstanding indebtedness 
incurred by an owner of the Family Company to acquire such Investments.
    (g) Special rules for certain Prospective Qualified Purchasers--1) 
Qualified institutional buyers. Any Prospective Qualified Purchaser who 
is, or who a Relying Person reasonably believes is, a qualified 
institutional buyer as defined in paragraph (a) of Sec.  230.144A of 
this chapter, acting for its own account, the account of another 
qualified institutional buyer, or the account of a qualified purchaser, 
shall be deemed to be a qualified purchaser provided:
    (i) That a dealer described in paragraph (a)(1)(ii) of Sec.  
230.144A of this chapter shall own and invest on a discretionary basis 
at least $25 million in securities of issuers that are not affiliated 
persons of the dealer; and
    (ii) That a plan referred to in paragraph (a)(1)(i)(D) or 
(a)(1)(i)(E) of Sec.  230.144A of this chapter, or a trust fund referred 
to in paragraph (a)(1)(i)(F) of Sec.  230.144A of this chapter that 
holds the assets of such a plan, will not be deemed to be acting for its 
own account if investment decisions with respect to the plan are made by 
the beneficiaries of the plan, except with respect to investment 
decisions made solely by the fiduciary, trustee or sponsor of such plan.
    (2) Joint Investments. In determining whether a natural person is a 
qualified

[[Page 402]]

purchaser, there may be included in the amount of such person's 
Investments any Investments held jointly with such person's spouse, or 
Investments in which such person shares with such person's spouse a 
community property or similar shared ownership interest. In determining 
whether spouses who are making a joint investment in a Section 3(c)(7) 
Company are qualified purchasers, there may be included in the amount of 
each spouse's Investments any Investments owned by the other spouse 
(whether or not such Investments are held jointly). In each case, there 
shall be deducted from the amount of any such Investments the amounts 
specified in paragraph (e) of this section incurred by each spouse.
    (3) Investments by Subsidiaries. For purposes of determining the 
amount of Investments owned by a company under section 2(a)(51)(A)(iv) 
of the Act [15 U.S.C. 80a-2(a)(51)(A)(iv)], there may be included 
Investments owned by majority-owned subsidiaries of the company and 
Investments owned by a company (``Parent Company'') of which the company 
is a majority-owned subsidiary, or by a majority-owned subsidiary of the 
company and other majority-owned subsidiaries of the Parent Company.
    (4) Certain Retirement Plans and Trusts. In determining whether a 
natural person is a qualified purchaser, there may be included in the 
amount of such person's Investments any Investments held in an 
individual retirement account or similar account the Investments of 
which are directed by and held for the benefit of such person.
    (h) Reasonable Belief. The term ``qualified purchaser'' as used in 
section 3(c)(7) of the Act [15 U.S.C. 80a-3(c)(7)] means any person that 
meets the definition of qualified purchaser in section 2(a)(51)(A) of 
the Act [15 U.S.C. 80a-2(a)(51)(A)]) and the rules thereunder, or that a 
Relying Person reasonably believes meets such definition.

[62 FR 17526, Apr. 9, 1997]



Sec.  270.2a51-2  Definitions of beneficial owner for certain purposes
under sections 2(a)(51) and 3(c)(7) and determining indirect ownership
interests.

    (a) Beneficial ownership: General. Except as set forth in this 
section, for purposes of sections 2(a)(51)(C) and 3(c)(7)(B)(ii) of the 
Act [15 U.S.C. 80a-2(a)(51)(C) and -3(c)(7)(B)(ii)], the beneficial 
owners of securities of an excepted investment company (as defined in 
section 2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)]) shall be 
determined in accordance with section 3(c)(1) of the Act [15 U.S.C. 80a-
3(c)(1)].
    (b) Beneficial ownership: Grandfather provision. For purposes of 
section 3(c)(7)(B)(ii) of the Act [15 U.S.C. 80a-3(c)(7)(B)(ii)], 
securities of an issuer beneficially owned by a company (without giving 
effect to section 3(c)(1)(A) of the Act [15 U.S.C. 80a-3(c)(1)(A)]) 
(``owning company'') shall be deemed to be beneficially owned by one 
person unless:
    (1) The owning company is an investment company or an excepted 
investment company;
    (2) The owning company, directly or indirectly, controls, is 
controlled by, or is under common control with, the issuer; and
    (3) On October 11, 1996, under section 3(c)(1)(A) of the Act as then 
in effect, the voting securities of the issuer were deemed to be 
beneficially owned by the holders of the owning company's outstanding 
securities (other than short-term paper), in which case, such holders 
shall be deemed to be beneficial owners of the issuer's outstanding 
voting securities.
    (c) Beneficial ownership: Consent provision. For purposes of section 
2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)], securities of an 
excepted investment company beneficially owned by a company (without 
giving effect to section 3(c)(1)(A) of the Act [15 U.S.C. 80a-
3(c)(1)(A)]) (``owning company'') shall be deemed to be beneficially 
owned by one person unless:
    (1) The owning company is an excepted investment company;
    (2) The owning company directly or indirectly controls, is 
controlled by, or is under common control with, the excepted investment 
company or the

[[Page 403]]

company with respect to which the excepted investment company is, or 
will be, a qualified purchaser; and
    (3) On April 30, 1996, under section 3(c)(1)(A) of the Act as then 
in effect, the voting securities of the excepted investment company were 
deemed to be beneficially owned by the holders of the owning company's 
outstanding securities (other than short-term paper), in which case the 
holders of such excepted company's securities shall be deemed to be 
beneficial owners of the excepted investment company's outstanding 
voting securities.
    (d) Indirect ownership: Consent provision. For purposes of section 
2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)], an excepted 
investment company shall not be deemed to indirectly own the securities 
of an excepted investment company seeking a consent to be treated as a 
qualified purchaser (``qualified purchaser company'') unless such 
excepted investment company, directly or indirectly, controls, is 
controlled by, or is under common control with, the qualified purchaser 
company or a company with respect to which the qualified purchaser 
company is or will be a qualified purchaser.
    (e) Required consent: Consent provision. For purposes of section 
2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)], the consent of the 
beneficial owners of an excepted investment company (``owning company'') 
that beneficially owns securities of an excepted investment company that 
is seeking the consents required by section 2(a)(51)(C) (``consent 
company'') shall not be required unless the owning company directly or 
indirectly controls, is controlled by, or is under common control with, 
the consent company or the company with respect to which the consent 
company is, or will be, a qualified purchaser.

    Notes to Sec.  270.2a51-2: 1. On both April 30, 1996 and October 11, 
1996, section 3(c)(1)(A) of the Act as then in effect provided that: (A) 
Beneficial ownership by a company shall be deemed to be beneficial 
ownership by one person, except that, if the company owns 10 per centum 
or more of the outstanding voting securities of the issuer, the 
beneficial ownership shall be deemed to be that of the holders of such 
company's outstanding securities (other than short-term paper) unless, 
as of the date of the most recent acquisition by such company of 
securities of that issuer, the value of all securities owned by such 
company of all issuers which are or would, but for the exception set 
forth in this subparagraph, be excluded from the definition of 
investment company solely by this paragraph, does not exceed 10 per 
centum of the value of the company's total assets. Such issuer 
nonetheless is deemed to be an investment company for purposes of 
section 12(d)(1).
    2. Issuers seeking the consent required by section 2(a)(51)(C) of 
the Act should note that section 2(a)(51)(C) requires an issuer to 
obtain the consent of the beneficial owners of its securities and the 
beneficial owners of securities of any ``excepted investment company'' 
that directly or indirectly owns the securities of the issuer. Except as 
set forth in paragraphs (d) (with respect to indirect owners) and (e) 
(with respect to direct owners) of this section, nothing in this section 
is designed to limit this consent requirement.

[62 FR 17528, Apr. 9, 1997]



Sec.  270.2a51-3  Certain companies as qualified purchasers.

    (a) For purposes of section 2(a)(51)(A) (ii) and (iv) of the Act [15 
U.S.C. 80a-2(a)(51)(A) (ii) and (iv)], a company shall not be deemed to 
be a qualified purchaser if it was formed for the specific purpose of 
acquiring the securities offered by a company excluded from the 
definition of investment company by section 3(c)(7) of the Act [15 
U.S.C. 80a-3(c)(7)] unless each beneficial owner of the company's 
securities is a qualified purchaser.
    (b) For purposes of section 2(a)(51) of the Act [15 U.S.C. 80a-
2(a)(51)], a company may be deemed to be a qualified purchaser if each 
beneficial owner of the company's securities is a qualified purchaser.

[62 FR 17528, Apr. 9, 1997]



Sec.  270.3a-1  Certain prima facie investment companies.

    Notwithstanding section 3(a)(1)(C) of the Act (15 U.S.C. 80a-
3(a)(1)(c)), an issuer will be deemed not to be an investment company 
under the Act; Provided, That:
    (a) No more than 45 percent of the value (as defined in section 
2(a)(41) of the Act) of such issuer's total assets (exclusive of 
Government securities and cash items) consists of, and no more than 45 
percent of such issuer's net income after taxes (for the last

[[Page 404]]

four fiscal quarters combined) is derived from, securites other than:
    (1) Government securities;
    (2) Securities issued by employees' securities companies;
    (3) Securities issued by majority-owned subsidiaries of the issuer 
(other than subsidiaries relying on the exclusion from the definition of 
investment company in section 3(b)(3) or (c)(1) of the Act) which are 
not investment companies; and
    (4) Securities issued by companies:
    (i) Which are controlled primarily by such issuer;
    (ii) Through which such issuer engages in a business other than that 
of investing, reinvesting, owning, holding or trading in securities; and
    (iii) Which are not investment companies;
    (b) The issuer is not an investment company as defined in section 
3(a)(1)(A) or 3(a)(1)(B) of the Act (15 U.S.C. 80a-3(a)(1)(A) or 80a-
3(a)(1)(B)) and is not a special situation investment company; and
    (c) The percentages described in paragraph (a) of this section are 
determined on an unconsolidated basis, except that the issuer shall 
consolidate its financial statements with the financial statements of 
any wholly-owned subsidiaries.

[46 FR 6881, Jan. 22, 1981, as amended at 67 FR 43536, June 28, 2002]



Sec.  270.3a-2  Transient investment companies.

    (a) For purposes of sections 3(a)(1)(A) and 3(a)(1)(C) of the Act 
(15 U.S.C. 80a-3(a)(1)(A) and 80a-3(a)(1)(C)), an issuer is deemed not 
to be engaged in the business of investing, reinvesting, owning, holding 
or trading in securities during a period of time not to exceed one year; 
Provided, That the issuer has a bona fide intent to be engaged 
primarily, as soon as is reasonably possible (in any event by the 
termination of such period of time), in a business other than that of 
investing, reinvesting, owning, holding or trading in securities, such 
intent to be evidenced by:
    (1) The issuer's business activities; and
    (2) An appropriate resolution of the issuer's board of directors, or 
by an appropriate action of the person or persons performing similar 
functions for any issuer not having a board of directors, which 
resolution or action has been recorded contemporaneously in its minute 
books or comparable documents.
    (b) For purposes of this rule, the period of time described in 
paragraph (a) shall commence on the earlier of:
    (1) The date on which an issuer owns securities and/or cash having a 
value exceeding 50 percent of the value of such issuer's total assets on 
either a consolidated or unconsolidated basis; or
    (2) The date on which an issuer owns or proposes to acquire 
investment securities (as defined in section 3(a) of the Act) having a 
value exceeding 40 per centum of the value of such issuer's total assets 
(exclusive of Government securities and cash items) on an unconsolidated 
basis.
    (c) No issuer may rely on this section more frequently than once 
during any three-year period.

[46 FR 6883, Jan. 22, 1981, as amended at 67 FR 43536, June 28, 2002]



Sec.  270.3a-3  Certain investment companies owned by companies which
are not investment companies.

    Notwithstanding section 3(a)(1)(A) or section 3(a)(1)(C) of the Act 
(15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(C)), an issuer will be deemed 
not to be an investment company for purposes of the Act; Provided, That 
all of the outstanding securities of the issuer (other than short-term 
paper, directors' qualifying shares, and debt securities owned by the 
Small Business Administration) are directly or indirectly owned by a 
company which satisfies the conditions of Sec.  270.3a-1(a) and which 
is:
    (a) A company that is not an investment company as defined in 
section 3(a) of the Act;
    (b) A company that is an investment company as defined in section 
3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(C)), but which is excluded 
from the definition of the term ``investment company'' by section 
3(b)(1) or 3(b)(2) of the Act (15 U.S.C. 80a-3(b)(1) or 80a-3(b)(2)); or

[[Page 405]]

    (c) A company that is deemed not to be an investment company for 
purposes of the Act by rule 3a-1.

[46 FR 6884, Jan. 22, 1981, as amended at 67 FR 43536, June 28, 2002]



Sec.  270.3a-4  Status of investment advisory programs.

    Note: This section is a nonexclusive safe harbor from the definition 
of investment company for programs that provide discretionary investment 
advisory services to clients. There is no registration requirement under 
section 5 of the Securities Act of 1933 [15 U.S.C. 77e] with respect to 
programs that are organized and operated in the manner described in 
Sec.  270.3a-4. The section is not intended, however, to create any 
presumption about a program that is not organized and operated in the 
manner contemplated by the section.

    (a) Any program under which discretionary investment advisory 
services are provided to clients that has the following characteristics 
will not be deemed to be an investment company within the meaning of the 
Act [15 U.S.C. 80a, et seq.]:
    (1) Each client's account in the program is managed on the basis of 
the client's financial situation and investment objectives and in 
accordance with any reasonable restrictions imposed by the client on the 
management of the account.
    (2)(i) At the opening of the account, the sponsor or another person 
designated by the sponsor obtains information from the client regarding 
the client's financial situation and investment objectives, and gives 
the client the opportunity to impose reasonable restrictions on the 
management of the account;
    (ii) At least annually, the sponsor or another person designated by 
the sponsor contacts the client to determine whether there have been any 
changes in the client's financial situation or investment objectives, 
and whether the client wishes to impose any reasonable restrictions on 
the management of the account or reasonably modify existing 
restrictions;
    (iii) At least quarterly, the sponsor or another person designated 
by the sponsor notifies the client in writing to contact the sponsor or 
such other person if there have been any changes in the client's 
financial situation or investment objectives, or if the client wishes to 
impose any reasonable restrictions on the management of the client's 
account or reasonably modify existing restrictions, and provides the 
client with a means through which such contact may be made; and
    (iv) The sponsor and personnel of the manager of the client's 
account who are knowledgeable about the account and its management are 
reasonably available to the client for consultation.
    (3) Each client has the ability to impose reasonable restrictions on 
the management of the client's account, including the designation of 
particular securities or types of securities that should not be 
purchased for the account, or that should be sold if held in the 
account; Provided, however, that nothing in this section requires that a 
client have the ability to require that particular securities or types 
of securities be purchased for the account.
    (4) The sponsor or person designated by the sponsor provides each 
client with a statement, at least quarterly, containing a description of 
all activity in the client's account during the preceding period, 
including all transactions made on behalf of the account, all 
contributions and withdrawals made by the client, all fees and expenses 
charged to the account, and the value of the account at the beginning 
and end of the period.
    (5) Each client retains, with respect to all securities and funds in 
the account, to the same extent as if the client held the securities and 
funds outside the program, the right to:
    (i) Withdraw securities or cash;
    (ii) Vote securities, or delegate the authority to vote securities 
to another person;
    (iii) Be provided in a timely manner with a written confirmation or 
other notification of each securities transaction, and all other 
documents required by law to be provided to security holders; and
    (iv) Proceed directly as a security holder against the issuer of any 
security in the client's account and not be obligated to join any person 
involved in the operation of the program, or any other client of the 
program, as a condition precedent to initiating such proceeding.

[[Page 406]]

    (b) As used in this section, the term sponsor refers to any person 
who receives compensation for sponsoring, organizing or administering 
the program, or for selecting, or providing advice to clients regarding 
the selection of, persons responsible for managing the client's account 
in the program. If a program has more than one sponsor, one person shall 
be designated the principal sponsor, and such person shall be considered 
the sponsor of the program under this section.

[62 FR 15109, Mar. 31, 1997]



Sec.  270.3a-5  Exemption for subsidiaries organized to finance the
operations of domestic or foreign companies.

    (a) A finance subsidiary will not be considered an investment 
company under section 3(a) of the Act (15 U.S.C. 80a-3(a)) and 
securities of a finance subsidiary held by the parent company or a 
company controlled by the parent company will not be considered 
``investment securities'' under section 3(a)(1)(C) of the Act (15 U.S.C. 
80a-3(a)(1)(C)); Provided, That:
    (1) Any debt securities of the finance subsidiary issued to or held 
by the public are unconditionally guaranteed by the parent company as to 
the payment of principal, interest, and premium, if any (except that the 
guarantee may be subordinated in right of payment to other debt of the 
parent company);
    (2) Any non-voting preferred stock of the finance subsidiary issued 
to or held by the public is unconditionally guaranteed by the parent 
company as to payment of dividends, payment of the liquidation 
preference in the event of liquidation, and payments to be made under a 
sinking fund, if a sinking fund is to be provided (except that the 
guarantee may be subordinated in right of payment to other debt of the 
parent company);
    (3) The parent company's guarantee provides that in the event of a 
default in payment of principal, interest, premium, dividends, 
liquidation preference or payments made under a sinking fund on any debt 
securities or non-voting preferred stock issued by the finance 
subsidiary, the holders of those securities may institute legal 
proceedings directly against the parent company (or, in the case of a 
partnership or joint venture, against the partners or participants in 
the joint venture) to enforce the guarantee without first proceeding 
against the finance subsidiary;
    (4) Any securities issued by the finance subsidiary which are 
convertible or exchangeable are convertible or exchangeable only for 
securities issued by the parent company (and, in the case of a 
partnership or joint venture, for securities issued by the partners or 
participants in the joint venture) or for debt securities or non-voting 
preferred stock issued by the finance subsidiary meeting the applicable 
requirements of paragraphs (a)(1) through (a)(3);
    (5) The finance subsidiary invests in or loans to its parent company 
or a company controlled by its parent company at least 85% of any cash 
or cash equivalents raised by the finance subsidiary through an offering 
of its debt securities or non-voting preferred stock or through other 
borrowings as soon as practicable, but in no event later than six months 
after the finance subsidiary's receipt of such cash or cash equivalents;
    (6) The finance subsidiary does not invest in, reinvest in, own, 
hold or trade in securities other than Government securities, securities 
of its parent company or a company controlled by its parent company (or 
in the case of a partnership or joint venture, the securities of the 
partners or participants in the joint venture) or debt securities 
(including repurchase agreements) which are exempted from the provisions 
of the Securities Act of 1933 by section 3(a)(3) of that Act; and
    (7) Where the parent company is a foreign bank as the term is used 
in rule 3a-6 (17 CFR 270.3a-6 of this chapter), the parent company may, 
in lieu of the guaranty required by paragraph (a)(1) or (a)(2) of this 
section, issue, in favor of the holders of the finance subsidiary's debt 
securities or non-voting preferred stock, as the case may be, an 
irrevocable letter of credit in an amount sufficient to fund all of the 
amounts required to be guaranteed by paragraphs (a)(1) and (a)(2) of 
this section, provided, that:

[[Page 407]]

    (i) Payment on such letter of credit shall be conditional only upon 
the presentation of customary documentation, and
    (ii) The beneficiary of such letter of credit is not required by 
either the letter of credit or applicable law to institute proceedings 
against the finance subsidiary before enforcing its remedies under the 
letter of credit.
    (b) For purposes of this rule,
    (1) A finance subsidiary shall mean any corporation--
    (i) All of whose securities other than debt securities or non-voting 
preferred stock meeting the applicable requirements of paragraphs (a)(1) 
through (3) or directors' qualifying shares are owned by its parent 
company or a company controlled by its parent company; and
    (ii) The primary purpose of which is to finance the business 
operations of its parent company or companies controlled by its parent 
company;
    (2) A parent company shall mean any corporation, partnership or 
joint venture:
    (i) That is not considered an investment company under section 3(a) 
or that is excepted or exempted by order from the definition of 
investment company by section 3(b) or by the rules or regulations under 
section 3(a);
    (ii) That is organized or formed under the laws of the United States 
or of a state or that is a foreign private issuer, or that is a foreign 
bank or foreign insurance company as those terms are used in rule 3a-6 
(17 CFR 270.3a-6 of this chapter); and
    (iii) In the case of a partnership or joint venture, each partner or 
participant in the joint venture meets the requirements of paragraphs 
(b)(2)(i) and (ii).
    (3) A company controlled by the parent company shall mean any 
corporation, partnership or joint venture:
    (i) That is not considered an investment company under section 3(a) 
or that is excepted or exempted by order from the definition of 
investment company by section 3(b) or by the rules or regulations under 
section 3(a);
    (ii) That is either organized or formed under the laws of the United 
States or of a state or that is a foreign private issuer, or that is a 
foreign bank or foreign insurance company as those terms are used in 
rule 3a-6; and
    (iii) In the case of a corporation, more than 25 percent of whose 
outstanding voting securities are beneficially owned directly or 
indirectly by the parent company; or
    (iv) In the case of a partnership or joint venture, each partner or 
participant in the joint venture meets the requirements of paragraphs 
(b)(3) (i) and (ii), and the parent company has the power to exercise a 
controlling influence over the management or policies of the partnership 
or joint venture.
    (4) A foreign private issuer shall mean any issuer which is 
incorporated or organized under the laws of a foreign country, but not a 
foreign government or political subdivision of a foreign government.

[49 FR 49446, Dec. 20, 1984, as amended at 56 FR 56299, Nov. 4, 1991; 67 
FR 43536, June 28, 2002]



Sec.  270.3a-6  Foreign banks and foreign insurance companies.

    (a) Notwithstanding section 3(a)(1)(A) or section 3(a)(1)(C) of the 
Act (15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(C)), a foreign bank or 
foreign insurance company shall not be considered an investment company 
for purposes of the Act.
    (b) For purposes of this section:
    (1)(i) Foreign bank means a banking institution incorporated or 
organized under the laws of a country other than the United States, or a 
political subdivision of a country other than the United States, that 
is:
    (A) Regulated as such by that country's or subdivision's government 
or any agency thereof;
    (B) Engaged substantially in commercial banking activity; and
    (C) Not operated for the purpose of evading the provisions of the 
Act;
    (ii) The term foreign bank shall also include:
    (A) A trust company or loan company that is:
    (1) Organized or incorporated under the laws of Canada or a 
political subdivision thereof;
    (2) Regulated as a trust company or a loan company by that country's 
or subdivision's government or any agency thereof; and

[[Page 408]]

    (3) Not operated for the purpose of evading the provisions of the 
Act; and
    (B) A building society that is:
    (1) Organized under the laws of the United Kingdom or a political 
subdivision thereof;
    (2) Regulated as a building society by the country's or 
subdivision's government or any agency thereof; and
    (3) Not operated for the purpose of evading the provisions of the 
Act.
    (iii) Nothing in this section shall be construed to include within 
the definition of foreign bank a common or collective trust or other 
separate pool of assets organized in the form of a trust or otherwise in 
which interests are separately offered.
    (2) Engaged substantially in commercial banking activity means 
engaged regularly in, and deriving a substantial portion of its business 
from, extending commercial and other types of credit, and accepting 
demand and other types of deposits, that are customary for commercial 
banks in the country in which the head office of the banking institution 
is located.
    (3) Foreign insurance company means an insurance company 
incorporated or organized under the laws of a country other than the 
United States, or a political subdivision of a country other than the 
United States, that is:
    (i) Regulated as such by that country's or subdivision's government 
or any agency thereof;
    (ii) Engaged primarily and predominantly in:
    (A) The writing of insurance agreements of the type specified in 
section 3(a)(8) of the Securities Act of 1933 (15 U.S.C. 77c(a)(8)), 
except for the substitution of supervision by foreign government 
insurance regulators for the regulators referred to in that section; or
    (B) The reinsurance of risks on such agreements underwritten by 
insurance companies; and
    (iii) Not operated for the purpose of evading the provisions of the 
Act. Nothing in this section shall be construed to include within the 
definition of ``foreign insurance company'' a separate account or other 
pool of assets organized in the form of a trust or otherwise in which 
interests are separately offered.

    Note: Foreign banks and foreign insurance companies (and certain of 
their finance subsidiaries and holding companies) relying on rule 3a-6 
for exemption from the Act may be required by rule 489 (17 CFR 230.489) 
under the Securities Act of 1933 (15 U.S.C. 77a et seq.) to file Form F-
N with the Commission in connection with the filing of a registration 
statement under the Securities Act of 1933.

[56 FR 56299, Nov. 4, 1991, as amended at 67 FR 43536, June 28, 2002]



Sec.  270.3a-7  Issuers of asset-backed securities.

    (a) Notwithstanding section 3(a) of the Act, any issuer who is 
engaged in the business of purchasing, or otherwise acquiring, and 
holding eligible assets (and in activities related or incidental 
thereto), and who does not issue redeemable securities will not be 
deemed to be an investment company; Provided That:
    (1) The issuer issues fixed-income securities or other securities 
which entitle their holders to receive payments that depend primarily on 
the cash flow from eligible assets;
    (2) Securities sold by the issuer or any underwriter thereof are 
fixed-income securities rated, at the time of initial sale, in one of 
the four highest categories assigned long-term debt or in an equivalent 
short-term category (within either of which there may be sub-categories 
or gradations indicating relative standing) by at least one nationally 
recognized statistical rating organization that is not an affiliated 
person of the issuer or of any person involved in the organization or 
operation of the issuer, except that:
    (i) Any fixed-income securities may be sold to accredited investors 
as defined in paragraphs (1), (2), (3), and (7) of rule 501(a) under the 
Securities Act of 1933 (17 CFR 230.501(a)) and any entity in which all 
of the equity owners come within such paragraphs; and
    (ii) Any securities may be sold to qualified institutional buyers as 
defined in rule 144A under the Securities Act (17 CFR 230.144A) and to 
persons (other than any rating organization rating the issuer's 
securities) involved in the organization or operation of the issuer or 
an affiliate, as defined in rule 405 under the Securities Act (17 CFR 
230.405), of such a person;

[[Page 409]]


Provided, That the issuer or any underwriter thereof effecting such sale 
exercises reasonable care to ensure that such securities are sold and 
will be resold to persons specified in paragraphs (a)(2) (i) and (ii) of 
this section;
    (3) The issuer acquires additional eligible assets, or disposes of 
eligible assets, only if:
    (i) The assets are acquired or disposed of in accordance with the 
terms and conditions set forth in the agreements, indentures, or other 
instruments pursuant to which the issuer's securities are issued;
    (ii) The acquisition or disposition of the assets does not result in 
a downgrading in the rating of the issuer's outstanding fixed-income 
securities; and
    (iii) The assets are not acquired or disposed of for the primary 
purpose of recognizing gains or decreasing losses resulting from market 
value changes; and
    (4) If the issuer issues any securities other than securities 
exempted from the Securities Act by section 3(a)(3) thereof (15 U.S.C. 
77c(a)(3)), the issuer:
    (i) Appoints a trustee that meets the requirements of section 
26(a)(1) of the Act and that is not affiliated, as that term is defined 
in rule 405 under the Securities Act (17 CFR 230.405), with the issuer 
or with any person involved in the organization or operation of the 
issuer, which does not offer or provide credit or credit enhancement to 
the issuer, and that executes an agreement or instrument concerning the 
issuer's securities containing provisions to the effect set forth in 
section 26(a)(3) of the Act;
    (ii) Takes reasonable steps to cause the trustee to have a perfected 
security interest or ownership interest valid against third parties in 
those eligible assets that principally generate the cash flow needed to 
pay the fixed-income security holders, provided that such assets 
otherwise required to be held by the trustee may be released to the 
extent needed at the time for the operation of the issuer; and
    (iii) Takes actions necessary for the cash flows derived from 
eligible assets for the benefit of the holders of fixed-income 
securities to be deposited periodically in a segregated account that is 
maintained or controlled by the trustee consistent with the rating of 
the outstanding fixed-income securities.
    (b) For purposes of this section:
    (1) Eligible assets means financial assets, either fixed or 
revolving, that by their terms convert into cash within a finite time 
period plus any rights or other assets designed to assure the servicing 
or timely distribution of proceeds to security holders.
    (2) Fixed-income securities means any securities that entitle the 
holder to receive:
    (i) A stated principal amount; or
    (ii) Interest on a principal amount (which may be a notional 
principal amount) calculated by reference to a fixed rate or to a 
standard or formula which does not reference any change in the market 
value or fair value of eligible assets; or
    (iii) Interest on a principal amount (which may be a notional 
principal amount) calculated by reference to auctions among holders and 
prospective holders, or through remarketing of the security; or
    (iv) An amount equal to specified fixed or variable portions of the 
interest received on the assets held by the issuer; or
    (v) Any combination of amounts described in paragraphs (b)(2) (i), 
(ii), (iii), and (iv) of this section;

Provided, That substantially all of the payments to which the holders of 
such securities are entitled consist of the foregoing amounts.

[57 FR 56256, Nov. 27, 1992]



Sec.  270.3a-8  Certain research and development companies.

    (a) Notwithstanding sections 3(a)(1)(A) and 3(a)(1)(C) of the Act 
(15 U.S.C. 80a-3(a)(1)(A) and 80a-3(a)(1)(C)), an issuer will be deemed 
not to be an investment company if:
    (1) Its research and development expenses, for the last four fiscal 
quarters combined, are a substantial percentage of its total expense for 
the same period;
    (2) Its net income derived from investments in securities, for the 
last four fiscal quarters combined, does not exceed twice the amount of 
its research and development expenses for the same period;

[[Page 410]]

    (3) Its expenses for investment advisory and management activities, 
investment research and custody, for the last four fiscal quarters, 
combined, do not exceed five percent of its total expenses for the same 
period;
    (4) Its investments in securities are capital preservation 
investments, except that:
    (i) No more than 10 percent of the issuer's total assets may consist 
of other investments, or
    (ii) No more than 25 percent of the issuer's total assets may 
consist of other investments, provided that at least 75 percent of such 
other investments are investments made pursuant to a collaborative 
research and development arrangement;
    (5) It does not hold itself out as being engaged in the business of 
investing, reinvesting or trading in securities, and it is not a special 
situation investment company;
    (6) It is primarily engaged, directly, through majority-owned 
subsidiaries, or through companies which it controls primarily, in a 
business or businesses other than that of investing, reinvesting, 
owning, holding, or trading in securities, as evidenced by:
    (i) The activities of its officers, directors and employees;
    (ii) Its public representations of policies;
    (iii) Its historical development; and
    (iv) An appropriate resolution of its board of directors, which 
resolution or action has been recorded contemporaneously in its minute 
books or comparable documents; and
    (7) Its board of directors has adopted a written investment policy 
with respect to the issuer's capital preservation investments.
    (b) For purposes of this section:
    (1) All assets shall be valued in accordance with section 
2(a)(41)(A) of the Act (15 U.S.C. 80a-2(a)(41)(A));
    (2) The percentages described in this section are determined on an 
unconsolidated basis, except that the issuer shall consolidate its 
financial statements with the financial statements of any wholly-owned 
subsidiaries;
    (3) Board of directors means the issuer's board of directors or an 
appropriate person or persons performing similar functions for any 
issuer not having a board of directors;
    (4) Capital preservation investment means an investment that is made 
to conserve capital and liquidity until the funds are used in the 
issuer's primary business or businesses;
    (5) Controlled primarily means controlled within the meaning of 
section 2(a)(9) of the Act (15 U.S.C. 80a-2(a)(9)) with a degree of 
control that is greater than that of any other person;
    (6) Investment made pursuant to a collaborative research and 
development arrangement means an investment in an investee made pursuant 
to a business relationship which:
    (i) Is designed to achieve narrowly focused goals that are directly 
related to, and an integral part of, the issue's research and 
development activities;
    (ii) Calls for the issuer to conduct joint research and development 
activities with the investee or a company controlled primarily by, or 
which controls primarily, the investee; and
    (iii) Is not entered into for the purpose of avoiding regulation 
under the Act;
    (7) Investments in securities means all securities other than 
securities issued by majority-owned subsidiaries and companies 
controlled primarily by the issuer that conduct similar types of 
businesses, through which the issuer is engaged primarily in a business 
other than that of investing, reinvesting, owning, holding, or trading 
in securities;
    (8) Other investment means an investment in securities that is not a 
capital preservation investment; and
    (9) Research and development expenses means research and development 
costs as defined in FASB ASC Topic 730, Research and Development, as 
currently in effect or as it may be subsequently revised.

[68 FR 37052, June 20, 2003, as amended at 76 FR 50123, Aug. 12, 2011]



Sec.  270.3a-9  Crowdfunding vehicle.

    (a) Notwithstanding section 3(a) of the Act, a crowdfunding vehicle 
will be deemed not to be an investment company if the vehicle:
    (1) Is organized and operated for the sole purpose of directly 
acquiring, holding, and disposing of securities

[[Page 411]]

issued by a single crowdfunding issuer and raising capital in one or 
more offerings made in compliance with Sec. Sec.  227.100 through 
227.504 (Regulation Crowdfunding);
    (2) Does not borrow money and uses the proceeds from the sale of its 
securities solely to purchase a single class of securities of a single 
crowdfunding issuer;
    (3) Issues only one class of securities in one or more offerings 
under Regulation Crowdfunding in which the crowdfunding vehicle and the 
crowdfunding issuer are deemed to be co-issuers under the Securities Act 
(15 U.S.C. 77a et seq.);
    (4) Receives a written undertaking from the crowdfunding issuer to 
fund or reimburse the expenses associated with its formation, operation, 
or winding up, receives no other compensation, and any compensation paid 
to any person operating the vehicle is paid solely by the crowdfunding 
issuer;
    (5) Maintains the same fiscal year-end as the crowdfunding issuer;
    (6) Maintains a one-to-one relationship between the number, 
denomination, type and rights of crowdfunding issuer securities it owns 
and the number, denomination, type and rights of its securities 
outstanding;
    (7) Seeks instructions from the holders of its securities with 
regard to:
    (i) The voting of the crowdfunding issuer securities it holds and 
votes the crowdfunding issuer securities only in accordance with such 
instructions; and
    (ii) Participating in tender or exchange offers or similar 
transactions conducted by the crowdfunding issuer and participates in 
such transactions only in accordance with such instructions;
    (8) Receives, from the crowdfunding issuer, all disclosures and 
other information required under Regulation Crowdfunding and the 
crowdfunding vehicle promptly provides such disclosures and other 
information to the investors and potential investors in the crowdfunding 
vehicle's securities and to the relevant intermediary; and
    (9) Provides to each investor the right to direct the crowdfunding 
vehicle to assert the rights under State and Federal law that the 
investor would have if he or she had invested directly in the 
crowdfunding issuer and provides to each investor any information that 
it receives from the crowdfunding issuer as a shareholder of record of 
the crowdfunding issuer.
    (b) For purposes of this section:
    (1) Crowdfunding issuer means a company that seeks to raise capital 
as a co-issuer with a crowdfunding vehicle in an offering that complies 
with all of the requirements under section 4(a)(6) of the Securities Act 
(15 U.S.C. 77d(a)(6)) and Regulation Crowdfunding.
    (2) Crowdfunding vehicle means an issuer formed by or on behalf of a 
crowdfunding issuer for the purpose of conducting an offering under 
section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) as a co-
issuer with the crowdfunding issuer, which offering is controlled by the 
crowdfunding issuer.
    (3) Regulation Crowdfunding means the regulations set forth in 
Sec. Sec.  227.100 through 227.504 of this chapter.

[86 FR 3602, Jan. 14, 2021]



Sec.  270.3c-1  Definition of beneficial ownership for certain 3(c)(1)
funds.

    (a) As used in this section:
    (1) The term Covered Company means a company that is an investment 
company, a Section 3(c)(1) Company or a Section 3(c)(7) Company.
    (2) The term Section 3(c)(1) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(1) 
of the Act [15 U.S.C. 80a-3(c)(1)].
    (3) The term Section 3(c)(7) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(7) 
of the Act [15 U.S.C. 80a-3(c)(7)].
    (b) For purposes of section 3(c)(1)(A) of the Act [15 U.S.C. 80a-
3(c)(1)(A)], beneficial ownership by a Covered Company owning 10 percent 
or more of the outstanding voting securities of a Section 3(c)(1) 
Company shall be deemed to be beneficial ownership by one person, 
provided that:
    (1) On April 1, 1997, the Covered Company owned 10 percent or more 
of the outstanding voting securities of the Section 3(c)(1) Company or 
non-voting

[[Page 412]]

securities that, on such date and in accordance with the terms of such 
securities, were convertible into or exchangeable for voting securities 
that, if converted or exchanged on or after such date, would have 
constituted 10 percent or more of the outstanding voting securities of 
the Section 3(c)(1) Company; and
    (2) On the date of any acquisition of securities of the Section 
3(c)(1) Company by the Covered Company, the value of all securities 
owned by the Covered Company of all issuers that are Section 3(c)(1) or 
Section 3(c)(7) Companies does not exceed 10 percent of the Covered 
Company's total assets.

[62 FR 17529, Apr. 9, 1997]



Sec.  270.3c-2  Definition of beneficial ownership in small business
investment companies.

    For the purpose of section 3(c)(1) of the Act, beneficial ownership 
by a company owning 10 per centum or more of the outstanding voting 
securities of any issuer which is a small business investment company 
licensed to operate under the Small Business Investment Act of 1958, or 
which has received from the Small Business Administration notice to 
proceed to qualify for a license, which notice or license has not been 
revoked, shall be deemed to be beneficial ownership by one person (a) if 
and so long as the value of all securities of small business investments 
companies owned by such company does not exceed 5 per centum of the 
value of its total assets; or (b) if and so long as such stock of the 
small business investment company shall be owned by a state development 
corporation which has been created by or pursuant to an act of the State 
legislature to promote and assist the growth and development of the 
economy within such State on a state-wide basis: Provided, That such 
State development corporation is not, or as a result of its investment 
in the small business investment company (considering such investment as 
an investment security) would not be, an investment company as defined 
in section 3 of the Act.

(Sec. 6, 74 Stat. 412; 15 U.S.C. 80a-6)

[33 FR 11451, Aug. 13, 1968]



Sec.  270.3c-3  Definition of certain terms used in section 3(c)(1) of 
the Act with respect to certain debt securities offered by small business 
investment companies.

    The term public offering as used in section 3(c)(1) of the Act shall 
not be deemed to include the offer and sale by a small business 
investment company, licensed under the Small Business Investment Act of 
1958, of any debt security issued by it which is (a) not convertible 
into, exchangeable for, or accompanied by any equity security, and (b) 
guaranteed as to timely payment of principal and interest by the Small 
Business Administration and backed by the full faith and credit of the 
United States. The holders of any securities offered and sold as 
described in this section shall be counted, in the aggregate, as one 
person for purposes of section 3(c)(1) of the Act.

[37 FR 7590, Apr. 18, 1972]



Sec.  270.3c-4  Definition of ``common trust fund'' as used in
section 3(c)(3) of the Act.

    The term common trust fund as used in section 3(c)(3) of the Act (15 
U.S.C. 80a-3(c)(3)) shall include a common trust fund which is 
maintained by a bank which is a member of an affiliated group, as 
defined in section 1504(a) of the Internal Revenue Code of 1954 (26 
U.S.C. 1504(a)), and which is maintained exclusively for the collective 
investment and reinvestment of monies contributed thereto by one or more 
bank members of such affiliated group in the capacity of trustee, 
executor, administrator, or guardian; Provided, That:
    (a) The common trust fund is operated in compliance with the same 
State and Federal regulatory requirements as would apply if the bank 
maintaining such fund and any other contributing banks were the same 
entity; and
    (b) The rights of persons for whose benefit a contributing bank acts 
as trustee, executor, administrator, or guardian would not be diminished 
by

[[Page 413]]

reason of the maintenance of such common trust fund by another bank 
member of the affiliated group.

(15 U.S.C. 80a-6(c), 80a-37(a))

[43 FR 2393, Jan. 17, 1978]



Sec.  270.3c-5  Beneficial ownership by knowledgeable employees and
certain other persons.

    (a) As used in this section:
    (1) The term Affiliated Management Person means an affiliated 
person, as such term is defined in section 2(a)(3) of the Act [15 U.S.C. 
80a-2(a)(3)], that manages the investment activities of a Covered 
Company. For purposes of this definition, the term ``investment 
company'' as used in section 2(a)(3) of the Act includes a Covered 
Company.
    (2) The term Covered Company means a Section 3(c)(1) Company or a 
Section 3(c)(7) Company.
    (3) The term Executive Officer means the president, any vice 
president in charge of a principal business unit, division or function 
(such as sales, administration or finance), any other officer who 
performs a policy-making function, or any other person who performs 
similar policy-making functions, for a Covered Company or for an 
Affiliated Management Person of the Covered Company.
    (4) The term Knowledgeable Employee with respect to any Covered 
Company means any natural person who is:
    (i) An Executive Officer, director, trustee, general partner, 
advisory board member, or person serving in a similar capacity, of the 
Covered Company or an Affiliated Management Person of the Covered 
Company; or
    (ii) An employee of the Covered Company or an Affiliated Management 
Person of the Covered Company (other than an employee performing solely 
clerical, secretarial or administrative functions with regard to such 
company or its investments) who, in connection with his or her regular 
functions or duties, participates in the investment activities of such 
Covered Company, other Covered Companies, or investment companies the 
investment activities of which are managed by such Affiliated Management 
Person of the Covered Company, provided that such employee has been 
performing such functions and duties for or on behalf of the Covered 
Company or the Affiliated Management Person of the Covered Company, or 
substantially similar functions or duties for or on behalf of another 
company for at least 12 months.
    (5) The term Section 3(c)(1) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(1) 
of the Act [15 U.S.C. 80a-3(c)(1)].
    (6) The term Section 3(c)(7) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(7) 
of the Act [15 U.S.C. 80a-3(c)(7)].
    (b) For purposes of determining the number of beneficial owners of a 
Section 3(c)(1) Company, and whether the outstanding securities of a 
Section 3(c)(7) Company are owned exclusively by qualified purchasers, 
there shall be excluded securities beneficially owned by:
    (1) A person who at the time such securities were acquired was a 
Knowledgeable Employee of such Company;
    (2) A company owned exclusively by Knowledgeable Employees;
    (3) Any person who acquires securities originally acquired by a 
Knowledgeable Employee in accordance with this section, provided that 
such securities were acquired by such person in accordance with Sec.  
270.3c-6

[62 FR 17529, Apr. 9, 1997]



Sec.  270.3c-6  Certain transfers of interests in section 3(c)(1) and
section 3(c)(7) funds.

    (a) As used in this section:
    (1) The term Donee means a person who acquires a security of a 
Covered Company (or a security or other interest in a company referred 
to in paragraph (b)(3) of this section) as a gift or bequest or pursuant 
to an agreement relating to a legal separation or divorce.
    (2) The term Section 3(c)(1) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(1) 
of the Act [15 U.S.C. 80a-3(c)(1)].
    (3) The term Section 3(c)(7) Company means a company that would be 
an investment company but for the exclusion provided by section 3(c)(7) 
of the Act [15 U.S.C. 80a-3(c)(7)].

[[Page 414]]

    (4) The term Transferee means a Section 3(c)(1) Transferee or a 
Qualified Purchaser Transferee, in each case as defined in paragraph (b) 
of this section.
    (5) The term Transferor means a Section 3(c)(1) Transferor or a 
Qualified Purchaser Transferor, in each case as defined in paragraph (b) 
of this section.
    (b) Beneficial ownership by any person (``Section 3(c)(1) 
Transferee'') who acquires securities or interests in securities of a 
Section 3(c)(1) Company from a person other than the Section 3(c)(1) 
Company shall be deemed to be beneficial ownership by the person from 
whom such transfer was made (``Section 3(c)(1) Transferor''), and 
securities of a Section 3(c)(7) Company that are owned by persons who 
received the securities from a qualified purchaser other than the 
Section 3(c)(7) Company (``Qualified Purchaser Transferor'') or a person 
deemed to be a qualified purchaser by this section shall be deemed to be 
acquired by a qualified purchaser (``Qualified Purchaser Transferee''), 
provided that the Transferee is:
    (1) The estate of the Transferor;
    (2) A Donee; or
    (3) A company established by the Transferor exclusively for the 
benefit of (or owned exclusively by) the Transferor and the persons 
specified in paragraphs (b)(1) and (b)(2) of this section.

[62 FR 17529, Apr. 9, 1997]



Sec.  270.5b-1  Definition of ``total assets.''

    The term total assets, when used in computing values for the 
purposes of sections 5 and 12 of the Act, shall mean the gross assets of 
the company with respect to which the computation is made, taken as of 
the end of the fiscal quarter of the company last preceding the date of 
computation. This section shall not apply to any company which has 
adopted either of the alternative methods of valuation permitted by 
Sec.  270.2a-1.

[Rule N-5B-1, 6 FR 5920, Nov. 22, 1941]



Sec.  270.5b-2  Exclusion of certain guarantees as securities of
the guarantor.

    (a) For the purposes of section 5 of the act, a guarantee of a 
security shall not be deemed to be a security issued by the guarantor: 
Provided, That the value of all securities issued or guaranteed by the 
guarantor, and owned by the management company, does not exceed 10 
percent of the value of the total assets of such management company.
    (b) Notwithstanding paragraph (a) of this section, for the purposes 
of section 5 of the Act, a guarantee by a railroad company of a security 
issued by a terminal company, warehouse company, switching company, or 
bridge company, shall not be deemed to be a security issued by such 
railroad company: Provided:
    (1) The security is guaranteed jointly or severally by more than one 
railroad company; and
    (2) No one of such guaranteeing railroad companies directly or 
indirectly controls all of its co-guarantors.
    (c) For the purposes of section 5 of the Act, a lease or other 
arrangement whereby a railroad company is or becomes obligated to pay a 
stipulated annual sum of rental either to another railroad company or to 
the security holders of such other railroad company shall not be deemed 
in itself a guarantee.

[Rule N-5B-2, 10 FR 581, Jan. 16, 1945]



Sec.  270.5b-3  Acquisition of repurchase agreement or refunded security
treated as acquisition of underlying securities.

    (a) Repurchase Agreements. For purposes of sections 5 and 12(d)(3) 
of the Act (15 U.S.C. 80a-5 and 80a-12(d)(3)), the acquisition of a 
repurchase agreement may be deemed to be an acquisition of the 
underlying securities, provided the obligation of the seller to 
repurchase the securities from the investment company is Collateralized 
Fully.
    (b) Refunded Securities. For purposes of section 5 of the Act (15 
U.S.C. 80a-5), the acquisition of a Refunded Security is deemed to be an 
acquisition of the escrowed Government Securities.
    (c) Definitions. As used in this section:
    (1) Collateralized Fully in the case of a repurchase agreement means 
that:
    (i) The value of the securities collateralizing the repurchase 
agreement (reduced by the transaction costs (including loss of interest) 
that the investment company reasonably could

[[Page 415]]

expect to incur if the seller defaults) is, and during the entire term 
of the repurchase agreement remains, at least equal to the Resale Price 
provided in the agreement;
    (ii) The investment company has perfected its security interest in 
the collateral;
    (iii) The collateral is maintained in an account of the investment 
company with its custodian or a third party that qualifies as a 
custodian under the Act;
    (iv) The collateral consists entirely of:
    (A) Cash items;
    (B) Government Securities; or
    (C) Securities that the investment company's board of directors, or 
its delegate, determines at the time the repurchase agreement is entered 
into:
    (1) Each issuer of which has an exceptionally strong capacity to 
meet its financial obligations; and

    Note to paragraph (c)(1)(iv)(C)(1): For a discussion of the phrase 
``exceptionally strong capacity to meet its financial obligations'' see 
Investment Company Act Release No. 30847, (December 27, 2013).

    (2) Are sufficiently liquid that they can be sold at approximately 
their carrying value in the ordinary course of business within seven 
calendar days; and
    (v) Upon an Event of Insolvency with respect to the seller, the 
repurchase agreement would qualify under a provision of applicable 
insolvency law providing an exclusion from any automatic stay of 
creditors' rights against the seller.
    (2) Event of Insolvency means, with respect to a person:
    (i) An admission of insolvency, the application by the person for 
the appointment of a trustee, receiver, rehabilitator, or similar 
officer for all or substantially all of its assets, a general assignment 
for the benefit of creditors, the filing by the person of a voluntary 
petition in bankruptcy or application for reorganization or an 
arrangement with creditors; or
    (ii) The institution of similar proceedings by another person which 
proceedings are not contested by the person; or
    (iii) The institution of similar proceedings by a government agency 
responsible for regulating the activities of the person, whether or not 
contested by the person.
    (3) Government Security means any ``Government Security'' as defined 
in section 2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16)).
    (4) Issuer, as used in paragraph (c)(1)(iv)(C)(1) of this section, 
means the issuer of a collateral security or the issuer of an 
unconditional obligation of a person other than the issuer of the 
collateral security to undertake to pay, upon presentment by the holder 
of the obligation (if required), the principal amount of the underlying 
collateral security plus accrued interest when due or upon default.
    (5) Refunded Security means a debt security the principal and 
interest payments of which are to be paid by Government Securities 
(``deposited securities'') that have been irrevocably placed in an 
escrow account pursuant to an agreement between the issuer of the debt 
security and an escrow agent that is not an ``affiliated person,'' as 
defined in section 2(a)(3)(C) of the Act (15 U.S.C. 80a-2(a)(3)(C)), of 
the issuer of the debt security, and, in accordance with such escrow 
agreement, are pledged only to the payment of the debt security and, to 
the extent that excess proceeds are available after all payments of 
principal, interest, and applicable premiums on the Refunded Securities, 
the expenses of the escrow agent and, thereafter, to the issuer or 
another party; provided that:
    (i) The deposited securities are not redeemable prior to their final 
maturity;
    (ii) The escrow agreement prohibits the substitution of the 
deposited securities unless the substituted securities are Government 
Securities; and
    (iii) At the time the deposited securities are placed in the escrow 
account, or at the time a substitution of the deposited securities is 
made, an independent certified public accountant has certified to the 
escrow agent that the deposited securities will satisfy all scheduled 
payments of principal, interest and applicable premiums on the Refunded 
Securities.
    (6) Resale Price means the acquisition price paid to the seller of 
the securities plus the accrued resale premium on

[[Page 416]]

such acquisition price. The accrued resale premium is the amount 
specified in the repurchase agreement or the daily amortization of the 
difference between the acquisition price and the resale price specified 
in the repurchase agreement.

[66 FR 36161, July 11, 2001, as amended at 74 FR 52373, Oct. 9, 2009; 79 
FR 1329, Jan. 8, 2014]



Sec.  270.6a-5  Purchase of certain debt securities by companies relying
on section 6(a)(5) of the Act.

    For purposes of reliance on the exemption for certain companies 
under section 6(a)(5)(A) of the Act (15 U.S.C. 80a-6(a)(5)(A)), a 
company shall be deemed to have met the requirement for credit-
worthiness of certain debt securities under section 6(a)(5)(A)(iv)(I) of 
the Investment Company Act (15 U.S.C. 80a-6(a)(5)(A)(iv)(I)) if, at the 
time of purchase, the board of directors (or its delegate) determines or 
members of the company (or their delegate) determine that the debt 
security is:
    (a) Subject to no greater than moderate credit risk; and
    (b) Sufficiently liquid that it can be sold at or near its carrying 
value within a reasonably short period of time.

[77 FR 70120, Nov. 23, 2012]



Sec.  270.6b-1  Exemption of employees' securities company pending
determination of application.

    Any employees' securities company which files an application for an 
order of exemption under section 6(b) of the Act (54 Stat. 801; 15 
U.S.C. 80a-6) shall be exempt, pending final determination of such 
application by the Commission, from all provisions of the Act applicable 
to investment companies as such.

[Rule N-6B-1, 6 FR 6126, Dec. 2, 1941]



Sec.  270.6c-3  Exemptions for certain registered variable life insurance
separate accounts.

    A separate account which meets the requirements of paragraph (a) of 
Rule 6e-2 (17 CFR 270.6e-2) or paragraph (a) of Rule 6e-3(T) (17 CFR 
270.6e-3(T)) and registers as an investment company under section 8(a) 
of the Act (15 U.S.C. 80a-8(a)), and the investment adviser, principal 
underwriter and depositor of such separate account, shall be exempt from 
the provisions of the Act specified in paragraph (b) of Rule 6e-2 or 
paragraph (b) of Rule 6e-3(T), except for sections 7 (15 U.S.C. 80a-7) 
and 8(a) of the Act, under the same terms and conditions as a separate 
account claiming exemption under Rule 6e-2 or Rule 6e-3(T).

(Secs. 6(c); 15 U.S.C. 80a-6(C) and 38(a))

[49 FR 49228, Dec. 3, 1984]



Sec.  270.6c-6  Exemption for certain registered separate accounts and 
other persons.

    (a) As used in this section,
    (1) Revenue Ruling shall mean Revenue Ruling 81-225, 1981-41 I.R.B. 
(October 13, 1981), issued by the Internal Revenue Service on September 
25, 1981.
    (2) Existing separate account shall mean a separate account which 
is, or is a part of, a unit investment trust registered under the Act, 
engaged in a continuous offering of its securities on September 25, 
1981.
    (3) Existing portfolio company shall mean a registered open-end 
management investment company, engaged in a continuous offering of its 
securities on September 25, 1981, all or part of whose securities were 
owned by an existing separate account on September 25, 1981.
    (4) New portfolio company shall mean any registered open-end 
management investment company the shares of which will be sold to one or 
more registered separate accounts for the purpose of minimizing the 
impact of the Revenue Ruling on the contractowners of an existing 
separate account, which new portfolio company has the same:
    (i) Investment objectives,
    (ii) Fundamental policies, and
    (iii) Voting rights as the existing portfolio company and has an 
advisory fee schedule, including expenses assumed by the adviser, that 
is at least as advantageous to the new portfolio company as was the fee 
schedule of the existing portfolio company.
    (5) New separate account shall mean a separate account which
    (i) Is, or is a part of, a unit investment trust registered under 
the Act;
    (ii) Is intended to minimize the impact of the Revenue Ruling on the 
contractowners of an existing separate account;

[[Page 417]]

    (iii) Invests solely in one or more new portfolio companies;
    (iv) Has the same
    (A) Sales loads,
    (B) Depositor, and
    (C) Custodial arrangements

As the existing separate account; and
    (v) Has
    (A) Asset charges,
    (B) Administrative fees, and
    (C) Any other fees and charges (not including taxes) that correspond 
only to fees of the existing separate account and are no greater than 
those corresponding fees.
    (b) Any order of the Commission under the Act, granted to an 
existing separate account on or before September 25, 1981, shall remain 
in full force and effect notwithstanding that the existing separate 
account invests in one or more new portfolio companies in lieu of, or in 
addition to, investing in one or more existing portfolio companies; 
Provided, That:
    (1) No material changes in the facts upon which the order was based 
have occurred;
    (2) All representations, undertakings, and conditions made or agreed 
to by the existing separate account, and any other person or persons, 
other than any existing portfolio company, in connection with the 
issuance of the order are, and continue to be, applicable to the 
existing separate account and any such other person or persons, unless 
modified in accordance with this section;
    (3) All representations, undertakings, and conditions made or agreed 
to by the existing portfolio company in connection with the issuance of 
the order are made or agreed to by the new portfolio company, unless 
modified in accordance with this section; and
    (4) Part II of the Registration Statement under the Securities Act 
of 1933 of the existing separate account
    (i) Indicates that the existing separate account is relying upon 
paragraph (b) of this section,
    (ii) Lists the Investment Company Act release numbers of any orders 
upon which the existing separate account intends to rely, and
    (iii) Contains a representation that the provisions of this 
paragraph (b) have been complied with.
    (c) Any order of the Commission under the Act, granted to an 
existing separate account on or before September 25, 1981, shall apply 
with full force and effect to a new separate account and the depositor 
of and principal underwriter for the new separate account 
notwithstanding that the new separate account invests in one or more new 
portfolio companies; Provided, That:
    (1) No material changes in the facts upon which the order was based 
have occurred;
    (2) All representations, undertakings, and conditions made or agreed 
to by the depositor, principal underwriter, and any other person or 
persons other than the existing separate account or any existing 
portfolio companies, in connection with the issuance of the order are, 
and continue to be, applicable to such depositor, principal underwriter, 
and other person or persons, unless modified in accordance with this 
section;
    (3) All representations, undertakings, and conditions made or agreed 
to by the existing separate account in connection with the issuance of 
the order are made or agreed to by the new separate account, unless 
modified in accordance with this section;
    (4) All representations, undertakings, and conditions made or agreed 
to by an existing portfolio company in connection with the issuance of 
the order are made or agreed to by the new portfolio company, unless 
modified in accordance with this section; and
    (5) Part II of the Registration Statement under the Securities Act 
of 1933 of the new separate account
    (i) Indicates that the new separate account is relying upon 
paragraph (c) of this section,
    (ii) Lists the Investment Company Act release numbers of any orders 
upon which the new separate account intends to rely, and
    (iii) Contains a representation that the provisions of this 
paragraph (c) have been complied with.
    (d) Any affiliated person or depositor of or principal underwriter 
for a new or existing separate account or any affiliated person of or 
principal underwriter for a new or existing portfolio company, and any 
affiliated person of such

[[Page 418]]

persons, principal underwriters, or depositor shall be exempt from 
section 17(d) of the Act (15 U.S.C 80a-17(d)) and rule 17d-1 thereunder 
(17 CFR 270.17d-1) to the extent necessary to permit the organization of 
one or more new portfolio companies; Provided, That, any expenses borne 
by the existing portfolio company or the new portfolio company in 
connection with such organization are necessary and appropriate and are 
allocated in a manner that is fair and reasonable to all of the 
shareholders of these companies.
    (e) Any affiliated person or depositor of or principal underwriter 
for a new or existing separate account and any affiliated persons of 
such a person, principal underwriter, or depositor shall be exempt from 
section 17(d) of the Act and Rule 17d-1 thereunder to the extent 
necessary to permit such person to bear any reasonable expenses arising 
out of the organization of one or more new portfolio companies or the 
new separate account.
    (f) Any affiliated persons or depositor of or principal underwriter 
for a new or existing separate account or any affiliated person of or 
principal underwriter for a new or existing portfolio company, and any 
affiliated person of such persons, principal underwriters, or depositor 
shall be exempt from section 17(a) (15 U.S.C. 80a-17(a)), and any 
existing portfolio company which has made an election pursuant to Rule 
18f-1 (17 CFR 270.18f-1) shall be permitted to revoke that election to 
the extent necessary to permit transactions involving the transfer of 
assets from the existing portfolio company to a new portfolio company; 
Provided, That:
    (1) Such assets are transferred without the imposition of any fees 
or charges;
    (2) The board of directors of the existing portfolio company, 
including a majority of the directors of the company who are not 
interested persons of such company, determines that the transfer of 
assets is fair and reasonable to all shareholders of the company and 
such determination, and the basis upon which it was made, is recorded in 
the minute book of the existing portfolio company;
    (3) Any securities involved are valued by the existing portfolio 
company for purposes of the transfer in accordance with its valuation 
practices for determining net asset value per share; and
    (4) With respect to Rule 18f-1, the existing separate account 
requests that the existing portfolio company redeem in kind the shares 
of the portfolio company held by the separate account.
    (g) The new portfolio company shall be exempt from section 2(a)(41) 
(15 U.S.C. 80a-2(a)(41)) of the Act and rules 2a-4 (17 CFR 270.2a-4) and 
22c-1 (17 CFR 270.22c-1) under the Act to the extent necessary to permit 
it to use the same method of valuation for the purpose of pricing its 
shares for sale, redemption, and repurchase, as the existing portfolio 
company; Provided, That:
    (1) The existing portfolio company had on September 25, 1981, an 
order of the Commission exempting it, for the purposes of pricing its 
shares for sale, redemption, and repurchase, from:
    (i) Section 2(a)(41) of the Act and rules 2a-4 and 22c-1 under the 
Act to the extent necessary to permit it to use the amortized cost 
valuation method or
    (ii) Rules 2a-4 and 22c-1 under the Act to the extent necessary to 
permit it to calculate its net asset value per share to the nearest one 
cent on share values of $1.00;
    (2) All representations, undertakings, and conditions made or agreed 
to by the existing portfolio company in connection with the order are 
made or agreed to by the new portfolio company unless modified in 
accordance with this section; and
    (3) Part II of the Registration Statement under the Securities Act 
of 1933 of the new portfolio company
    (i) Indicates that the new portfolio company is relying upon 
paragraph (g) of this section,
    (ii) Lists the Investment Company Act release numbers of any orders 
upon which the new portfolio company intends to rely, and
    (iii) Contains a representation that the provisions of paragraph (g) 
have been complied with.
    (h) The depositor or trustee of an existing separate account shall 
be exempt from section 26(c) of the Act (15 U.S.C. 80a-26(c)) to the 
extent necessary to permit the substitution of securities of

[[Page 419]]

the new portfolio company for securities of the existing portfolio 
company; Provided; That, within thirty days of such substitution:
    (1) The existing separate account notifies all contractowners of the 
substitution of securities and any determinations of the board of 
directors of the new portfolio company required by paragraph (d) of this 
section;
    (2) The existing separate account delivers a copy of the prospectus 
of the new portfolio company to all contractowners; and
    (3) The existing separate account, concurrently with the 
notification referred to in paragraph (h)(1) of this section or the 
delivery of the prospectus of the new portfolio company referred to in 
paragraph (h)(2) of this section, whichever is later, offers to those 
contractowners who would otherwise have surrender rights under their 
contracts the right, for a period of at least thirty days from the 
receipt of this offer, to surrender their contracts without the 
imposition of any withdrawal charge or contingent deferred sales load, 
and any surrendering contractowner receives the price next determined 
after the request for surrender is received by the insurance company.
    (i) The existing separate account shall be exempt from section 22(d) 
of the Act (15 U.S.C. 80a-22(d)) to the extent necessary to permit it to 
comply with paragraph (h) of this section and the principal underwriter 
for or depositor of the existing separate account shall be exempt from 
section 26(a)(4)(B) of the Act (15 U.S.C. 80a-26(a)(4)(B)) to the extent 
necessary to permit them to rely on paragraph (h) of this section.
    (j) Notwithstanding section 11 of the Act (15 U.S.C. 80a-11), the 
existing separate account or any principal underwriter for the existing 
separate account may make or cause to be made to the contractowners of 
the existing separate account an offer to exchange a security funded by 
an existing portfolio company for a security funded by a new portfolio 
company without the terms of that offer having first been submitted to 
and approved by the Commission; Provided, That the exchange is to be 
made on the basis of the relative net asset values of the securities to 
be exchanged without the imposition of any fees or charges.
    (k) Notwithstanding section 11 of the Act, the new separate account 
or any principal underwriter for the new separate account may make or 
cause to be made an offer to the contractowners of the existing separate 
account to exchange their securities for securities of the new separate 
account without the terms of that offer having first been submitted to 
and approved by the Commission;

Provided, That:
    (1) The exchange is to be made on the basis of the relative net 
asset values of the securities to be exchanged without the imposition of 
any fees or charges; and
    (2) If the new separate account imposes a contingent deferred sales 
load (``sales load'') on the securities to be acquired in the exchange
    (i) At the time this sales load is imposed, it is calculated as if
    (A) The contractowner had been a contractowner of the new separate 
account from the date on which he became a contractowner of the existing 
separate account, in the case of a sales load based on the amount of 
time the contractowner has been invested in the new separate account, 
and
    (B) Amounts attributable to purchase payments made to the existing 
separate account had been made to the new separate account on the date 
on which they were made to the existing separate account, in the case of 
a sales load based on the amount of time purchase payments have been 
invested in the new separate account, and
    (ii) The total sales load imposed does not exceed 9 percent of the 
sum of the purchase payments made to the new separate account and that 
portion of purchase payments made to the existing separate account 
attributable to the securities exchanged.
    (l) Notwithstanding the foregoing, the provisions of this section 
will be available to a new separate account or new portfolio company, or 
to any affiliated person or depositor of or principal underwriter for 
such a new separate account, to any affiliated person of or principal 
underwriter for such a new portfolio company, to any affiliated person 
of such persons, depositor, or

[[Page 420]]

principal underwriters, or to any substitution of securities effected in 
reliance on this section, only if such new separate account or new 
portfolio company is registered under the Act or such substitution is 
effected prior to September 21, 1983.

[47 FR 42559, Sept. 28, 1982, as amended at 67 FR 43536, June 28, 2002]



Sec.  270.6c-7  Exemptions from certain provisions of sections 22(e) 
and 27 for registered separate accounts offering variable annuity 
contracts to participants in the Texas Optional Retirement Program.

    A registered separate account, and any depositor of or underwriter 
for such account, shall be exempt from the provisions of sections 22(e), 
27(i)(2)(A), and 27(d) of the Act (15 U.S.C. 80a-22(e), 80a-27(i)(2)(A), 
and 80a-27(d), respectively) with respect to any variable annuity 
contract participating in such account to the extent necessary to permit 
compliance with the Texas Optional Retirement Program (``Program''), 
Provided, That the separate, account, depositor, or underwriter for such 
account:
    (a) Includes appropriate disclosure regarding the restrictions on 
redemption imposed by the Program in each registration statement, 
including the prospectus, used in connection with the Program;
    (b) Includes appropriate disclosure regarding the restrictions on 
redemption imposed by the Program in any sales literature used in 
connection with the offer of annuity contracts to potential Program 
participants;
    (c) Instructs salespeople who solicit Program participants to 
purchase annuity contracts specifically to bring the restrictions on 
redemption imposed by the Program to the attention of potential Program 
participants;
    (d) Obtains from each Program participant who purchases an annuity 
contract in connection with the Program, prior to or at the time of such 
purchase, a signed statement acknowledging the restrictions on 
redemption imposed by the Program; and
    (e) Includes in Part II of the separate account's registration 
statement under the Securities Act of 1933 a representation that this 
section is being relied upon and that the provisions of paragraphs (a) 
through (d) of this section have been complied with.

[49 FR 1479, Jan. 12, 1984, as amended at 85 FR 26102, May 1, 2020]



Sec.  270.6c-8  Exemptions for registered separate accounts to impose
a deferred sales load and to deduct certain administrative charges.

    (a) As used in this section Deferred sales load shall mean any sales 
load, including a contingent deferred sales load, that is deducted upon 
redemption or annuitization of amounts representing all or a portion of 
a securityholder's interest in a registered separate account.
    (b) A registered separate account, and any depositor of or principal 
underwriter for such account, shall be exempt from the provisions of 
sections 22(c) and 27(i)(2)(A) of the Act (15 U.S.C. 80a-22(c) and 80a-
27(i)(2)(A), respectively) and Sec.  270.22c-1 (Rule 22c-1) to the 
extent necessary to permit them to impose a deferred sales load on any 
variable annuity contract participating in such account; provided that 
the terms of any offer to exchange another contract for the contract are 
in compliance with the requirements of paragraph (d) or (e) of Sec.  
270.11a-2 (Rule 11a-2).
    (c) A registered separate account, and any depositor of or principal 
underwriter for such account, shall be exempt from sections 22(c) and 
27(i)(2)(A) of the Act (15 U.S.C. 80a-22(c) and 80a-27(i)(2)(A), 
respectively) and Sec.  270.22c-1 (Rule 22c-1) to the extent necessary 
to permit them to deduct from the value of any variable annuity contract 
participating in such account, upon total redemption of the contract 
prior to the last day of the year, the full annual fee for 
administrative services that otherwise would have been deducted on that 
date.

[48 FR 36098, Aug. 9, 1983, as amended at 85 FR 26102, May 1, 2020]



Sec.  270.6c-10  Exemption for certain open-end management investment
companies to impose deferred sales loads.

    (a) A company and any exempted person shall be exempt from the 
provisions of sections 2(a)(32), 2(a)(35), and

[[Page 421]]

22(d) of the Act [15 U.S.C. 80a-2(a)(32), 80a-2(a)(35), and 80a-22(d), 
respectively] and Sec.  270.22c-1 to the extent necessary to permit a 
deferred sales load to be imposed on shares issued by the company, 
Provided, that:
    (1) The amount of the deferred sales load does not exceed a 
specified percentage of the net asset value or the offering price at the 
time of purchase;
    (2) The terms of the deferred sales load are covered by the 
provisions of Rule 2830 of the Conduct Rules of the National Association 
of Securities Dealers, Inc.; and
    (3) The same deferred sales load is imposed on all shareholders, 
except that scheduled variations in or elimination of a deferred sales 
load may be offered to a particular class of shareholders or 
transactions, Provided, that the conditions in Sec.  270.22d-1 are 
satisfied. Nothing in this paragraph (a) shall prevent a company from 
offering to existing shareholders a new scheduled variation that would 
waive or reduce the amount of a deferred sales load not yet paid.
    (b) For purposes of this section:
    (1) Company means a registered open-end management investment 
company, other than a registered separate account, and includes a 
separate series of the company;
    (2) Exempted person means any principal underwriter of, dealer in, 
and any other person authorized to consummate transactions in, 
securities issued by a company; and
    (3) Deferred sales load means any amount properly chargeable to 
sales or promotional expenses that is paid by a shareholder after 
purchase but before or upon redemption.

[61 FR 49016, Sept. 17, 1996]



Sec.  270.6c-11  Exchange-traded funds.

    (a) Definitions. (1) For purposes of this section:
    Authorized participant means a member or participant of a clearing 
agency registered with the Commission, which has a written agreement 
with the exchange-traded fund or one of its service providers that 
allows the authorized participant to place orders for the purchase and 
redemption of creation units.
    Basket means the securities, assets or other positions in exchange 
for which an exchange-traded fund issues (or in return for which it 
redeems) creation units.
    Business day means any day the exchange-traded fund is open for 
business, including any day when it satisfies redemption requests as 
required by section 22(e) of the Act (15 U.S.C. 80a-22(e)).
    Cash balancing amount means an amount of cash to account for any 
difference between the value of the basket and the net asset value of a 
creation unit.
    Creation unit means a specified number of exchange-traded fund 
shares that the exchange-traded fund will issue to (or redeem from) an 
authorized participant in exchange for the deposit (or delivery) of a 
basket and a cash balancing amount if any.
    Custom basket means:
    (A) A basket that is composed of a non-representative selection of 
the exchange-traded fund's portfolio holdings; or
    (B) A representative basket that is different from the initial 
basket used in transactions on the same business day.
    Exchange-traded fund means a registered open-end management company:
    (A) That issues (and redeems) creation units to (and from) 
authorized participants in exchange for a basket and a cash balancing 
amount if any; and
    (B) Whose shares are listed on a national securities exchange and 
traded at market-determined prices.
    Exchange-traded fund share means a share of stock issued by an 
exchange-traded fund.
    Foreign investment means any security, asset or other position of 
the ETF issued by a foreign issuer as that term is defined in Sec.  
240.3b-4 of this title, and that is traded on a trading market outside 
of the United States.
    Market price means:
    (A) The official closing price of an exchange-traded fund share; or
    (B) If it more accurately reflects the market value of an exchange-
traded fund share at the time as of which the exchange-traded fund 
calculates current net asset value per share, the price that is the 
midpoint between the

[[Page 422]]

national best bid and national best offer as of that time.
    National securities exchange means an exchange that is registered 
with the Commission under section 6 of the Securities Exchange Act of 
1934 (15 U.S.C. 78f).
    Portfolio holdings means the securities, assets or other positions 
held by the exchange-traded fund.
    Premium or discount means the positive or negative difference 
between the market price of an exchange-traded fund share at the time as 
of which the current net asset value is calculated and the exchange-
traded fund's current net asset value per share, expressed as a 
percentage of the exchange-traded fund share's current net asset value 
per share.
    (2) Notwithstanding the definition of exchange-traded fund in 
paragraph (a)(1) of this section, an exchange-traded fund is not 
prohibited from selling (or redeeming) individual shares on the day of 
consummation of a reorganization, merger, conversion or liquidation, and 
is not limited to transactions with authorized participants under these 
circumstances.
    (b) Application of the Act to exchange-traded funds. If the 
conditions of paragraph (c) of this section are satisfied:
    (1) Redeemable security. An exchange-traded fund share is considered 
a ``redeemable security'' within the meaning of section 2(a)(32) of the 
Act (15 U.S.C. 80a-2(a)(32)).
    (2) Pricing. A dealer in exchange-traded fund shares is exempt from 
section 22(d) of the Act (15 U.S.C. 80a-22(d)) and Sec.  270.22c-1(a) 
with regard to purchases, sales and repurchases of exchange-traded fund 
shares at market-determined prices.
    (3) Affiliated transactions. A person who is an affiliated person of 
an exchange-traded fund (or who is an affiliated person of such a 
person) solely by reason of the circumstances described in paragraphs 
(b)(3)(i) and (ii) of this section is exempt from sections 17(a)(1) and 
17(a)(2) of the Act (15 U.S.C. 80a-17(a)(1) and (a)(2)) with regard to 
the deposit and receipt of baskets:
    (i) Holding with the power to vote 5% or more of the exchange-traded 
fund's shares; or
    (ii) Holding with the power to vote 5% or more of any investment 
company that is an affiliated person of the exchange-traded fund.
    (4) Postponement of redemptions. If an exchange-traded fund includes 
a foreign investment in its basket, and if a local market holiday, or 
series of consecutive holidays, or the extended delivery cycles for 
transferring foreign investments to redeeming authorized participants 
prevents timely delivery of the foreign investment in response to a 
redemption request, the exchange-traded fund is exempt, with respect to 
the delivery of the foreign investment, from the prohibition in section 
22(e) of the Act (15 U.S.C. 80a-22(e)) against postponing the date of 
satisfaction upon redemption for more than seven days after the tender 
of a redeemable security if the exchange-traded fund delivers the 
foreign investment as soon as practicable, but in no event later than 15 
days after the tender of the exchange-traded fund shares.
    (c) Conditions. (1) Each business day, an exchange-traded fund must 
disclose prominently on its website, which is publicly available and 
free of charge:
    (i) Before the opening of regular trading on the primary listing 
exchange of the exchange-traded fund shares, the following information 
(as applicable) for each portfolio holding that will form the basis of 
the next calculation of current net asset value per share:
    (A) Ticker symbol;
    (B) CUSIP or other identifier;
    (C) Description of holding;
    (D) Quantity of each security or other asset held; and
    (E) Percentage weight of the holding in the portfolio;
    (ii) The exchange-traded fund's current net asset value per share, 
market price, and premium or discount, each as of the end of the prior 
business day;
    (iii) A table showing the number of days the exchange-traded fund's 
shares traded at a premium or discount during the most recently 
completed calendar year and the most recently completed calendar 
quarters since that year (or the life of the exchange-traded fund, if 
shorter);
    (iv) A line graph showing exchange-traded fund share premiums or 
discounts for the most recently completed

[[Page 423]]

calendar year and the most recently completed calendar quarters since 
that year (or the life of the exchange-traded fund, if shorter);
    (v) The exchange-traded fund's median bid-ask spread, expressed as a 
percentage rounded to the nearest hundredth, computed by:
    (A) Identifying the exchange-traded fund's national best bid and 
national best offer as of the end of each 10 second interval during each 
trading day of the last 30 calendar days;
    (B) Dividing the difference between each such bid and offer by the 
midpoint of the national best bid and national best offer; and
    (C) Identifying the median of those values; and
    (vi) If the exchange-traded fund's premium or discount is greater 
than 2% for more than seven consecutive trading days, a statement that 
the exchange-traded fund's premium or discount, as applicable, was 
greater than 2% and a discussion of the factors that are reasonably 
believed to have materially contributed to the premium or discount, 
which must be maintained on the website for at least one year 
thereafter.
    (2) The portfolio holdings that form the basis for the exchange-
traded fund's next calculation of current net asset value per share must 
be the ETF's portfolio holdings as of the close of business on the prior 
business day.
    (3) An exchange-traded fund must adopt and implement written 
policies and procedures that govern the construction of baskets and the 
process that will be used for the acceptance of baskets; provided, 
however, if the exchange-traded fund utilizes a custom basket, these 
written policies and procedures also must:
    (i) Set forth detailed parameters for the construction and 
acceptance of custom baskets that are in the best interests of the 
exchange-traded fund and its shareholders, including the process for any 
revisions to, or deviations from, those parameters; and
    (ii) Specify the titles or roles of the employees of the exchange-
traded fund's investment adviser who are required to review each custom 
basket for compliance with those parameters.
    (4) An exchange-traded fund that seeks, directly or indirectly, to 
provide investment returns that correspond to the performance of a 
market index by a specified multiple, or to provide investment returns 
that have an inverse relationship to the performance of a market index, 
over a predetermined period of time, must comply with all applicable 
provisions of Sec.  270.18f-4.
    (d) Recordkeeping. The exchange-traded fund must maintain and 
preserve for a period of not less than five years, the first two years 
in an easily accessible place:
    (1) All written agreements (or copies thereof) between an authorized 
participant and the exchange-traded fund or one of its service providers 
that allows the authorized participant to place orders for the purchase 
or redemption of creation units;
    (2) For each basket exchanged with an authorized participant, 
records setting forth:
    (i) The ticker symbol, CUSIP or other identifier, description of 
holding, quantity of each holding, and percentage weight of each holding 
composing the basket exchanged for creation units;
    (ii) If applicable, identification of the basket as a custom basket 
and a record stating that the custom basket complies with policies and 
procedures that the exchange-traded fund adopted pursuant to paragraph 
(c)(3) of this section;
    (iii) Cash balancing amount (if any); and
    (iv) Identity of authorized participant transacting with the 
exchange-traded fund.

[84 FR 57234, Oct. 24, 2019, as amended at 85 FR 83291, Dec. 21, 2020]



Sec.  270.6d-1  Exemption for certain closed-end investment companies.

    (a) An application under section 6(d) of the Act shall contain the 
following information:
    (1) A brief description of the character of the business and 
investment policy of the applicant.
    (2) The information relied upon by the applicant to satisfy the 
conditions of paragraphs (1) and (2) of section 6(d) of the Act.

[[Page 424]]

    (3) The number of holders of each class of the applicant's 
outstanding securities.
    (4) An unconsolidated balance sheet as of a date not earlier than 
the end of the applicant's first fiscal year, together with a schedule 
specifying the title, the amount, the book value and, if determinable, 
the market value of each security in the applicant's portfolio.
    (5) An unconsolidated profit and loss statement for the applicant's 
last fiscal year.
    (6) A statement of each provision of the act from which the 
applicant seeks exemption, together with a statement of the facts by 
reason of which, in the applicant's opinion, such exemption is not 
contrary to the public interest or inconsistent with the protection of 
investors.
    (b) There shall be attached to each copy of the application a copy 
of Form N-8A. The form need not be executed, but it shall be clearly 
marked on its facing page as an exhibit to the application. The filing 
of Form N-8A in this manner shall not be construed as the filing of a 
notification of registration under section 8(a) of the Act.
    (c) The application may contain any additional information which the 
applicant desires to submit.

[Rule N-6D-1, 5 FR 4346, Nov. 2, 1940]



Sec.  270.6e-2  Exemptions for certain variable life insurance separate
accounts.

    (a) A separate account, and the investment adviser, principal 
underwriter and depositor of such separate account, shall, except for 
the exemptions provided in paragraph (b) of this section, be subject to 
all provisions of the Act and this part as though such separate account 
were a registered investment company issuing periodic payment plan 
certificates if:
    (1) Such separate account is established and maintained by a life 
insurance company pursuant to the insurance laws or code of:
    (i) Any state or territory of the United States or the District of 
Columbia; or
    (ii) Canada or any province thereof, if it complies to the extent 
necessary with Sec.  270.7d-1 (Rule 7d-1) under the Act;
    (2) The assets of the separate account are derived solely from the 
sale of variable life insurance contracts as defined in paragraph (c) of 
this section, and advances made by the life insurance company which 
established and maintains the separate account (``life insurer'') in 
connection with the operation of such separate account;
    (3) The separate account is not used for variable annuity contracts 
or for funds corresponding to dividend accumulations or other contract 
liabilities not involving life contingencies;
    (4) The income, gains and losses, whether or not realized, from 
assets allocated to such separate account, are, in accordance with the 
applicable variable life insurance contract, credited to or charged 
against such account without regard to other income, gains or losses of 
the life insurer;
    (5) The separate account is legally segregated, and that portion of 
its assets having a value equal to, or approximately equal to, the 
reserves and other contract liabilities with respect to such separate 
account are not chargeable with liabilities arising out of any other 
business that the life insurer may conduct;
    (6) The assets of the separate account have, at each time during the 
year that adjustments in the reserves are made, a value at least equal 
to the reserves and other contract liabilities with respect to such 
separate account, and at all other times, except pursuant to an order of 
the Commission, have a value approximately equal to or in excess of such 
reserves and liabilities; and
    (7) The investment adviser of the separate account is registered 
under the Investment Advisers Act of 1940.
    (b) If a separate account meets the requirements of paragraph (a) of 
this section, then such separate account and the other persons described 
in paragraph (a) of this section shall be exempt from the provisions of 
the Act as follows:
    (1) Section 7 (15 U.S.C. 80a-7).
    (2) Section 8 (15 U.S.C. 80a-8) to the extent that:
    (i) For purposes of paragraph (a) of section 8, the separate account 
shall file with the Commission a notification

[[Page 425]]

on Sec.  274.301 of this chapter (Form N-6EI-1) which identifies such 
separate account; and
    (ii) For purposes of paragraph (b) of section 8, the separate 
account shall file with the Commission a form to be designated by the 
Commission within 90 days after filing the notification on Form N-6EI-1; 
provided, however, that if the fiscal year of the separate account ends 
within this 90 day period the form may be filed within ninety days after 
the end of such fiscal year.
    (3) Section 9 (15 U.S.C. 80a-9) to the extent that:
    (i) The eligibility restrictions of section 9(a) shall not be 
applicable to those persons who are officers, directors and employees of 
the life insurer or its affiliates who do not participate directly in 
the management or administration of the separate account or in the sale 
of variable life insurance contracts funded by such separate account; 
and
    (ii) A life insurer shall be ineligible pursuant to paragraph (3) of 
section 9(a) to serve as investment adviser, depositor of or principal 
underwriter for a variable life insurance separate account only if an 
affiliated person of such life insurer, ineligible by reason of 
paragraph (1) or (2) of section 9(a), participates directly in the 
management or administration of the separate account or in the sale of 
variable life insurance contracts funded by such separate account.
    (4) Section 13(a) (15 U.S.C. 80a-13(a)) to the extent that:
    (i) An insurance regulatory authority may require pursuant to 
insurance law or regulation that the separate account make (or refrain 
from making) certain investments which would result in changes in the 
subclassification or investment policies of the separate account;
    (ii) Changes in the investment policy of the separate account 
initiated by contractholders or the board of directors of the separate 
account may be disapproved by the life insurer, provided that such 
disapproval is reasonable and is based upon a determination by the life 
insurer in good faith that:
    (A) Such change would be contrary to state law; or
    (B) Such change would be inconsistent with the investment objectives 
of the separate account or would result in the purchase of securities 
for the separate account which vary from the general quality and nature 
of investments and investment techniques utilized by other separate 
accounts of the life insurer or of an affiliated life insurance company, 
which separate accounts have investment objectives similar to the 
separate account; and
    (iii) Any action taken in accordance with paragraph (b)(4)(i) or 
(ii) of this section and the reasons therefor shall be disclosed in the 
proxy statement for the next meeting of variable life insurance 
contractholders of the separate account.
    (5) Section 14(a) (15 U.S.C. 80a-14(a)).
    (6)(i) Section 15(a) (15 U.S.C. 80a-15(a)) to the extent this 
section requires that the initial written contract pursuant to which the 
investment adviser serves or acts shall have been approved by the vote 
of a majority of the outstanding voting securities of the registered 
company; provided that:
    (A) Such investment adviser is selected and a written contract is 
entered into before the effective date of the registration statement 
under the Securities Act of 1933, as amended, for variable life 
insurance contracts which are funded by the separate account, and that 
the terms of the contract are fully disclosed in such registration 
statement; and
    (B) A written contract is submitted to a vote of variable life 
insurance contractholders at their first meeting after the effective 
date of the registration statement under the Securities Act of 1933, as 
amended, on condition that such meeting shall take place within one year 
after such effective date, unless the time for the holding of such 
meeting shall be extended by the Commission upon written request for 
good cause shown; and
    (ii) Sections 15(a), (b) and (c) (15 U.S.C. 80a-15(a), (b), and (c)) 
to the extent that:
    (A) An insurance regulatory authority may disapprove pursuant to 
insurance law or regulation any contract between the separate account 
and an investment adviser or principal underwriter;

[[Page 426]]

    (B) Changes in the principal underwriter for the separate account 
initiated by contractholders or the board of directors of the separate 
account may be disapproved by the life insurer; provided that such 
disapproval is reasonable;
    (C) Changes in the investment adviser of the separate account 
initiated by contractholders or the board of directors of the separate 
account may be disapproved by the life insurer; provided that such 
disapproval is reasonable and is based upon a determination by the life 
insurer in good faith that:
    (1) The rate of the proposed investment advisory fee will exceed the 
maximum rate that is permitted to be charged against the assets of the 
separate account for such services as specified by any variable life 
insurance contract funded by such separate account; or
    (2) The proposed investment adviser may be expected to employ 
investment techniques which vary from the general techniques utilized by 
the current investment adviser to the separate account, or advise the 
purchase or sale of securities which would be inconsistent with the 
investment objectives of the separate account, or which would vary from 
the quality and nature of investments made by other separate accounts of 
the life insurer or of an affiliated life insurance company, which 
separate accounts have investment objectives similar to the separate 
account; and
    (D) Any action taken in accordance with paragraph (b)(6)(ii)(A), 
(B), or (C) of this section and the reasons therefor shall be disclosed 
in the proxy statement for the next meeting of variable life insurance 
contractholders of the separate account.
    (7) Section 16(a) (15 U.S.C. 80a-16(a)) to the extent that:
    (i) Persons serving as directors of the separate account prior to 
the first meeting of such account's variable life insurance 
contractholders are exempt from the requirement of section 16(a) that 
such persons be elected by the holders of outstanding voting securities 
of such account at an annual or special meeting called for that purpose; 
provided that:
    (A) Such persons have been appointed directors of such account by 
the life insurer before the effective date of the registration statement 
under the Securities Act of 1933, as amended, for variable life 
insurance contracts which are funded by the separate account and are 
identified in such registration statement (or are replacements appointed 
by the life insurer for any such persons who have become unable to serve 
as directors); and
    (B) An election of directors for such account shall be held at the 
first meeting of variable life insurance contractholders after the 
effective date of the registration statement under the Securities Act of 
1933, as amended, relating to contracts funded by such account, which 
meeting shall take place within one year after such effective date, 
unless the time for holding such meeting shall be extended by the 
Commission upon written request for good cause shown; and
    (ii) A member of the board of directors of such separate account may 
be disapproved or removed by the appropriate insurance regulatory 
authority if such person is ineligible to serve as a director of the 
separate account pursuant to insurance law or regulation of the 
jurisdiction in which the life insurer is domiciled.
    (8) Section 17(f) (15 U.S.C. 80a-17(f)) to the extent that the 
securities and similar investments of the separate account may be 
maintained in the custody of the life insurer or an insurance company 
which is an affiliated person of such life insurer; provided that:
    (i) The securities and similar investments allocated to such 
separate account are clearly identified as to ownership by such account, 
and such securities and similar investments are maintained in the vault 
of an insurance company which meets the qualifications set forth in 
paragraph (b)(8)(ii) of this section, and whose procedures and 
activities with respect to such safekeeping function are supervised by 
the insurance regulatory authorities of the jurisdiction in which the 
securities and similar investments will be held;
    (ii) The insurance company maintaining such investments must file 
with an insurance regulatory authority of a State or territory of the 
United States or the District of Columbia an

[[Page 427]]

annual statement of its financial condition in the form prescribed by 
the National Association of Insurance Commissioners, must be subject to 
supervision and inspection by such authority and must be examined 
periodically as to its financial condition and other affairs by such 
authority, must hold the securities and similar investments of the 
separate account in its vault, which vault must be equivalent to that of 
a bank which is a member of the Federal Reserve System, and must have a 
combined capital and surplus, if a stock company, or an unassigned 
surplus, if a mutual company, of not less than $1,000,000 as set forth 
in its most recent annual statement filed with such authority;
    (iii) Access to such securities and similar investments shall be 
limited to employees of or agents authorized by the Commission, 
representatives of insurance regulatory authorities, independent public 
accountants for the separate account, accountants for the life insurer 
and to no more than 20 persons authorized pursuant to a resolution of 
the board of directors of the separate account, which persons shall be 
directors of the separate account, officers and responsible employees of 
the life insurer or officers and responsible employees of the affiliated 
insurance company in whose vault such investments are maintained (if 
applicable), and access to such securities and similar investments shall 
be had only by two or more such persons jointly, at least one of whom 
shall be a director of the separate account or officer of the life 
insurer;
    (iv) The requirement in paragraph (b)(8)(i) of this section that the 
securities and similar investments of the separate account be maintained 
in the vault of a qualified insurance company shall not apply to 
securities deposited with insurance regulatory authorities or deposited 
in a system for the central handling of securities established by a 
national securities exchange or national securities association 
registered with the Commission under the Securities Exchange Act of 
1934, as amended, or such person as may be permitted by the Commission, 
or to securities on loan which are collateralized to the extent of their 
full market value, or to securities hypothecated, pledged, or placed in 
escrow for the account of such separate account in connection with a 
loan or other transaction authorized by specific resolution of the board 
of directors of the separate account, or to securities in transit in 
connection with the sale, exchange, redemption, maturity or conversion, 
the exercise of warrants or rights, assents to changes in terms of the 
securities, or to other transactions necessary or appropriate in the 
ordinary course of business relating to the management of securities;
    (v) Each person when depositing such securities or similar 
investments in or withdrawing them from the depository or when ordering 
their withdrawal and delivery from the custody of the life insurer or 
affiliated insurance company, shall sign a notation in respect of such 
deposit, withdrawal or order which shall show:
    (A) The date and time of the deposit, withdrawal, or order;
    (B) The title and amount of the securities or other investments 
deposited, withdrawn or ordered to be withdrawn, and an identification 
thereof by certificate numbers or otherwise;
    (C) The manner of acquisition of the securities or similar 
investments deposited or the purpose for which they have been withdrawn, 
or ordered to be withdrawn; and
    (D) If withdrawn and delivered to another person the name of such 
person. Such notation shall be transmitted promptly to an officer or 
director of the separate account or the life insurer designated by the 
board of directors of the separate account who shall not be a person 
designated for the purpose of paragraph (b)(8)(iii) of this section. 
Such notation shall be on serially numbered forms and shall be preserved 
for at least one year;
    (vi) Such securities and similar investments shall be verified by 
complete examination by an independent public accountant retained by the 
separate account at least three times during each fiscal year, at least 
two of which shall be chosen by such accountant without prior notice to 
such separate

[[Page 428]]

account. A certificate of such accountant stating that he has made an 
examination of such securities and investments and describing the nature 
and extent of the examination shall be transmitted to the Commission by 
the accountant promptly after each examination; and
    (vii) Securities and similar investments of a separate account 
maintained with a bank or other company whose functions and physical 
facilities are supervised by Federal or state authorities pursuant to 
any arrangement whereby the directors, officers, employees or agents of 
the separate account or the life insurer are authorized or permitted to 
withdraw such investments upon their mere receipt are deemed to be in 
the custody of the life insurer and shall be exempt from the 
requirements of section 17(f) so long as the arrangement complies with 
all provisions of paragraph (b)(8) of this section, except that such 
securities will be maintained in the vault of a bank or other company 
rather than the vault of an insurance company.
    (9) Section 18(i) (15 U.S.C. 80a-18(i)) to the extent that:
    (i) For the purposes of any section of the Act which provides for 
the vote of securityholders on matters relating to the investment 
company:
    (A) Variable life insurance contractholders shall have one vote for 
each $100 of cash value funded by the separate account, with fractional 
votes allocated for amounts less than $100;
    (B) The life insurer shall have one vote for each $100 of assets of 
the separate account not otherwise attributable to contractholders 
pursuant to paragraph (b)(9)(i)(A) of this section, with fractional 
votes allocated for amounts less than $100; provided that after the 
commencement of sales of variable life insurance contracts funded by the 
separate account, the life insurer shall cast its votes for and against 
each matter which may be voted upon by contractholders in the same 
proportion as the votes cast by contractholders; and
    (C) The number of votes to be allocated shall be determined as of a 
record date not more than 90 days prior to any meeting at which such 
vote is held; provided that if a quorum is not present at the meeting, 
the meeting may be adjourned for up to 60 days without fixing a new 
record date; and
    (ii) The requirement of this section that every share of stock 
issued by a registered management investment company (except a common-
law trust of the character described in section 16(c)) shall be a voting 
stock and have equal voting rights with every other outstanding voting 
stock shall not be deemed to be violated by actions specifically 
permitted by any provision of this section.
    (10) Section 19 (15 U.S.C. 80a-19) to the extent that the provisions 
of this section shall not be applicable to any dividend or similar 
distribution paid or payable pursuant to provisions of participating 
variable life insurance contracts.
    (11) Sections 22(d), 22(e), and 27(i)(2)(A) (15 U.S.C. 80a-22(d), 
80a-22(e), and 80a-27(i)(2)(A), respectively) and Sec.  270.22c-1 (Rule 
22c-1) promulgated under section 22(c) to the extent:
    (i) That the amount payable on death and the cash surrender value of 
each variable life insurance contract shall be determined on each day 
during which the New York Stock Exchange is open for trading, not less 
frequently than once daily as of the time of the close of trading on 
such exchange; provided that the amount payable on death need not be 
determined more than once each contract month if such determination does 
not reduce the participation of the contract in the investment 
experience of the separate account; provided further, however, that if 
the net valuation premium for such contract is transferred at least 
annually, then the amount payable on death need be determined only when 
such net premium is transferred; and
    (ii) Necessary for compliance with this section or with insurance 
laws and regulations and established administrative procedures of the 
life insurer with respect to issuance, transfer and redemption 
procedures for variable life insurance contracts funded by the separate 
account including, but not limited to, premium rate structure and 
premium processing, insurance underwriting standards, and the particular 
benefit afforded by the contract; provided, however, that any procedure 
or

[[Page 429]]

action shall be reasonable, fair and not discriminatory to the interests 
of the affected contractholder and to all other holders of contracts of 
the same class or series funded by the separate account; and, further 
provided that any such action shall be disclosed in the form required to 
be filed by the separate account with the Commission pursuant to 
paragraph (b)(2)(ii) of this section.
    (12) Section 27(i)(2)(A) (15 U.S.C. 80a-27(i)(A)), to the extent 
that such sections require that the variable life insurance contract be 
redeemable or provide for a refund in cash; provided that such contract 
provides for election by the contractholder of a cash surrender value or 
certain non-forfeiture and settlement options which are required or 
permitted by the insurance law or regulation of the jurisdiction in 
which the contract is offered; and further provided that unless required 
by the insurance law or regulation of the jurisdiction in which the 
contract is offered or unless elected by the contractholder, such 
contract shall not provide for the automatic imposition of any option, 
including, but not limited to, an automatic premium loan, which would 
involve the accrual or payment of an interest or similar charge;
    (13) Section 32(a)(2) (15 U.S.C. 80a-31(a)(2)); provided that:
    (i) The independent public accountant is selected before the 
effective date of the registration statement under the Securities Act of 
1933, as amended, for variable life insurance contracts which are funded 
by the separate account, and the identity of such accountant is 
disclosed in such registration statement; and
    (ii) The selection of such accountant is submitted for ratification 
or rejection to variable life insurance contractholders at their first 
meeting after the effective date of the registration statement under the 
Securities Act of 1933, as amended, on condition that such meeting shall 
take place within one year after such effective date, unless the time 
for the holding of such meeting shall be extended by the Commission upon 
written request for good cause shown.
    (14) If the separate account is organized as a unit investment 
trust, all the assets of which consist of the shares of one or more 
registered management investment companies which offer their shares 
exclusively to variable life insurance separate accounts of the life 
insurer or of any affiliated life insurance company:
    (i) The eligibility restrictions of section 9(a) (15 U.S.C. 80a-
9(a)) shall not be applicable to those persons who are officers, 
directors, and employees of the life insurer or its affiliates who do 
not participate directly in the management or administration of any 
registered management investment company described in paragraph (b)(14) 
introductory text;
    (ii) The life insurer shall be ineligible pursuant to paragraph (3) 
of section 9(a) to serve as investment adviser of or principal 
underwriter for any registered management investment company described 
in paragraph (b)(14) of this section only if an affiliated person of 
such life insurer, ineligible by reason of paragraph (1) or (2) of 
section 9(a), participates in the management or administration of such 
company;
    (iii) The life insurer may vote shares of the registered management 
investment companies held by the separate account without regard to 
instructions from contractholders of the separate account if such 
instructions would require such shares to be voted:
    (A) To cause such companies to make (or refrain from making) certain 
investments which would result in changes in the sub-classification or 
investment objectives of such companies or to approve or disapprove any 
contract between such companies and an investment adviser when required 
to do so by an insurance regulatory authority subject to the provisions 
of paragraphs (b)(4)(i) and (b)(6)(ii)(A) of this section; or
    (B) In favor of changes in investment objectives, investment adviser 
of or principal underwriter for such companies subject to the provisions 
of paragraphs (b)(4)(ii) and (b)(6)(ii)(B) and (C) of this section;
    (iv) Any action taken in accordance with paragraph (b)(14)(iii)(A) 
or (B) of this section and the reasons therefor shall be disclosed in 
the next report to

[[Page 430]]

contractholders made pursuant to section 30(e) (15 U.S.C. 80a-29(e)) and 
Sec.  270.30e-2 (Rule 30e-2);
    (v) Any registered management investment company established by the 
insurer and described in paragraph (b)(14) of this section shall be 
exempt from section 14(a); and
    (vi) Any registered management investment company established by the 
insurer and described in paragraph (b)(14) of this section shall be 
exempt from sections 15(a), 16(a), and 32(a)(2) (15 U.S.C. 80a-15(a), 
80-16(a), and 80-31(a)(2), respectively), to the extent prescribed by 
paragraphs (b)(6)(i), (b)(7)(i), and (b)(13) of this section, provided 
that such company complies with the conditions set forth in those 
paragraphs as if it were a separate account.
    (c) When used in this section, variable life insurance contract 
means a contract of life insurance, subject to regulation under the 
insurance laws or code of every jurisdiction in which it is offered, 
funded by a separate account of a life insurer, which contract, so long 
as premium payments are duly paid in accordance with its terms, provides 
for:
    (1) A death benefit and cash surrender value which vary to reflect 
the investment experience of the separate account;
    (2) An initial stated dollar amount of death benefit, and payment of 
a death benefit guaranteed by the life insurer to be at least equal to 
such stated amount; and
    (3) Assumption of the mortality and expense risks thereunder by the 
life insurer for which a charge against the assets of the separate 
account may be assessed. Such charge shall be disclosed in the 
prospectus and shall not be less than fifty per centum of the maximum 
charge for risk assumption as disclosed in the prospectus and as 
provided for in the contract.

[85 FR 26102, May 1, 2020]



Sec.  270.6e-3  Exemptions for flexible premium variable life insurance
separate accounts.

    (a) A separate account, and its investment adviser, principal 
underwriter and depositor, shall, except as provided in paragraph (b) of 
this section, comply with all provisions of the Investment Company Act 
of 1940 (15 U.S.C. 80a-1 et seq.) and this part that apply to a 
registered investment company issuing periodic payment plan certificates 
if:
    (1) It is a separate account within the meaning of section 2(a)(37) 
of the Act (15 U.S.C. 80a-2(a)(37)) and is established and maintained by 
a life insurance company pursuant to the insurance laws or code of:
    (i) Any state or territory of the United States or the District of 
Columbia; or
    (ii) Canada or any province thereof, if it complies with Sec.  
270.7d-1 (Rule 7d-1) under the Act (the ``life insurer'');
    (2) The assets of the separate account are derived solely from:
    (i) The sale of flexible premium variable life insurance contracts 
(``flexible contracts'') as defined in paragraph (c)(1) of this section;
    (ii) The sale of scheduled premium variable life insurance contracts 
(``scheduled contracts'') as defined in paragraph (c) of Sec.  270.6e-2 
(Rule 6e-2) under the Act;
    (iii) Funds corresponding to dividend accumulations with respect to 
such contracts; and
    (iv) Advances made by the life insurer in connection with the 
operation of such separate account;
    (3) The separate account is not used for variable annuity contracts 
or other contract liabilities not involving life contingencies;
    (4) The separate account is legally segregated, and that part of its 
assets with a value approximately equal to the reserves and other 
contract liabilities for such separate account are not chargeable with 
liabilities arising from any other business of the life insurer;
    (5) The value of the assets of the separate account, each time 
adjustments in the reserves are made, is at least equal to the reserves 
and other contract liabilities of the separate account, and at all other 
times approximately equals or exceeds the reserves and liabilities; and
    (6) The investment adviser of the separate account is registered 
under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.).
    (b) A separate account that meets the requirements of paragraph (a) 
of

[[Page 431]]

this section, and its investment adviser, principal underwriter and 
depositor shall be exempt with respect to flexible contracts funded by 
the separate account from the following provisions of the Act:
    (1) Subject to section 26(f) of the Act, in connection with any 
sales charge deducted under the flexible contract, the separate account 
and other persons shall be exempt from sections 12(b), 22(c), and 
27(i)(2)(A) (15 U.S.C. 80a-12(b), 80-22(c), and 80a-27(i)(2)(A), 
respectively) of the Act, and Sec. Sec.  270.12b-1 (Rule 12b-1) and 
270.22c-1 (Rule 22c-1) under the Act.
    (2) Section 7 (15 U.S.C. 80a-7).
    (3) Section 8 (15 U.S.C. 80a-8), to the extent that:
    (i) For purposes of paragraph (a) of section 8, the separate account 
filed with the Commission a notification on Sec.  274.301 of this 
chapter (Form N-6EI-1) which identifies the separate account; and
    (ii) For purposes of paragraph (b) of section 8, the separate 
account shall file with the Commission the form designated by the 
Commission within ninety days after filing the notification on Form N-
6EI-1; provided, however, that if the fiscal year of the separate 
account end within this ninety day period, the form may be filed within 
ninety days after the end of such fiscal year.
    (4) Section 9 (15 U.S.C. 80a-9), to the extent that:
    (i) The eligibility restrictions of section 9(a) shall not apply to 
persons who are officers, directors or employees of the life insurer or 
its affiliates and who do not participate directly in the management or 
administration of the separate account or in the sale of flexible 
contracts; and
    (ii) A life insurer shall be ineligible under paragraph (3) of 
section 9(a) to serve as investment adviser, depositor of or principal 
underwriter for the separate account only if an affiliated person of 
such life insurer, ineligible by reason of paragraphs (1) or (2) of 
section 9(a), participates directly in the management or administration 
of the separate account or in the sale of flexible contracts.
    (5) Section 13(a) (15 U.S.C. 80a-13(a)), to the extent that:
    (i) An insurance regulatory authority may require pursuant to 
insurance law or regulation that the separate account make (or refrain 
from making) certain investments which would result in changes in the 
subclassification or investment policies of the separate account;
    (ii) Changes in the investment policy of the separate account 
initiated by its contractholders or board of directors may be 
disapproved by the life insurer, if the disapproval is reasonable and is 
based on a good faith determination by the life insurer that:
    (A) The change would violate state law; or
    (B) The change would not be consistent with the investment 
objectives of the separate account or would result in the purchase of 
securities for the separate account which vary from the general quality 
and nature of investments and investment techniques used by other 
separate accounts of the life insurer or of an affiliated life insurance 
company with similar investment objectives; and
    (iii) Any action described in paragraph (b)(5)(i) or (ii) of this 
section and the reasons for it shall be disclosed in the next 
communication to contractholders, but in no case, later than twelve 
months from the date of such action.
    (6) Section 14(a) (15 U.S.C. 80a-14(a)).
    (7)(i) Section 15(a) (15 U.S.C. 80a-15(a)), to the extent it 
requires that the initial written contract with the investment adviser 
shall have been approved by the vote of a majority of the outstanding 
voting securities of the registered investment company; provided that:
    (A) The investment adviser is selected and a written contract is 
entered into before the effective date of the 1933 Act registration 
statement for flexible contracts, and that the terms of the contract are 
fully disclosed in the registration statement; and
    (B) A written contract is submitted to a vote of contractholders at 
their first meeting and within one year after the effective date of the 
1933 Act registration statement, unless the Commission upon written 
request and for good cause shown extends the time for the holding of 
such meeting; and

[[Page 432]]

    (ii) Sections 15(a), (b), and (c), to the extent that:
    (A) An insurance regulatory authority may disapprove pursuant to 
insurance law or regulation any contract between the separate account 
and an investment adviser or principal underwriter;
    (B) Changes in the principal underwriter for the separate account 
initiated by contractholders or the board of directors of the separate 
account may be disapproved by the life insurer; provided that such 
disapproval is reasonable;
    (C) Changes in the investment adviser of the separate account 
initiated by contractholders or the board of directors of the separate 
account may be disapproved by the life insurer; provided that such 
disapproval is reasonable and is based on a good faith determination by 
the life insurer that:
    (1) The proposed investment advisory fee will exceed the maximum 
rate specified in any flexible contract that may be charged against the 
assets of the separate account for such services; or
    (2) The proposed investment adviser may be expected to employ 
investment techniques which vary from the general techniques used by the 
current investment adviser to the separate account, or advise the 
purchase or sale of securities which would not be consistent with the 
investment objectives of the separate account, or which would vary from 
the quality and nature of investments made by other separate accounts 
with similar investment objectives of the life insurer or an affiliated 
life insurance company; and
    (D) Any action described in paragraph (b)(7)(ii)(A), (B), or (C) of 
this section and the reasons for it shall be disclosed in the next 
communication to contractholders, but in no case, later than twelve 
months from the date of such action.
    (8) Section 16(a) (15 U.S.C. 80a-16(a)), to the extent that:
    (i) Directors of the separate account serving before the first 
meeting of the account's contractholders are exempt from the requirement 
of section 16(a) that they be elected by the holders of outstanding 
voting securities of the account at an annual or special meeting called 
for that purpose; provided that:
    (A) Such persons were appointed directors of the account by the life 
insurer before the effective date of the 1933 Act registration statement 
for flexible contracts and are identified in the registration statement 
(or are replacements appointed by the life insurer for any such persons 
who have become unable to serve as directors); and
    (B) An election of directors for the account is held at the first 
meeting of contractholders and within one year after the effective date 
of the 1933 Act registration statement for flexible contracts, unless 
the time for holding the meeting is extended by the Commission upon 
written request and for good cause shown; and
    (ii) A member of the board of directors of the separate account may 
be disapproved or removed by an insurance regulatory authority if the 
person is not eligible to be a director of the separate account under 
the law of the life insurer's domicile.
    (9) Section 17(f) (15 U.S.C. 80a-17(f)), to the extent that the 
securities and similar investments of a separate account organized as a 
management investment company may be maintained in the custody of the 
life insurer or of an affiliated life insurance company; provided that:
    (i) The securities and similar investments allocated to the separate 
account are clearly identified as owned by the account, and the 
securities and similar investments are kept in the vault of an insurance 
company which meets the qualifications in paragraph (b)(9)(ii) of this 
section, and whose safekeeping function is supervised by the insurance 
regulatory authorities of the jurisdiction in which the securities and 
similar investments will be held;
    (ii) The insurance company maintaining such investments must file 
with an insurance regulatory authority of a state or territory of the 
United States or the District of Columbia an annual statement of its 
financial condition in the form prescribed by the National Association 
of Insurance Commissioners, must be subject to supervision and 
inspection by such authority and must be examined periodically as to its 
financial condition and other affairs by such authority, must

[[Page 433]]

hold the securities and similar investments of the separate account in 
its vault, which vault must be equivalent to that of a bank which is a 
member of the Federal Reserve System, and must have a combined capital 
and surplus, if a stock company, or an unassigned surplus, if a mutual 
company, of not less than $1,000,000 as set forth in its most recent 
annual statement filed with such authority;
    (iii) Access to such securities and similar investments shall be 
limited to employees of the Commission, representatives of insurance 
regulatory authorities, independent public accountants retained by the 
separate account (or on its behalf by the life insurer), accountants for 
the life insurer, and to no more than 20 persons authorized by a 
resolution of the board of directors of the separate account, which 
persons shall be directors of the separate account, officers and 
responsible employees of the life insurer or officers and responsible 
employees of the affiliated life insurance company in whose vault the 
investments are kept (if applicable), and access to such securities and 
similar investments shall be had only by two or more such persons 
jointly, at least one of whom shall be a director of the separate 
account or officer of the life insurer;
    (iv) The requirement in paragraph (b)(9)(i) of this section that the 
securities and similar investments of the separate account be maintained 
in the vault of a qualified insurance company shall not apply to 
securities deposited with insurance regulatory authorities or deposited 
in accordance with any rule under section 17(f), or to securities on 
loan which are collateralized to the extent of their full market value, 
or to securities hypothecated, pledged, or placed in escrow for the 
account of such separate account in connection with a loan or other 
transaction authorized by specific resolution of the board of directors 
of the separate account, or to securities in transit in connection with 
the sale, exchange, redemption, maturity or conversion, the exercise of 
warrants or rights, assents to changes in terms of the securities, or to 
other transactions necessary or appropriate in the ordinary course of 
business relating to the management of securities;
    (v) Each person when depositing such securities or similar 
investments in or withdrawing them from the depository or when ordering 
their withdrawal and delivery from the custody of the life insurer or 
affiliated life insurance company, shall sign a notation showing:
    (A) The date and time of the deposit, withdrawal or order;
    (B) The title and amount of the securities or other investments 
deposited, withdrawn or ordered to be withdrawn, and an identification 
thereof by certificate numbers or otherwise;
    (C) The manner of acquisition of the securities or similar 
investments deposited or the purpose for which they have been withdrawn, 
or ordered to be withdrawn; and
    (D) If withdrawn and delivered to another person, the name of such 
person. The notation shall be sent promptly to an officer or director of 
the separate account or the life insurer designated by the board of 
directors of the separate account who is not himself permitted to have 
access to the securities or investments under paragraph (b)(9)(iii) of 
this section. The notation shall be on serially numbered forms and shall 
be kept for at least one year;
    (vi) The securities and similar investments shall be verified by 
complete examination by an independent public accountant retained by the 
separate account (or on its behalf by the life insurer) at least three 
times each fiscal year, at least two of which shall be chosen by the 
accountant without prior notice to the separate account. A certificate 
of the accountant stating that he has made an examination of such 
securities and investments and describing the nature and extent of the 
examination shall be sent to the Commission by the accountant promptly 
after each examination; and
    (vii) Securities and similar investments of a separate account 
maintained with a bank or other company whose functions and physical 
facilities are supervised by Federal or state authorities under any 
arrangement whereby the directors, officers, employees or agents of the 
separate account or the life insurer are authorized

[[Page 434]]

or permitted to withdraw such investments upon their mere receipt are 
deemed to be in the custody of the life insurer and shall be exempt from 
the requirements of section 17(f) so long as the arrangement complies 
with all provisions of paragraph (b)(9) of this section, except that 
such securities will be maintained in the vault of a bank or other 
company rather than the vault of an insurance company.
    (10) Section 18(i) (15 U.S.C. 80a-18(i)), to the extent that:
    (i) For the purposes of any section of the Act which provides for 
the vote of securityholders on matters relating to the investment 
company:
    (A) Flexible contractholders shall have one vote for each $100 of 
cash value funded by the separate account, with fractional votes 
allocated for amounts less than $100;
    (B) The life insurer shall have one vote for each $100 of assets of 
the separate account not otherwise attributable to contractholders under 
paragraph (b)(10)(i)(A) of this section, with fractional votes allocated 
for amounts less than $100; provided that after the commencement of 
sales of flexible contracts, the life insurer shall cast its votes for 
and against each matter which may be voted upon by contractholders in 
the same proportion as the votes cast by contractholders; and
    (C) The number of votes to be allocated shall be determined as of a 
record date not more than 90 days before any meeting at which such vote 
is held; provided that if a quorum is not present at the meeting, the 
meeting may be adjourned for up to 60 days without fixing a new record 
date; and
    (ii) The requirement of section 18(i) that every share of stock 
issued by a registered management investment company (except a common-
law trust of the character described in section 16(c) (15 U.S.C. 80a-
16(c))) shall be a voting stock and have equal voting rights with every 
other outstanding voting stock shall not be deemed to be violated by 
actions specifically permitted by any provisions of this section.
    (11) Section 19 (15 U.S.C. 80a-19), to the extent that the 
provisions of this section shall not apply to any dividend or similar 
distribution paid or payable under provisions of participating flexible 
contracts.
    (12) Sections 22(c), 22(d), 22(e) and 27(i)(2)(A) (15 U.S.C. 80a-
22(c)), 80a-22(d), 80a-22(e), and 80a-27(i)(2)(A), respectively) and 
Sec.  270.22c-1 (Rule 22c-1) to the extent:
    (i) The cash value of each flexible contract shall be computed in 
accordance with Rule 22c-1(b); provided, however, that where actual 
computation is not necessary for the operation of a particular contract, 
then the cash value of that contract must only be capable of 
computation; and provided further that to the extent the calculation of 
the cash value reflects deductions for the cost of insurance and other 
insurance benefits or administrative expenses and fees or sales charges, 
such deductions need only be made at such times as specified in the 
contract or as necessary for compliance with insurance laws and 
regulations;
    (ii) The death benefit, unless required by insurance laws and 
regulations, shall be computed on any day that the investment experience 
of the separate account would affect the death benefit under the terms 
of the contract provided that such terms are reasonable, fair, and 
nondiscriminatory; and
    (iii) Necessary to comply with this section or with insurance laws 
and regulations and established administrative procedures of the life 
insurer for issuance, increases in or additions of insurance benefits, 
transfer and redemption of flexible contracts, including, but not 
limited to, premium rate structure and premium processing, insurance 
underwriting standards, and the particular benefit afforded by the 
contract; provided, however, that any procedure or action shall be 
reasonable, fair, and not discriminatory to the interests of the 
affected contractholders and to all other holders of contracts of the 
same class or series funded by the separate account; and provided 
further that any such action shall be disclosed in the form filed by the 
separate account with the Commission under paragraph (b)(3)(ii) of this 
section.
    (13) Sections 27(i)(2)(A) and 22(c) (15 U.S.C. 80a-27(i)(2)(A) and 
80a-22(c)) and Sec.  270.22c-1 (Rule 22c-1), to the extent that:

[[Page 435]]

    (i) Such sections require that the flexible contract be redeemable 
or provide for a refund in cash; provided that the contract provides for 
election by the contractholder of a cash surrender value or certain non-
forfeiture and settlement options which are required or permitted by the 
insurance law or regulation of the jurisdiction in which the contract is 
offered; and provided further that unless required by the insurance law 
or regulation of the jurisdiction in which the contract is offered or 
unless elected by the contractholder, the contract shall not provide for 
the automatic imposition of any option, including, but not limited to, 
an automatic premium loan, which would involve the accrual or payment of 
an interest or similar charge.
    (ii) Notwithstanding the provisions of paragraph (b)(13)(i) of this 
section, if the amounts available under the contract to pay the charges 
due under the contract on any contract processing day are less than such 
charges due, the contract may provide that the cash surrender value 
shall be applied to purchase a non-forfeiture option specified by the 
life insurer in such contract; provided that the contract also provides 
that Contract processing days occur not less frequently than monthly.
    (iii) Subject to section 26(f) (15 U.S.C. 80a-26(f)), sales charges 
and administrative expenses or fees may be deducted upon redemption.
    (14) Section 32(a)(2) (15 U.S.C. 80a-31(a)(2)); provided that:
    (i) The independent public accountant is selected before the 
effective date of the 1933 Act registration statement for flexible 
contracts, and the identity of the accountant is disclosed in the 
registration statement; and
    (ii) The selection of the accountant is submitted for ratification 
or rejection to flexible contractholders at their first meeting and 
within one year after the effective date of the 1933 Act registration 
statement for flexible contracts, unless the time for holding the 
meeting is extended by order of the Commission.
    (15) If the separate account is organized as a unit investment 
trust, all the assets of which consist of the shares of one or more 
registered management investment companies which offer their shares 
exclusively to separate accounts of the life insurer, or of any 
affiliated life insurance company, offering either scheduled contracts 
or flexible contracts, or both; or which also offer their shares to 
variable annuity separate accounts of the life insurer or of an 
affiliated life insurance company, or which offer their shares to any 
such life insurance company in consideration solely for advances made by 
the life insurer in connection with the operation of the separate 
account; provided that the board of directors of each investment 
company, constituted with a majority of disinterested directors, will 
monitor such company for the existence of any material irreconcilable 
conflict between the interests of variable annuity contractholders and 
scheduled or flexible contractholders investing in such company; the 
life insurer agrees that it will be responsible for reporting any 
potential or existing conflicts to the directors; and if a conflict 
arises, the life insurer will, at its own cost, remedy such conflict up 
to and including establishing a new registered management investment 
company and segregating the assets underlying the variable annuity 
contracts and the scheduled or flexible contracts; then:
    (i) The eligibility restrictions of section 9(a) shall not apply to 
those persons who are officers, directors or employees of the life 
insurer or its affiliates who do not participate directly in the 
management or administration of any registered management investment 
company described in paragraph (b)(15) of this section;
    (ii) The life insurer shall be ineligible under paragraph (3) of 
section 9(a) to serve as investment adviser of or principal underwriter 
for any registered management investment company described in paragraph 
(b)(15) of this section only if an affiliated person of such life 
insurer, ineligible by reason of paragraphs (1) or (2) of section 9(a), 
participates in the management or administration of such company;
    (iii) For purposes of any section of the Act which provides for the 
vote of securityholders on matters relating to the separate account or 
the underlying registered investment company, the

[[Page 436]]

voting provisions of paragraphs (b)(10)(i) and (ii) of this section 
apply; provided that:
    (A) The life insurer may vote shares of the registered management 
investment companies held by the separate account without regard to 
instructions from contractholders of the separate account if such 
instructions would require such shares to be voted:
    (1) To cause such companies to make (or refrain from making) certain 
investments which would result in changes in the sub-classification or 
investment objectives of such companies or to approve or disapprove any 
contract between such companies and an investment adviser when required 
to do so by an insurance regulatory authority subject to the provisions 
of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of this section; or
    (2) In favor of changes in investment objectives, investment adviser 
of or principal underwriter for such companies subject to the provisions 
of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of this section;
    (B) Any action taken in accordance with paragraph (b)(15)(iii)(A)(1) 
or (2) of this section and the reasons therefor shall be disclosed in 
the next report contractholders made under section 30(e) (15 U.S.C. 80a-
29(e)) and Sec.  270.30e-2 (Rule 30e-2);
    (iv) Any registered management investment company established by the 
life insurer and described in paragraph (b)(15) of this section shall be 
exempt from section 14(a); and
    (v) Any registered management investment company established by the 
life insurer and described in paragraph (b)(14) of this section shall be 
exempt from sections 15(a), 16(a), and 32(a)(2) (15 U.S.C. 80a-15(a), 
80-16(a), and 80-31(a)(2), respectively), to the extent prescribed by 
paragraphs (b)(7)(i), (b)(8)(i), and (b)(14) of this section; provided 
that the company complies with the conditions set forth in paragraphs 
(b)(7)(i), (b)(8)(i), and (b)(14) of this section as if it were a 
separate account.
    (c) When used in this section:
    (1) Flexible premium variable life insurance contract means a 
contract of life insurance, subject to regulation under the insurance 
laws or code of every jurisdiction in which it is offered, funded by a 
separate account of a life insurer, which contract provides for:
    (i) Premium payments which are not fixed by the life insurer as to 
both timing and amount; provided, however, that the life insurer may fix 
the timing and minimum amount of premium payments for the first two 
contract periods following issuance of the contract or of an increase in 
or addition of insurance benefits, and may prescribe a reasonable 
minimum amount for any additional premium payment;
    (ii) A death benefit the amount or duration of which may vary to 
reflect the investment experience of the separate account;
    (iii) A cash value which varies to reflect the investment experience 
of the separate account; and
    (iv) There is a reasonable expectation that subsequent premium 
payments will be made.
    (2) Contract period means the period from a contract issue or 
anniversary date to the earlier of the next following anniversary date 
(or, if later, the last day of any grace period commencing before such 
next following anniversary date) or the termination date of the 
contract.
    (3) Cash value means the amount that would be available in cash upon 
voluntary termination of a contract by its owner before it becomes 
payable by death or maturity, without regard to any charges that may be 
assessed upon such termination and before deduction of any outstanding 
contract loan.
    (4) Cash surrender value means the amount available in cash upon 
voluntary termination of a contract by its owner before it becomes 
payable by death or maturity, after any charges assessed in connection 
with the termination have been deducted and before deduction of any 
outstanding contract loan.
    (5) Contract processing day means any day on which charges under the 
contract are deducted from the separate account.

[85 FR 26105, May 1, 2020]

[[Page 437]]



Sec.  270.7d-1  Specification of conditions and arrangements for
Canadian management investment companies requesting order permitting 
registration.

    (a) A management investment company organized under the laws of 
Canada or any province thereof may obtain an order pursuant to section 
7(d) permitting its registration under the act and the public offering 
of its securities, if otherwise appropriate, upon the filing of an 
application complying with paragraph (b) of this section. All such 
applications will be considered by the Commission pursuant to the 
procedure set forth in Sec.  270.0-5 and other applicable rules. 
Conditions and arrangements proposed by investment companies organized 
under the laws of other countries will be considered by the Commission 
in the light of the special circumstances and local laws involved in 
each case.
    (b) An application filed pursuant to this section shall contain, 
inter alia, the following undertakings and agreements of the applicant:
    (1) Applicant will cause each present and future officer, director, 
investment adviser, principal underwriter and custodian of the applicant 
to enter into an agreement, to be filed by applicant with the Commission 
upon the filing of its registration statement or upon the assumption of 
such office by such person which will provide, among other things, that 
each such person agrees (i) to comply with the applicant's Letters 
Patent (Charter) and By Laws, the act and the rules thereunder, and the 
undertakings and agreements contained in said application insofar as 
applicable to such person; (ii) to do nothing inconsistent with the 
applicant's undertakings and agreements required by this section; (iii) 
that the undertakings enumerated as paragraphs (b)(1)(i) and (ii) of 
this section constitute representations and inducements to the 
Commission to issue its order in the premises and continue the same in 
effect, as the case may be; (iv) that each such agreement constitutes a 
contract between such person and the applicant and its shareholders with 
the intent that applicant's shareholders shall be beneficiaries of and 
shall have the status of parties to such agreement so as to enable them 
to maintain actions at law or in equity within the United States and 
Canada for any violation thereof. In addition the agreement of each 
officer and director will contain provisions similar to those contained 
in paragraph (b)(6) of this section.
    (2) That every agreement and undertaking of the applicant, its 
officers, directors, investment adviser, principal underwriter and 
custodian required by this section (i) constitute inducements to the 
Commission for the issuance and continuance in effect of, and conditions 
to, the Commission's order to be entered under this section; (ii) 
constitute a contract among applicant and applicant's shareholders with 
the same intent as set forth in paragraph (b)(1)(iv) of this section; 
and (iii) failure by the applicant or any of the above enumerated 
persons to comply with any such agreement and undertaking, unless 
permitted by the Commission, shall constitute a violation of the order 
entered under this section.
    (3) That the Commission, in its discretion, may revoke its order 
permitting registration of the applicant and the public offering of its 
securities if it shall find after notice and opportunity for hearing 
that there shall have been a violation of such order or the act and may 
determine whether distribution of applicant's assets is necessary or 
appropriate in the interests of investors and may so direct.
    (4) That applicant will perform every action and thing necessary to 
cause and assist the custodian of its assets to distribute the same, or 
the proceeds thereof, if the Commission or a court of competent 
jurisdiction, shall have so directed by a final order.
    (5) That any shareholder of the applicant or the Commission on its 
own motion or on request of shareholders shall have the right to 
initiate a proceeding (i) before the Commission for the revocation of 
the order permitting registration of the applicant or (ii) before a 
court of competent jurisdiction for the liquidation of applicant and a 
distribution of its assets to its shareholders and creditors. Such court 
may enter such order in the event that it shall find, after notice and 
opportunity for hearing that applicant, its officers, directors, 
investment adviser, principal

[[Page 438]]

underwriter or custodian shall have violated any provision of the act or 
the Commission's order of registration of the applicant.

A court of competent jurisdiction for the purpose of paragraphs (b)(4) 
and (5) of this paragraph means the District Court of the United States 
of the district in which the assets of the applicant are maintained.
    (6) That any shareholder of the applicant shall have the right to 
bring suit at law or in equity, in any court of the United States or 
Canada having jurisdiction over applicant, its assets or any of its 
officers or directors to enforce compliance by applicant, its officers 
and directors with any provision of applicant's Charter or By Laws, the 
act and the rules thereunder, or undertakings and agreements required by 
this section, insofar as applicable to such persons. That such court may 
appoint a trustee or receiver of the applicant with all powers necessary 
to implement the purposes of such suit, including the administration of 
the estate, the collection of corporate property including choses-in-
action, and distribution of applicant's assets to its creditors and 
shareholders. That applicant and its officers and directors waive any 
objection they may be entitled to raise and any right they may have to 
object to the power and right of any shareholder of the applicant to 
bring such suit, reserving, however, their right to maintain that they 
have complied with the aforesaid provisions, undertakings and 
agreements, and otherwise to dispute such suit on its merits. Applicant, 
its officers and directors also agree that any final judgment or decree 
of any United States court as aforesaid, may be granted full faith and 
credit by a court of competent jurisdiction of Canada and consent that 
such Canadian court may enter judgment or decree thereon at the instance 
of any shareholder, receiver or trustee of the applicant.
    (7) Applicant will file, and will cause each of its present or 
future directors, officers, or investment advisers who is not a resident 
of the United States to file with the Commission irrevocable designation 
of the applicant's custodian as an agent in the United States to accept 
service of process in any suit, action or proceeding before the 
Commission or any appropriate court to enforce the provisions of the 
acts administered by the Commission, or to enforce any right or 
liability based upon applicant's Charter, By Laws, contracts, or the 
respective undertakings and agreements of any such person required by 
this section, or which alleges a liability on the part of any such 
persons arising out of their service, acts of transactions relating to 
the applicant.
    (8) Applicant's Charter and By Laws, taken together, will contain, 
so long as applicant is registered under the act in substance the 
following:
    (i) The provisions of the Act as follows: Section 2(a): Provided, 
That the term ``government securities'' defined in section 2(a)(16) may 
include securities issued or guaranteed by Canada or any instrumentality 
of the government of Canada; the term ``value'' defined in section 
2(a)(41) may be defined solely for the purposes of sections 5 and 12 in 
accordance with the provisions of Sec.  270.2a-1 (Rule 2a-1) if the same 
shall be necessary or desirable to comply with Canadian regulatory or 
revenue laws or rules or regulations thereunder; the term ``bank'' 
defined in section 2(a)(5) shall be defined solely for the purposes of 
section 9 and 10, as any banking institution; section 4; section 5; 
section 6(c); section 9; section 10 (a), (b), (c), (e), (f) and (g): 
Provided, That the provisions of section 10(d) may be substituted for 
the provisions of section 10(a) and 10(b)(2) if applicable; section 11; 
section 12 (a), (b), (c), and (d); section 13(a); section 15 (a), (b), 
and (c); section 16(a); sections 17, 18, 19, 20 and 21; section 22(d); 
section 22(e): Provided, That the Toronto Stock Exchange or the Montreal 
Stock Exchange or both may be included in addition to the New York Stock 
Exchange; section 22(f); section 22(g); section 23; section 25 (a) and 
(b); section 30 (a), (b), (d), (e), and (f); section 31; section 32(a): 
Provided, That provision may be made for the selection and termination 
of employment of the accountant in compliance with The Companies Act of 
Canada; section 32(b). Where a provision of the act prohibits or directs 
action by an investment company, or its directors, officers or 
employees, the Charter or By Laws

[[Page 439]]

shall state that the applicant of its directors, officers or employees 
shall or shall not act, as the case may be, in conformity with the 
intent of the statute; where the provision applies to others, such as 
principal underwriters, investment advisers, controlled companies and 
affiliated persons, the Charter or By Laws shall also state that the 
applicant will not permit the prohibited conduct or will obtain the 
required action. Any of the provisions of sections 11, 12, 15, 18, 22, 
23, 30, and 31 may be omitted if not applicable to a company of 
applicant's classification or sub-classification as defined in section 4 
or 5 of the act or if not applicable because the subject matter of such 
provisions is prohibited by the Charter or By Laws. Other provisions of 
the act not specified above may be incorporated in the applicant's 
Charter or By Laws at its option.
    (ii) Any question of interpretation of any term or provision of the 
Charter or By Laws having a counterpart in or otherwise derived from a 
term or provision of the act shall be resolved by reference to 
interpretations, if any, of the corresponding term or provision of the 
act by the courts of the United States of America or, in the absence of 
any controlling decision of any such court, by rules, regulations, 
orders or interpretations of the Commission.
    (iii) Applicant will maintain the original or duplicate copies of 
its books and records at the office of its custodian or other office 
located within the United States.
    (iv) At least a majority of the directors and of the officers of the 
applicant will be United States citizens of whom a majority will be 
resident in the United States.
    (v) Except as provided in Sec.  270.17f-5 and Sec.  270.17f-7, 
applicant will appoint, by contract, a bank, as defined in section 
2(a)(5) of the Act (15 U.S.C. 80a-2(a)(5)) and having the qualification 
described in section 26(a)(1) of the Act (15 U.S.C. 80a-26(a)(1)), to 
act as trustee of, and maintain in its sole custody in the United 
States, all of applicant's securities and cash, other than cash 
necessary to meet applicant's current administrative expenses. The 
contract will provide, inter alia, that the custodian will:
    (A) Consummate all purchases and sales of securities by applicant, 
other than purchases and sales on an established securities exchange, 
through the delivery of securities and receipt of cash, or vice versa as 
the case may be, within the United States, and (B) redeem in the United 
States such of applicant's shares as shall be surrendered therefor, and 
(C) distribute applicant's assets, or the proceeds thereof, to 
applicant's creditors and shareholders, upon service upon the custodian 
of an order of the Commission or court directing such distribution as 
provided in paragraphs (b) (3) and (5) of this section.
    (vi) Applicant's principal underwriter for the sale of its shares 
will be a citizen and resident of the United States or a corporation 
organized under the laws of a state of the United States, and having its 
principal place of business therein, and if redeemable shares are 
offered, also a member in good standing of a securities association 
registered under section 15A of the Securities Exchange Act of 1934.
    (vii) Applicant will appoint an accountant, qualified to act as an 
independent public accountant for the applicant under the act and the 
rules thereunder, who maintains a permanent office and place of business 
in the United States.
    (viii) Any contract entered into between the applicant and its 
investment adviser and principal underwriter will contain provisions in 
compliance with the requirements of sections 15, 17(i) and 31 and the 
rules thereunder, and require that the investment adviser maintain in 
the United States its books and records or duplicate copies thereof 
relating to applicant.
    (ix) Applicant's Charter and By Laws will not be changed in any 
manner inconsistent with this paragraph or the Act and the rules 
thereunder unless authorized by the Commission.
    (9) Contracts of the applicant, other than those executed on an 
established securities exchange which do not involve affiliated persons, 
will provide that:
    (i) Such contracts, irrespective of the place of their execution or 
performance, will be performed in accordance with the requirements of 
the Act, the

[[Page 440]]

Securities Act of 1933, and the Securities Exchange Act of 1934, if the 
subject matter of such contracts is within the purview of such acts; and
    (ii) In effecting the purchase or sale of assets the parties thereto 
will utilize the United States mails or means of interstate commerce.
    (10) Applicant will furnish to the Commission with its registration 
statement filed under the Act a list of persons affiliated with it and 
with its investment adviser and principal underwriter and will furnish 
revisions of such list, if any, concurrently with the filing of periodic 
reports required to be filed under the Act.

(Sec. 7, 54 Stat. 802; 15 U.S.C. 80a-7; secs. 6(c); 15 U.S.C. 80a-6(c); 
and 38(a); 15 U.S.C. 80a-37(a) of the Act)

[19 FR 2585, May 5, 1954, as amended at 38 FR 8593, Apr. 4, 1973; 49 FR 
36084, Sept. 14, 1984; 65 FR 25637, May 3, 2000]



Sec.  270.7d-2  Definition of ``public offering'' as used in 
section 7(d) of the Act with respect to certain Canadian tax-deferred
retirement savings accounts.

    (a) Definitions. As used in this section:
    (1) Canadian law means the federal laws of Canada, the laws of any 
province or territory of Canada, and the rules or regulations of any 
federal, provincial, or territorial regulatory authority, or any self-
regulatory authority, of Canada.
    (2) Canadian Retirement Account means a trust or other arrangement, 
including, but not limited to, a ``Registered Retirement Savings Plan'' 
or ``Registered Retirement Income Fund'' administered under Canadian 
law, that is managed by the Participant and:
    (i) Operated to provide retirement benefits to a Participant; and
    (ii) Established in Canada, administered under Canadian law, and 
qualified for tax-deferred treatment under Canadian law.
    (3) Eligible Security means a security issued by a Qualified Company 
that:
    (i) Is offered to a Participant, or sold to his or her Canadian 
Retirement Account, in reliance on this section; and
    (ii) May also be purchased by Canadians other than Participants.
    (4) Foreign Government means the government of any foreign country 
or of any political subdivision of a foreign country.
    (5) Foreign Issuer means any issuer that is a Foreign Government, a 
national of any foreign country or a corporation or other organization 
incorporated or organized under the laws of any foreign country, except 
an issuer meeting the following conditions:
    (i) More than 50 percent of the outstanding voting securities of the 
issuer are held of record either directly or through voting trust 
certificates or depositary receipts by residents of the United States; 
and
    (ii) Any of the following:
    (A) The majority of the executive officers or directors are United 
States citizens or residents;
    (B) More than 50 percent of the assets of the issuer are located in 
the United States; or
    (C) The business of the issuer is administered principally in the 
United States.
    (iii) For purposes of this definition, the term resident, as applied 
to security holders, means any person whose address appears on the 
records of the issuer, the voting trustee, or the depositary as being 
located in the United States.
    (6) Participant means a natural person who is a resident of the 
United States, or is temporarily present in the United States, and who 
contributes to, or is or will be entitled to receive the income and 
assets from, a Canadian Retirement Account.
    (7) Qualified Company means a Foreign Issuer whose securities are 
qualified for investment on a tax-deferred basis by a Canadian 
Retirement Account under Canadian law.
    (8) United States means the United States of America, its 
territories and possessions, any State of the United States, and the 
District of Columbia.
    (b) Public Offering. For purposes of section 7(d) of the Act (15 
U.S.C. 80a-7(d)), the term ``public offering'' does not include the 
offer to a Participant, or the sale to his or her Canadian Retirement 
Account, of Eligible Securities issued by a Qualified Company, if the 
Qualified Company:

[[Page 441]]

    (1) Includes in any written offering materials delivered to a 
Participant, or to his or her Canadian Retirement Account, a prominent 
statement that the Eligible Security, and the Qualified Company that 
issued the Eligible Security, are not registered with the U.S. 
Securities and Exchange Commission, and that the Eligible Security and 
the Qualified Company are relying on exemptions from registration.
    (2) Has not asserted that Canadian law, or the jurisdiction of the 
courts of Canada, does not apply in a proceeding involving an Eligible 
Security.

[65 FR 37677, June 15, 2000]



Sec.  270.8b-1  Scope of Sec. Sec.  270.8b-1 through 270.8b-31.

    The rules contained in Sec. Sec.  270.8b-1 through 270.8b-31 shall 
govern all registration statements pursuant to section 8 of the Act (15 
U.S.C. 80a-8), including notifications of registration pursuant to 
section 8(a), and all reports pursuant to section 30(a) or (b) of the 
Act (15 U.S.C. 80a-29(a) or (b)), including all amendments to such 
statements and reports, except that any provision in a form covering the 
same subject matter as any such rule shall be controlling.

[83 FR 40880, Aug. 16, 2018, as amended at 85 FR 26109, May 1, 2020]



Sec.  270.8b-2  Definitions.

    Unless the context otherwise requires, the terms in paragraphs (a) 
through (m) of this section, when used in the rules contained in 
Sec. Sec.  270.8b-1 through 270.8b-32, in the rules under section 30(a) 
or (b) of the Act or in the forms for registration statements and 
reports pursuant to section 8 or 30(a) or (b) of the Act, shall have the 
respective meanings indicated in this section. The terms ``EDGAR,'' 
``EDGAR Filer Manual,'' ``electronic filer,'' ``electronic filing,'' 
``electronic format,'' ``electronic submission,'' ``paper format,'' and 
``signature'' shall have the meanings assigned to such terms in part 232 
of this chapter (Regulation S-T--General Rules for Electronic Filings).
    (a) Amount. The term ``amount'', when used in regard to securities, 
means the principal amount if relating to evidences of indebtedness, the 
number of shares if relating to shares, and the number of units if 
relating to any other kind of security.
    (b) Certified. The term ``certified'', when used in regard to 
financial statements, means certified by an independent public or 
independent certified public accountant or accountants.
    (c) Charter. The term ``charter'' includes articles of 
incorporation, declaration of trust, articles of association or 
partnership, or any similar instrument, as amended, effecting (either 
with or without filing with any governmental agency) the organization or 
creation of an incorporated or unincorporated person.
    (d) Employee. The term ``employee'' does not include a director, 
trustee, officer or member of the advisory board.
    (e) Fiscal year. The term ``fiscal year'' means the annual 
accounting period or, if no closing date has been adopted, the calendar 
year ending on December 31.
    (f) Investment income. The term ``investment income'' means the 
aggregate of net operating income or loss from real estate and gross 
income from interest, dividends and all other sources, exclusive of 
profit or loss on sales of securities or other properties.
    (g) Material. The term ``material'', when used to qualify a 
requirement for the furnishing of information as to any subject, limits 
the information required to those matters as to which an average prudent 
investor ought reasonably to be informed before buying or selling any 
security of the particular company.
    (h) Parent. A ``parent'' of a specified person is an affiliated 
person who controls the specified person directly or indirectly through 
one or more intermediaries.
    (i) Previously filed or reported. The terms ``previously filed'' and 
``previously reported'' means previously filed with, or reported in, a 
registration statement filed under section 8 of the Act or under the 
Securities Act of 1933, a report filed under section 30 of the Act or 
section 13 or 15(d) of the Securities Exchange Act of 1934, a definitive 
proxy statement filed under section 20 of the Act or section 14 of the 
Securities Exchange Act of 1934, or a prospectus filed under the 
Securities Act of 1933: Provided, That information

[[Page 442]]

contained in any such document shall be deemed to have been previously 
filed with, or reported to, an exchange only if such document is filed 
with such exchange.
    (j) Share. The term ``share'' means a share of stock in a 
corporation or unit of interest in an unincorporated person.
    (k) Significant subsidiary. The term ``significant subsidiary'' 
means a subsidiary, including its subsidiaries, which meets any of the 
following conditions, using amounts determined under U.S. Generally 
Accepted Accounting Principles and, if applicable, section 2(a)(41) of 
the Act:
    (1) Investment test. The value of the registrant's and its other 
subsidiaries' investments in and advances to the tested subsidiary 
exceed 10 percent of the value of the total investments of the 
registrant and its subsidiaries consolidated as of the end of the most 
recently completed fiscal year; or
    (2) Income test. The absolute value of the sum of combined 
investment income from dividends, interest, and other income, the net 
realized gains and losses on investments, and the net change in 
unrealized gains and losses on investments from the tested subsidiary, 
for the most recently completed fiscal year exceeds:
    (i) 80 percent of the absolute value of the change in net assets 
resulting from operations of the registrant and its subsidiaries 
consolidated for the most recently completed fiscal year; or
    (ii) 10 percent of the absolute value of the change in net assets 
resulting from operations of the registrant and its subsidiaries 
consolidated for the most recently completed fiscal year and the 
investment test (paragraph (k)(1) of this section) condition exceeds 5 
percent. However, if the absolute value of the change in net assets 
resulting from operations of the registrant and its subsidiaries 
consolidated is at least 10 percent lower than the average of the 
absolute value of such amounts for each of its last five fiscal years, 
then the registrant may compute both conditions of the income test using 
the average of the absolute value of such amounts for the registrant and 
its subsidiaries consolidated for each of its last five fiscal years.
    (l) Subsidiary. A ``subsidiary'' of a specified person is an 
affiliated person who is controlled by the specified person, directly or 
indirectly, through one or more intermediaries.
    (m) Totally-held subsidiary. The term ``totally-held subsidiary'' 
means a subsidiary (1) substantially all of whose outstanding securities 
are owned by its parent and/or the parent's other totally-held 
subsidiaries, and (2) which is not indebted to any person other than its 
parent and/or the parent's other totally-held subsidiaries in an amount 
which is material in relation to the particular subsidiary, excepting 
indebtedness incurred in the ordinary course of business which is not 
over-due and which matures within one year from the date of its 
creation, whether evidenced by securities or not.

[18 FR 8575, Dec. 19, 1953, as amended at 19 FR 2779, May 14, 1954; 58 
FR 14860, Mar. 18, 1993; 65 FR 24802, Apr. 27, 2000; 70 FR 6572, Feb. 8, 
2005; 83 FR 40878, Aug. 16, 2018; 85 FR 54073, Aug. 31, 2020]



Sec.  270.8b-3  Title of securities.

    Wherever the title of securities is required to be stated, there 
shall be given such information as will indicate the type and general 
character of the securities, including the following:
    (a) In the case of shares, the par or stated value, if any; the rate 
of dividends, if fixed, and whether cumulative or noncumulative; a brief 
indication of the preference, if any; and if convertible, a statement to 
that effect.
    (b) In the case of funded debt, the rate of interest; the date of 
maturity, or if the issue matures serially, a brief indication of the 
serial maturities, such as ``maturing serially from 1950 to 1960''; if 
the payment of principal or interest is contingent, an appropriate 
indication of such contingency; a brief indication of the priority of 
the issue; and if convertible, a statement to that effect.
    (c) In the case of any other kind of security, appropriate 
information of comparable character.

[18 FR 8575, Dec. 19, 1953]



Sec.  270.8b-4  Interpretation of requirements.

    Unless the context clearly shows otherwise:

[[Page 443]]

    (a) The forms require information only as to the company filing the 
registration statement or report.
    (b) Whenever any fixed period of time in the past is indicated, such 
period shall be computed from the date of filing.
    (c) Whenever words relate to the future, they have reference solely 
to present intention.
    (d) Any words indicating the holder of a position or office include 
persons, by whatever titles designated, whose duties are those 
ordinarily performed by holders of such positions or officers.

[18 FR 8575, Dec. 18, 1953]



Sec.  270.8b-5  Time of filing original registration statement.

    An investment company shall file a registration statement with the 
Commission on the appropriate form within three months after the filing 
of notification of registration under section 8(a) of the Act, provided 
that if the fiscal year of the company ends within the three months 
period, its registration statement may be filed within three months 
after the end of such fiscal year.

[19 FR 2779, May 14, 1954]



Sec.  270.8b-6  [Reserved]



Sec.  270.8b-10  Requirements as to proper form.

    Every registration statement or report shall be prepared in 
accordance with the form prescribed therefor by the Commission, as in 
effect on the date of filing. Any such statement or report shall be 
deemed to be filed on the proper form unless objection to the form is 
made by the Commission within thirty days after the date of filing.

[18 FR 8576, Dec. 19, 1953]



Sec.  270.8b-11  Number of copies; signatures; binding.

    (a) Three complete copies of each registration statement or report, 
including exhibits and all other papers and documents filed as a part 
thereof, shall be filed with the Commission.
    (b) In the case of a registration statement filed on Form N-1A 
(Sec.  239.15A and Sec.  274.11A of this chapter), Form N-2 (Sec.  
239.14 and Sec.  274.11a-1 of this chapter), Form N-3 (Sec.  239.17a and 
Sec.  274.11b of this chapter), Form N-4 (Sec.  239.17b and Sec.  
274.11c of this chapter), or Form N-6 (Sec.  239.17c and Sec.  274.11d 
of this chapter), three complete copies of each part of the registration 
statement (including, if applicable, exhibits and all other papers and 
documents filed as part of Part C of the registration statement) shall 
be filed with the Commission.
    (c) At least one copy of the registration statement or report shall 
be signed in the manner prescribed by the appropriate form. Unsigned 
copies shall be conformed. If the signature of any person is affixed 
pursuant to a power of attorney or other similar authority, a copy of 
such power of attorney or other authority shall also be filed with the 
registration statement or report.
    (d) Each copy of a registration statement or report filed with the 
Commission shall be bound in one or more parts without stiff covers. The 
binding shall be made on the left-hand side and in such manner as to 
leave the reading matter legible.
    (e) Signatures. Where the Act or the rules thereunder, including 
paragraph (c) of this section, require a document filed with or 
furnished to the Commission to be signed, the document should be 
manually signed, or signed using either typed signatures or duplicated 
or facsimile versions of manual signatures. When typed, duplicated, or 
facsimile signatures are used, each signatory to the filing shall 
manually or electronically sign a signature page or other document 
authenticating, acknowledging, or otherwise adopting his or her 
signature that appears in the filing (``authentication document''). 
Execute each such authentication document before or at the time the 
filing is made and retain for a period of five years. The requirements 
set forth in Sec.  232.302(b) must be met with regards to the use of an 
electronically signed authentication document pursuant to this paragraph 
(e). Upon request, the registrant shall furnish to the Commission or its 
staff a copy of any or all

[[Page 444]]

documents retained pursuant to this section.

[49 FR 32059, Aug. 10, 1984, as amended at 50 FR 26160, June 25, 1985; 
57 FR 56835, Dec. 1, 1992; 60 FR 26622, May 17, 1995; 63 FR 13944, Mar. 
23, 1998; 67 FR 19870, Apr. 23, 2002; 85 FR 78320, Dec. 4, 2020]



Sec.  270.8b-12  Requirements as to paper, printing and language.

    (a) Registration statements and reports shall be filed on good 
quality, unglazed, white paper, no larger than 8\1/2\ x 11 inches in 
size, insofar as practicable. To the extent that the reduction of larger 
documents would render them illegible, such documents may be filed on 
paper larger than 8\1/2\ x 11 inches in size.
    (b) In the case of a registration statement filed on Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter), Form N-2 (Sec. Sec.  
239.14 and 274.11a-1 of this chapter), Form N-3 (Sec. Sec.  239.17a and 
274.11b of this chapter), Form N-4 (Sec. Sec.  239.17b and 274.11c of 
this chapter), or Form N-6 (Sec.  239.17c and Sec.  274.11d of this 
chapter), Part C of the registration statement shall be filed on good 
quality, unglazed, white paper, no larger than 8\1/2\ x 11 inches in 
size, insofar as practicable. The prospectus and, if applicable, the 
Statement of Additional Information, however, may be filed on smaller-
sized paper provided that the size of paper used in each document is 
uniform.
    (c) The registration statement or report and, insofar as practicable 
all papers and documents filed as a part thereof, shall be printed, 
lithographed, mimeographed or typewritten. However, the registration 
statement or report or any portion thereof may be prepared by any 
similar process which, in the opinion of the Commission, produces copies 
suitable for permanent record. Irrespective of the process used, all 
copies of any such material shall be clear, easily readable and suitable 
for repeated photocopying. Debits in credit categories and credits in 
debit categories shall be designated so as to be clearly distinguishable 
as such on photocopies.
    (d) The body of all printed registration statements and reports and 
all notes to financial statements and other tabular data included 
therein shall be in roman type at least as large as 10-point modern 
type. However, to the extent necessary for convenient presentation, 
financial statements and other statistical or tabular data, including 
tabular data in notes, may be set in type at least as large and as 
legible as 8-point modern type. All type shall be leaded at least 2-
points.
    (e) Registration statements and reports shall be in the English 
language. If any exhibit or other paper or document filed with a 
registration statement or report is in a foreign language, it shall be 
accompanied by a translation into the English language.
    (f) Where a registration statement or report is distributed through 
an electronic medium, issuers may satisfy legibility requirements 
applicable to printed documents, such as paper size, type size and font, 
bold-face type, italics and red ink, by presenting all required 
information in a format readily communicated to investors, and where 
indicated, in a manner reasonably calculated to draw investor attention 
to specific information.

[49 FR 32060, Aug. 10, 1984, as amended at 50 FR 26160, June 25, 1985; 
57 FR 56836, Dec. 1, 1992; 61 FR 24657, May 15, 1996; 67 FR 19870, Apr. 
23, 2002]



Sec.  270.8b-13  Preparation of registration statement or report.

    The registration statement or report shall contain the numbers and 
captions of all items of the appropriate form, but the text of the items 
may be omitted provided the answers thereto are so prepared as to 
indicate to the reader the coverage of the items without the necessity 
of his referring to the text of the items or instructions thereto. 
However, where any item requires information to be given in tabular 
form, it shall be given in substantially the tabular form specified in 
the item. All instructions, whether appearing under the items of the 
form or elsewhere therein, are to be omitted from the registration 
statement or report. Unless expressly provided otherwise, if any item is 
inapplicable or the answer thereto is in the negative, an appropriate 
statement to that effect shall be made.

[18 FR 8576, Dec. 19, 1953]

[[Page 445]]



Sec.  270.8b-14  Riders; inserts.

    Riders shall not be used. If the registration statement or report is 
typed on a printed form, and the space provided for the answer to any 
given item is insufficient, reference shall be made in such space to a 
full insert page or pages on which the item number and caption and the 
complete answer are given.

[18 FR 8576, Dec. 19, 1953]



Sec.  270.8b-15  Amendments.

    All amendments shall be filed under cover of the facing sheet of the 
appropriate form, shall be clearly identified as amendments, and shall 
comply with all pertinent requirements applicable to registration 
statements and reports. Amendments shall be filed separately for each 
separate registration or report amended. Except as permitted under rule 
102(b) of Regulation S-T (Sec.  232.102(b) of this chapter), any 
amendment filed under this section shall state the complete text of each 
item amended. An amendment to any report required to include the 
certifications as specified in Sec.  270.30a-2(a) must include new 
certifications by each principal executive and principal financial 
officer of the registrant, and an amendment to any report required to be 
accompanied by the certifications as specified in Sec.  240.13a-14(b) or 
Sec.  240.15d-14(b) and Sec.  270.30a-2(b) must be accompanied by new 
certifications by each principal executive and principal financial 
officer of the registrant.

[18 FR 8576, Dec. 19, 1953, as amended at 58 FR 14860, Mar. 18, 1993; 68 
FR 5365, Feb. 3, 2003; 68 FR 36671, June 18, 2003]



Sec.  270.8b-16  Amendments to registration statement.

    (a) Every registered management investment company which is required 
to file an annual report on Form N-CEN, as prescribed by Sec.  270.30a-1 
of this chaptershall amend the registration statement required pursuant 
to Section 8(b) by filing, not more than 120 days after the close of 
each fiscal year ending on or after the date upon which such 
registration statement was filed, the appropriate form prescribed for 
such amendments.
    (b) Paragraph (a) of this section shall not apply to a registered 
closed-end management investment company whose registration statement 
was filed on Form N-2; provided that the following information is 
transmitted to shareholders in its annual report to shareholders:
    (1) If the company offers a dividend reinvestment plan to 
shareholders, information about the plan required to be disclosed in the 
company's prospectus by Item 10.1.e of Form N-2 (17 CFR 274.11a-1);
    (2) The company's investment objectives and policies (described in 
Item 8.2 of Form N-2), and any material changes to same that have not 
been approved by shareholders;
    (3) Any changes in the company's charter or by-laws that would delay 
or prevent a change of control of the company (described in Item 10.1.f 
of Form N-2) that have not been approved by shareholders;
    (4) The principal risk factors associated with investment in the 
company (described in Item 8.3 of Form N-2), and any material changes to 
same; and
    (5) Any changes in the persons who are primarily responsible for the 
day-to-day management of the company's portfolio (described in Item 
9.1.c of Form N-2), including any new person's business experience 
during the past five years and the length of time he or she has been 
responsible for the management of the portfolio.
    (c) In lieu of including a description of the dividend reinvestment 
plan in its annual report, a company may comply with the disclosure 
requirement of paragraph (b)(1) of this section concerning a company's 
dividend reinvestment plan by delivering to each shareholder annually a 
separate document containing the information about the plan required to 
be disclosed in the company's prospectus by Item 10.1.e of Form N-2. Any 
such document shall be deemed to be a record or document subject to the 
record-keeping requirements of section 31 (15 U.S.C. 80a-30) and the 
rules adopted thereunder (17 CFR 270.31a-1 et seq.).
    (d) The changes required to be disclosed by paragraphs (b)(2) 
through

[[Page 446]]

(b)(5) of this section are those that occurred since the later of either 
the effective date of the company's registration statement relating to 
its initial offering of securities under the Securities Act of 1933 (15 
U.S.C. 77a et seq.) (or the most recent post-effective amendment 
thereto) or the close of the period covered by the previously 
transmitted annual shareholder report.
    (e) The changes required to be disclosed by paragraphs (b)(2) 
through (5) of this section must be described in enough detail to allow 
investors to understand each change and how it may affect the fund. Such 
disclosures must be prefaced with the following legend: ``The following 
information [in this annual report] is a summary of certain changes 
since [date]. This information may not reflect all of the changes that 
have occurred since you purchased [this fund].''

[54 FR 10321, Mar. 13, 1989, as amended at 57 FR 56836, Dec. 1, 1992; 81 
FR 82020, Nov. 18, 2016; 85 FR 33360, June 1, 2020]



Sec.  270.8b-20  Additional information.

    In addition to the information expressly required to be included in 
a registration statement or report, there shall be added such further 
material information, if any, as may be necessary to make the required 
statements, in the light of the circumstances under which they are made, 
not misleading.

[18 FR 8576, Dec. 19, 1953]



Sec.  270.8b-21  Information unknown or not available.

    Information required need be given only insofar as it is known or 
reasonably available to the registrant. If any required information is 
unknown and not reasonably available to the registrant, either because 
the obtaining thereof would involve unreasonable effort or expense, or 
because it rests peculiarly within the knowledge of another person not 
affiliated with the registrant, the information may be omitted subject 
to the following conditions:
    (a) The registrant shall give such information on the subject as it 
possesses or can acquire without unreasonable effort or expense, 
together with the sources thereof.
    (b) The registrant shall include a statement either showing that 
unreasonable effort or expense would be involved or indicating the 
absence of any affiliation with the person within whose knowledge the 
information rests and stating the result of a request made to such 
person for the information.

[18 FR 8576, Dec. 19, 1953]



Sec.  270.8b-22  Disclaimer of control.

    If the existence of control is open to reasonable doubt in any 
instance, the registrant may disclaim the existence of control and any 
admission thereof; in such case, however, the registrant shall state the 
material facts pertinent to the possible existence of control.

[18 FR 8576, Dec. 19, 1953]



Sec. Sec.  270.8b-23--270.8b-24  [Reserved]



Sec.  270.8b-25  Extension of time for furnishing information.

    (a) Subject to paragraph (b) of this section, if it is impractical 
to furnish any required information, document or report at the time it 
is required to be filed, there may be filed with the Commission as a 
separate document an application (a) identifying the information, 
document or report in question, (b) stating why the filing thereof at 
the time required is impracticable, and (c) requesting an extension of 
time for filing the information, document or report to a specified date 
not more than 60 days after the date it would otherwise have to be 
filed. The application shall be deemed granted unless the Commission, 
within 10 days after receipt thereof, shall enter an order denying the 
application. Section 270.0-5 (Rule N-5) shall not apply to such 
applications.
    (b) If it is impracticable to furnish any document or report 
required to be filed in electronic format at the time it is required to 
be filed, the electronic filer may file under the temporary hardship 
provision of rule 201 of Regulation S-T (Sec.  232.201 of this chapter) 
or may submit a written application for a continuing hardship exemption, 
in accordance with rule 202 of Regulation S-

[[Page 447]]

T (Sec.  232.202 of this chapter). Applications for such exemptions 
shall be considered in accordance with the provisions of those sections 
and paragraphs (h) and (i) of Sec.  200.30-5 of this chapter.

[18 FR 8576, Dec. 19, 1953, as amended at 58 FR 14860, Mar. 18, 1993; 60 
FR 14630, Mar. 20, 1995]



Sec.  270.8b-30  Additional exhibits.

    A company may file such exhibits as it may desire, in addition to 
those required by the appropriate form. Such exhibits shall be so marked 
as to indicate clearly the subject matters to which they refer.

[18 FR 8576, Dec. 19, 1953]



Sec.  270.8b-31  Omission of substantially identical documents.

    In any case where two or more indentures, contracts, franchises, or 
other documents required to be filed as exhibits are substantially 
identical in all material respects except as to the parties thereto, the 
dates of execution, or other details, copies of only one of such 
documents need be filed, with a schedule identifying the other documents 
omitted and setting forth the material details in which such documents 
differ from the documents filed. The Commission may at any time in its 
discretion require the filing of copies of any documents so omitted.

[18 FR 8576, Dec. 19, 1953]



Sec.  270.8b-32  [Reserved]



Sec.  270.8f-1  Deregistration of certain registered investment companies.

    A registered investment company that seeks a Commission order 
declaring that it is no longer an investment company may file an 
application with the Commission on Form N-8F (17 CFR 274.218) if the 
investment company:
    (a) Has sold substantially all of its assets to another registered 
investment company or merged into or consolidated with another 
registered investment company;
    (b) Has distributed substantially all of its assets to its 
shareholders and has completed, or is in the process of, winding up its 
affairs;
    (c) Qualifies for an exclusion from the definition of ``investment 
company'' under section 3(c)(1) (15 U.S.C. 80a-3(c)(1)) or section 
3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the Act; or
    (d) Has become a business development company.

    Note to Sec.  270.8f-1: Applicants who are not eligible to use Form 
N-8F to file an application to deregister may follow the general 
guidance for filing applications under rule 0-2 (17 CFR 270.0-2) of this 
chapter.

[64 FR 19471, Apr. 21, 1999]



Sec.  270.10b-1  Definition of regular broker or dealer.

    The term regular broker or dealer of an investment company shall 
mean:
    (a) One of the ten brokers or dealers that received the greatest 
dollar amount of brokerage commissions by virtue of direct or indirect 
participation in the company's portfolio transactions during the 
company's most recent fiscal year;
    (b) One of the ten brokers or dealers that engaged as principal in 
the largest dollar amount of portfolio transactions of the investment 
company during the company's most recent fiscal year; or
    (c) One of the ten brokers or dealers that sold the largest dollar 
amount of securities of the investment company during the company's most 
recent fiscal year.

[49 FR 40572, Oct. 17, 1984]



Sec.  270.10e-1  Death, disqualification, or bona fide resignation of directors.

    If a registered investment company, by reason of the death, 
disqualification, or bona fide resignation of any director, does not 
meet any requirement of the Act or any rule or regulation thereunder 
regarding the composition of the company's board of directors, the 
operation of the relevant subsection of the Act, rule, or regulation 
will be suspended as to the company:
    (a) For 90 days if the vacancy may be filled by action of the board 
of directors; or
    (b) For 150 days if a vote of stockholders is required to fill the 
vacancy.

[66 FR 3758, Jan. 16, 2001]

[[Page 448]]



Sec.  270.10f-1  Conditional exemption of certain underwriting transactions.

    Any purchase or other acquisition by a registered management company 
acting, pursuant to a written agreement, as an underwriter of securities 
of an issuer which is not an investment company shall be exempt from the 
provisions of section 10(f) (54 Stat. 806; 15 U.S.C. 80a-10) upon the 
following conditions:
    (a) The party to such agreement other than such registered company 
is a principal underwriter of such securities, which principal 
underwriter (1) is a person primarily engaged in the business of 
underwriting and distributing securities issued by other persons, 
selling securities to customers, or related activities, whose gross 
income normally is derived principally from such business or related 
activities, and (2) does not control or is not under common control with 
such registered company.
    (b) No public offering of the securities underwritten by such 
agreement has been made prior to the execution thereof.
    (c) Such securities have been effectively registered pursuant to the 
Securities Act of 1933 (48 Stat. 74; 15 U.S.C. 77a-aa) prior to the 
execution of such agreement.
    (d) In regard to any securities underwritten, whether or not 
purchased, by the registered company pursuant to such agreement, such 
company shall be allowed a rate of gross commission, spread, concession 
or other profit not less than the amount allowed to such principal 
underwriter, exclusive of any amounts received by such principal 
underwriter as a management fee from other principal underwriters.
    (e) Such agreement is authorized by resolution adopted by a vote of 
not less than a majority of the board of directors of such registered 
company, none of which majority is an affiliated person of such 
principal underwriter, of the issuer of the securities underwritten 
pursuant to such agreement or of any person engaged in a business 
described in paragraph (a)(1) of this section.
    (f) The resolution required in paragraph (e) of this section shall 
state that it has been adopted pursuant to this section, and shall 
incorporate the terms of the proposed agreement by attaching a copy 
thereof as an exhibit or otherwise.
    (g) A copy of the resolution required in paragraph (e) of this 
section, signed by each member of the board of directors of the 
registered company who voted in favor of its adoption, shall be 
transmitted to the Commission not later than the fifth day succeeding 
the date on which such agreement is executed.

[Rule N-10F-1, 6 FR 1191, Feb. 28, 1941]



Sec.  270.10f-2  Exercise of warrants or rights received on portfolio
securities.

    Any purchase or other acquisition of securities by a registered 
investment company pursuant to the exercise of warrants or rights to 
subscribe to or to purchase securities shall be exempt from the 
provisions of section 10(f) (section 10(f), 54 Stat. 807; 15 U.S.C. 80a-
10) of the Act, Provided, That the warrants or rights so exercised (a) 
were offered or issued to such company as a security holder on the same 
basis as all other holders of the class or classes of securities to whom 
such warrants or rights were offered or issued, and (b) do not exceed 5 
percent of the total amount of such warrants or rights so issued.

[Rule N-10F-2, 9 FR 339, Jan. 8, 1944]



Sec.  270.10f-3  Exemption for the acquisition of securities during
the existence of an underwriting or selling syndicate.

    (a) Definitions--(1) Domestic Issuer means any issuer other than a 
foreign government, a national of any foreign country, or a corporation 
or other organization incorporated or organized under the laws of any 
foreign country.
    (2) Eligible Foreign Offering means a public offering of securities, 
conducted under the laws of a country other than the United States, that 
meets the following conditions:
    (i) The offering is subject to regulation by a ``foreign financial 
regulatory authority,'' as defined in section 2(a)(50) of the Act [15 
U.S.C. 80a-2(a)(50)], in such country;

[[Page 449]]

    (ii) The securities are offered at a fixed price to all purchasers 
in the offering (except for any rights to purchase securities that are 
required by law to be granted to existing security holders of the 
issuer);
    (iii) Financial statements, prepared and audited in accordance with 
standards required or permitted by the appropriate foreign financial 
regulatory authority in such country, for the two years prior to the 
offering, are made available to the public and prospective purchasers in 
connection with the offering; and
    (iv) If the issuer is a Domestic Issuer, it meets the following 
conditions:
    (A) It has a class of securities registered pursuant to section 
12(b) or 12(g) of the Securities Exchange Act of 1934 [15 U.S.C. 78l(b) 
or 78l(g)] or is required to file reports pursuant to section 15(d) of 
the Securities Exchange Act of 1934 [15 U.S.C. 78o(d)]; and
    (B) It has filed all the material required to be filed pursuant to 
section 13(a) or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 
78m(a) or 78o(d)] for a period of at least twelve months immediately 
preceding the sale of securities made in reliance upon this (or for such 
shorter period that the issuer was required to file such material).
    (3) Eligible Municipal Securities means ``municipal securities,'' as 
defined in section 3(a)(29) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(29)), that are sufficiently liquid that they can be sold 
at or near their carrying value within a reasonably short period of time 
and either:
    (i) Are subject to no greater than moderate credit risk; or
    (ii) If the issuer of the municipal securities, or the entity 
supplying the revenues or other payments from which the issue is to be 
paid, has been in continuous operation for less than three years, 
including the operation of any predecessors, the securities are subject 
to a minimal or low amount of credit risk.
    (4) Eligible Rule 144A Offering means an offering of securities that 
meets the following conditions:
    (i) The securities are offered or sold in transactions exempt from 
registration under section 4(2) of the Securities Act of 1933 [15 U.S.C. 
77d(2)], rule 144A thereunder [Sec.  230.144A of this chapter], or rules 
501-508 thereunder [Sec. Sec.  230.501-230.508 of this chapter];
    (ii) The securities are sold to persons that the seller and any 
person acting on behalf of the seller reasonably believe to include 
qualified institutional buyers, as defined in Sec.  230.144A(a)(1) of 
this chapter; and
    (iii) The seller and any person acting on behalf of the seller 
reasonably believe that the securities are eligible for resale to other 
qualified institutional buyers pursuant to Sec.  230.144A of this 
chapter.
    (5) Managed portion of a portfolio of a registered investment 
company means a discrete portion of a portfolio of a registered 
investment company for which a subadviser is responsible for providing 
investment advice, provided that:
    (i) The subadviser is not an affiliated person of any investment 
adviser, promoter, underwriter, officer, director, member of an advisory 
board, or employee of the registered investment company; and
    (ii) The subadviser's advisory contract:
    (A) Prohibits it from consulting with any subadviser of the 
investment company that is a principal underwriter or an affiliated 
person of a principal underwriter concerning transactions of the 
investment company in securities or other assets; and
    (B) Limits its responsibility in providing advice to providing 
advice with respect to such portion.
    (6) Series of a series company means any class or series of a 
registered investment company that issues two or more classes or series 
of preferred or special stock, each of which is preferred over all other 
classes or series with respect to assets specifically allocated to that 
class or series.
    (7) Subadviser means an investment adviser as defined in section 
2(a)(20)(B) of the Act (15 U.S.C. 80a-2(a)(20)(B)).
    (b) Exemption for purchases by series companies and investment 
companies with managed portions. For purposes of this section and 
section 10(f) of the Act (15 U.S.C. 80a-10(f)), each Series of a Series 
Company, and each Managed Portion of a registered investment company, is

[[Page 450]]

deemed to be a separate investment company. Therefore, a purchase or 
acquisition of a security by a registered investment company is exempt 
from the prohibitions of section 10(f) of the Act if section 10(f) of 
the Act would not prohibit such purchase if each Series and each Managed 
Portion of the company were a separately registered investment company.
    (c) Exemption for other purchases. Any purchase of securities by a 
registered investment company prohibited by section 10(f) of the Act [15 
U.S.C. 80a-10(f)] shall be exempt from the provisions of such section if 
the following conditions are met:
    (1) Type of Security. The securities to be purchased are:
    (i) Part of an issue registered under the Securities Act of 1933 (15 
U.S.C. 77a--aa) that is being offered to the public;
    (ii) Part of an issue of government securities, as defined in 
section 2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16));
    (iii) Eligible Municipal Securities;
    (iv) Securities sold in an Eligible Foreign Offering; or
    (v) Securities sold in an Eligible Rule 144A Offering.
    (2) Timing and Price. (i) The securities are purchased prior to the 
end of the first day on which any sales are made, at a price that is not 
more than the price paid by each other purchaser of securities in that 
offering or in any concurrent offering of the securities (except, in the 
case of an Eligible Foreign Offering, for any rights to purchase that 
are required by law to be granted to existing security holders of the 
issuer); and
    (ii) If the securities are offered for subscription upon exercise of 
rights, the securities shall be purchased on or before the fourth day 
preceding the day on which the rights offering terminates.
    (3) Reasonable reliance. For purposes of determining compliance with 
paragraphs (c)(1)(v) and (c)(2)(i) of this section, an investment 
company may reasonably rely upon written statements made by the issuer 
or a syndicate manager, or by an underwriter or seller of the securities 
through which such investment company purchases the securities.
    (4) Continuous operation. If the securities to be purchased are part 
of an issue registered under the Securities Act of 1933 (15 U.S.C. 77a-
aa) that is being offered to the public, are government securities (as 
defined in section 2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16))), or are 
purchased pursuant to an Eligible Foreign Offering or an Eligible Rule 
144A Offering, the issuer of the securities must have been in continuous 
operation for not less than three years, including the operations of any 
predecessors.
    (5) Firm Commitment Underwriting. The securities are offered 
pursuant to an underwriting or similar agreement under which the 
underwriters are committed to purchase all of the securities being 
offered, except those purchased by others pursuant to a rights offering, 
if the underwriters purchase any of the securities.
    (6) Reasonable commission. The commission, spread or profit received 
or to be received by the principal underwriters is reasonable and fair 
compared to the commission, spread or profit received by other such 
persons in connection with the underwriting of similar securities being 
sold during a comparable period of time.
    (7) Percentage limit--(i) Generally. The amount of securities of any 
class of such issue to be purchased by the investment company, 
aggregated with purchases by any other investment company advised by the 
investment company's investment adviser, and any purchases by another 
account with respect to which the investment adviser has investment 
discretion if the investment adviser exercised such investment 
discretion with respect to the purchase, does not exceed the following 
limits:
    (A) If purchased in an offering other than an Eligible Rule 144A 
Offering, 25 percent of the principal amount of the offering of such 
class; or
    (B) If purchased in an Eligible Rule 144A Offering, 25 percent of 
the total of:
    (1) The principal amount of the offering of such class sold by 
underwriters or members of the selling syndicate to qualified 
institutional buyers, as defined in Sec.  230.144A(a)(1) of this 
chapter; plus

[[Page 451]]

    (2) The principal amount of the offering of such class in any 
concurrent public offering.
    (ii) Exemption from percentage limit. The requirement in paragraph 
(c)(7)(i) of this section applies only if the investment adviser of the 
investment company is, or is an affiliated person of, a principal 
underwriter of the security; and
    (iii) Separate aggregation. The requirement in paragraph (c)(7)(i) 
of this section applies independently with respect to each investment 
adviser of the investment company that is, or is an affiliated person 
of, a principal underwriter of the security.
    (8) Prohibition of Certain Affiliate Transactions. Such investment 
company does not purchase the securities being offered directly or 
indirectly from an officer, director, member of an advisory board, 
investment adviser or employee of such investment company or from a 
person of which any such officer, director, member of an advisory board, 
investment adviser or employee is an affiliated person; provided, that a 
purchase from a syndicate manager shall not be deemed to be a purchase 
from a specific underwriter if:
    (i) Such underwriter does not benefit directly or indirectly from 
the transaction; or
    (ii) In respect to the purchase of Eligible Municipal Securities, 
such purchase is not designated as a group sale or otherwise allocated 
to the account of any person from whom this paragraph prohibits the 
purchase.
    (9) [Reserved]
    (10) Board review. The board of directors of the investment company, 
including a majority of the directors who are not interested persons of 
the investment company:
    (i) Has approved procedures, pursuant to which such purchases may be 
effected for the company, that are reasonably designed to provide that 
the purchases comply with all the conditions of this section;
    (ii) Approves such changes to the procedures as the board deems 
necessary; and
    (iii) Determines no less frequently than quarterly that all 
purchases made during the preceding quarter were effected in compliance 
with such procedures.
    (11) Board composition. The board of directors of the investment 
company satisfies the fund governance standards defined in Sec.  270.0-
1(a)(7).
    (12) Maintenance of records. The investment company:
    (i) Shall maintain and preserve permanently in an easily accessible 
place a written copy of the procedures, and any modification thereto, 
described in paragraphs (c)(10)(i) and (c)(10)(ii) of this section; and
    (ii) Shall maintain and preserve for a period not less than six 
years from the end of the fiscal year in which any transactions 
occurred, the first two years in an easily accessible place, a written 
record of each such transaction, setting forth from whom the securities 
were acquired, the identity of the underwriting syndicate's members, the 
terms of the transaction, and the information or materials upon which 
the determination described in paragraph (c)(10)(iii) of this section 
was made.

[62 FR 42408, Aug. 7, 1997, as amended at 66 FR 3758, Jan. 16, 2001; 67 
FR 31079, May 8, 2002; 68 FR 3152, Jan. 22, 2003; 69 FR 46389, Aug. 7, 
2004; 74 FR 52373, Oct. 9, 2009; 81 FR 82020, Nov. 18, 2016]



Sec.  270.11a-1  Definition of ``exchange'' for purposes of section 11
of the Act.

    (a) For the purposes of section 11 of the Act, the term exchange as 
used therein shall include the issuance of any security by a registered 
investment company in an amount equal to the proceeds, or any portion of 
the proceeds, paid or payable--
    (1) Upon the repurchase, by or at the instance of such issuer, of an 
outstanding security the terms of which provide for its termination, 
retirement or cancellation, or
    (2) Upon the termination, retirement or cancellation of an 
outstanding security of such issuer in accordance with the terms 
thereof.
    (b) A security shall not be deemed to have been repurchased by or at 
the instance of the issuer, or terminated, retired or canceled in 
accordance with the terms of the security if--

[[Page 452]]

    (1) The security was redeemed or repurchased at the instance of the 
holder; or
    (2) A security holder's account was closed for failure to make 
payments as prescribed in the security or instruments pursuant to which 
the security was issued, and notice of intention to close the account 
was mailed to the security holder, and he had a reasonable time in which 
to meet the deficiency; or
    (3) Sale of the security was restricted to a specified, limited 
group of persons and, in accordance with the terms of the security or 
the instruments pursuant to which the security was issued, upon its 
being transferred by the holder to a person not a member of the group 
eligible to purchase the security, the issuer required the surrender of 
the security and paid the redemption price thereof.
    (c) The provisions of paragraph (a) of this section shall not apply 
if, following the repurchase of an outstanding security by or at the 
instance of the issuer or the termination, retirement or cancellation of 
an outstanding security in accordance with the terms thereof--
    (1) The proceeds are actually paid to the security holder by or on 
behalf of the issuer within 7 days, and
    (2) No sale and no offer (other than by way of exchange) of any 
security of the issuer is made by or on behalf of the issuer to the 
person to whom such proceeds were paid, within 60 days after such 
payment.
    (d) The provisions of paragraph (a) of this section shall not apply 
to the repurchase, termination, retirement, or cancellation of a 
security outstanding on the effective date of this section or issued 
pursuant to a subscription agreement or other plan of acquisition in 
effect on such date.

(Sec. 11, 54 Stat. 808; 15 U.S.C. 80a-11)

[32 FR 10728, July 21, 1967]



Sec.  270.11a-2  Offers of exchange by certain registered separate 
accounts or others the terms of which do not require prior Commission
approval.

    (a) As used in this section:
    (1) Deferred sales load shall mean any sales load, including a 
contingent deferred sales load, that is deducted upon redemption or 
annuitization of amounts representing all or a portion of a 
securityholder's interest in a separate account;
    (2) Exchanged security shall include not only the security or 
securities (or portion[s] thereof) of a securityholder actually 
exchanged pursuant to an exchange offer but also any security or 
securities (or portion[s] thereof) of the securityholder previously 
exchanged for the exchanged security or its predecessors;
    (3) Front-end sales load shall mean any sales load that is deducted 
from one or more purchase payments made by a securityholder before they 
are invested in a separate account; and
    (4) Purchase payments made for the acquired security, as used in 
paragraphs (c)(2) and (d)(2) of this section, shall not include any 
purchase payments made for the exchanged security or any appreciation 
attributable to those purchase payments that are transferred to the 
offering account in connection with an exchange.
    (b) Notwithstanding section 11 of the Act [15 U.S.C. 80a-11], any 
registered separate account or any principal underwriter for such an 
account (collectively, the ``offering account'') may make or cause to be 
made an offer to the holder of a security of the offering account, or of 
any other registered separate account having the same insurance company 
depositor or sponsor as the offering account or having an insurance 
company depositor or sponsor that is an affiliate of the offering 
account's depositor or sponsor, to exchange his security (or portion 
thereof) (the ``exchanged security'') for a security (or portion 
thereof) of the offering account (the ``acquired security'') without the 
terms of such exchange offer first having been submitted to and approved 
by the Commission, as provided below:
    (1) If the securities (or portions thereof) involved are variable 
annuity contracts, then
    (i) The exchange must be made on the basis of the relative net asset 
values of the securities to be exchanged, except that the offering 
account may deduct at the time of the exchange

[[Page 453]]

    (A) An administrative fee which is disclosed in the part of the 
offering account's registration statement under the Securities Act of 
1933 relating to the prospectus, and
    (B) Any front-end sales load permitted by paragraph (c) of this 
section, and
    (ii) Any deferred sales load imposed on the acquired security by the 
offering account shall be calculated in the manner prescribed by 
paragraph (d) or (e) of this section; or
    (2) If the securities (or portions thereof) involved are variable 
life insurance contracts offered by a separate account registered under 
the Act as a unit investment trust, then the exchange must be made on 
the basis of the relative net asset values of the securities to be 
exchanged, except that the offering account may deduct at the time of 
the exchange an administrative fee which is disclosed in the part of the 
offering account's registration statement under the Securities Act of 
1933 relating to the prospectus.
    (c) If the offering account imposes a front-end sales load on the 
acquired security, then such sales load shall be a percentage that is no 
greater than the excess of the rate of the front-end sales load 
otherwise applicable to that security over the rate of any front-end 
sales load previously paid on the exchanged security.
    (d) If the offering account imposes a deferred sales load on the 
acquired security and the exchanged security was also subject to a 
deferred sales load, then any deferred sales load imposed on the 
acquired security shall be calculated as if:
    (1) The holder of the acquired security had been the holder of that 
security from the date on which he became the holder of the exchanged 
security; and
    (2) Purchase payments made for the exchanged security had been made 
for the acquired security on the date on which they were made for the 
exchanged security.
    (e) If the offering account imposes a deferred sales load on the 
acquired security and a front-end sales load was paid on the exchanged 
security, then any deferred sales load imposed on the acquired security 
may not be imposed on purchase payments made for the exchanged security 
or any appreciation attributable to purchase payments made for the 
exchanged security that are transferred in connection with the exchange.
    (f) Notwithstanding the foregoing, no offer of exchange shall be 
made in reliance on this section if both a front-end sales load and a 
deferred sales load are to be imposed on the acquired security or if 
both such sales loads are imposed on the exchanged security.

[48 FR 36245, Aug. 10, 1983, as amended at 85 FR 26109, May 1, 2020]



Sec.  270.11a-3  Offers of exchange by open-end investment companies
other than separate accounts.

    (a) For purposes of this rule:
    (1) Acquired security means the security held by a securityholder 
after completing an exchange pursuant to an exchange offer;
    (2) Administrative fee means any fee, other than a sales load, 
deferred sales load or redemption fee, that is
    (i) Reasonably intended to cover the costs incurred in processing 
exchanges of the type for which the fee is charged, Provided that: the 
offering company will maintain and preserve records of any determination 
of the costs incurred in connection with exchanges for a period of not 
less than six years, the first two years in an easily accessible place. 
The records preserved under this provision shall be subject to 
inspection by the Commission in accordance with section 31(b) of the Act 
(15 U.S.C. 80a-30(b)) as if such records were records required to be 
maintained under rules adopted under section 31(a) of the Act (15 U.S.C. 
80a-30a)); or
    (ii) A nominal fee as defined in paragraph (a)(8) of this section;
    (3) Deferred sales load means any amount properly chargeable to 
sales or promotional expenses that is paid by a shareholder after 
purchase but before or upon redemption;
    (4) Exchanged security means
    (i) The security actually exchanged pursuant to an exchange offer, 
and
    (ii) Any security previously exchanged for such security or for any 
of its predecessors;
    (5) Group of investment companies means any two or more registered

[[Page 454]]

open-end investment companies that hold themselves out to investors as 
related companies for purposes of investment and investor services, and
    (i) That have a common investment adviser or principal underwriter, 
or
    (ii) The investment adviser or principal underwriter of one of the 
companies is an affiliated person as defined in section 2(a)(3) of the 
Act (15 U.S.C. 80a-2(a)(3)) of the investment adviser or principal 
underwriter of each of the other companies;
    (6) Offering company means a registered open-end investment company 
(other than a registered separate account) or any principal underwriter 
thereof that makes an offer (an ``exchange offer'') to the holder of a 
security of that company, or of another open-end investment company 
within the same group of investment companies as the offering company, 
to exchange that security for a security of the offering company;
    (7) Redemption fee means a fee that is imposed by the fund pursuant 
to section 270.22c-2; and
    (8) Nominal fee means a slight or de minimis fee.
    (b) Nothwithstanding section 11(a) of the Act (15 U.S.C. 80a-11(a)), 
and except as provided in paragraphs (d) and (e) of this section, in 
connection with an exchange offer an offering company may cause a 
securityholder to be charged a sales load on the acquired security, a 
redemption fee, an administrative fee, or any combination of the 
foregoing, Provided that:
    (1) Any administrative fee or scheduled variation thereof is applied 
uniformly to all securityholders of the class specified;
    (2) Any redemption fee charged with respect to the exchanged 
security or any scheduled variation thereof
    (i) Is applied uniformly to all securityholders of the class 
specified, and
    (ii) Does not exceed the redemption fee applicable to a redemption 
of the exchanged security in the absence of an exchange.
    (3) No deferred sales load is imposed on the exchanged security at 
the time of an exchange;
    (4) Any sales load charged with respect to the acquired security is 
a percentage that is no greater than the excess, if any, of the rate of 
the sales load applicable to that security in the absence of an exchange 
over the sum of the rates of all sales loads previously paid on the 
exchanged security, Provided that:
    (i) The percentage rate of any sales load charged when the acquired 
security is redeemed, that is solely the result of a deferred sales load 
imposed on the exchanged security, may be no greater than the excess, if 
any, of the applicable rate of such sales load, calculated in accordance 
with paragraph (b)(5) of this section, over the sum of the rates of all 
sales loads previously paid on the acquired security, and
    (ii) In no event may the sum of the rates of all sales loads imposed 
prior to and at the time the acquired security is redeemed, including 
any sales load paid or to be paid with respect to the exchanged 
security, exceed the maximum sales load rate, calculated in accordance 
with paragraph (b)(5) of this section, that would be applicable in the 
absence of an exchange to the security (exchanged or acquired) with the 
highest such rate;
    (5) Any deferred sales load charged at the time the acquired 
security is redeemed is calculated as if the holder of the acquired 
security had held that security from the date on which he became the 
holder of the exchanged security, Provided that:
    (i) The time period during which the acquired security is held need 
not be included when the amount of the deferred sales load is 
calculated, if the deferred sales load is
    (A) reduced by the amount of any fees collected on the acquired 
security under the terms of any plan of distribution adopted in 
accordance with rule 12b-1 under the Act (17 CFR 270.12b-1) (a ``12b-1 
plan''), and
    (B) Solely the result of a sales load imposed on the exchanged 
security, and no other sales loads, including deferred sales loads, are 
imposed with respect to the acquired security,
    (ii) The time period during which the exchanged security is held 
need not be included when the amount of the deferred sales load on the 
acquired security is calculated, if

[[Page 455]]

    (A) The deferred sales load is reduced by the amount of any fees 
previously collected on the exchanged security under the terms of any 
12b-1 plan, and
    (B) The exchanged security was not subject to any sales load, and
    (iii) The holding periods in this subsection may be computed as of 
the end of the calendar month in which a security was purchased or 
redeemed;
    (6) The prospectus of the offering company discloses
    (i) The amount of any administrative or redemption fee imposed on an 
exchange transaction for its securities, as well as the amount of any 
administrative or redemption fee imposed on its securityholders to 
acquire the securities of other investment companies in an exchange 
transaction, and
    (ii) If the offering company reserves the right to change the terms 
of or terminate an exchange offer, that the exchange offer is subject to 
termination and its terms are subject to change;
    (7) Any sales literature or advertising that mentions the existence 
of the exchange offer also discloses
    (i) The existence of any administrative fee or redemption fee that 
would be imposed at the time of an exchange; and
    (ii) If the offering company reserves the right to change the terms 
of or terminate the exchange offer, that the exchange offer is subject 
to termination and its terms are subject to change;
    (8) Whenever an exchange offer is to be terminated or its terms are 
to be amended materially, any holder of a security subject to that offer 
shall be given prominent notice of the impending termination or 
amendment at least 60 days prior to the date of termination or the 
effective date of the amendment, Provided that:
    (i) No such notice need be given if the only material effect of an 
amendment is to reduce or eliminate an administrative fee, sales load or 
redemption fee payable at the time of an exchange, and
    (ii) No notice need be given if, under extraordinary circumstances, 
either
    (A) There is a suspension of the redemption of the exchanged 
security under section 22(e) of the Act [15 U.S.C. 80a-22(e)] and the 
rules and regulations thereunder, or
    (B) The offering company temporarily delays or ceases the sale of 
the acquired security because it is unable to invest amounts effectively 
in accordance with applicable investment objectives, policies and 
restrictions; and
    (9) In calculating any sales load charged with respect to the 
acquired security:
    (i) If a securityholder exchanges less than all of his securities, 
the security upon which the highest sales load rate was previously paid 
is deemed exchanged first; and
    (ii) If the exchanged security was acquired through reinvestment of 
dividends or capital gains distributions, that security is deemed to 
have been sold with a sales load rate equal to the sales load rate 
previously paid on the security on which the dividend was paid or 
distribution made.
    (c) If either no sales load is imposed on the acquired security or 
the sales load imposed is less than the maximum allowed by paragraph 
(b)(4) of this section, the offering company may require the exchanging 
securityholder to have held the exchanged security for a minimum period 
of time previously established by the offering company and applied 
uniformly to all securityholders of the class specified.
    (d) Any offering company that has previously made an offer of 
exchange may continue to impose fees or sales loads permitted by an 
order under section 11(a) of the Act upon shares purchased before the 
earlier of (1) One year after the effective date of this section, or (2) 
When the offer has been brought into compliance with the terms of this 
section, and upon shares acquired through reinvestment of dividends or 
capital gains distributions based on such shares, until such shares are 
redeemed.
    (e) Any offering company that has previously made an offer of 
exchange cannot rely on this section to amend such prior offer unless
    (1) The offering company's prospectus disclosed, during at least the 
two year period prior to the amendment of the offer (or, if the fund is 
less than two years old, at all times the offer has been outstanding) 
that the terms of the offer were subject to change, or

[[Page 456]]

    (2) The only effect of such change is to reduce or eliminate an 
administrative fee, sales load or redemption fee payable at the time of 
an exchange.

[54 FR 35185, Aug. 24, 1989, as amended at 61 FR 49016, Sept. 17, 1996; 
70 FR 13341, Mar. 18, 2005]



Sec.  270.12b-1  Distribution of shares by registered open-end management
investment company.

    (a)(1) Except as provided in this section, it shall be unlawful for 
any registered open-end management investment company (other than a 
company complying with the provisions of section 10(d) of the Act (15 
U.S.C. 80a-10(d))) to act as a distributor of securities of which it is 
the issuer, except through an underwriter;
    (2) For purposes of this section, such a company will be deemed to 
be acting as a distributor of securities of which it is the issuer, 
other than through an underwriter, if it engages directly or indirectly 
in financing any activity which is primarily intended to result in the 
sale of shares issued by such company, including, but not necessarily 
limited to, advertising, compensation of underwriters, dealers, and 
sales personnel, the printing and mailing of prospectuses to other than 
current shareholders, and the printing and mailing of sales literature;
    (b) A registered, open-end management investment company 
(``Company'') may act as a distributor of securities of which it is the 
issuer: Provided, That any payments made by such company in connection 
with such distribution are made pursuant to a written plan describing 
all material aspects of the proposed financing of distribution and that 
all agreements with any person relating to implementation of the plan 
are in writing: And further provided, That:
    (1) Such plan has been approved by a vote of at least a majority of 
the outstanding voting securities of such company, if adopted after any 
public offering of the company's voting securities or the sale of such 
securities to persons who are not affiliated persons of the company, 
affiliated persons of such persons, promoters of the company, or 
affiliated persons of such promoters;
    (2) Such plan, together with any related agreements, has been 
approved by a vote of the board of directors of such company, and of the 
directors who are not interested persons of the company and have no 
direct or indirect financial interest in the operation of the plan or in 
any agreements related to the plan, cast in person at a meeting called 
for the purpose of voting on such plan or agreements;
    (3) Such plan or agreement provides, in substance:
    (i) That it shall continue in effect for a period of more than one 
year from the date of its execution or adoption only so long as such 
continuance is specifically approved at least annually in the manner 
described in paragraph (b)(2) of this section;
    (ii) That any person authorized to direct the disposition of monies 
paid or payable by such company pursuant to the plan or any related 
agreement shall provide to the company's board of directors, and the 
directors shall review, at least quarterly, a written report of the 
amounts so expended and the purposes for which such expenditures were 
made; and
    (iii) In the case of a plan, that it may be terminated at any time 
by vote of a majority of the members of the board of directors of the 
company who are not interested persons of the company and have no direct 
or indirect financial interest in the operation of the plan or in any 
agreements related to the plan or by vote of a majority of the 
outstanding voting securities of such company;
    (iv) In the case of an agreement related to a plan:
    (A) That it may be terminated at any time, without the payment of 
any penalty, by vote of a majority of the members of the board of 
directors of such company who are not interested persons of the company 
and have no direct or indirect financial interest in the operation of 
the plan or in any agreements related to the plan or by vote of a 
majority of the outstanding voting securities of such company on not 
more than sixty days' written notice to any other party to the 
agreement, and
    (B) For its automatic termination in the event of its assignment;

[[Page 457]]

    (4) Such plan provides that it may not be amended to increase 
materially the amount to be spent for distribution without shareholder 
approval and that all material amendments of the plan must be approved 
in the manner described in paragraph (b)(2) of this section; and
    (5) Such plan is implemented and continued in a manner consistent 
with the provisions of paragraphs (c), (d), and (e) of this section;
    (c) A registered open-end management investment company may rely on 
the provisions of paragraph (b) of this section only if its board of 
directors satisfies the fund governance standards as defined in Sec.  
270.0-1(a)(7);
    (d) In considering whether a registered open-end management 
investment company should implement or continue a plan in reliance on 
paragraph (b) of this section, the directors of such company shall have 
a duty to request and evaluate, and any person who is a party to any 
agreement with such company relating to such plan shall have a duty to 
furnish, such information as may reasonably be necessary to an informed 
determination of whether such plan should be implemented or continued; 
in fulfilling their duties under this paragraph the directors should 
consider and give appropriate weight to all pertinent factors, and 
minutes describing the factors considered and the basis for the decision 
to use company assets for distribution must be made and preserved in 
accordance with paragraph (f) of this section;

    Note: For a discussion of factors which may be relevant to a 
decision to use company assets for distribution, see Investment Company 
Act Releases Nos. 10862, September 7, 1979, and 11414, October 28, 1980.

    (e) A registered open-end management investment company may 
implement or continue a plan pursuant to paragraph (b) of this section 
only if the directors who vote to approve such implementation or 
continuation conclude, in the exercise of reasonable business judgment 
and in light of their fiduciary duties under state law and under 
sections 36(a) and (b) (15 U.S.C. 80a-35 (a) and (b)) of the Act, that 
there is a reasonable likelihood that the plan will benefit the company 
and its shareholders;
    (f) A registered open-end management investment company must 
preserve copies of any plan, agreement or report made pursuant to this 
section for a period of not less than six years from the date of such 
plan, agreement or report, the first two years in an easily accessible 
place;
    (g) If a plan covers more than one series or class of shares, the 
provisions of the plan must be severable for each series or class, and 
whenever this rule provides for any action to be taken with respect to a 
plan, that action must be taken separately for each series or class 
affected by the matter. Nothing in this paragraph (g) shall affect the 
rights of any purchase class under Sec.  270.18f-3(f)(2)(iii).
    (h) Notwithstanding any other provision of this section, a company 
may not:
    (1) Compensate a broker or dealer for any promotion or sale of 
shares issued by that company by directing to the broker or dealer:
    (i) The company's portfolio securities transactions; or
    (ii) Any remuneration, including but not limited to any commission, 
mark-up, mark-down, or other fee (or portion thereof) received or to be 
received from the company's portfolio transactions effected through any 
other broker (including a government securities broker) or dealer 
(including a municipal securities dealer or a government securities 
dealer); and
    (2) Direct its portfolio securities transactions to a broker or 
dealer that promotes or sells shares issued by the company, unless the 
company (or its investment adviser):
    (i) Is in compliance with the provisions of paragraph (h)(1) of this 
section with respect to that broker or dealer; and
    (ii) Has implemented, and the company's board of directors 
(including a majority of directors who are not interested persons of the 
company) has approved, policies and procedures reasonably designed to 
prevent:
    (A) The persons responsible for selecting brokers and dealers to 
effect the company's portfolio securities transactions from taking into 
account the brokers' and dealers' promotion or sale of shares issued by 
the company or

[[Page 458]]

any other registered investment company; and
    (B) The company, and any investment adviser and principal 
underwriter of the company, from entering into any agreement (whether 
oral or written) or other understanding under which the company directs, 
or is expected to direct, portfolio securities transactions, or any 
remuneration described in paragraph (h)(1)(ii) of this section, to a 
broker (including a government securities broker) or dealer (including a 
municipal securities dealer or a government securities dealer) in 
consideration for the promotion or sale of shares issued by the company 
or any other registered investment company.

[45 FR 73905, Nov. 7, 1980, as amended at 60 FR 11885, Mar. 2, 1995; 61 
FR 49011, Sept. 17, 1996; 62 FR 51765, Oct. 3, 1997; 66 FR 3758, Jan. 
16, 2001; 69 FR 46389, Aug. 2, 2004; 69 FR 54733, Sept. 9, 2004; 78 FR 
79299, Dec. 30, 2013]



Sec.  270.12d1-1  Exemptions for investments in money market funds.

    (a) Exemptions for acquisition of money market fund shares. If the 
conditions of paragraph (b) of this section are satisfied, 
notwithstanding sections 12(d)(1)(A), 12(d)(1)(B), 12(d)(1)(G), 17(a), 
and 57 of the Act (15 U.S.C. 80a-12(d)(1)(A), 80a-12(d)(1)(B), 80a-
12(d)(1)(G), 80a-17(a), and 80a-56)) and Sec.  270.17d-1:
    (1) An investment company (acquiring fund) may purchase and redeem 
shares issued by a money market fund; and
    (2) A money market fund, any principal underwriter thereof, and a 
broker or a dealer may sell or otherwise dispose of shares issued by the 
money market fund to any acquiring fund.
    (b) Conditions--(1) Fees. The acquiring fund pays no sales charge, 
as defined in FINRA Rule 2341(b)(8) (``sales charge''), or service fee, 
as defined in FINRA Rule 2341(b)(9), charged in connection with the 
purchase, sale, or redemption of securities issued by a money market 
fund (``service fee''); or the acquiring fund's investment adviser 
waives its advisory fee in an amount necessary to offset any sales 
charge or service fee.
    (2) Unregistered money market funds. If the money market fund is not 
an investment company registered under the Act:
    (i) The acquiring fund reasonably believes that the money market 
fund satisfies the following conditions as if it were a registered open-
end investment company:
    (A) Operates in compliance with Sec.  270.2a-7;
    (B) Complies with sections 17(a), (d), (e), 18, and 22(e) of the Act 
(15 U.S.C. 80a-17(a), (d), (e), 80a-18, and 80a-22(e));
    (C) Has adopted procedures designed to ensure that it complies with 
sections 17(a), (d), (e), 18, and 22(e) of the Act (15 U.S.C. 80a-17(a), 
(d), (e), 80a-18, and 80a-22(e)), periodically reviews and updates those 
procedures, and maintains books and records describing those procedures;
    (D) Maintains the records required by Sec. Sec.  270.31a-1(b)(1), 
270.31a-1(b)(2)(ii), 270.31a-1(b)(2)(iv), and 270.31a-1(b)(9); and
    (E) Preserves permanently, the first two years in an easily 
accessible place, all books and records required to be made under 
paragraphs (b)(2)(i)(C) and (D) of this section, and makes those records 
available for examination on request by the Commission or its staff; and
    (ii) The adviser to the money market fund is registered with the 
Commission as an investment adviser under section 203 of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-3).
    (c) Exemption from certain monitoring and recordkeeping requirements 
under Sec.  270.17e-1. Notwithstanding the requirements of Sec. Sec.  
270.17e-1(b)(3) and 270.17e-1(d)(2), the payment of a commission, fee, 
or other remuneration to a broker shall be deemed as not exceeding the 
usual and customary broker's commission for purposes of section 
17(e)(2)(A) of the Act if:
    (1) The commission, fee, or other remuneration is paid in connection 
with the sale of securities to or by an acquiring fund;
    (2) The broker and the acquiring fund are affiliated persons because 
each is an affiliated person of the same money market fund; and
    (3) The acquiring fund is an affiliated person of the money market 
fund solely because the acquiring fund owns, controls, or holds with 
power to vote five percent or more of the outstanding securities of the 
money market fund.

[[Page 459]]

    (d) Definitions. (1) Investment company includes a company that 
would be an investment company under section 3(a) of the Act (15 U.S.C. 
80a-3(a)) but for the exceptions to that definition provided for in 
sections 3(c)(1) and 3(c)(7) of the Act (15 U.S.C. 80a-3(c)(1) and 80a-
3(c)(7)).
    (2) Money market fund means:
    (i) An open-end management investment company registered under the 
Act that is regulated as a money market fund under Sec.  270.2a-7; or
    (ii) A company that would be an investment company under section 
3(a) of the Act (15 U.S.C. 80a-3(a)) but for the exceptions to that 
definition provided for in sections 3(c)(1) and 3(c)(7) of the Act (15 
U.S.C. 80a-3(c)(1) and 80a-3(c)(7)) and that:
    (A) Is limited to investing in the types of securities and other 
investments in which a money market fund may invest under Sec.  270.2a-
7; and
    (B) Undertakes to comply with all the other requirements of Sec.  
270.2a-7, except that, if the company has no board of directors, the 
company's investment adviser performs the duties of the board of 
directors.

[71 FR 36655, June 27, 2006, as amended at 85 FR 74005, Nov. 19, 2020; 
88 FR 37987, June 12, 2023]



Sec.  270.12d1-2  [Reserved]



Sec.  270.12d1-3  Exemptions for investment companies relying on 
section 12(d)(1)(F) of the Act.

    (a) Exemption from sales charge limits. A registered investment 
company (``acquiring fund'') that relies on section 12(d)(1)(F) of the 
Act (15 U.S.C. 80a-12(d)(1)(F)) to acquire securities issued by an 
investment company (``acquired fund'') may offer or sell any security it 
issues through a principal underwriter or otherwise at a public offering 
price that includes a sales load of more than 1\1/2\ percent if any 
sales charges and service fees charged with respect to the acquiring 
fund's securities do not exceed the limits set forth in FINRA Rule 2341 
applicable to a fund of funds.
    (b) Definitions. For purposes of this section, the terms fund of 
funds, sales charge, and service fee have the same meanings as in FINRA 
Rule 2341(b).

[71 FR 36655, June 27, 2006, as amended at 88 FR 37987, June 12, 2023]



Sec.  270.12d1-4  Exemptions for investments in certain investment 
companies.

    (a) Exemptions for acquisition and sale of acquired fund shares. If 
the conditions of paragraph (b) of this section are satisfied, 
notwithstanding sections 12(d)(1)(A), 12(d)(1)(B), 12(d)(1)(C), 17(a), 
57(a)(1)-(2), and 57(d)(1)-(2) of the Act (15 U.S.C. 80a-12(d)(1)(A), 
80a-12(d)(1)(C), 80a-17(a), 80a-56(a)(1)-(2), and 80a-56(d)(1)-(2)):
    (1) A registered investment company (other than a face-amount 
certificate company) or business development company (an acquiring fund) 
may purchase or otherwise acquire the securities issued by another 
registered investment company (other than a face-amount certificate 
company) or business development company (an acquired fund);
    (2) An acquired fund, any principal underwriter thereof, and any 
broker or dealer registered under the Securities Exchange Act of 1934 
may sell or otherwise dispose of the securities issued by the acquired 
fund to any acquiring fund and any acquired fund may redeem or 
repurchase any securities issued by the acquired fund from any acquiring 
fund; and
    (3) An acquiring fund that is an affiliated person of an exchange-
traded fund (or who is an affiliated person of such a fund) solely by 
reason of the circumstances described in Sec.  270.6c-11(b)(3)(i) and 
(ii), may deposit and receive the exchange-traded fund's baskets, 
provided that the acquired exchange-traded fund is not otherwise an 
affiliated person (or affiliated person of an affiliated person) of the 
acquiring fund.
    (b) Conditions--(1) Control. (i) The acquiring fund and its advisory 
group will not control (individually or in the aggregate) an acquired 
fund;
    (ii) If the acquiring fund and its advisory group, in the aggregate,
    (A) Hold more than 25% of the outstanding voting securities of an 
acquired fund that is a registered open-end management investment 
company

[[Page 460]]

or registered unit investment trust as a result of a decrease in the 
outstanding voting securities of the acquired fund, or
    (B) Hold more than 10% of the outstanding voting securities of an 
acquired fund that is a registered closed-end management investment 
company or business development company, each of those holders will vote 
its securities in the same proportion as the vote of all other holders 
of such securities; provided, however, that in circumstances where all 
holders of the outstanding voting securities of the acquired fund are 
required by this section or otherwise under section 12(d)(1) to vote 
securities of the acquired fund in the same proportion as the vote of 
all other holders of such securities, the acquiring fund will seek 
instructions from its security holders with regard to the voting of all 
proxies with respect to such acquired fund securities and vote such 
proxies only in accordance with such instructions; and
    (iii) The conditions in paragraphs (b)(1)(i) through (ii) of this 
section do not apply if:
    (A) The acquiring fund is in the same group of investment companies 
as an acquired fund; or
    (B) The acquiring fund's investment sub-adviser or any person 
controlling, controlled by, or under common control with such investment 
sub-adviser acts as an acquired fund's investment adviser or depositor.
    (2) Findings and agreements. (i) Management companies.
    (A) If the acquiring fund is a management company, prior to the 
initial acquisition of an acquired fund in excess of the limits in 
section 12(d)(1)(A)(i) of the Act (15 U.S.C. 80a-12(d)(1)(A)(i)), the 
acquiring fund's investment adviser must evaluate the complexity of the 
structure and fees and expenses associated with the acquiring fund's 
investment in the acquired fund, and find that the acquiring fund's fees 
and expenses do not duplicate the fees and expenses of the acquired 
fund;
    (B) If the acquired fund is a management company, prior to the 
initial acquisition of an acquired fund in excess of the limits in 
section 12(d)(1)(A)(i) of the Act (15 U.S.C. 80a-12(d)(1)(A)(i)), the 
acquired fund's investment adviser must find that any undue influence 
concerns associated with the acquiring fund's investment in the acquired 
fund are reasonably addressed and, as part of this finding, the 
investment adviser must consider at a minimum the following items:
    (1) The scale of contemplated investments by the acquiring fund and 
any maximum investment limits;
    (2) The anticipated timing of redemption requests by the acquiring 
fund;
    (3) Whether and under what circumstances the acquiring fund will 
provide advance notification of investments and redemptions; and
    (4) The circumstances under which the acquired fund may elect to 
satisfy redemption requests in kind rather than in cash and the terms of 
any such redemptions in kind; and
    (C) The investment adviser to each acquiring or acquired management 
company must report its evaluation, finding, and the basis for its 
evaluations or findings required by paragraphs (b)(2)(i)(A) or (B) of 
this section, as applicable, to the fund's board of directors, no later 
than the next regularly scheduled board of directors meeting.
    (ii) Unit investment trusts. If the acquiring fund is a unit 
investment trust (UIT) and the date of initial deposit of portfolio 
securities into the UIT occurs after the effective date of this section, 
the UIT's principal underwriter or depositor must evaluate the 
complexity of the structure associated with the UIT's investment in 
acquired funds and, on or before such date of initial deposit, find that 
the UIT's fees and expenses do not duplicate the fees and expenses of 
the acquired funds that the UIT holds or will hold at the date of 
deposit.
    (iii) Separate accounts funding variable insurance contracts. With 
respect to a separate account funding variable insurance contracts that 
invests in an acquiring fund, the acquiring fund must obtain a 
certification from the insurance company offering the separate account 
that the insurance company has determined that the fees and expenses 
borne by the separate account, acquiring fund, and acquired fund, in the 
aggregate, are consistent with the standard set forth in section

[[Page 461]]

26(f)(2)(A) of the Act (15 U.S.C. 80a-26(f)(2)(A)).
    (iv) Fund of funds investment agreement. Unless the acquiring fund's 
investment adviser acts as the acquired fund's investment adviser and 
such adviser is not acting as the sub-adviser to either fund, the 
acquiring fund must enter into an agreement with the acquired fund 
effective for the duration of the funds' reliance on this section, which 
must include the following:
    (A) Any material terms regarding the acquiring fund's investment in 
the acquired fund necessary to make the finding required under paragraph 
(b)(2)(i) through (ii) of this section;
    (B) A termination provision whereby either the acquiring fund or 
acquired fund may terminate the agreement subject to advance written 
notice no longer than 60 days; and
    (C) A requirement that the acquired fund provide the acquiring fund 
with information on the fees and expenses of the acquired fund 
reasonably requested by the acquiring fund.
    (3) Complex fund structures. (i) No investment company may rely on 
section 12(d)(1)(G) of the Act (15 U.S.C. 80a-12(d)(1)(G)) or this 
section to purchase or otherwise acquire, in excess of the limits in 
section 12(d)(1)(A) of the Act (15 U.S.C. 80a-12(d)(1)(A)), the 
outstanding voting securities of an investment company (a second-tier 
fund) that relies on this section to acquire the securities of an 
acquired fund, unless the second-tier fund makes investments permitted 
by paragraph (b)(3)(ii) of this section; and
    (ii) No acquired fund may purchase or otherwise acquire the 
securities of an investment company or private fund if immediately after 
such purchase or acquisition, the securities of investment companies and 
private funds owned by the acquired fund have an aggregate value in 
excess of 10 percent of the value of the total assets of the acquired 
fund; provided, however, that the 10 percent limitation of this 
paragraph shall not apply to investments by the acquired fund in:
    (A) Reliance on section 12(d)(1)(E) of the Act (15 U.S.C. 80a-
12(d)(1)(E));
    (B) Reliance on Sec.  270.12d1-1;
    (C) A subsidiary that is wholly-owned and controlled by the acquired 
fund;
    (D) Securities received as a dividend or as a result of a plan of 
reorganization of a company; or
    (E) Securities of another investment company received pursuant to 
exemptive relief from the Commission to engage in interfund borrowing 
and lending transactions.
    (c) Recordkeeping. The acquiring and acquired funds relying upon 
this section must maintain and preserve for a period of not less than 
five years, the first two years in an easily accessible place, as 
applicable:
    (1) A copy of each fund of funds investment agreement that is in 
effect, or at any time within the past five years was in effect, and any 
amendments thereto;
    (2) A written record of the evaluations and findings required by 
paragraph (b)(2)(i) of this section, and the basis therefor within the 
past five years;
    (3) A written record of the finding required by paragraph (b)(2)(ii) 
of this section and the basis for such finding; and
    (4) The certification from each insurance company required by 
paragraph (b)(2)(iii) of this section.
    (d) Definitions. For purposes of this section:
    Advisory group means either:
    (1) An acquiring fund's investment adviser or depositor, and any 
person controlling, controlled by, or under common control with such 
investment adviser or depositor; or
    (2) An acquiring fund's investment sub-adviser and any person 
controlling, controlled by, or under common control with such investment 
sub-adviser.
    Baskets has the same meaning as in 17 CFR 270.6c-11(a)(1).
    Exchange-traded fund means a fund or class, the shares of which are 
listed and traded on a national securities exchange, and that has formed 
and operates in reliance on Sec.  6c-11 or under an exemptive order 
granted by the Commission.
    Group of investment companies means any two or more registered 
investment companies or business development companies that hold 
themselves out to investors as related companies for purposes of 
investment and investor services.

[[Page 462]]

    Private fund means an issuer that would be an investment company 
under section 3(a) of the Act but for the exclusions from that 
definition provided for in section 3(c)(1) or section 3(c)(7) of the Act 
(15 U.S.C. 80a-3(c)(1) or 80a-3(c)(7)).

[85 FR 74005, Nov. 19, 2020]



Sec.  270.12d2-1  Definition of insurance company for purposes of
sections 12(d)(2) and 12(g) of the Act.

    For purposes of sections 12(d)(2) and 12(g) of the Act [15 U.S.C. 
80a-12(d)(2) and 80a-12(g)], insurance company shall include a foreign 
insurance company as that term is used in rule 3a-6 under the Act (17 
CFR 270.3a-6).

[56 FR 56300, Nov. 4, 1991]



Sec.  270.12d3-1  Exemption of acquisitions of securities issued by 
persons engaged in securities related businesses.

    (a) Notwithstanding section 12(d)(3) of the Act, a registered 
investment company, or any company or companies controlled by such 
registered investment company (``acquiring company'') may acquire any 
security issued by any person that, in its most recent fiscal year, 
derived 15 percent or less of its gross revenues from securities related 
activities unless the acquiring company would control such person after 
the acquisition.
    (b) Notwithstanding section 12(d)(3) of the Act, an acquiring 
company may acquire any security issued by a person that, in its most 
recent fiscal year, derived more than 15 percent of its gross revenues 
from securities related activities, provided that:
    (1) Immediately after the acquisition of any equity security, the 
acquiring company owns not more than five percent of the outstanding 
securities of that class of the issuer's equity securities;
    (2) Immediately after the acquisition of any debt security, the 
acquiring company owns not more than ten percent of the outstanding 
principal amount of the issuer's debt securities; and
    (3) Immediately after any such acquisition, the acquiring company 
has invested not more than five percent of the value of its total assets 
in the securities of the issuer.
    (c) Notwithstanding paragraphs (a) and (b) of this section, this 
section does not exempt the acquisition of:
    (1) A general partnership interest; or
    (2) A security issued by the acquiring company's promoter, principal 
underwriter, or any affiliated person of such promoter, or principal 
underwriter; or
    (3) A security issued by the acquiring company's investment adviser, 
or an affiliated person of the acquiring company's investment adviser, 
other than a security issued by a subadviser or an affiliated person of 
a subadviser of the acquiring company provided that:
    (i) Prohibited relationships. The subadviser that is (or whose 
affiliated person is) the issuer is not, and is not an affiliated person 
of, an investment adviser responsible for providing advice with respect 
to the portion of the acquiring company that is acquiring the 
securities, or of any promoter, underwriter, officer, director, member 
of an advisory board, or employee of the acquiring company;
    (ii) Advisory contract. The advisory contracts of the Subadviser 
that is (or whose affiliated person is) the issuer, and any Subadviser 
that is advising the portion of the acquiring company that is purchasing 
the securities:
    (A) Prohibit them from consulting with each other concerning 
transactions of the acquiring company in securities or other assets, 
other than for purposes of complying with the conditions of paragraphs 
(a) and (b) of this section; and
    (B) Limit their responsibility in providing advice to providing 
advice with respect to a discrete portion of the acquiring company's 
portfolio.
    (d) For purposes of this section:
    (1) Securities related activities are a person's activities as a 
broker, a dealer, an underwriter, an investment adviser registered under 
the Investment Advisers Act of 1940, as amended, or as an investment 
adviser to a registered investment company.
    (2) An issuer's gross revenues from its own securities related 
activities and from its ratable share of the securities related 
activities of enterprises of which it owns 20 percent or more of the

[[Page 463]]

voting or equity interest should be considered in determining the degree 
to which an issuer is engaged in securities related activities. Such 
information may be obtained from the issuer's annual report to 
shareholders, the issuer's annual reports or registration statement 
filed with the Commission, or the issuer's chief financial officer.
    (3) Equity security is as defined in Sec.  240.3a-11 of this 
chapter.
    (4) Debt security includes all securities other than equity 
securities.
    (5) Determination of the percentage of an acquiring company's 
ownership of any class of outstanding equity securities of an issuer 
shall be made in accordance with the procedures described in the rules 
under Sec.  240.16 of this chapter.
    (6) Where an acquiring company is considering acquiring or has 
acquired options, warrants, rights, or convertible securities of a 
securities related business, the determination required by paragraph (b) 
of this section shall be made as though such options, warrants, rights, 
or conversion privileges had been exercised.
    (7) The following transactions will not be deemed to be an 
acquisition of securities of a securities related business:
    (i) Receipt of stock dividends on securities acquired in compliance 
with this section;
    (ii) Receipt of securities arising from a stock-for-stock split on 
securities acquired in compliance with this section;
    (iii) Exercise of options, warrants, or rights acquired in 
compliance with this section;
    (iv) Conversion of convertible securities acquired in compliance 
with this section; and
    (v) Acquisition of Demand Features or Guarantees, as these terms are 
defined in Sec. Sec.  270.2a-7(a)(9) and 270.2a-7(a)(16) respectively, 
provided that, immediately after the acquisition of any Demand Feature 
or Guarantee, the company will not, with respect to 75 percent of the 
total value of its assets, have invested more than ten percent of the 
total value of its assets in securities underlying Demand Features or 
Guarantees from the same institution. For the purposes of this section, 
a Demand Feature or Guarantee will be considered to be from the party to 
whom the company will look for a payment of the exercise price.
    (8) Any class or series of an investment company that issues two or 
more classes or series of preferred or special stock, each of which is 
preferred over all other classes or series with respect to assets 
specifically allocated to that class or series, shall be treated as if 
it is a registered investment company.
    (9) Subadviser means an investment adviser as defined in section 
2(a)(20)(B) of the Act (15 U.S.C. 80a-2(a)(20)(B)).

[58 FR 49427, Sept. 23, 1993, as amended at 61 FR 13982, Mar. 28, 1996; 
62 FR 64986, Dec. 9, 1997; 66 FR 36162, July 11, 2001; 68 FR 3152, Jan. 
22, 2003; 79 FR 47967, Aug. 14, 2014; 80 FR 58155, Sept. 25, 2015]



Sec.  270.13a-1  Exemption for change of status by temporarily diversified
company.

    A change of its subclassification by a registered management company 
from that of a diversified company to that of a nondiversified company 
shall be exempt from the provisions of section 13(a)(1) of the Act (54 
Stat. 811; 15 U.S.C. 80a-13), if such change occurs under the following 
circumstances:
    (a) Such company was a nondiversified company at the time of its 
registration pursuant to section 8(a) (54 Stat. 803; 15 U.S.C. 80a-8), 
or thereafter legally became a nondiversified company.
    (b) After its registration and within 3 years prior to such change, 
such company became a diversified company.
    (c) At the time such company became a diversified company, its 
registration statement filed pursuant to section 8(b) (54 Stat. 803; 15 
U.S.C. 80a-8), as supplemented and modified by any amendments and 
reports theretofore filed, did not stated that the registrant proposed 
to become a diversified company.

[Rule N-13A-1, 6 FR 3967, Aug. 8, 1941]



Sec.  270.14a-1  Use of notification pursuant to regulation E under
the Securities Act of 1933.

    For the purposes of section 14(a)(3) of the Act, registration of 
securities under the Securities Act of 1933 by a small business 
investment company operating under the Small Business Investment Act of 
1958 shall be deemed to

[[Page 464]]

include the filing of a notification under Rule 604 of Regulation E 
promulgated under said Act if provision is made in connection with such 
notification which in the opinion of the Commission adequately insures 
(a) that after the effective date of such notification such company will 
not issue any security or receive any proceeds of any subscription for 
any security until firm agreements have been made with such company by 
not more than twenty-five responsible persons to purchase from it 
securities to be issued by it for an aggregate net amount which plus the 
then net worth of the company, if any, will equal at least $100,000; (b) 
that said aggregate net amount will be paid into such company before any 
subscriptions for such securities will be accepted from any persons in 
excess of twenty-five; (c) that arrangements will be made whereby any 
proceeds so paid in, as well as any sales load, will be refunded to any 
subscriber on demand without any deduction, in the event that the net 
proceeds so received by the company do not result in the company having 
a net worth of at least $100,000 within ninety days after such 
notification becomes effective.

[25 FR 3512, Apr. 22, 1960]



Sec.  270.14a-2  Exemption from section 14(a) of the Act for certain
registered separate accounts and their principal underwriters.

    (a) A registered separate account, and any principal underwriter for 
such account, shall be exempt from section 14(a) of the Act (15 U.S.C. 
80a-14(a)) with respect to a public offering of variable annuity 
contracts participating in such account.
    (b) Any registered management investment company which has as a 
promoter an insurance company and which offers its securities to 
separate accounts of such insurance company that offer variable annuity 
contracts and are registered under the Act as unit investment trusts 
(``trust accounts''), and any principal underwriter for such investment 
company, shall be exempt from section 14(a) with respect to such 
offering and to the offering of such securities to trust accounts of 
other insurance companies.
    (c) Any registered management investment company exempt from section 
14(a) of the Act pursuant to paragraph (b) of this section shall be 
exempt from sections 15(a), 16(a), and 32(a)(2) of the Act (15 U.S.C. 
80a-15(a), 80a-16(a), and 80a-31(a)(2)), to the extent prescribed in 
Sec. Sec.  270.15a-3, 270.16a-1, and 270.32a-2 (Rules 15a-3, 16a-1, and 
32a-2 under the Act), provided that such investment company complies 
with the conditions set forth in Rules 15a-3, 16a-1, and 32a-2 as if it 
were a separate account.

[85 FR 26109, May 1, 2020]



Sec.  270.14a-3  Exemption from section 14(a) of the Act for certain
registered unit investment trusts and their principal underwriters.

    (a) A registered unit investment trust (hereinafter referred to as 
the ``Trust'') engaged exclusively in the business of investing in 
eligible trust securities, and any principal underwriter for the Trust, 
shall be exempt from section 14(a) of the Act with respect to a public 
offering of Trust units: Provided, That:
    (1) At the commencement of such offering the Trust holds at least 
$100,000 principal amount of eligible trust securities (or delivery 
statements relating to contracts for the purchase of any such securities 
which, together with cash or an irrevocable letter of credit issued by a 
bank in the amount required for their purchase, are held by the Trust 
for purchase of the securities);
    (2) If, within ninety days from the time that the Trust's 
registration statement has become effective under the Securities Act of 
1933 (15 U.S.C. 77a et seq.) the net worth of the Trust declines to less 
than $100,000 or the Trust is terminated, the sponsor for the Trust 
shall--
    (i) Refund, on demand and without deduction, all sales charges to 
any unitholders who purchased Trust units from the sponsor (or from any 
underwriter or dealer participating in the distribution), and
    (ii) Liquidate the eligible trust securities held by the Trust and 
distribute the proceeds thereof to the unitholders of the Trust;

[[Page 465]]

    (3) The sponsor instructs the trustee when the eligible trust 
securities are deposited in the Trust that, in the event that 
redemptions by the sponsor or any underwriter of units constituting a 
part of the unsold units results in the Trust having a net worth of less 
than 40 percent of the principal amount of the eligible trust securities 
(or delivery statements relating to contracts for the purchase of any 
such securities which, together with cash or an irrevocable letter of 
credit issued by a bank in the amount required for their purchase, are 
held by the Trust for purchase of the securities) initially deposited in 
the Trust--
    (i) The trustee shall terminate the Trust and distribute the assets 
thereof to the unitholders of the Trust, and
    (ii) The sponsor for the Trust shall refund, on demand and without 
deduction, all sales charges to any unitholder who purchased Trust units 
from the sponsor or from any underwriter or dealer participating in the 
distribution.
    (b) For the purposes of determining the availability of the 
exemption provided by the foregoing subsection, the term ``eligible 
trust securities'' shall mean:
    (1) Securities (other than convertible securities) which are issued 
by a corporation and which have their interest or dividend rate fixed at 
the time they are issued;
    (2) Interest bearing obligations issued by a state, or by any 
agency, instrumentality, authority or political subdivision thereof;
    (3) Government securities; and
    (4) Units of a previously issued series of the Trust: Provided, 
That:
    (i) The aggregate principal amount of units of existing series so 
deposited shall not exceed 10% of the aggregate principal amount of the 
portfolio of the new series;
    (ii) The aggregate principal amount of units of any particular 
existing series so deposited shall not exceed 5% of the aggregate 
principal amount of the portfolio of the new series;
    (iii) No units shall be so deposited which do not substantially meet 
investment quality criteria at least as high as those applicable to the 
new series in which such units are deposited;
    (iv) The value of the eligible trust securities underlying units of 
an existing series deposited in a new series shall not, by reason of 
maturity of such securities according to their terms within ten years 
following the date of deposit, be reduced sufficiently for such existing 
series to be voluntarily terminated;
    (v) Units of existing series so deposited shall constitute units 
purchased by the sponsor as market maker and not remaining unsold units 
from the original distribution of such units; and
    (vi) The sponsor shall deposit units of existing series in the new 
series without a sales charge.

(Secs. 6(c) and 38(a) (15 U.S.C. 80a-6(c) and 15 U.S.C. 80a-37(a)))

[44 FR 29646, May 22, 1979; 44 FR 40064, July 9, 1979]



Sec.  270.15a-1  Exemption from stockholders' approval of certain small 
investment advisory contracts.

    An investment adviser of a registered investment company shall be 
exempt from the requirement of sections 15(a) and 15(e) of the Act (54 
Stat. 812; 15 U.S.C. 80a-15) that the written contract pursuant to which 
he acts shall have been approved by the vote of a majority of the 
outstanding votingsecurities of such company, if the following 
conditions are met:
    (a) Such investment adviser is not an affiliated person of such 
company (except as investment adviser) nor of any principal underwriter 
for such company.
    (b) His compensation as investment adviser of such company in any 
fiscal year of the company during which any such contract is in effect 
either (1) is not more than $100 or (2) is not more than $2,500 and not 
more than \1/40\ of 1 percent of the value of the company's net assets 
averaged over the year or taken as of a definite date or dates within 
the year.
    (c) The aggregate compensation of all investment advisers of such 
company exempted pursuant to this section in any fiscal year of the 
company either (1) is not more than $200 or (2) is not more than \1/20\ 
of 1 percent of the value of the company's net assets averaged

[[Page 466]]

over the year or taken as of a definite date or dates within the year.

[Rule N-15A-1, 6 FR 2275, Jan. 8, 1944]



Sec.  270.15a-2  Annual continuance of contracts.

    (a) For purposes of sections 15(a) and 15(b) of the Act, the 
continuance of a contract for a period more than two years after the 
date of its execution shall be deemed to have been specifically approved 
at least annually by the board of directors or by a vote of a majority 
of the outstanding voting securities of a registered investment company 
if such approval occurs:
    (1) With respect to the first continuance of a contract, during the 
90 days prior to and including the earlier of (i) the date specified in 
such contract for its termination in the absence of such approval, or 
(ii) the second anniversary of the date upon which such contract was 
executed; or
    (2) With respect to any subsequent continuance of a contract, during 
the 90 days prior to and including the first anniversary of the date 
upon which the most recent previous annual continuance of such contract 
became effective.
    (b) The provisions of paragraph (a) of this section shall not apply 
to any continuance of a contract which shall have been approved not 
later than 90 days after the date of adoption of this section, provided 
that such contract shall expire, by its terms, not later than 17 months 
from the date of adoption of this section.

    Note: This section does not establish the exclusive method of 
complying with the Act. It provides one procedure by which a registered 
investment company may comply with the applicable provisions of sections 
15(a) and 15(b) of the Act; it does not preclude any other appropriate 
procedure. Any annual continuance of a contract approved in accordance 
with the provisions of paragraph (a)(1) or (a)(2) of Sec.  270.15a-2 
will constitute a renewal of such contract for the purposes of section 
15(c) of the Act, and therefore such renewal must be approved by the 
disinterested directors within the times specified in the section for a 
continuance.

[41 FR 41911, Sept. 24, 1976]



Sec.  270.15a-3  Exemption for initial period of investment adviser of
certain registered separate accounts from requirement of security holder
approval of investment advisory contract.

    (a) An investment adviser of a registered separate account shall be 
exempt from the requirement under section 15(a) of the Act that the 
initial written contract pursuant to which the investment adviser serves 
or acts shall have been approved by the vote of a majority of the 
outstanding voting securities of such registered separate account, 
subject to the following conditions:
    (1) Such registered separate account qualifies for exemption from 
section 14(a) of the Act pursuant to Sec.  270.14a-2, or is exempt 
therefrom by order of the Commission upon application; and
    (2) Such written contract shall be submitted to a vote of variable 
annuity contract owners at their first meeting after the effective date 
of the registration statement under the Securities Act of 1933, as 
amended (15 U.S.C. 77a et seq.) relating to variable annuity contracts 
participating in such account: Provided, That such meeting shall take 
place within 1 year after such effective date, unless the time for the 
holding of such meeting shall be extended by the Commission upon written 
request showing good cause therefor.

(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)

[34 FR 12695, Aug. 5, 1969]



Sec.  270.15a-4  Temporary exemption for certain investment advisers.

    (a) For purposes of this section:
    (1) Fund means an investment company, and includes a separate series 
of the company.
    (2) Interim contract means a written investment advisory contract:
    (i) That has not been approved by a majority of the fund's 
outstanding voting securities; and
    (ii) That has a duration no greater than 150 days following the date 
on which the previous contract terminates.
    (3) Previous contract means an investment advisory contract that has 
been approved by a majority of the fund's outstanding voting securities 
and has been terminated.

[[Page 467]]

    (b) Notwithstanding section 15(a) of the Act (15 U.S.C. 80a-15(a)), 
a person may act as investment adviser for a fund under an interim 
contract after the termination of a previous contract as provided in 
paragraphs (b)(1) or (b)(2) of this section:
    (1) In the case of a previous contract terminated by an event 
described in section 15(a)(3) of the Act (15 U.S.C. 80a-15(a)(3)), by 
the failure to renew the previous contract, or by an assignment (other 
than an assignment by an investment adviser or a controlling person of 
the investment adviser in connection with which assignment the 
investment adviser or a controlling person directly or indirectly 
receives money or other benefit):
    (i) The compensation to be received under the interim contract is no 
greater than the compensation the adviser would have received under the 
previous contract; and
    (ii) The fund's board of directors, including a majority of the 
directors who are not interested persons of the fund, has approved the 
interim contract within 10 business days after the termination, at a 
meeting in which directors may participate by any means of communication 
that allows all directors participating to hear each other 
simultaneously during the meeting.
    (2) In the case of a previous contract terminated by an assignment 
by an investment adviser or a controlling person of the investment 
adviser in connection with which assignment the investment adviser or a 
controlling person directly or indirectly receives money or other 
benefit:
    (i) The compensation to be received under the interim contract is no 
greater than the compensation the adviser would have received under the 
previous contract;
    (ii) The board of directors, including a majority of the directors 
who are not interested persons of the fund, has voted in person to 
approve the interim contract before the previous contract is terminated;
    (iii) The board of directors, including a majority of the directors 
who are not interested persons of the fund, determines that the scope 
and quality of services to be provided to the fund under the interim 
contract will be at least equivalent to the scope and quality of 
services provided under the previous contract;
    (iv) The interim contract provides that the fund's board of 
directors or a majority of the fund's outstanding voting securities may 
terminate the contract at any time, without the payment of any penalty, 
on not more than 10 calendar days' written notice to the investment 
adviser;
    (v) The interim contract contains the same terms and conditions as 
the previous contract, with the exception of its effective and 
termination dates, provisions governed by paragraphs (b)(2)(i), 
(b)(2)(iv), and (b)(2)(vi) of this section, and any other differences in 
terms and conditions that the board of directors, including a majority 
of the directors who are not interested persons of the fund, finds to be 
immaterial;
    (vi) The interim contract contains the following provisions:
    (A) The compensation earned under the contract will be held in an 
interest-bearing escrow account with the fund's custodian or a bank;
    (B) If a majority of the fund's outstanding voting securities 
approve a contract with the investment adviser by the end of the 150-day 
period, the amount in the escrow account (including interest earned) 
will be paid to the investment adviser; and
    (C) If a majority of the fund's outstanding voting securities do not 
approve a contract with the investment adviser, the investment adviser 
will be paid, out of the escrow account, the lesser of:
    (1) Any costs incurred in performing the interim contract (plus 
interest earned on that amount while in escrow); or
    (2) The total amount in the escrow account (plus interest earned); 
and
    (vii) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7).

[64 FR 68023, Dec. 6, 1999, as amended 66 FR 3758, Jan. 16, 2001; 69 FR 
46389, Aug. 2, 2004]

[[Page 468]]



Sec.  270.16a-1  Exemption for initial period of directors of certain
registered accounts from requirements of election by security holders.

    (a) Persons serving as the directors of a registered separate 
account shall, prior to the first meeting of such account's variable 
annuity contract owners, be exempt from the requirement of section 16(a) 
of the Act that such persons be elected by the holders of outstanding 
voting securities of such account at an annual or special meeting called 
for that purpose, subject to the following conditions:
    (1) Such registered separate account qualifies for exemption from 
section 14(a) of the Act pursuant to Sec.  270.14a-1 or is exempt 
therefrom by order of the Commission upon application; and
    (2) Such persons have been appointed directors of such account by 
the establishing insurance company; and
    (3) An election of directors for such account shall be held at the 
first meeting of variable annuity contract owners after the effective 
date of the registration statement under the Securities Act of 1933, as 
amended (15 U.S.C. 77a et seq.), relating to contracts participating in 
such account: Provided, That such meeting shall take place within 1 year 
after such effective date, unless the time for the holding of such 
meeting shall be extended by the Commission upon written request showing 
good cause therefor.

(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)

[34 FR 12695, Aug. 5, 1969]



Sec.  270.17a-1  Exemption of certain underwriting transactions exempted
by Sec.  270.10f-1.

    Any transaction exempted pursuant to Sec.  270.10f-1 shall be exempt 
from the provisions of section 17(a)(1) of the Act (54 Stat. 815; 15 
U.S.C. 80a-17).

[Rule N-17A-1, 6 FR 1191, Feb. 28, 1941]



Sec.  270.17a-2  Exemption of certain purchase, sale, or borrowing 
transactions.

    Purchase, sale or borrowing transactions occurring in the usual 
course of business between affiliated persons of registered investment 
companies shall be exempt from section 17(a) of the Act provided (a) the 
transactions involve notes, drafts, time payment contracts, bills of 
exchange, acceptance or other property of a commercial character rather 
than of an investment character; (b) the buyer or lender is a bank; and 
(c) the seller or borrower is a bank or is engaged principally in the 
business of installment financing.

[Rule N-17A-2, 12 FR 5008, July 29, 1947]



Sec.  270.17a-3  Exemption of transactions with fully owned subsidiaries.

    (a) The following transactions shall be exempt from section 17(a) of 
the Act:
    (1) Transactions solely between a registered investment company and 
one or more of its fully owned subsidiaries or solely between two or 
more fully owned subsidiaries of such company.
    (2) Transactions solely between any subsidiary of a registered 
investment company and one or more fully owned subsidiaries of such 
subsidiary or solely between two or more fully owned subsidiaries of 
such subsidiary.
    (b) The term fully owned subsidiary as used in this section, means a 
subsidiary (1) all of whose outstanding securities, other than 
directors' qualifying shares, are owned by its parent and/or the 
parent's other fully owned subsidiaries, and (2) which is not indebted 
to any person other than its parent and/or the parent's other fully 
owned subsidiaries in an amount which is material in relation to the 
particular subsidiary, excepting (i) indebtedness incurred in the 
ordinary course of business which is not overdue and which matures 
within one year from the date of its creation, whether evidenced by 
securities or not, and (ii) any other indebtedness to one or more banks 
or insurance companies.

[Rule N-17A-3, 12 FR 3442, May 28, 1947]



Sec.  270.17a-4  Exemption of transactions pursuant to certain contracts.

    Transactions pursuant to a contract shall be exempt from section 
17(a) of the Act if at the time of the making of the contract and for a 
period of at least six months prior thereto no affiliation or other 
relationship existed which would operate to make such contract or the 
subsequent performance thereof

[[Page 469]]

subject to the provisions of said section 17(a).

[Rule N-17A-4, 12 FR 5008, July 29, 1947]



Sec.  270.17a-5  Pro rata distribution neither ``sale'' nor ``purchase.''

    When a company makes a pro rata distribution in cash or in kind 
among its common stockholders without giving any election to any 
stockholder as to the specific assets which such stockholders shall 
receive, such distribution shall not be deemed to involve a sale to or a 
purchase from such distributing company as those terms are used in 
section 17(a) of the Act.

[20 FR 7447, Oct. 6, 1955]



Sec.  270.17a-6  Exemption for transactions with portfolio affiliates.

    (a) Exemption for transactions with portfolio affiliates. A 
transaction to which a fund, or a company controlled by a fund, and a 
portfolio affiliate of the fund are parties is exempt from the 
provisions of section 17(a) of the Act (15 U.S.C. 80a-17(a)), provided 
that none of the following persons is a party to the transaction, or has 
a direct or indirect financial interest in a party to the transaction 
other than the fund:
    (1) An officer, director, employee, investment adviser, member of an 
advisory board, depositor, promoter of or principal underwriter for the 
fund;
    (2) A person directly or indirectly controlling the fund;
    (3) A person directly or indirectly owning, controlling or holding 
with power to vote five percent or more of the outstanding voting 
securities of the fund;
    (4) A person directly or indirectly under common control with the 
fund, other than:
    (i) A portfolio affiliate of the fund; or
    (ii) A fund whose sole interest in the transaction or a party to the 
transaction is an interest in the portfolio affiliate; or
    (5) An affiliated person of any of the persons mentioned in 
paragraphs (a)(1)-(4) of this section, other than the fund or a 
portfolio affiliate of the fund.
    (b) Definitions--(1) Financial interest. (i) The term financial 
interest as used in this section does not include:
    (A) Any interest through ownership of securities issued by the fund;
    (B) Any interest of a wholly-owned subsidiary of a fund;
    (C) Usual and ordinary fees for services as a director;
    (D) An interest of a non-executive employee;
    (E) An interest of an insurance company arising from a loan or 
policy made or issued by it in the ordinary course of business to a 
natural person;
    (F) An interest of a bank arising from a loan or account made or 
maintained by it in the ordinary course of business to or with a natural 
person, unless it arises from a loan to a person who is an officer, 
director or executive of a company which is a party to the transaction, 
or from a loan to a person who directly or indirectly owns, controls, or 
holds with power to vote, five percent or more of the outstanding voting 
securities of a company which is a party to the transaction;
    (G) An interest acquired in a transaction described in paragraph 
(d)(3) of Sec.  270.17d-1; or
    (H) Any other interest that the board of directors of the fund, 
including a majority of the directors who are not interested persons of 
the fund, finds to be not material, provided that the directors record 
the basis for that finding in the minutes of their meeting.
    (ii) A person has a financial interest in any party in which it has 
a financial interest, in which it had a financial interest within six 
months prior to the transaction, or in which it will acquire a financial 
interest pursuant to an arrangement in existence at the time of the 
transaction.
    (2) Fund means a registered investment company or separate series of 
a registered investment company.
    (3) Portfolio affiliate of a fund means a person that is an 
affiliated person (or an affiliated person of an affiliated person) of a 
fund solely because the fund, a fund under common control with the fund, 
or both:
    (i) Controls such person (or an affiliated person of such person); 
or
    (ii) Owns, controls, or holds with power to vote five percent or 
more of the outstanding voting securities of

[[Page 470]]

such person (or an affiliated person of such person).

[68 FR 3153, Jan. 22, 2003]



Sec.  270.17a-7  Exemption of certain purchase or sale transactions 
between an investment company and certain affiliated persons thereof.

    A purchase or sale transaction between registered investment 
companies or separate series of registered investment companies, which 
are affiliated persons, or affiliated persons of affiliated persons, of 
each other, between separate series of a registered investment company, 
or between a registered investment company or a separate series of a 
registered investment company and a person which is an affiliated person 
of such registered investment company (or affiliated person of such 
person) solely by reason of having a common investment adviser or 
investment advisers which are affiliated persons of each other, common 
directors, and/or common officers, is exempt from section 17(a) of the 
Act; Provided, That:
    (a) The transaction is a purchase or sale, for no consideration 
other than cash payment against prompt delivery of a security for which 
market quotations are readily available;
    (b) The transaction is effected at the independent current market 
price of the security. For purposes of this paragraph the ``current 
market price'' shall be:
    (1) If the security is an ``NMS stock'' as that term is defined in 
17 CFR 242.600, the last sale price with respect to such security 
reported in the consolidated transaction reporting system 
(``consolidated system'') or the average of the highest current 
independent bid and lowest current independent offer for such security 
(reported pursuant to 17 CFR 242.602) if there are no reported 
transactions in the consolidated system that day; or
    (2) If the security is not a reported security, and the principal 
market for such security is an exchange, then the last sale on such 
exchange or the average of the highest current independent bid and 
lowest current independent offer on such exchange if there are no 
reported transactions on such exchange that day; or
    (3) If the security is not a reported security and is quoted in the 
NASDAQ System, then the average of the highest current independent bid 
and lowest current independent offer reported on Level 1 of NASDAQ; or
    (4) For all other securities, the average of the highest current 
independent bid and lowest current independent offer determined on the 
basis of reasonable inquiry;
    (c) The transaction is consistent with the policy of each registered 
investment company and separate series of a registered investment 
company participating in the transaction, as recited in its registration 
statement and reports filed under the Act;
    (d) No brokerage commission, fee (except for customary transfer 
fees), or other remuneration is paid in connection with the transaction;
    (e) The board of directors of the investment company, including a 
majority of the directors who are not interested persons of such 
investment company,
    (1) Adopts procedures pursuant to which such purchase or sale 
transactions may be effected for the company, which are reasonably 
designed to provide that all of the conditions of this section in 
paragraphs (a) through (d) have been complied with,
    (2) Makes and approves such changes as the board deems necessary, 
and
    (3) Determines no less frequently than quarterly that all such 
purchases or sales made during the preceding quarter were effected in 
compliance with such procedures;
    (f) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7); and
    (g) The investment company (1) maintains and preserves permanently 
in an easily accessible place a written copy of the procedures (and any 
modifications thereto) described in paragraph (e) of this section, and 
(2) maintains and preserves for a period not less than six years from 
the end of the fiscal year in which any transactions occurred, the first 
two years in an easily accessible place, a written record of each such 
transaction setting forth a description of the security purchased or 
sold, the identity of the person on

[[Page 471]]

the other side of the transaction, the terms of the purchase or sale 
transaction, and the information or materials upon which the 
determinations described in paragraph (e)(3) of this section were made.

[46 FR 17013, Mar. 17, 1981, as amended at 58 FR 49921, Sept. 24, 1993; 
66 FR 3758, Jan. 16, 2001; 69 FR 46389, Aug. 2, 2004; 70 FR 37632, June 
29, 2005]



Sec.  270.17a-8  Mergers of affiliated companies.

    (a) Exemption of affiliated mergers. A Merger of a registered 
investment company (or a series thereof) and one or more other 
registered investment companies (or series thereof) or Eligible 
Unregistered Funds is exempt from sections 17(a)(1) and (2) of the Act 
(15 U.S.C. 80a-17(a)(1)-(2)) if:
    (1) Surviving company. The Surviving Company is a registered 
investment company (or a series thereof).
    (2) Board determinations. As to any registered investment company 
(or series thereof) participating in the Merger (``Merging Company''):
    (i) The board of directors, including a majority of the directors 
who are not interested persons of the Merging Company or of any other 
company or series participating in the Merger, determines that:
    (A) Participation in the Merger is in the best interests of the 
Merging Company; and
    (B) The interests of the Merging Company's existing shareholders 
will not be diluted as a result of the Merger.

    Note to paragraph (a)(2)(i): For a discussion of factors that may be 
relevant to the determinations in paragraph (a)(2)(i) of this section, 
see Investment Company Act Release No. 25666, July 18, 2002.

    (ii) The directors have requested and evaluated such information as 
may reasonably be necessary to their determinations in paragraph 
(a)(2)(i) of this section, and have considered and given appropriate 
weight to all pertinent factors.
    (iii) The directors, in making the determination in paragraph 
(a)(2)(i)(B) of this section, have approved procedures for the valuation 
of assets to be conveyed by each Eligible Unregistered Fund 
participating in the Merger. The approved procedures provide for the 
preparation of a report by an Independent Evaluator, to be considered in 
assessing the value of any securities (or other assets) for which market 
quotations are not readily available, that sets forth the fair value of 
each such asset as of the date of the Merger.
    (iv) The determinations required in paragraph (a)(2)(i) of this 
section and the bases thereof, including the factors considered by the 
directors pursuant to paragraph (a)(2)(ii) of this section, are recorded 
fully in the minute books of the Merging Company.
    (3) Shareholder approval. Participation in the Merger is approved by 
the vote of a majority of the outstanding voting securities (as provided 
in section 2(a)(42) of the Act (15 U.S.C. 80a-2(a)(42))) of any Merging 
Company that is not a Surviving Company, unless--
    (i) No policy of the Merging Company that under section 13 of the 
Act (15 U.S.C. 80a-13) could not be changed without a vote of a majority 
of its outstanding voting securities, is materially different from a 
policy of the Surviving Company;
    (ii) No advisory contract between the Merging Company and any 
investment adviser thereof is materially different from an advisory 
contract between the Surviving Company and any investment adviser 
thereof, except for the identity of the investment companies as a party 
to the contract;
    (iii) Directors of the Merging Company who are not interested 
persons of the Merging Company and who were elected by its shareholders, 
will comprise a majority of the directors of the Surviving Company who 
are not interested persons of the Surviving Company; and
    (iv) Any distribution fees (as a percentage of the fund's average 
net assets) authorized to be paid by the Surviving Company pursuant to a 
plan adopted in accordance with Sec.  270.12b-1 are no greater than the 
distribution fees (as a percentage of the fund's average net assets) 
authorized to be paid by the Merging Company pursuant to such a plan.
    (4) Board composition. The board of directors of the Merging Company 
satisfies the fund governance standards defined in Sec.  270.0-1(a)(7).

[[Page 472]]

    (5) Merger records. Any Surviving Company preserves written records 
that describe the Merger and its terms for six years after the Merger 
(and for the first two years in an easily accessible place).
    (b) Definitions. For purposes of this section:
    (1) Merger means the merger, consolidation, or purchase or sale of 
substantially all of the assets between a registered investment company 
(or a series thereof) and another company;
    (2) Eligible Unregistered Fund means:
    (i) A collective trust fund, as described in section 3(c)(11) of the 
Act (15 U.S.C. 80a-3(c)(11));
    (ii) A common trust fund or similar fund, as described in section 
3(c)(3) of the Act (15 U.S.C. 80a-3(c)(3)); or
    (iii) A separate account, as described in section 2(a)(37) of the 
Act (15 U.S.C. 80a-2(a)(37)), that is neither registered under section 8 
of the Act, nor required to be so registered;
    (3) Independent Evaluator means a person who has expertise in the 
valuation of securities and other financial assets and who is not an 
interested person, as defined in section 2(a)(19) of the Act (15 U.S.C. 
80a-2(a)(19)), of the Eligible Unregistered Fund or any affiliate 
thereof except the Merging Company; and
    (4) Surviving Company means a company in which shareholders of a 
Merging Company will obtain an interest as a result of a Merger.

[67 FR 48518, July 24, 2002, as amended at 69 FR 46389, Aug. 2, 2004]



Sec.  270.17a-9  Purchase of certain securities from a money market
fund by an affiliate, or an affiliate of an affiliate.

    The purchase of a security from the portfolio of an open-end 
investment company holding itself out as a money market fund by any 
affiliated person or promoter of or principal underwriter for the money 
market fund or any affiliated person of such person shall be exempt from 
section 17(a) of the Act (15 U.S.C. 80a-17(a)); provided that:
    (a) In the case of a portfolio security that has ceased to be an 
Eligible Security (as defined in Sec.  270.2a-7(a)(12)), or has 
defaulted (other than an immaterial default unrelated to the financial 
condition of the issuer):
    (1) The purchase price is paid in cash; and
    (2) The purchase price is equal to the greater of the amortized cost 
of the security or its market price (in each case, including accrued 
interest).
    (b) In the case of any other portfolio security:
    (1) The purchase price meets the requirements of paragraph (a)(1) 
and (2) of this section; and
    (2) In the event that the purchaser thereafter sells the security 
for a higher price than the purchase price paid to the money market 
fund, the purchaser shall promptly pay to the fund the amount by which 
the subsequent sale price exceeds the purchase price paid to the fund.

[75 FR 10117, Mar. 4, 2010]



Sec.  270.17a-10  Exemption for transactions with certain subadvisory
affiliates.

    (a) Exemption. A person that is prohibited by section 17(a) of the 
Act (15 U.S.C. 80a-17(a)) from entering into a transaction with a fund 
solely because such person is, or is an affiliated person of, a 
subadviser of the fund, or a subadviser of a fund that is under common 
control with the fund, may nonetheless enter into such transaction, if:
    (1) Prohibited relationship. The person is not, and is not an 
affiliated person of, an investment adviser responsible for providing 
advice with respect to the portion of the fund for which the transaction 
is entered into, or of any promoter, underwriter, officer, director, 
member of an advisory board, or employee of the fund.
    (2) Prohibited conduct. The advisory contracts of the subadviser 
that is (or whose affiliated person is) entering into the transaction, 
and any subadviser that is advising the fund (or portion of the fund) 
entering into the transaction:
    (i) Prohibit them from consulting with each other concerning 
transactions for the fund in securities or other assets; and
    (ii) If both such subadvisers are responsible for providing 
investment advice to the fund, limit the subadvisers' responsibility in 
providing advice with

[[Page 473]]

respect to a discrete portion of the fund's portfolio.
    (b) Definitions. (1) Fund means a registered investment company and 
includes a separate series of a registered investment company.
    (2) Subadviser means an investment adviser as defined in section 
2(a)(20)(B) of the Act (15 U.S.C. 80a-2(a)(20)(B)).

[68 FR 3153, Jan. 22, 2003]



Sec.  270.17d-1  Applications regarding joint enterprises or arrangements
and certain profit-sharing plans.

    (a) No affiliated person of or principal underwriter for any 
registered investment company (other than a company of the character 
described in section 12(d)(3) (A) and (B) of the Act) and no affiliated 
person of such a person or principal underwriter, acting as principal, 
shall participate in, or effect any transaction in connection with, any 
joint enterprise or other joint arrangement or profit-sharing plan in 
which any such registered company, or a company controlled by such 
registered company, is a participant, and which is entered into, adopted 
or modified subsequent to the effective date of this rule, unless an 
application regarding such joint enterprise, arrangement or profit-
sharing plan has been filed with the Commission and has been granted by 
an order entered prior to the submission of such plan or modification to 
security holders for approval, or prior to such adoption or modification 
if not so submitted, except that the provisions of this rule shall not 
preclude any affiliated person from acting as manager of any 
underwriting syndicate or other group in which such registered or 
controlled company is a participant and receiving compensation therefor.
    (b) In passing upon such applications, the Commission will consider 
whether the participation of such registered or controlled company in 
such joint enterprise, joint arrangement or profit-sharing plan on the 
basis proposed is consistent with the provisions, policies and purposes 
of the Act and the extent to which such participation is on a basis 
different from or less advantageous than that of other participants.
    (c) ``Joint enterprise or other joint arrangement or profit-sharing 
plan'' as used in this section shall mean any written or oral plan, 
contract, authorization or arrangement, or any practice or understanding 
concerning an enterprise or undertaking whereby a registered investment 
company or a controlled company thereof and any affiliated person of or 
a principal underwriter for such registered investment company, or any 
affiliated person of such a person or principal underwriter, have a 
joint or a joint and several participation, or share in the profits of 
such enterprise or undertaking, including, but not limited to, any stock 
option or stock purchase plan, but shall not include an investment 
advisory contract subject to section 15 of the Act.
    (d) Notwithstanding the requirements of paragraph (a) of this 
section, no application need be filed pursuant to this section with 
respect to any of the following:
    (1) Any profit-sharing, stock option or stock purchase plan provided 
by any controlled company which is not an investment company for its 
officers, directors or employees, or the purchase of stock or the 
granting, modification or exercise of options pursuant to such a plan, 
provided:
    (i) No individual participates therein who is either:
    (a) An affiliated person of any investment company which is an 
affiliated person of such controlled company; or
    (b) An affiliated person of the investment adviser or principal 
underwriter of such investment company; and
    (ii) No participant has been an affiliated person of such investment 
company, its investment adviser or principal underwriter during the life 
of the plan and for six months prior to, as the case may be:
    (a) Institution of the profit-sharing plan;
    (b) The purchase of stock pursuant to a stock purchase plan; or
    (c) The granting of any options pursuant to a stock option plan.
    (2) Any plan provided by any registered investment company or any 
controlled company for its officers or employees if such plan has been 
qualified under section 401 of the Internal

[[Page 474]]

Revenue Code of 1954 and all contributions paid under said plan by the 
employer qualify as deductible under section 404 of said Code.
    (3) Any loan or advance of credit to, or acquisition of securities 
or other property of, a small business concern, or any agreement to do 
any of the foregoing (``Investments''), made by a bank and a small 
business investment company (SBIC) licensed under the Small Business 
Investment Act of 1958, whether such transactions are contemporaneous or 
separated in time, where the bank is an affiliated person of either (i) 
the SBIC or (ii) an affiliated person of the SBIC; but reports 
containing pertinent details as to Investments and transactions relating 
thereto shall be made at such time, on such forms and by such persons as 
the Commission may from time to time prescribe.
    (4) The issuance by a registered investment company which is 
licensed by the Small Business Administration pursuant to the Small 
Business Investment Act of 1958 of stock options which qualify under 
section 422 of the Internal Revenue Code, as amended, and which conform 
to Sec.  107.805(b) of Chapter I of Title 13 of the Code of Federal 
Regulations.
    (5) Any joint enterprise or other joint arrangement or profit-
sharing plan (``joint enterprise'') in which a registered investment 
company or a company controlled by such a company, is a participant, and 
in which a portfolio affiliate (as defined in Sec.  270.17a-6(b)(3)) of 
such registered investment company is also a participant, provided that:
    (i) None of the persons identified in Sec.  270.17a-6(a) is a 
participant in the joint enterprise, or has a direct or indirect 
financial interest in a participant in the joint enterprise (other than 
the registered investment company);
    (ii) Financial interest. (A) The term financial interest as used in 
this section does not include:
    (1) Any interest through ownership of securities issued by the 
registered investment company;
    (2) Any interest of a wholly owned subsidiary of the registered 
investment company;
    (3) Usual and ordinary fees for services as a director;
    (4) An interest of a non-executive employee;
    (5) An interest of an insurance company arising from a loan or 
policy made or issued by it in the ordinary course of business to a 
natural person;
    (6) An interest of a bank arising from a loan to a person who is an 
officer, director, or executive of a company which is a participant in 
the joint transaction or from a loan to a person who directly or 
indirectly owns, controls, or holds with power to vote, five percent or 
more of the outstanding voting securities of a company which is a 
participant in the joint transaction;
    (7) An interest acquired in a transaction described in paragraph 
(d)(3) of this section; or
    (8) Any other interest that the board of directors of the investment 
company, including a majority of the directors who are not interested 
persons of the investment company, finds to be not material, provided 
that the directors record the basis for that finding in the minutes of 
their meeting.
    (B) A person has a financial interest in any party in which it has a 
financial interest, in which it had a financial interest within six 
months prior to the investment company's participation in the 
enterprise, or in which it will acquire a financial interest pursuant to 
an arrangement in existence at the time of the investment company's 
participation in the enterprise.
    (6) The receipt of securities and/or cash by an investment company 
or a controlled company thereof and an affiliated person of such 
investment company or an affiliated person of such person pursuant to a 
plan of reorganization: Provided, That no person identified in Sec.  
270.17a-6(a)(1) or any company in which such a person has a direct or 
indirect financial interest (as defined in paragraph (d)(5)(ii) of this 
section):
    (i) Has a direct or indirect financial interest in the corporation 
under reorganization, except owning securities of each class or classes 
owned by such investment company or controlled company;
    (ii) Receives pursuant to such plan any securities or other 
property, except securities of the same class and

[[Page 475]]

subject to the same terms as the securities received by such investment 
company or controlled company, and/or cash in the same proportion as is 
received by the investment company or controlled company based on 
securities of the company under reorganization owned by such persons; 
and
    (iii) Is, or has a direct or indirect financial interest in any 
person (other than such investment company or controlled company) who 
is:
    (A) Purchasing assets from the company under reorganization; or
    (B) Exchanging shares with such person in a transaction not in 
compliance with the standards described in this paragraph (d)(6).
    (7) Any arrangement regarding liability insurance policies (other 
than a bond required pursuant to rule 17g-1 (Sec.  270.17g-1) under the 
Act); Provided, That
    (i) The investment company's participation in the joint liability 
insurance policy is in the best interests of the investment company;
    (ii) The proposed premium for the joint liability insurance policy 
to be allocated to the investment company, based upon its proportionate 
share of the sum of the premiums that would have been paid if such 
insurance coverage were purchased separately by the insured parties, is 
fair and reasonable to the investment company;
    (iii) The joint liability insurance policy does not exclude coverage 
for bona fide claims made against any director who is not an interested 
person of the investment company, or against the investment company if 
it is a co-defendant in the claim with the disinterested director, by 
another person insured under the joint liability insurance policy;
    (iv) The board of directors of the investment company, including a 
majority of the directors who are not interested persons with respect 
thereto, determine no less frequently than annually that the standards 
described in paragraphs (d)(7)(i) and (ii) of this section have been 
satisfied; and
    (v) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7).
    (8) An investment adviser's bearing expenses in connection with a 
merger, consolidation or purchase or sale of substantially all of the 
assets of a company which involves a registered investment company of 
which it is an affiliated person.

[22 FR 426, Jan. 23, 1957, as amended at 26 FR 11240, Nov. 29, 1961; 35 
FR 13123, Aug. 18, 1970; 39 FR 37973, Oct. 25, 1974; 44 FR 58503, Oct. 
10, 1979; 44 FR 58908, Oct. 12, 1979; 45 FR 12409, Feb. 26, 1980; 66 FR 
3758, Jan. 16, 2001; 68 FR 3153, Jan. 22, 2003; 69 FR 46389, Aug. 2, 
2004; 78 FR 79299, Dec. 30, 2013]



Sec.  270.17d-2  Form for report by small business investment company
and affiliated bank.

    Form N-17D-1 is hereby prescribed as the form for reports required 
by paragraph (d)(3) of Sec.  270.17d-1.

[26 FR 11240, Nov. 29, 1961]



Sec.  270.17d-3  Exemption relating to certain joint enterprises or 
arrangements concerning payment for distribution of shares of a 
registered open-end management investment company.

    An affiliated person of, or principal underwriter for, a registered 
open-end management investment company and an affiliated person of such 
a person or principal underwriter shall be exempt from section 17(d) of 
the Act (15 U.S.C. 80a-17(d)) and rule 17d-1 thereunder (17 CFR 270.17d-
1), to the extent necessary to permit any such person or principal 
underwriter to enter into a written agreement with such company whereby 
the company will make payments in connection with the distribution of 
its shares, Provided, That:
    (a) Such agreement is made in compliance with the provisions of 
Sec.  270.12b-1; and
    (b) No other registered management investment company which is 
either an affiliated person of such company or an affiliated person of 
such a person is a party to such agreement.

[45 FR 73905, Nov. 7, 1980]



Sec.  270.17e-1  Brokerage transactions on a securities exchange.

    For purposes of section 17(e)(2)(A) of the Act [15 U.S.C. 80a-
17(e)(2)(A)], a commission, fee or other remuneration shall be deemed as 
not exceeding the

[[Page 476]]

usual and customary broker's commission, if:
    (a) The commission, fee, or other remuneration received or to be 
received is reasonable and fair compared to the commission, fee or other 
remuneration received by other brokers in connection with comparable 
transactions involving similar securities being purchased or sold on a 
securities exchange during a comparable period of time;
    (b) The board of directors, including a majority of the directors of 
the investment company who are not interested persons thereof:
    (1) Has adopted procedures which are reasonably designed to provide 
that such commission, fee, or other remuneration is consistent with the 
standard described in paragraph (a) of this section;
    (2) Makes and approves such changes as the board deems necessary; 
and
    (3) Determines no less frequently than quarterly that all 
transactions effected pursuant to this section during the preceding 
quarter (other than transactions in which the person acting as broker is 
a person permitted to enter into a transaction with the investment 
company by Sec.  270.17a-10) were effected in compliance with such 
procedures;
    (c) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7); and
    (d) The investment company:
    (1) Shall maintain and preserve permanently in an easily accessible 
place a copy of the procedures (and any modification thereto) described 
in paragraph (b)(1) of this section; and
    (2) Shall maintain and preserve for a period not less than six years 
from the end of the fiscal year in which any transactions occurred, the 
first two years in an easily accessible place, a record of each such 
transaction (other than any transaction in which the person acting as 
broker is a person permitted to enter into a transaction with the 
investment company by Sec.  270.17a-10) setting forth the amount and 
source of the commission, fee or other remuneration received or to be 
received, the identity of the person acting as broker, the terms of the 
transaction, and the information or materials upon which the findings 
described in paragraph (b)(3) of this section were made.

[44 FR 37203, June 26, 1979, as amended at 58 FR 49921, Sept. 24, 1993; 
66 FR 3759, Jan. 16, 2001; 68 FR 3154, Jan. 22, 2003; 69 FR 46389, Aug. 
2, 2004]



Sec.  270.17f-1  Custody of securities with members of national securities
exchanges.

    (a) No registered management investment company shall place or 
maintain any of its securities or similar investments in the custody of 
a company which is a member of a national securities exchange as defined 
in the Securities Exchange Act of 1934 (whether or not such company 
trades in securities for its own account) except pursuant to a written 
contract which shall have been approved, or if executed before January 
1, 1941, shall have been ratified not later than that date, by a 
majority of the board of directors of such investment company.
    (b) The contract shall require, and the securities and investments 
shall be maintained in accordance with the following:
    (1) The securities and similar investments held in such custody 
shall at all times be individually segregated from the securities and 
investments of any other person and marked in such manner as to clearly 
identify them as the property of such registered management company, 
both upon physical inspection thereof and upon examination of the books 
of the custodian. The physical segregation and marking of such 
securities and investments may be accomplished by putting them in 
separate containers bearing the name of such registered management 
investment company or by attaching tags or labels to such securities and 
investments.
    (2) The custodian shall have no power or authority to assign, 
hypothecate, pledge or otherwise to dispose of any such securities and 
investments, except pursuant to the direction of such registered 
management company and only for the account of such registered 
investment company.
    (3) Such securities and investments shall be subject to no lien or 
charge of any kind in favor of the custodian or

[[Page 477]]

any persons claiming through the custodian.
    (4) Such securities and investments shall be verified by actual 
examination at the end of each annual and semi-annual fiscal period by 
an independent public accountant retained by the investment company, and 
shall be examined by such accountant at least one other time, chosen by 
the accountant, during each fiscal year. A certificate of such 
accountant stating that an examination of such securities has been made, 
and describing the nature and extent of the examination, shall be 
attached to a completed Form N-17f-1 (17 CFR 274.219) and transmitted to 
the Commission promptly after each examination.
    (5) Such securities and investments shall, at all times, be subject 
to inspection by the Commission through its employees or agents.
    (6) The provisions of paragraphs (b) (1), (2) and (3) of this 
section shall not apply to securities and similar investments bought for 
or sold to such investment company by the company which is custodian 
until the securities have been reduced to the physical possession of the 
custodian and have been paid for by such investment company: Provided, 
That the company which is custodian shall take possession of such 
securities at the earliest practicable time. Nothing in this 
subparagraph shall be construed to relieve any company which is a member 
of a national securities exchange of any obligation under existing law 
or under the rules of any national securities exchange.
    (c) A copy of any contract executed or ratified pursuant to 
paragraph (a) of this section shall be transmitted to the Commission 
promptly after execution or ratification unless it has been previously 
transmitted.
    (d) Any contract executed or ratified pursuant to paragraph (a) of 
this section shall be ratified by the board of directors of the 
registered management investment company at least annually thereafter.

[Rule N-17F-1, 5 FR 4317, Oct. 31, 1940, as amended at 54 FR 32049, Aug. 
4, 1989]



Sec.  270.17f-2  Custody of investments by registered management 
investment company.

    (a) The securities and similar investments of a registered 
management investment company may be maintained in the custody of such 
company only in accordance with the provisions of this section. 
Investments maintained by such a company with a bank or other company 
whose functions and physical facilities are supervised by Federal or 
State authority under any arrangement whereunder the directors, 
officers, employees or agents of such company are authorized or 
permitted to withdraw such investments upon their mere receipt, are 
deemed to be in the custody of such company and may be so maintained 
only upon compliance with the provisions of this section.
    (b) Except as provided in paragraph (c) of this section, all such 
securities and similar investments shall be deposited in the safekeeping 
of, or in a vault or other depository maintained by, a bank or other 
company whose functions and physical facilities are supervised by 
Federal or State authority. Investments so deposited shall be physically 
segregated at all times from those of any other person and shall be 
withdrawn only in connection with transactions of the character 
described in paragraph (c) of this section.
    (c) The first sentence of paragraph (b) of this section shall not 
apply to securities on loan which are collateralized to the extent of 
their full market value, or to securities hypothecated, pledged, or 
placed in escrow for the account of such investment company in 
connection with a loan or other transaction authorized by specific 
resolution of its board of directors, or to securities in transit in 
connection with the sale, exchange, redemption, maturity or conversion, 
the exercise of warrants or rights, assents to changes in terms of the 
securities, or other transactions necessary or appropriate in the 
ordinary course of business relating to the management of securities.
    (d) Except as otherwise provided by law, no person shall be 
authorized or permitted to have access to the securities and similar 
investments deposited in accordance with paragraph (b) of

[[Page 478]]

this section except pursuant to a resolution of the board of directors 
of such investment company. Each such resolution shall designate not 
more than five persons who shall be either officers or responsible 
employees of such company and shall provide that access to such 
investments shall be had only by two or more such persons jointly, at 
least one of whom shall be an officer; except that access to such 
investments shall be permitted (1) to properly authorized officers and 
employees of the bank or other company in whose safekeeping the 
investments are placed and (2) for the purpose of paragraph (f) of this 
section to the independent public accountant jointly with any two 
persons so designated or with such officer or employee of such bank or 
such other company. Such investments shall at all times be subject to 
inspection by the Commission through its authorized employees or agents 
accompanied, unless otherwise directed by order of the Commission, by 
one or more of the persons designated pursuant to this paragraph.
    (e) Each person when depositing such securities or similar 
investments in or withdrawing them from the depository or when ordering 
their withdrawal and delivery from the safekeeping of the bank or other 
company, shall sign a notation in respect of such deposit, withdrawal or 
order which shall show (1) the date and time of the deposit, withdrawal 
or order, (2) the title and amount of the securities or other 
investments deposited, withdrawn or ordered to be withdrawn, and an 
identification thereof by certificate numbers or otherwise, (3) the 
manner of acquisition of the securities or similar investments deposited 
or the purpose for which they have been withdrawn, or ordered to be 
withdrawn, and (4) if withdrawn and delivered to another person the name 
of such person. Such notation shall be transmitted promptly to an 
officer or director of the investment company designated by its board of 
directors who shall not be a person designated for the purpose of 
paragraph (d) of this section. Such notation shall be on serially 
numbered forms and shall be preserved for at least one year.
    (f) Such securities and similar investments shall be verified by 
actual examination by an independent public accountant retained by the 
investment company at least three times during each fiscal year, at 
least two of which shall be chosen by such accountant without prior 
notice to such company. A certificate of such accountant stating that an 
examination of such securities and investments has been made, and 
describing the nature and extent of the examination, shall be attached 
to a completed Form N-17f-2 (17 CFR 274.220) and transmitted to the 
Commission promptly after each examination.

[Rule N-17F-2, 12 FR 6717, Oct. 11, 1947, as amended at 54 FR 32049, 
Aug. 4, 1989]



Sec.  270.17f-3  Free cash accounts for investment companies with 
bank custodians.

    No registered investment company having a bank custodian shall hold 
free cash except, upon resolution of its board or directors, a petty 
cash account may be maintained in an amount not to exceed $500: 
Provided, That such account is operated under the imprest system and is 
maintained subject to adequate controls approved by the board of 
directors over disbursements and reimbursements including, but not 
limited to fidelity bond coverage of persons having access to such 
funds.

(Sec. 17(f), 54 Stat. 815, 15 U.S.C. 80a-17(f), sec. 9, Pub. L. 91-547, 
84 Stat. 1420)

[37 FR 9989, May 18, 1972]




Sec.  270.17f-4  Custody of investment company assets with a securities
depository.

    (a) Custody arrangement with a securities depository. A fund's 
custodian may place and maintain financial assets, corresponding to the 
fund's security entitlements, with a securities depository or 
intermediary custodian, if the custodian:
    (1) Is at a minimum obligated to exercise due care in accordance 
with reasonable commercial standards in discharging its duty as a 
securities intermediary to obtain and thereafter maintain such financial 
assets;
    (2) Is required to provide, promptly upon request by the fund, such 
reports

[[Page 479]]

as are available concerning the internal accounting controls and 
financial strength of the custodian; and
    (3) Requires any intermediary custodian at a minimum to exercise due 
care in accordance with reasonable commercial standards in discharging 
its duty as a securities intermediary to obtain and thereafter maintain 
financial assets corresponding to the security entitlements of its 
entitlement holders.
    (b) Direct dealings with securities depository. A fund may place and 
maintain financial assets, corresponding to the fund's security 
entitlements, directly with a securities depository, if:
    (1) The fund's contract with the securities depository or the 
securities depository's written rules for its participants:
    (i) Obligate the securities depository at a minimum to exercise due 
care in accordance with reasonable commercial standards in discharging 
its duty as a securities intermediary to obtain and thereafter maintain 
financial assets corresponding to the fund's security entitlements; and
    (ii) Requires the securities depository to provide, promptly upon 
request by the fund, such reports as are available concerning the 
internal accounting controls and financial strength of the securities 
depository; and
    (2) The fund has implemented internal control systems reasonably 
designed to prevent unauthorized officer's instructions (by providing at 
least for the form, content and means of giving, recording and reviewing 
all officer's instructions).
    (c) Definitions. For purposes of this section the terms:
    (1) Clearing corporation, financial asset, securities intermediary, 
and security entitlement have the same meanings as is attributed to 
those terms in Sec.  8-102, Sec.  8-103, and Sec. Sec.  8-501 through 8-
511 of the Uniform Commercial Code, 2002 Official Text and Comments, 
which are incorporated by reference in this section pursuant to 5 U.S.C. 
552(a) and 1 CFR part 51. The Director of the Federal Register has 
approved this incorporation by reference in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. You may obtain a copy of the Uniform 
Commercial Code from the National Conference of Commissioners on Uniform 
State Laws, 211 East Ontario Street, Suite 1300, Chicago, Il 60611. You 
may inspect a copy at the following addresses: Louis Loss Library, U.S. 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549, or at the National Archives and Records Administration (NARA). 
For information on the availability of this material at NARA, call 202-
741-6030, or go to: http://www.archives.gov/federal _register/code_of 
_federal_regulations/ ibr_locations.html.
    (2) Custodian means a bank or other person authorized to hold assets 
for the fund under section 17(f) of the Act (15 U.S.C. 80a-17(f)) or 
Commission rules in this chapter, but does not include a fund itself, a 
foreign custodian whose use is governed by Sec.  270.17f-5 or Sec.  
270.17f-7, or a vault, safe deposit box, or other repository for 
safekeeping maintained by a bank or other company whose functions and 
physical facilities are supervised by a federal or state authority if 
the fund maintains its own assets there in accordance with Sec.  
270.17f-2.
    (3) Fund means an investment company registered under the Act and, 
where the context so requires with respect to a fund that is a unit 
investment trust or a face-amount certificate company, includes the 
fund's trustee.
    (4) Intermediary custodian means any subcustodian that is a 
securities intermediary and is qualified to act as a custodian.
    (5) Officer's instruction means a request or direction to a 
securities depository or its operator, or to a registered transfer 
agent, in the name of the fund by one or more persons authorized by the 
fund's board of directors (or by the fund's trustee, if the fund is a 
unit investment trust or a face-amount certificate company) to give the 
request or direction.
    (6) Securities depository means a clearing corporation that is:
    (i) Registered with the Commission as a clearing agency under 
section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1); or
    (ii) A Federal Reserve Bank or other person authorized to operate 
the federal book entry system described in the regulations of the 
Department of Treasury codified at 31 CFR 357, Subpart B, or book-entry 
systems operated

[[Page 480]]

pursuant to comparable regulations of other federal agencies.

[68 FR 8442, Feb. 20, 2003, as amended at 69 FR 18803, Apr. 9, 2004; 73 
FR 32228, June 5, 2008]



Sec.  270.17f-5  Custody of investment company assets outside the 
United States.

    (a) Definitions. For purposes of this section:
    (1) Eligible Foreign Custodian means an entity that is incorporated 
or organized under the laws of a country other than the United States 
and that is a Qualified Foreign Bank or a majority-owned direct or 
indirect subsidiary of a U.S. Bank or bank-holding company.
    (2) Foreign Assets means any investments (including foreign 
currencies) for which the primary market is outside the United States, 
and any cash and cash equivalents that are reasonably necessary to 
effect the Fund's transactions in those investments.
    (3) Foreign Custody Manager means a Fund's or a Registered Canadian 
Fund's board of directors or any person serving as the board's delegate 
under paragraphs (b) or (d) of this section.
    (4) Fund means a management investment company registered under the 
Act (15 U.S.C. 80a) and incorporated or organized under the laws of the 
United States or of a state.
    (5) Qualified Foreign Bank means a banking institution or trust 
company, incorporated or organized under the laws of a country other 
than the United States, that is regulated as such by the country's 
government or an agency of the country's government.
    (6) Registered Canadian Fund means a management investment company 
incorporated or organized under the laws of Canada and registered under 
the Act pursuant to the conditions of Sec.  270.7d-1.
    (7) U.S. Bank means an entity that is:
    (i) A banking institution organized under the laws of the United 
States;
    (ii) A member bank of the Federal Reserve System;
    (iii) Any other banking institution or trust company organized under 
the laws of any state or of the United States, whether incorporated or 
not, doing business under the laws of any state or of the United States, 
a substantial portion of the business of which consists of receiving 
deposits or exercising fiduciary powers similar to those permitted to 
national banks under the authority of the Comptroller of the Currency, 
and which is supervised and examined by state or federal authority 
having supervision over banks, and which is not operated for the purpose 
of evading the provisions of this section; or
    (iv) A receiver, conservator, or other liquidating agent of any 
institution or firm included in paragraphs (a)(7)(i), (ii), or (iii) of 
this section.
    (b) Delegation. A Fund's board of directors may delegate to the 
Fund's investment adviser or officers or to a U.S. Bank or to a 
Qualified Foreign Bank the responsibilities set forth in paragraphs 
(c)(1), (c)(2), or (c)(3) of this section, provided that:
    (1) Reasonable Reliance. The board determines that it is reasonable 
to rely on the delegate to perform the delegated responsibilities;
    (2) Reporting. The board requires the delegate to provide written 
reports notifying the board of the placement of Foreign Assets with a 
particular custodian and of any material change in the Fund's foreign 
custody arrangements, with the reports to be provided to the board at 
such times as the board deems reasonable and appropriate based on the 
circumstances of the Fund's arrangements; and
    (3) Exercise of Care. The delegate agrees to exercise reasonable 
care, prudence and diligence such as a person having responsibility for 
the safekeeping of the Fund's Foreign Assets would exercise, or to 
adhere to a higher standard of care, in performing the delegated 
responsibilities.
    (c) Maintaining Assets with an Eligible Foreign Custodian. A Fund or 
its Foreign Custody Manager may place and maintain the Fund's Foreign 
Assets in the care of an Eligible Foreign Custodian, provided that:
    (1) General Standard. The Foreign Custody Manager determines that 
the Foreign Assets will be subject to reasonable care, based on the 
standards applicable to custodians in the relevant

[[Page 481]]

market, if maintained with the Eligible Foreign Custodian, after 
considering all factors relevant to the safekeeping of the Foreign 
Assets, including, without limitation:
    (i) The Eligible Foreign Custodian's practices, procedures, and 
internal controls, including, but not limited to, the physical 
protections available for certificated securities (if applicable), the 
method of keeping custodial records, and the security and data 
protection practices;
    (ii) Whether the Eligible Foreign Custodian has the requisite 
financial strength to provide reasonable care for Foreign Assets;
    (iii) The Eligible Foreign Custodian's general reputation and 
standing; and
    (iv) Whether the Fund will have jurisdiction over and be able to 
enforce judgments against the Eligible Foreign Custodian, such as by 
virtue of the existence of offices in the United States or consent to 
service of process in the United States.
    (2) Contract. The arrangement with the Eligible Foreign Custodian is 
governed by a written contract that the Foreign Custody Manager has 
determined will provide reasonable care for Foreign Assets based on the 
standards specified in paragraph (c)(1) of this section.
    (i) The contract must provide:
    (A) For indemnification or insurance arrangements (or any 
combination) that will adequately protect the Fund against the risk of 
loss of Foreign Assets held in accordance with the contract;
    (B) That the Foreign Assets will not be subject to any right, 
charge, security interest, lien or claim of any kind in favor of the 
Eligible Foreign Custodian or its creditors, except a claim of payment 
for their safe custody or administration or, in the case of cash 
deposits, liens or rights in favor of creditors of the custodian arising 
under bankruptcy, insolvency, or similar laws;
    (C) That beneficial ownership of the Foreign Assets will be freely 
transferable without the payment of money or value other than for safe 
custody or administration;
    (D) That adequate records will be maintained identifying the Foreign 
Assets as belonging to the Fund or as being held by a third party for 
the benefit of the Fund;
    (E) That the Fund's independent public accountants will be given 
access to those records or confirmation of the contents of those 
records; and
    (F) That the Fund will receive periodic reports with respect to the 
safekeeping of the Foreign Assets, including, but not limited to, 
notification of any transfer to or from the Fund's account or a third 
party account containing assets held for the benefit of the Fund.
    (ii) The contract may contain, in lieu of any or all of the 
provisions specified in paragraph (c)(2)(i) of this section, other 
provisions that the Foreign Custody Manager determines will provide, in 
their entirety, the same or a greater level of care and protection for 
the Foreign Assets as the specified provisions, in their entirety.
    (3)(i) Monitoring the Foreign Custody Arrangements. The Foreign 
Custody Manager has established a system to monitor the appropriateness 
of maintaining the Foreign Assets with a particular custodian under 
paragraph (c)(1) of this section, and to monitor performance of the 
contract under paragraph (c)(2) of this section.
    (ii) If an arrangement with an Eligible Foreign Custodian no longer 
meets the requirements of this section, the Fund must withdraw the 
Foreign Assets from the Eligible Foreign Custodian as soon as reasonably 
practicable.
    (d) Registered Canadian Funds. Any Registered Canadian Fund may 
place and maintain its Foreign Assets outside the United States in 
accordance with the requirements of this section, provided
    (1) The Foreign Assets are placed in the care of an overseas branch 
of a U.S. Bank that has aggregate capital, surplus, and undivided 
profits of a specified amount, which must not be less than $500,000; and
    (2) The Foreign Custody Manager is the Fund's board of directors, 
its investment adviser or officers, or a U.S. Bank.

    Note to Sec.  270.17f-5: When a Fund's (or its custodian's) custody 
arrangement with an Eligible Securities Depository (as defined in

[[Page 482]]

Sec.  270.17f-7) involves one or more Eligible Foreign Custodians 
through which assets are maintained with the Eligible Securities 
Depository, Sec.  270.17f-5 will govern the Fund's (or its custodian's) 
use of each Eligible Foreign Custodian, while Sec.  270.17f-7 will 
govern an Eligible Foreign Custodian's use of the Eligible Securities 
Depository.

[65 FR 25637, May 3, 2000]



Sec.  270.17f-6  Custody of investment company assets with Futures
Commission Merchants and Commodity Clearing Organizations.

    (a) A Fund may place and maintain cash, securities, and similar 
investments with a Futures Commission Merchant in amounts necessary to 
effect the Fund's transactions in Exchange-Traded Futures Contracts and 
Commodity Options, Provided that:
    (1) The manner in which the Futures Commission Merchant maintains 
the Fund's assets shall be governed by a written contract, which 
provides that:
    (i) The Futures Commission Merchant shall comply with the 
segregation requirements of section 4d(2) of the Commodity Exchange Act 
(7 U.S.C. 6d(2)) and the rules thereunder (17 CFR Chapter I) or, if 
applicable, the secured amount requirements of rule 30.7 under the 
Commodity Exchange Act (17 CFR 30.7);
    (ii) The Futures Commission Merchant, as appropriate to the Fund's 
transactions and in accordance with the Commodity Exchange Act (7 U.S.C. 
1 through 25) and the rules and regulations thereunder (including 17 CFR 
part 30), may place and maintain the Fund's assets to effect the Fund's 
transactions with another Futures Commission Merchant, a Clearing 
Organization, a U.S. or Foreign Bank, or a member of a foreign board of 
trade, and shall obtain an acknowledgment, as required under rules 
1.20(a) or 30.7(c) under the Commodity Exchange Act [17 CFR 1.20(a) or 
30.7(c)], as applicable, that such assets are held on behalf of the 
Futures Commission Merchant's customers in accordance with the 
provisions of the Commodity Exchange Act; and
    (iii) The Futures Commission Merchant shall promptly furnish copies 
of or extracts from the Futures Commission Merchant's records or such 
other information pertaining to the Fund's assets as the Commission 
through its employees or agents may request.
    (2) Any gains on the Fund's transactions, other than de minimis 
amounts, may be maintained with the Futures Commission Merchant only 
until the next business day following receipt.
    (3) If the custodial arrangement no longer meets the requirements of 
this section, the Fund shall withdraw its assets from the Futures 
Commission Merchant as soon as reasonably practicable.
    (b) For purposes of this section:
    (1) Clearing Organization means a clearing organization as defined 
in rule 1.3(d) under the Commodity Exchange Act (17 CFR 1.3(d)) and 
includes a clearing organization for a foreign board of trade.
    (2) Exchange-Traded Futures Contracts and Commodity Options means 
commodity futures contracts, options on commodity futures contracts, and 
options on physical commodities traded on or subject to the rules of:
    (i) Any contract market designated for trading such transactions 
under the Commodity Exchange Act and the rules thereunder; or
    (ii) Any board of trade or exchange outside the United States, as 
contemplated in Part 30 under the Commodity Exchange Act.
    (3) Fund means an investment company registered under the Act (15 
U.S.C. 80a-1 et seq.).
    (4) Futures Commission Merchant means any person that is registered 
as a futures commission merchant under the Commodity Exchange Act and 
that is not an affiliated person of the Fund or an affiliated person of 
such person.
    (5) U.S. or Foreign Bank means a bank, as defined in section 2(a)(5) 
of the Act (15 U.S.C. 80a-2(a)(5)), or a banking institution or trust 
company that is incorporated or organized under the laws of a country 
other than the United States and that is regulated as such by the 
country's government or an agency thereof.

[61 FR 66212, Dec. 17, 1996]

[[Page 483]]



Sec.  270.17f-7  Custody of investment company assets with a foreign
securities depository.

    (a) Custody arrangement with an eligible securities depository. A 
Fund, including a Registered Canadian Fund, may place and maintain its 
Foreign Assets with an Eligible Securities Depository, provided that:
    (1) Risk-limiting safeguards. The custody arrangement provides 
reasonable safeguards against the custody risks associated with 
maintaining assets with the Eligible Securities Depository, including:
    (i) Risk analysis and monitoring. (A) The fund or its investment 
adviser has received from the Primary Custodian (or its agent) an 
analysis of the custody risks associated with maintaining assets with 
the Eligible Securities Depository; and
    (B) The contract between the Fund and the Primary Custodian requires 
the Primary Custodian (or its agent) to monitor the custody risks 
associated with maintaining assets with the Eligible Securities 
Depository on a continuing basis, and promptly notify the Fund or its 
investment adviser of any material change in these risks.
    (ii) Exercise of care. The contract between the Fund and the Primary 
Custodian states that the Primary Custodian will agree to exercise 
reasonable care, prudence, and diligence in performing the requirements 
of paragraphs (a)(1)(i)(A) and (B) of this section, or adhere to a 
higher standard of care.
    (2) Withdrawal of assets from eligible securities depository. If a 
custody arrangement with an Eligible Securities Depository no longer 
meets the requirements of this section, the Fund's Foreign Assets must 
be withdrawn from the depository as soon as reasonably practicable.
    (b) Definitions. The terms Foreign Assets, Fund, Qualified Foreign 
Bank, Registered Canadian Fund, and U.S. Bank have the same meanings as 
in Sec.  270.17f-5. In addition:
    (1) Eligible Securities Depository means a system for the central 
handling of securities as defined in Sec.  270.17f-4 that:
    (i) Acts as or operates a system for the central handling of 
securities or equivalent book-entries in the country where it is 
incorporated, or a transnational system for the central handling of 
securities or equivalent book-entries;
    (ii) Is regulated by a foreign financial regulatory authority as 
defined under section 2(a)(50) of the Act (15 U.S.C. 80a-2(a)(50));
    (iii) Holds assets for the custodian that participates in the system 
on behalf of the Fund under safekeeping conditions no less favorable 
than the conditions that apply to other participants;
    (iv) Maintains records that identify the assets of each participant 
and segregate the system's own assets from the assets of participants;
    (v) Provides periodic reports to its participants with respect to 
its safekeeping of assets, including notices of transfers to or from any 
participant's account; and
    (vi) Is subject to periodic examination by regulatory authorities or 
independent accountants.
    (2) Primary Custodian means a U.S. Bank or Qualified Foreign Bank 
that contracts directly with a Fund to provide custodial services 
related to maintaining the Fund's assets outside the United States.

    Note to Sec.  270.17f-7: When a Fund's (or its custodian's) custody 
arrangement with an Eligible Securities Depository involves one or more 
Eligible Foreign Custodians (as defined in Sec.  270.17f-5) through 
which assets are maintained with the Eligible Securities Depository, 
Sec.  270.17f-5 will govern the Fund's (or its custodian's) use of each 
Eligible Foreign Custodian, while Sec.  270.17f-7 will govern an 
Eligible Foreign Custodian's use of the Eligible Securities Depository.

[65 FR 25638, May 3, 2000]



Sec.  270.17g-1  Bonding of officers and employees of registered management
investment companies.

    (a) Each registered management investment company shall provide and 
maintain a bond which shall be issued by a reputable fidelity insurance 
company, authorized to do business in the place where the bond is 
issued, against larceny and embezzlement, covering each officer and 
employee of the investment company, who may singly, or jointly with 
others, have access to securities or funds of the investment company, 
either directly or through

[[Page 484]]

authority to draw upon such funds or to direct generally the disposition 
of such securities, unless the officer or employee has such access 
solely through his position as an officer or employee of a bank 
(hereinafter referred to as ``covered persons'').
    (b) The bond may be in the form of (1) an individual bond for each 
covered person or a schedule or blanket bond covering such persons, (2) 
a blanket bond which names the registered management investment company 
as the only insured (hereinafter referred to as ``single insured bond'') 
or (3) a bond which names the registered management investment company 
and one or more other parties as insureds (hereinafter referred to as a 
``joint insured bond''), such other insured parties being limited to (i) 
persons engaged in the management or distribution of the shares of the 
registered investment company, (ii) other registered investment 
companies which are managed and/or whose shares are distributed by the 
same persons (or affiliates of such persons), (iii) persons who are 
engaged in the management and/or distribution of shares of companies 
included in paragraph (b)(3)(i) of this section, (iv) affiliated persons 
of any registered management investment company named in the bond or of 
any person included in paragraph (b)(3)(i) or (b)(3)(iii) of this 
section who are engaged in the administration of any registered 
management investment company named as insured in the bond, and (v) any 
trust, pension, profit-sharing or other benefit plan for officers, 
directors or employees of persons named in the bond.
    (c) A bond of the type described in paragraph (b)(1) or (b)(2) of 
this section shall provide that it shall not be cancelled, terminated or 
modified except after written notice shall have been given by the acting 
party to the affected party and to the Commission not less than sixty 
days prior to the effective date of cancellation, termination or 
modification. A joint insured bond described in paragraph (b)(3) of this 
section shall provide, that (1) it shall not be cancelled terminated or 
modified except after written notice shall have been given by the acting 
party to the affected party, and by the fidelity insurance company to 
all registered investment companies named as insureds and to the 
Commission, not less than sixty days prior to the effective date of 
cancellation, termination, or modification and (2) the fidelity 
insurance company shall furnish each registered management investment 
company named as an insured with (i) a copy of the bond and any 
amendment thereto promptly after the execution thereof, (ii) a copy of 
each formal filing of a claim under the bond by any other named insured 
promptly after the receipt thereof, and (iii) notification of the terms 
of the settlement of each such claim prior to the execution of the 
settlement.
    (d) The bond shall be in such reasonable form and amount as a 
majority of the board of directors of the registered management 
investment company who are not ``interested persons'' of such investment 
company as defined by section 2(a)(19) of the Act shall approve as often 
as their fiduciary duties require, but not less than once every twelve 
months, with due consideration to all relevant factors including, but 
not limited to, the value of the aggregate assets of the registered 
management investment company to which any covered person may have 
access, the type and terms of the arrangements made for the custody and 
safekeeping of such assets, and the nature of the securities in the 
company's portfolio: Provided, however, That (1) the amount of a single 
insured bond shall be at least equal to an amount computed in accordance 
with the following schedule:

------------------------------------------------------------------------
Amount of registered management investment
  company gross assets--at the end of the    Minimum amount of bond (in
 most recent fiscal quarter prior to date             dollars)
               (in dollars)
------------------------------------------------------------------------
Up to 500,000.............................  50,000.
500,000 to 1,000,000......................  75,000.
1,000,000 to 2,500,000....................  100,000.
2,500,000 to 5,000,000....................  125,000.
5,000,000 to 7,500,000....................  150,000.
7,500,000 to 10,000,000...................  175,000.
10,000,000 to 15,000,000..................  200,000.
15,000,000 to 20,000,000..................  225,000.
20,000,000 to 25,000,000..................  250,000.
25,000,000 to 35,000,000..................  300,000.
35,000,000 to 50,000,000..................  350,000.
50,000,000 to 75,000,000..................  400,000.
75,000,000, to 100,000,000................  450,000.
100,000,000 to 150,000,000................  525,000.
150,000,000 to 250,000,000................  600,000.
250,000,000 to 500,000,000................  750,000.
500,000,000 to 750,000,000................  900,000.
750,000,000 to 1,000,000,000..............  1,000,000.

[[Page 485]]

 
1,000,000,000 to 1,500,000,000............  1,250,000.
1,500,000,000 to 2,000,000,000............  1,500,000.
Over 2,000,000,000........................  1,500,000 plus 200,000 for
                                             each 500,000,000 of gross
                                             assets up to a maximum bond
                                             of 2,500,000.
------------------------------------------------------------------------

    (2) A joint insured bond shall be in an amount at least equal to the 
sum of (i) the total amount of coverage which each registered management 
investment company named as an insured would have been required to 
provide and maintain individually pursuant to the schedule hereinabove 
had each such registered management investment company not been named 
under a joint insured bond, plus (ii) the amount of each bond which each 
named insured other than a registered management investment company 
would have been required to provide and maintain pursuant to federal 
statutes or regulations had it not been named as an insured under a 
joint insured bond.
    (e) No premium may be paid for any joint insured bond or any 
amendment thereto unless a majority of the board of directors of each 
registered management investment company named as an insured therein who 
are not ``interested persons'' of such company shall approve the portion 
of the premium to be paid by such company, taking all relevant factors 
into consideration including, but not limited to, the number of the 
other parties named as insured, the nature of the business activities of 
such other parties, the amount of the joint insured bond, and the amount 
of the premium for such bond, the ratable allocation of the premium 
among all parties named as insureds, and the extent to which the share 
of the premium allocated to the investment company is less than the 
premium such company would have had to pay if it had provided and 
maintained a single insured bond.
    (f) Each registered management investment company named as an 
insured in a joint insured bond shall enter into an agreement with all 
of the other named insureds providing that in the event recovery is 
received under the bond as a result of a loss sustained by the 
registered management investment company and one or more other named 
insureds, the registered management investment company shall receive an 
equitable and proportionate share of the recovery, but at least equal to 
the amount which it would have received had it provided and maintained a 
single insured bond with the minimum coverage required by paragraph 
(d)(1) of this section.
    (g) Each registered management investment company shall:
    (1) File with the Commission (i) within 10 days after receipt of an 
executed bond of the type described in paragraph (b)(1) or (2) of this 
section or any amendment thereof, (a) a copy of the bond, (b) a copy of 
the resolution of a majority of the board of directors who are not 
``interested persons'' of the registered management investment company 
approving the form and amount of the bond, and (c) a statement as to the 
period for which premiums have been paid; (ii) within 10 days after 
receipt of an executed joint insured bond, or any amendment thereof, (a) 
a copy of the bond, (b) a copy of the resolution of a majority of the 
board of directors who are not ``interested persons'' of the registered 
management investment company approving the amount, type, form and 
coverage of the bond and the portion of the premium to be paid by such 
company, (c) a statement showing the amount of the single insured bond 
which the investment company would have provided and maintained had it 
not been named as an insured under a joint insured bond, (d) a statement 
as to the period for which premiums have been paid, and (e) a copy of 
each agreement between the investment company and all of the other named 
insureds entered into pursuant to paragraph (f) of this section; and 
(iii) a copy of any amendment to the agreement entered into pursuant to 
paragraph (f) of this section within 10 days after the execution of such 
amendment,
    (2) File with the Commission, in writing, within five days after the 
making of any claim under the bond by the investment company, a 
statement of the nature and amount of the claim,

[[Page 486]]

    (3) File with the Commission, within five days of the receipt 
thereof, a copy of the terms of the settlement of any claim made under 
the bond by the investment company, and
    (4) Notify by registered mail each member of the board of directors 
of the investment company at his last known residence address of (i) any 
cancellation, termination or modification of the bond, not less than 
forty-five days prior to the effective date of the cancellation or 
termination or modification, (ii) the filing and of the settlement of 
any claim under the bond by the investment company, at the time the 
filings required by paragraph (g) (2) and (3) of this section are made 
with the Commission, and (iii) the filing and of the proposed terms of 
settlement of any claim under the bond by any other named insured, 
within five days of the receipt of a notice from the fidelity insurance 
company.
    (h) Each registered management investment company shall designate an 
officer thereof who shall make the filings and give the notices required 
by paragraph (g) of this section.
    (i) Where the registered management investment company is an 
unincorporated company managed by a depositor, trustee or investment 
adviser, the terms ``officer'' and ``employee'' shall include, for the 
purposes of this rule, the officers and employees of the depositor, 
trustee, or investment adviser.
    (j) Any joint insured bond provided and maintained by a registered 
management investment company and one or more other parties shall be a 
transaction exempt from the provisions of section 17(d) of the Act (15 
U.S.C. 80a-17(d)) and the rules thereunder, if:
    (1) The terms and provisions of the bond comply with the provisions 
of this section;
    (2) The terms and provisions of any agreement required by paragraph 
(f) of this section comply with the provisions of that paragraph; and
    (3) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7).
    (k) At the next anniversary date of an existing fidelity bond, but 
not later than one year from the effective date of this rule, 
arrangements between registered management investment companies and 
fidelity insurance companies and arrangements between registered 
management investment companies and other parties named as insureds 
under joint insured bonds which would not permit compliance with the 
provisions of this rule shall be modified by the parties so as to effect 
such compliance.

[39 FR 10579, Mar. 21, 1974, as amended at 66 FR 3759, Jan. 16, 2001; 69 
FR 46390, Aug. 2, 2004]



Sec.  270.17j-1  Personal investment activities of investment company
personnel.

    (a) Definitions. For purposes of this section:
    (1) Access person means:
    (i) Any Advisory Person of a Fund or of a Fund's investment adviser. 
If an investment adviser's primary business is advising Funds or other 
advisory clients, all of the investment adviser's directors, officers, 
and general partners are presumed to be Access Persons of any Fund 
advised by the investment adviser. All of a Fund's directors, officers, 
and general partners are presumed to be Access Persons of the Fund.
    (ii) Any director, officer or general partner of a principal 
underwriter who, in the ordinary course of business, makes, participates 
in or obtains information regarding, the purchase or sale of Covered 
Securities by the Fund for which the principal underwriter acts, or 
whose functions or duties in the ordinary course of business relate to 
the making of any recommendation to the Fund regarding the purchase or 
sale of Covered Securities.
    (2) Advisory person of a Fund or of a Fund's investment adviser 
means:
    (i) Any director, officer, general partner or employee of the Fund 
or investment adviser (or of any company in a control relationship to 
the Fund or investment adviser) who, in connection with his or her 
regular functions or duties, makes, participates in, or obtains 
information regarding, the purchase or sale of Covered Securities by a 
Fund, or whose functions relate to the making of any recommendations 
with respect to such purchases or sales; and

[[Page 487]]

    (ii) Any natural person in a control relationship to the Fund or 
investment adviser who obtains information concerning recommendations 
made to the Fund with regard to the purchase or sale of Covered 
Securities by the Fund.
    (3) Control has the same meaning as in section 2(a)(9) of the Act 
[15 U.S.C. 80a-2(a)(9)].
    (4) Covered security means a security as defined in section 2(a)(36) 
of the Act [15 U.S.C. 80a-2(a)(36)], except that it does not include:
    (i) Direct obligations of the Government of the United States;
    (ii) Bankers' acceptances, bank certificates of deposit, commercial 
paper and high quality short-term debt instruments, including repurchase 
agreements; and
    (iii) Shares issued by open-end Funds.
    (5) Fund means an investment company registered under the Investment 
Company Act.
    (6) An Initial public offering means an offering of securities 
registered under the Securities Act of 1933 [15 U.S.C. 77a], the issuer 
of which, immediately before the registration, was not subject to the 
reporting requirements of sections 13 or 15(d) of the Securities 
Exchange Act of 1934 [15 U.S.C. 78m or 78o(d)].
    (7) Investment personnel of a Fund or of a Fund's investment adviser 
means:
    (i) Any employee of the Fund or investment adviser (or of any 
company in a control relationship to the Fund or investment adviser) 
who, in connection with his or her regular functions or duties, makes or 
participates in making recommendations regarding the purchase or sale of 
securities by the Fund.
    (ii) Any natural person who controls the Fund or investment adviser 
and who obtains information concerning recommendations made to the Fund 
regarding the purchase or sale of securities by the Fund.
    (8) A Limited offering means an offering that is exempt from 
registration under the Securities Act of 1933 pursuant to section 
4(a)(2) or section 4(a)(5) [15 U.S.C. 77d(a)(2) or 77d(a)(5)] or 
pursuant to rule 504, or rule 506 [17 CFR 230.504 or 230.506] under the 
Securities Act of 1933.
    (9) Purchase or sale of a covered security includes, among other 
things, the writing of an option to purchase or sell a Covered Security.
    (10) Security held or to be acquired by a Fund means:
    (i) Any Covered Security which, within the most recent 15 days:
    (A) Is or has been held by the Fund; or
    (B) Is being or has been considered by the Fund or its investment 
adviser for purchase by the Fund; and
    (ii) Any option to purchase or sell, and any security convertible 
into or exchangeable for, a Covered Security described in paragraph 
(a)(10)(i) of this section.
    (11) Automatic investment plan means a program in which regular 
periodic purchases (or withdrawals) are made automatically in (or from) 
investment accounts in accordance with a predetermined schedule and 
allocation. An Automatic Investment Plan includes a dividend 
reinvestment plan.
    (b) Unlawful actions. It is unlawful for any affiliated person of or 
principal underwriter for a Fund, or any affiliated person of an 
investment adviser of or principal underwriter for a Fund, in connection 
with the purchase or sale, directly or indirectly, by the person of a 
Security Held or to be Acquired by the Fund:
    (1) To employ any device, scheme or artifice to defraud the Fund;
    (2) To make any untrue statement of a material fact to the Fund or 
omit to state a material fact necessary in order to make the statements 
made to the Fund, in light of the circumstances under which they are 
made, not misleading;
    (3) To engage in any act, practice or course of business that 
operates or would operate as a fraud or deceit on the Fund; or
    (4) To engage in any manipulative practice with respect to the Fund.
    (c) Code of Ethics--(1) Adoption and approval of Code of Ethics. (i) 
Every Fund (other than a money market fund or a Fund that does not 
invest in Covered Securities) and each investment adviser of and 
principal underwriter for the Fund, must adopt a written code of ethics 
containing provisions reasonably necessary to prevent its Access Persons 
from engaging in any conduct

[[Page 488]]

prohibited by paragraph (b) of this section.
    (ii) The board of directors of a Fund, including a majority of 
directors who are not interested persons, must approve the code of 
ethics of the Fund, the code of ethics of each investment adviser and 
principal underwriter of the Fund, and any material changes to these 
codes. The board must base its approval of a code and any material 
changes to the code on a determination that the code contains provisions 
reasonably necessary to prevent Access Persons from engaging in any 
conduct prohibited by paragraph (b) of this section. Before approving a 
code of a Fund, investment adviser or principal underwriter or any 
amendment to the code, the board of directors must receive a 
certification from the Fund, investment adviser or principal underwriter 
that it has adopted procedures reasonably necessary to prevent Access 
Persons from violating the Fund's, investment adviser's, or principal 
underwriter's code of ethics. The Fund's board must approve the code of 
an investment adviser or principal underwriter before initially 
retaining the services of the investment adviser or principal 
underwriter. The Fund's board must approve a material change to a code 
no later than six months after adoption of the material change.
    (iii) If a Fund is a unit investment trust, the Fund's principal 
underwriter or depositor must approve the Fund's code of ethics, as 
required by paragraph (c)(1)(ii) of this section. If the Fund has more 
than one principal underwriter or depositor, the principal underwriters 
and depositors may designate, in writing, which principal underwriter or 
depositor must conduct the approval required by paragraph (c)(1)(ii) of 
this section, if they obtain written consent from the designated 
principal underwriter or depositor.
    (2) Administration of Code of Ethics. (i) The Fund, investment 
adviser and principal underwriter must use reasonable diligence and 
institute procedures reasonably necessary to prevent violations of its 
code of ethics.
    (ii) No less frequently than annually, every Fund (other than a unit 
investment trust) and its investment advisers and principal underwriters 
must furnish to the Fund's board of directors, and the board of 
directors must consider, a written report that:
    (A) Describes any issues arising under the code of ethics or 
procedures since the last report to the board of directors, including, 
but not limited to, information about material violations of the code or 
procedures and sanctions imposed in response to the material violations; 
and
    (B) Certifies that the Fund, investment adviser or principal 
underwriter, as applicable, has adopted procedures reasonably necessary 
to prevent Access Persons from violating the code.
    (3) Exception for principal underwriters. The requirements of 
paragraphs (c)(1) and (c)(2) of this section do not apply to any 
principal underwriter unless:
    (i) The principal underwriter is an affiliated person of the Fund or 
of the Fund's investment adviser; or
    (ii) An officer, director or general partner of the principal 
underwriter serves as an officer, director or general partner of the 
Fund or of the Fund's investment adviser.
    (d) Reporting requirements of access persons--(1) Reports required. 
Unless excepted by paragraph (d)(2) of this section, every Access Person 
of a Fund (other than a money market fund or a Fund that does not invest 
in Covered Securities) and every Access Person of an investment adviser 
of or principal underwriter for the Fund, must report to that Fund, 
investment adviser or principal underwriter:
    (i) Initial holdings reports. No later than 10 days after the person 
becomes an Access Person (which information must be current as of a date 
no more than 45 days prior to the date the person becomes an Access 
Person):
    (A) The title, number of shares and principal amount of each Covered 
Security in which the Access Person had any direct or indirect 
beneficial ownership when the person became an Access Person;
    (B) The name of any broker, dealer or bank with whom the Access 
Person maintained an account in which any securities were held for the 
direct or indirect benefit of the Access Person as of the date the 
person became an Access Person; and

[[Page 489]]

    (C) The date that the report is submitted by the Access Person.
    (ii) Quarterly transaction reports. No later than 30 days after the 
end of a calendar quarter, the following information:
    (A) With respect to any transaction during the quarter in a Covered 
Security in which the Access Person had any direct or indirect 
beneficial ownership:
    (1) The date of the transaction, the title, the interest rate and 
maturity date (if applicable), the number of shares and the principal 
amount of each Covered Security involved;
    (2) The nature of the transaction (i.e., purchase, sale or any other 
type of acquisition or disposition);
    (3) The price of the Covered Security at which the transaction was 
effected;
    (4) The name of the broker, dealer or bank with or through which the 
transaction was effected; and
    (5) The date that the report is submitted by the Access Person.
    (B) With respect to any account established by the Access Person in 
which any securities were held during the quarter for the direct or 
indirect benefit of the Access Person:
    (1) The name of the broker, dealer or bank with whom the Access 
Person established the account;
    (2) The date the account was established; and
    (3) The date that the report is submitted by the Access Person.
    (iii) Annual Holdings Reports. Annually, the following information 
(which information must be current as of a date no more than 45 days 
before the report is submitted):
    (A) The title, number of shares and principal amount of each Covered 
Security in which the Access Person had any direct or indirect 
beneficial ownership;
    (B) The name of any broker, dealer or bank with whom the Access 
Person maintains an account in which any securities are held for the 
direct or indirect benefit of the Access Person; and
    (C) The date that the report is submitted by the Access Person.
    (2) Exceptions from reporting requirements. (i) A person need not 
make a report under paragraph (d)(1) of this section with respect to 
transactions effected for, and Covered Securities held in, any account 
over which the person has no direct or indirect influence or control.
    (ii) A director of a Fund who is not an ``interested person'' of the 
Fund within the meaning of section 2(a)(19) of the Act [15 U.S.C. 80a-
2(a)(19)], and who would be required to make a report solely by reason 
of being a Fund director, need not make:
    (A) An initial holdings report under paragraph (d)(1)(i) of this 
section and an annual holdings report under paragraph (d)(1)(iii) of 
this section; and
    (B) A quarterly transaction report under paragraph (d)(1)(ii) of 
this section, unless the director knew or, in the ordinary course of 
fulfilling his or her official duties as a Fund director, should have 
known that during the 15-day period immediately before or after the 
director's transaction in a Covered Security, the Fund purchased or sold 
the Covered Security, or the Fund or its investment adviser considered 
purchasing or selling the Covered Security.
    (iii) An Access Person to a Fund's principal underwriter need not 
make a report to the principal underwriter under paragraph (d)(1) of 
this section if:
    (A) The principal underwriter is not an affiliated person of the 
Fund (unless the Fund is a unit investment trust) or any investment 
adviser of the Fund; and
    (B) The principal underwriter has no officer, director or general 
partner who serves as an officer, director or general partner of the 
Fund or of any investment adviser of the Fund.
    (iv) An Access Person to an investment adviser need not make a 
separate report to the investment adviser under paragraph (d)(1) of this 
section to the extent the information in the report would duplicate 
information required to be recorded under Sec.  275.204-2(a)(13) of this 
chapter.
    (v) An Access Person need not make a quarterly transaction report 
under paragraph (d)(1)(ii) of this section if the report would duplicate 
information contained in broker trade confirmations or account 
statements received by the Fund, investment adviser or principal 
underwriter with respect to

[[Page 490]]

the Access Person in the time period required by paragraph (d)(1)(ii), 
if all of the information required by that paragraph is contained in the 
broker trade confirmations or account statements, or in the records of 
the Fund, investment adviser or principal underwriter.
    (vi) An Access Person need not make a quarterly transaction report 
under paragraph (d)(1)(ii) of this section with respect to transactions 
effected pursuant to an Automatic Investment Plan.
    (3) Review of reports. Each Fund, investment adviser and principal 
underwriter to which reports are required to be made by paragraph (d)(1) 
of this section must institute procedures by which appropriate 
management or compliance personnel review these reports.
    (4) Notification of reporting obligation. Each Fund, investment 
adviser and principal underwriter to which reports are required to be 
made by paragraph (d)(1) of this section must identify all Access 
Persons who are required to make these reports and must inform those 
Access Persons of their reporting obligation.
    (5) Beneficial ownership. For purposes of this section, beneficial 
ownership is interpreted in the same manner as it would be under Sec.  
240.16a-1(a)(2) of this chapter in determining whether a person is the 
beneficial owner of a security for purposes of section 16 of the 
Securities Exchange Act of 1934 [15 U.S.C. 78p] and the rules and 
regulations thereunder. Any report required by paragraph (d) of this 
section may contain a statement that the report will not be construed as 
an admission that the person making the report has any direct or 
indirect beneficial ownership in the Covered Security to which the 
report relates.
    (e) Pre-approval of investments in IPOs and limited offerings. 
Investment Personnel of a Fund or its investment adviser must obtain 
approval from the Fund or the Fund's investment adviser before directly 
or indirectly acquiring beneficial ownership in any securities in an 
Initial Public Offering or in a Limited Offering.
    (f) Recordkeeping Requirements. (1) Each Fund, investment adviser 
and principal underwriter that is required to adopt a code of ethics or 
to which reports are required to be made by Access Persons must, at its 
principal place of business, maintain records in the manner and to the 
extent set out in this paragraph (f), and must make these records 
available to the Commission or any representative of the Commission at 
any time and from time to time for reasonable periodic, special or other 
examination:
    (A) A copy of each code of ethics for the organization that is in 
effect, or at any time within the past five years was in effect, must be 
maintained in an easily accessible place;
    (B) A record of any violation of the code of ethics, and of any 
action taken as a result of the violation, must be maintained in an 
easily accessible place for at least five years after the end of the 
fiscal year in which the violation occurs;
    (C) A copy of each report made by an Access Person as required by 
this section, including any information provided in lieu of the reports 
under paragraph (d)(2)(v) of this section, must be maintained for at 
least five years after the end of the fiscal year in which the report is 
made or the information is provided, the first two years in an easily 
accessible place;
    (D) A record of all persons, currently or within the past five 
years, who are or were required to make reports under paragraph (d) of 
this section, or who are or were responsible for reviewing these 
reports, must be maintained in an easily accessible place; and
    (E) A copy of each report required by paragraph (c)(2)(ii) of this 
section must be maintained for at least five years after the end of the 
fiscal year in which it is made, the first two years in an easily 
accessible place.
    (2) A Fund or investment adviser must maintain a record of any 
decision, and the reasons supporting the decision, to approve the 
acquisition by investment personnel of securities under paragraph (e), 
for at least five years after the end of the fiscal year in which the 
approval is granted.

[64 FR 46834, Aug. 27, 1999; 65 FR 12943, Mar. 10, 2000, as amended at 
69 FR 41707, July 9, 2004; 76 FR 81806, Dec. 29, 2011; 81 FR 83554, Nov. 
21, 2016]

[[Page 491]]



Sec.  270.18c-1  Exemption of privately held indebtedness.

    The issuance or sale of more than one class of senior securities 
representing indebtedness by a small business investment company, 
licensed under the Small Business Investment Act of 1958, shall not be 
prohibited by section 18(c) so long as such small business investment 
company does not have outstanding any publicly held indebtedness, and 
all securities of any such class are (a) privately held by the Small 
Business Administration, or banks, insurance companies or other 
institutional investors, (b) not intended to be publicly distributed, 
and (c) not convertible into, exchangeable for, or accompanied by any 
option to acquire, any equity security.

[26 FR 11240, Nov. 29, 1961]



Sec.  270.18c-2  Exemptions of certain debentures issued by small
business investment companies.

    (a) The issuance or sale of any class of senior security 
representing indebtedness by a small business investment company 
licensed under the Small Business Investment Act of 1958 shall not be 
prohibited by section 18(c) of the Act provided such senior security 
representing indebtedness is (1) not convertible into, exchangeable for, 
or accompanied by an option to acquire any equity security; (2) fully 
guaranteed as to timely payment of all principal and interest by the 
Small Business Administration and backed by the full faith and credit of 
the United States; and (3) subordinated to any other debt securities not 
issued pursuant to this section or, if such security is not so 
subordinated, that such security, according to its own terms, will not 
be preferred over any other unsecured debt securities in the payment of 
principal and interest: And further provided, That all other debt 
securities then outstanding issued by such small business investment 
company were issued as permitted by Sec.  270.18c-1 or this section.
    (b) Any security issued and sold as permitted by paragraph (a) of 
this section shall be deemed for purposes of Sec.  270.18c-1 to be 
privately held by the Small Business Administration and for purposes of 
Sec.  270.18c-1 shall not be deemed to be publicly held outstanding 
indebtedness.
    (c) The issuance or sale of any security as permitted by paragraph 
(a) of this section shall not be deemed to be a sale to any person other 
than the Small Business Administration by any small business investment 
company licensed under the Small Business Investment Company Act of 1958 
which is exempt from any provision of the Investment Company Act, if 
such exemption is conditioned on such company not offering or selling 
its securities to any person other than the Small Business 
Administration.

(Secs. 6(c), 38(a), 54 Stat. 800, 841, 15 U.S.C. 80a-6(c), 80a-37(a))

[37 FR 7590, Apr. 18, 1972]



Sec.  270.18f-1  Exemption from certain requirements of section 18(f)(1)
(of the Act) for registered open-end investment companies which have the 
right to redeem in kind.

    (a) A registered open-end investment company which has the right to 
redeem securities of which it is the issuer in assets other than cash 
may file with the Commission at any time a notification of election on 
Form N-18F-1 (Sec.  274.51 of this chapter) committing itself to pay in 
cash all requests for redemption by any shareholder of record, limited 
in amount with respect to each shareholder during any 90-day period to 
the lesser of
    (1) $250,000 or
    (2) 1 percent of the net asset value of such company at the 
beginning of such period.
    (b) An election pursuant to paragraph (a) of this section:
    (1) Shall be described in either the prospectus or the Statement of 
Additional Information, at the discretion of the investment company, and
    (2) Shall be irrevocable while this Sec.  270.18f-1 is in effect 
unless the Commission by order upon application permits the withdrawal 
of such notification of election as being appropriate in the public 
interest and consistent with the protection of investors.
    (c) Upon making the election described in paragraph (a) of this 
section, an investment company shall be exempt from the requirements of 
section

[[Page 492]]

18(f)(1) (of the Act) to the extent necessary for such company to 
effectuate redemptions in the manner set forth in such paragraph.

(Secs. 7, 10, and 19 of the Securities Act of 1933 (15 U.S.C. 77g, 77j, 
and 77s) and secs. 8, 30 and 38 of the Investment Company Act of 1940 
(15 U.S.C. 80a-8, 80a-29 and 80a-37))

[36 FR 11919, June 23, 1971, as amended at 48 FR 37940, Aug. 22, 1983]



Sec.  270.18f-2  Fair and equitable treatment for holders of each class
or series of stock of series investment companies.

    (a) For purposes of this Sec.  270.18f-2 a series company is a 
registered open-end investment company which, in accordance with the 
provisions of section 18(f)(2) of the Act, issues two or more classes or 
series of preferred or special stock each of which is preferred over all 
other classes or series in respect of assets specifically allocated to 
that class or series. Any matter required to be submitted by the 
provisions of the Act or of applicable State law, or otherwise, to the 
holders of the outstanding voting securities of a series company shall 
not be deemed to have been effectively acted upon less approved by the 
holders of a majority of the outstanding voting securities of each class 
or series of stock affected by such matter.
    (b) For the purposes of paragraph (a) of this Sec.  270.18f-2, a 
class or series of stock will be deemed to be affected by such a matter, 
unless (1) the interests of each class or series in the matter are 
substantially identical, or (2) the matter does not affect any interest 
of such class or series.
    (c)(1) With respect to the submission of an investment advisory 
contract to the holders of the outstanding voting securities of a series 
company for the approval required by section 15(a) of the Act, such 
matter shall be deemed to be effectively acted upon with respect to any 
class or series of securities of such company if a majority of the 
outstanding voting securities of such class or series vote for the 
approval of such matter, notwithstanding (i) that such matter has not 
been approved by the holders of a majority of the outstanding voting 
securities of any other class or series affected by such matter, and 
(ii) that such matter has not been approved by the vote of a majority of 
the outstanding voting securities of such company, provided that if such 
a majority is required by State law or otherwise, such requirement shall 
apply.
    (2) If any class or series of securities of a series company fails 
to approve an investment advisory contract in the manner required by 
paragraph (c)(1) of this section, the investment adviser of such company 
may continue to serve or act in such capacity for the period of time 
pending such required approval of such contract, of a new contract with 
the same or different adviser, or other definitive action: Provided, 
That the compensation received by such investment adviser during such 
period is equal to no more than its actual costs incurred in furnishing 
investment advisory services to such class or series or the amount it 
would have received under the advisory contract, whichever is less.
    (d) With respect to the submission of a change in investment policy 
to the holders of the outstanding voting securities of a series company 
for the approval required by section 13 of the Act, such matter shall be 
deemed to have been effectively acted upon with respect to any class or 
series of such company if a majority of the outstanding voting 
securities of such class or series vote for the approval of such matter, 
notwithstanding (1) that such matter has not been approved by the 
holders of a majority of the outstanding voting securities of any other 
class or series affected by such matter, and (2) that such matter has 
not been approved by the vote of a majority of the outstanding voting 
securities of such company: Provided, That if such a majority is 
required by State law or otherwise, such requirement shall apply.
    (e) The submission to shareholders of the selection of the 
independent public accountant of a series company required by section 
32(a) (of the Act) shall be exempt from the separate voting requirements 
of paragraph (a) of this Sec.  270.18f-2.
    (f) The submission to shareholders of a contract with a principal 
underwriter of a series company required by section

[[Page 493]]

15(b) of the Act shall be exempt from the separate voting requirements 
of paragraph (a) of this Sec.  270.18f-2.
    (g) The submission to shareholders of nominees for election as 
directors required by section 16(a) of the Act shall be exempt from the 
separate voting requirements of paragraph (a) of this Sec.  270.18f-2.
    (h) For the purposes of this Sec.  270.18f-2 a ``majority of the 
outstanding voting securities'' of a class or series, (1) when used with 
respect to a matter required by any provision of the Act to be submitted 
to the outstanding voting securities of a series company, shall have the 
same meaning as a ``majority of the outstanding voting securities of a 
company'' as defined in section 2(a)(42) of the Act; and (2) when used 
with respect to any other matter required to be submitted to the 
outstanding voting securities of a series company, shall mean the lesser 
of (i) the minimum vote of the outstanding voting securities of a 
company required by applicable State law or other applicable 
requirement, or (ii) the minimum vote specified by paragraph (1) of this 
paragraph (h), unless State law requires approval of such matters by a 
specified percentage of the outstanding voting securities of a 
particular class or series, in which case, State law shall apply.

(Secs. 6(c), 13, 15(a), 15(b), 16(a), 18(f)(2), 32(a), 54 Stat. 800, 
811, 812, 813, 817, 838, 841, 15 U.S.C. 80a-6(c), 80a-13, 80a-15(b), 
80a-16(a), 80a-18(f)(2), 80a-31(a), 80a-37(a), Pub. L. 91-547, 84 Stat. 
1421)

[37 FR 17386, Aug. 26, 1972]



Sec.  270.18f-3  Multiple class companies.

    Notwithstanding sections 18(f)(1) and 18(i) of the Act (15 U.S.C. 
80a-18(f)(1) and (i), respectively), a registered open-end management 
investment company or series or class thereof established in accordance 
with section 18(f)(2) of the Act (15 U.S.C. 80a-18(f)(2)) whose shares 
are registered on Form N-1A [Sec. Sec.  239.15A and 274.11A of this 
chapter] (``company'') may issue more than one class of voting stock, 
provided that:
    (a) Each class:
    (1)(i) Shall have a different arrangement for shareholder services 
or the distribution of securities or both, and shall pay all of the 
expenses of that arrangement;
    (ii) May pay a different share of other expenses, not including 
advisory or custodial fees or other expenses related to the management 
of the company's assets, if these expenses are actually incurred in a 
different amount by that class, or if the class receives services of a 
different kind or to a different degree than other classes; and
    (iii) May pay a different advisory fee to the extent that any 
difference in amount paid is the result of the application of the same 
performance fee provisions in the advisory contract of the company to 
the different investment performance of each class;
    (2) Shall have exclusive voting rights on any matter submitted to 
shareholders that relates solely to its arrangement;
    (3) Shall have separate voting rights on any matter submitted to 
shareholders in which the interests of one class differ from the 
interests of any other class; and
    (4) Shall have in all other respects the same rights and obligations 
as each other class.
    (b) Expenses may be waived or reimbursed by the company's adviser, 
underwriter, or any other provider of services to the company.
    (c)(1) Income, realized gains and losses, unrealized appreciation 
and depreciation, and Fundwide Expenses shall be allocated based on one 
of the following methods (which method shall be applied on a consistent 
basis):
    (i) To each class based on the net assets of that class in relation 
to the net assets of the company (``relative net assets'');
    (ii) To each class based on the Simultaneous Equations Method;
    (iii) To each class based on the Settled Shares Method, provided 
that the company is a Daily Dividend Fund (such a company may allocate 
income and Fundwide Expenses based on the Settled Shares Method and 
realized gains and losses and unrealized appreciation and depreciation 
based on relative net assets);
    (iv) To each share without regard to class, provided that the 
company is a Daily Dividend Fund that maintains the same net asset value 
per share in

[[Page 494]]

each class; that the company has received undertakings from its adviser, 
underwriter, or any other provider of services to the company, agreeing 
to waive or reimburse the company for payments to such service provider 
by one or more classes, as allocated under paragraph (a)(1) of this 
section, to the extent necessary to assure that all classes of the 
company maintain the same net asset value per share; and that payments 
waived or reimbursed under such an undertaking may not be carried 
forward or recouped at a future date; or
    (v) To each class based on any other appropriate method, provided 
that a majority of the directors of the company, and a majority of the 
directors who are not interested persons of the company, determine that 
the method is fair to the shareholders of each class and that the 
annualized rate of return of each class will generally differ from that 
of the other classes only by the expense differentials among the 
classes.
    (2) For purposes of this section:
    (i) Daily Dividend Fund means any company that has a policy of 
declaring distributions of net income daily, including any money market 
fund that operates in compliance with Sec.  270.2a-7;
    (ii) Fundwide Expenses means expenses of the company not allocated 
to a particular class under paragraph (a)(1) of this section;
    (iii) The Settled Shares Method means allocating to each class based 
on relative net assets, excluding the value of subscriptions receivable; 
and
    (iv) The Simultaneous Equations Method means the simultaneous 
allocation to each class of each day's income, realized gains and 
losses, unrealized appreciation and depreciation, and Fundwide Expenses 
and reallocation to each class of undistributed net investment income, 
undistributed realized gains or losses, and unrealized appreciation or 
depreciation, based on the operating results of the company, changes in 
ownership interests of each class, and expense differentials between the 
classes, so that the annualized rate of return of each class generally 
differs from that of the other classes only by the expense differentials 
among the classes.
    (d) Any payments made under paragraph (a) of this section shall be 
made pursuant to a written plan setting forth the separate arrangement 
and expense allocation of each class, and any related conversion 
features or exchange privileges. Before the first issuance of a share of 
any class in reliance upon this section, and before any material 
amendment of a plan, a majority of the directors of the company, and a 
majority of the directors who are not interested persons of the company, 
shall find that the plan as proposed to be adopted or amended, including 
the expense allocation, is in the best interests of each class 
individually and the company as a whole; initial board approval of a 
plan under this paragraph (d) is not required, however, if the plan does 
not make any change in the arrangements and expense allocations 
previously approved by the board under an existing order of exemption. 
Before any vote on the plan, the directors shall request and evaluate, 
and any agreement relating to a class arrangement shall require the 
parties thereto to furnish, such information as may be reasonably 
necessary to evaluate the plan.
    (e) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7).
    (f) Nothing in this section prohibits a company from offering any 
class with:
    (1) An exchange privilege providing that securities of the class may 
be exchanged for certain securities of another company; or
    (2) A conversion feature providing that shares of one class of the 
company (the ``purchase class'') will be exchanged automatically for 
shares of another class of the company (the ``target class'') after a 
specified period of time, provided that:
    (i) The conversion is effected on the basis of the relative net 
asset values of the two classes without the imposition of any sales 
load, fee, or other charge;
    (ii) The expenses, including payments authorized under a plan 
adopted pursuant to Sec.  270.12b-1 (``rule 12b-1 plan''), for the 
target class are not higher than the expenses, including payments 
authorized under a rule 12b-1 plan, for the purchase class; and

[[Page 495]]

    (iii) If the shareholders of the target class approve any increase 
in expenses allocated to the target class under paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section, and the purchase class shareholders do not 
approve the increase, the company will establish a new target class for 
the purchase class on the same terms as applied to the target class 
before that increase.
    (3) A conversion feature providing that shares of a class in which 
an investor is no longer eligible to participate may be converted to 
shares of a class in which that investor is eligible to participate, 
provided that:
    (i) The investor is given prior notice of the proposed conversion; 
and
    (ii) The conversion is effected on the basis of the relative net 
asset values of the two classes without the imposition of any sales 
load, fee, or other charge.

[60 FR 11885, Mar. 2, 1995, as amended at 62 FR 51765, Oct. 3, 1997; 66 
FR 3759, Jan. 16, 2001; 69 FR 46390, Aug. 2, 2004; 79 FR 47967, Aug. 14, 
2014]



Sec.  270.18f-4  Exemption from the requirements of section 18 and
section 61 for certain senior securities transactions.

    (a) Definitions. For purposes of this section:
    Absolute VaR test means that the VaR of the fund's portfolio does 
not exceed 20% of the value of the fund's net assets, or in the case of 
a closed-end company that has issued to investors and has then 
outstanding shares of a class of senior security that is a stock, that 
the VaR of the fund's portfolio does not exceed 25% of the value of the 
fund's net assets.
    Derivatives exposure means the sum of the gross notional amounts of 
the fund's derivatives transactions described in paragraph (1) of the 
definition of the term ``derivatives transaction'' of this section, and 
in the case of short sale borrowings, the value of the assets sold 
short. If a fund's derivatives transactions include reverse repurchase 
agreements or similar financing transactions under paragraph (d)(1)(ii) 
of this section, the fund's derivatives exposure also includes, for each 
transaction, the proceeds received but not yet repaid or returned, or 
for which the associated liability has not been extinguished, in 
connection with the transaction. In determining derivatives exposure a 
fund may convert the notional amount of interest rate derivatives to 10-
year bond equivalents and delta adjust the notional amounts of options 
contracts and exclude any closed-out positions, if those positions were 
closed out with the same counterparty and result in no credit or market 
exposure to the fund.
    Derivatives risk manager means an officer or officers of the fund's 
investment adviser responsible for administering the program and 
policies and procedures required by paragraph (c)(1) of this section, 
provided that the derivatives risk manager:
    (1) May not be a portfolio manager of the fund, or if multiple 
officers serve as derivatives risk manager, may not have a majority 
composed of portfolio managers of the fund; and
    (2) Must have relevant experience regarding the management of 
derivatives risk.
    Derivatives risks means the risks associated with a fund's 
derivatives transactions or its use of derivatives transactions, 
including leverage, market, counterparty, liquidity, operational, and 
legal risks and any other risks the derivatives risk manager (or, in the 
case of a fund that is a limited derivatives user as described in 
paragraph (c)(4) of this section, the fund's investment adviser) deems 
material.
    Derivatives transaction means:
    (1) Any swap, security-based swap, futures contract, forward 
contract, option, any combination of the foregoing, or any similar 
instrument (``derivatives instrument''), under which a fund is or may be 
required to make any payment or delivery of cash or other assets during 
the life of the instrument or at maturity or early termination, whether 
as margin or settlement payment or otherwise;
    (2) Any short sale borrowing; and
    (3) If a fund relies on paragraph (d)(1)(ii) of this section, any 
reverse repurchase agreement or similar financing transaction.
    Designated index means an unleveraged index that is approved by the 
derivatives risk manager for purposes of the relative VaR test and that 
reflects the markets or asset classes in

[[Page 496]]

which the fund invests and is not administered by an organization that 
is an affiliated person of the fund, its investment adviser, or 
principal underwriter, or created at the request of the fund or its 
investment adviser, unless the index is widely recognized and used. In 
the case of a blended index, none of the indexes that compose the 
blended index may be administered by an organization that is an 
affiliated person of the fund, its investment adviser, or principal 
underwriter, or created at the request of the fund or its investment 
adviser, unless the index is widely recognized and used.
    Designated reference portfolio means a designated index or the 
fund's securities portfolio. Notwithstanding the first sentence of the 
definition of designated index of this section, if the fund's investment 
objective is to track the performance (including a leverage multiple or 
inverse multiple) of an unleveraged index, the fund must use that index 
as its designated reference portfolio.
    Fund means a registered open-end or closed-end company or a business 
development company, including any separate series thereof, but does not 
include a registered open-end company that is regulated as a money 
market fund under Sec.  270.2a-7.
    Leveraged/inverse fund means a fund that seeks, directly or 
indirectly, to provide investment returns that correspond to the 
performance of a market index by a specified multiple (``leverage 
multiple''), or to provide investment returns that have an inverse 
relationship to the performance of a market index (``inverse 
multiple''), over a predetermined period of time.
    Relative VaR test means that the VaR of the fund's portfolio does 
not exceed 200% of the VaR of the designated reference portfolio, or in 
the case of a closed-end company that has issued to investors and has 
then outstanding shares of a class of senior security that is a stock, 
that the VaR of the fund's portfolio does not exceed 250% of the VaR of 
the designated reference portfolio.
    Securities portfolio means the fund's portfolio of securities and 
other investments, excluding any derivatives transactions, that is 
approved by the derivatives risk manager for purposes of the relative 
VaR test, provided that the fund's securities portfolio reflects the 
markets or asset classes in which the fund invests (i.e., the markets or 
asset classes in which the fund invests directly through securities and 
other investments and indirectly through derivatives transactions).
    Unfunded commitment agreement means a contract that is not a 
derivatives transaction, under which a fund commits, conditionally or 
unconditionally, to make a loan to a company or to invest equity in a 
company in the future, including by making a capital commitment to a 
private fund that can be drawn at the discretion of the fund's general 
partner.
    Value-at-risk or VaR means an estimate of potential losses on an 
instrument or portfolio, expressed as a percentage of the value of the 
portfolio's assets (or net assets when computing a fund's VaR), over a 
specified time horizon and at a given confidence level, provided that 
any VaR model used by a fund for purposes of determining the fund's 
compliance with the relative VaR test or the absolute VaR test must:
    (1) Take into account and incorporate all significant, identifiable 
market risk factors associated with a fund's investments, including, as 
applicable:
    (i) Equity price risk, interest rate risk, credit spread risk, 
foreign currency risk and commodity price risk;
    (ii) Material risks arising from the nonlinear price characteristics 
of a fund's investments, including options and positions with embedded 
optionality; and
    (iii) The sensitivity of the market value of the fund's investments 
to changes in volatility;
    (2) Use a 99% confidence level and a time horizon of 20 trading 
days; and
    (3) Be based on at least three years of historical market data.
    (b) Derivatives transactions. If a fund satisfies the conditions of 
paragraph (c) of this section, the fund may enter into derivatives 
transactions, notwithstanding the requirements of sections 18(a)(1), 
18(c), 18(f)(1), and 61 of the Investment Company Act (15 U.S.C. 80a-
18(a)(1), 80a-18(c), 80a-18(f)(1), and 80a-

[[Page 497]]

60), and derivatives transactions entered into by the fund in compliance 
with this section will not be considered for purposes of computing asset 
coverage, as defined in section 18(h) of the Investment Company Act (15 
U.S.C. 80a-18(h)).
    (c) Conditions--(1) Derivatives risk management program. The fund 
adopts and implements a written derivatives risk management program 
(``program''), which must include policies and procedures that are 
reasonably designed to manage the fund's derivatives risks and to 
reasonably segregate the functions associated with the program from the 
portfolio management of the fund. The program must include the following 
elements:
    (i) Risk identification and assessment. The program must provide for 
the identification and assessment of the fund's derivatives risks. This 
assessment must take into account the fund's derivatives transactions 
and other investments.
    (ii) Risk guidelines. The program must provide for the 
establishment, maintenance, and enforcement of investment, risk 
management, or related guidelines that provide for quantitative or 
otherwise measurable criteria, metrics, or thresholds of the fund's 
derivatives risks. These guidelines must specify levels of the given 
criterion, metric, or threshold that the fund does not normally expect 
to exceed, and measures to be taken if they are exceeded.
    (iii) Stress testing. The program must provide for stress testing to 
evaluate potential losses to the fund's portfolio in response to extreme 
but plausible market changes or changes in market risk factors that 
would have a significant adverse effect on the fund's portfolio, taking 
into account correlations of market risk factors and resulting payments 
to derivatives counterparties. The frequency with which the stress 
testing under this paragraph is conducted must take into account the 
fund's strategy and investments and current market conditions, provided 
that these stress tests must be conducted no less frequently than 
weekly.
    (iv) Backtesting. The program must provide for backtesting to be 
conducted no less frequently than weekly, of the results of the VaR 
calculation model used by the fund in connection with the relative VaR 
test or the absolute VaR test by comparing the fund's gain or loss that 
occurred on each business day during the backtesting period with the 
corresponding VaR calculation for that day, estimated over a one-trading 
day time horizon, and identifying as an exception any instance in which 
the fund experiences a loss exceeding the corresponding VaR 
calculation's estimated loss.
    (v) Internal reporting and escalation--(A) Internal reporting. The 
program must identify the circumstances under which persons responsible 
for portfolio management will be informed regarding the operation of the 
program, including exceedances of the guidelines specified in paragraph 
(c)(1)(ii) of this section and the results of the stress tests specified 
in paragraph (c)(1)(iii) of this section.
    (B) Escalation of material risks. The derivatives risk manager must 
inform in a timely manner persons responsible for portfolio management 
of the fund, and also directly inform the fund's board of directors as 
appropriate, of material risks arising from the fund's derivatives 
transactions, including risks identified by the fund's exceedance of a 
criterion, metric, or threshold provided for in the fund's risk 
guidelines established under paragraph (c)(1)(ii) of this section or by 
the stress testing described in paragraph (c)(1)(iii) of this section.
    (vi) Periodic review of the program. The derivatives risk manager 
must review the program at least annually to evaluate the program's 
effectiveness and to reflect changes in risk over time. The periodic 
review must include a review of the VaR calculation model used by the 
fund under paragraph (c)(2) of this section (including the backtesting 
required by paragraph (c)(1)(iv) of this section) and any designated 
reference portfolio to evaluate whether it remains appropriate.
    (2) Limit on fund leverage risk. (i) The fund must comply with the 
relative VaR test unless the derivatives risk manager reasonably 
determines that a designated reference portfolio would not provide an 
appropriate reference portfolio for purposes of the relative VaR test, 
taking into account the

[[Page 498]]

fund's investments, investment objectives, and strategy. A fund that 
does not apply the relative VaR test must comply with the absolute VaR 
test.
    (ii) The fund must determine its compliance with the applicable VaR 
test at least once each business day. If the fund determines that it is 
not in compliance with the applicable VaR test, the fund must come back 
into compliance promptly after such determination, in a manner that is 
in the best interests of the fund and its shareholders.
    (iii) If the fund is not in compliance with the applicable VaR test 
within five business days:
    (A) The derivatives risk manager must provide a written report to 
the fund's board of directors and explain how and by when (i.e., number 
of business days) the derivatives risk manager reasonably expects that 
the fund will come back into compliance;
    (B) The derivatives risk manager must analyze the circumstances that 
caused the fund to be out of compliance for more than five business days 
and update any program elements as appropriate to address those 
circumstances; and
    (C) The derivatives risk manager must provide a written report 
within thirty calendar days of the exceedance to the fund's board of 
directors explaining how the fund came back into compliance and the 
results of the analysis and updates required under paragraph 
(c)(2)(iii)(B) of this section. If the fund remains out of compliance 
with the applicable VaR test at that time, the derivatives risk 
manager's written report must update the report previously provided 
under paragraph (c)(2)(iii)(A) of this section and the derivatives risk 
manager must update the board of directors on the fund's progress in 
coming back into compliance at regularly scheduled intervals at a 
frequency determined by the board.
    (3) Board oversight and reporting--(i) Approval of the derivatives 
risk manager. A fund's board of directors, including a majority of 
directors who are not interested persons of the fund, must approve the 
designation of the derivatives risk manager.
    (ii) Reporting on program implementation and effectiveness. On or 
before the implementation of the program, and at least annually 
thereafter, the derivatives risk manager must provide to the board of 
directors a written report providing a representation that the program 
is reasonably designed to manage the fund's derivatives risks and to 
incorporate the elements provided in paragraphs (c)(1)(i) through (vi) 
of this section. The representation may be based on the derivatives risk 
manager's reasonable belief after due inquiry. The written report must 
include the basis for the representation along with such information as 
may be reasonably necessary to evaluate the adequacy of the fund's 
program and, for reports following the program's initial implementation, 
the effectiveness of its implementation. The written report also must 
include, as applicable, the derivatives risk manager's basis for the 
approval of any designated reference portfolio or any change in the 
designated reference portfolio during the period covered by the report; 
or an explanation of the basis for the derivatives risk manager's 
determination that a designated reference portfolio would not provide an 
appropriate reference portfolio for purposes of the relative VaR test.
    (iii) Regular board reporting. The derivatives risk manager must 
provide to the board of directors, at a frequency determined by the 
board, a written report regarding the derivatives risk manager's 
analysis of exceedances described in paragraph (c)(1)(ii) of this 
section, the results of the stress testing conducted under paragraph 
(c)(1)(iii) of this section, and the results of the backtesting 
conducted under paragraph (c)(1)(iv) of this section since the last 
report to the board. Each report under this paragraph must include such 
information as may be reasonably necessary for the board of directors to 
evaluate the fund's response to exceedances and the results of the 
fund's stress testing.
    (4) Limited derivatives users. (i) A fund is not required to adopt a 
program as prescribed in paragraph (c)(1) of this section, comply with 
the limit on fund leverage risk in paragraph (c)(2) of this section, or 
comply with the board oversight and reporting requirements as

[[Page 499]]

prescribed in paragraph (c)(3) of this section, if:
    (A) The fund adopts and implements written policies and procedures 
reasonably designed to manage the fund's derivatives risk; and
    (B) The fund's derivatives exposure does not exceed 10 percent of 
the fund's net assets, excluding, for this purpose, currency or interest 
rate derivatives that hedge currency or interest rate risks associated 
with one or more specific equity or fixed-income investments held by the 
fund (which must be foreign-currency-denominated in the case of currency 
derivatives), or the fund's borrowings, provided that the currency or 
interest rate derivatives are entered into and maintained by the fund 
for hedging purposes and that the notional amounts of such derivatives 
do not exceed the value of the hedged investments (or the par value 
thereof, in the case of fixed-income investments, or the principal 
amount, in the case of borrowing) by more than 10 percent.
    (ii) If a fund's derivatives exposure exceeds 10 percent of its net 
assets, as calculated in accordance with paragraph (c)(4)(i)(B) of this 
section, and the fund is not in compliance with that paragraph within 
five business days, the fund's investment adviser must provide a written 
report to the fund's board of directors informing them whether the 
investment adviser intends either:
    (A) To reduce the fund's derivatives exposure to less than 10 
percent of the fund's net assets promptly, but within no more than 
thirty calendar days of the exceedance, in a manner that is in the best 
interests of the fund and its shareholders; or
    (B) For the fund to establish a program as prescribed in paragraph 
(c)(1) of this section, comply with the limit on fund leverage risk in 
paragraph (c)(2) of this section, and comply with the board oversight 
and reporting requirements as prescribed in paragraph (c)(3) of this 
section, as soon as reasonably practicable.
    (5) Leveraged/inverse funds. A leveraged/inverse fund that cannot 
comply with the limit on fund leverage risk in paragraph (c) of this 
section is not required to comply with the limit on fund leverage risk 
if, in addition to complying with all other applicable requirements of 
this section:
    (i) As of October 28, 2020, the fund is in operation; has 
outstanding shares issued in one or more public offerings to investors; 
and discloses in its prospectus a leverage multiple or inverse multiple 
that exceeds 200% of the performance or the inverse of the performance 
of the underlying index;
    (ii) The fund does not change the underlying market index or 
increase the level of leveraged or inverse market exposure the fund 
seeks, directly or indirectly, to provide; and
    (iii) The fund discloses in its prospectus that it is not subject to 
the limit on fund leverage risk in paragraph (c)(2) of this section.
    (6) Recordkeeping--(i) Records to be maintained. A fund must 
maintain a written record documenting, as applicable:
    (A) The fund's written policies and procedures required by paragraph 
(c)(1) of this section, along with:
    (1) The results of the fund's stress tests under paragraph 
(c)(1)(iii) of this section;
    (2) The results of the backtesting conducted under paragraph 
(c)(1)(iv) of this section;
    (3) Records documenting any internal reporting or escalation of 
material risks under paragraph (c)(1)(v)(B) of this section; and
    (4) Records documenting the reviews conducted under paragraph 
(c)(1)(vi) of this section.
    (B) Copies of any materials provided to the board of directors in 
connection with its approval of the designation of the derivatives risk 
manager, any written reports provided to the board of directors relating 
to the program, and any written reports provided to the board of 
directors under paragraphs (c)(2)(iii)(A) and (C) of this section.
    (C) Any determination and/or action the fund made under paragraphs 
(c)(2)(i) and (ii) of this section, including a fund's determination of: 
The VaR of its portfolio; the VaR of the fund's designated reference 
portfolio, as applicable; the fund's VaR ratio (the value of the VaR of 
the fund's portfolio divided by the VaR of the designated reference 
portfolio), as applicable; and

[[Page 500]]

any updates to any VaR calculation models used by the fund and the basis 
for any material changes thereto.
    (D) If applicable, the fund's written policies and procedures 
required by paragraph (c)(4) of this section, along with copies of any 
written reports provided to the board of directors under paragraph 
(c)(4)(ii) of this section.
    (ii) Retention periods. (A) A fund must maintain a copy of the 
written policies and procedures that the fund adopted under paragraph 
(c)(1) or (4) of this section that are in effect, or at any time within 
the past five years were in effect, in an easily accessible place.
    (B) A fund must maintain all records and materials that paragraphs 
(c)(6)(i)(A)(1) through (4) and (c)(6)(i)(B) through (D) of this section 
describe for a period of not less than five years (the first two years 
in an easily accessible place) following each determination, action, or 
review that these paragraphs describe.
    (7) Current reports. A fund that experiences an event specified in 
the parts of Form N-RN [referenced in 17 CFR 274.223] titled ``Relative 
VaR Test Breaches,'' ``Absolute VaR Test Breaches,'' or ``Compliance 
with VaR Test'' must file with the Commission a report on Form N-RN 
within the period and according to the instructions specified in that 
form.
    (d) Reverse repurchase agreements. (1) A fund may enter into reverse 
repurchase agreements or similar financing transactions, notwithstanding 
the requirements of sections 18(c) and 18(f)(1) of the Investment 
Company Act, if the fund:
    (i) Complies with the asset coverage requirements of section 18, and 
combines the aggregate amount of indebtedness associated with all 
reverse repurchase agreements or similar financing transactions with the 
aggregate amount of any other senior securities representing 
indebtedness when calculating the asset coverage ratio; or
    (ii) Treats all reverse repurchase agreements or similar financing 
transactions as derivatives transactions for all purposes under this 
section.
    (2) A fund relying on paragraph (d) of this section must maintain a 
written record documenting whether the fund is relying on paragraph 
(d)(1)(i) or (ii) of this section for a period of not less than five 
years (the first two years in an easily accessible place) following the 
determination.
    (e) Unfunded commitment agreements. (1) A fund may enter into an 
unfunded commitment agreement, notwithstanding the requirements of 
sections 18(a), 18(c), 18(f)(1), and 61 of the Investment Company Act, 
if the fund reasonably believes, at the time it enters into such 
agreement, that it will have sufficient cash and cash equivalents to 
meet its obligations with respect to all of its unfunded commitment 
agreements, in each case as they come due. In forming a reasonable 
belief, the fund must take into account its reasonable expectations with 
respect to other obligations (including any obligation with respect to 
senior securities or redemptions), and may not take into account cash 
that may become available from the sale or disposition of any investment 
at a price that deviates significantly from the market value of those 
investments, or from issuing additional equity. Unfunded commitment 
agreements entered into by the fund in compliance with this section will 
not be considered for purposes of computing asset coverage, as defined 
in section 18(h) of the Investment Company Act (15 U.S.C. 80a-18(h)).
    (2) For each unfunded commitment agreement that a fund enters into 
under paragraph (e)(1) of this section, a fund must document the basis 
for its reasonable belief regarding the sufficiency of its cash and cash 
equivalents to meet its unfunded commitment agreement obligations, and 
maintain a record of this documentation for a period of not less than 
five years (the first two years in an easily accessible place) following 
the date that the fund entered into the agreement.
    (f) When issued, forward-settling, and non-standard settlement cycle 
securities transactions. Notwithstanding the requirements of sections 
18(a)(1), 18(c), 18(f)(1), and 61 of the Investment Company Act (15 
U.S.C. 80a-18(a)(1), 80a018(c), 80a-18(f)(1), and 80a-60), a fund or 
registered open-end company that is regulated as a money market

[[Page 501]]

fund under Sec.  270.2a-7 may invest in a security on a when-issued or 
forward-settling basis, or with a non-standard settlement cycle, and the 
transaction will be deemed not to involve a senior security, provided 
that: The fund intends to physically settle the transaction; and the 
transaction will settle within 35 days of its trade date.

[85 FR 83291, Dec. 21, 2020, as amended at 87 FR 22446, Apr. 15, 2022]



Sec.  270.19a-1  Written statement to accompany dividend payments by
management companies.

    (a) Every written statement made pursuant to section 19 by or on 
behalf of a management company shall be made on a separate paper and 
shall clearly indicate what portion of the payment per share is made 
from the following sources:
    (1) Net income for the current or preceding fiscal year, or 
accumulated undistributed net income, or both, not including in either 
case profits or losses from the sale of securities or other properties.
    (2) Accumulated undistributed net profits from the sale of 
securities or other properties (except that an open-end company may 
treat as a separate source its net profits from such sales during its 
current fiscal year).
    (3) Paid-in surplus or other capital source.

To the extent that a payment is properly designated as being made from a 
source specified in paragraph (a) (1) or (2) of this section, it need 
not be designated as having been made from a source specified in this 
paragraph.
    (b) If the payment is made in whole or in part from a source 
specified in paragraph (a)(2) of this section the written statement 
shall indicate, after giving effect to the part of such payment so 
specified, the deficit, if any, in the aggregate of (1) accumulated 
undistributed realized profits less losses on the sale of securities or 
other properties and (2) the net unrealized appreciation or depreciation 
of portfolio securities, all as of a date reasonably close to the end of 
the period as of which the dividend is paid. Any statement made pursuant 
to the preceding sentence shall specify the amount, if any, of such 
deficit which represents unrealized depreciation of portfolio 
securities.
    (c) Accumulated undistributed net income and accumulated 
undistributed net profits from the sale of securities or other 
properties shall be determined, at the option of the company, either (1) 
from the date of the organization of the company, (2) from the date of a 
reorganization, as defined in clause (A) or (B) of section 2(a)(33) of 
the Act (54 Stat. 790; 15 U.S.C. 80a-2(a)(33)), (3) from the date as of 
which a write-down of portfolio securities was made in connection with a 
corporate readjustment, approved by stockholders, of the type known as 
``quasi- reorganization,'' or (4) from January 1, 1925, to the close of 
the period as of which the dividend is paid, without giving effect to 
such payment.
    (d) For the purpose of this section, open-end companies which upon 
the sale of their shares allocate to undistributed income or other 
similar account that portion of the consideration received which 
represents the approximate per share amount of undistributed net income 
included in the sales price, and make a corresponding deduction from 
undistributed net income upon the purchase or redemption of shares, need 
not treat the amounts so allocated as paid-in surplus or other capital 
source.
    (e) For the purpose of this section, the source or sources from 
which a dividend is paid shall be determined (or reasonably estimated) 
to the close of the period as of which it is paid without giving effect 
to such payment. If any such estimate is subsequently ascertained to be 
inaccurate in a significant amount, a correction thereof shall be made 
by a written statement pursuant to section 19(a) of the Act or in the 
first report to stockholders following discovery of the inaccuracy.
    (f) Insofar as a written statement made pursuant to section 19(a) of 
the Act relates to a dividend on preferred stock paid for a period of 
less than a year, a company may elect to indicate only that portion of 
the payment which is made from sources specified in paragraph (a)(1) of 
this section, and need not specify the sources from which the remainder 
was paid. Every company which in any fiscal year

[[Page 502]]

elects to make a statement pursuant to the preceding sentence shall 
transmit to the holders of such preferred stock, at a date reasonably 
near the end of the last dividend period in such fiscal year, a 
statement meeting the requirements of paragraph (a) of this section on 
an annual basis.
    (g) The purpose of this section, in the light of which it shall be 
construed, is to afford security holders adequate disclosure of the 
sources from which dividend payments are made. Nothing in this section 
shall be construed to prohibit the inclusion in any written statement of 
additional information in explanation of the information required by 
this section. Nothing in this section shall be construed to permit a 
dividend payment in violation of any State law or to prevent compliance 
with any requirement of State law regarding dividends consistent with 
this rule.

    Cross Reference: For interpretative release applicable to Sec.  
270.19a-1, see No. 71 in tabulation, part 271 of this chapter.

[Rule N-19-1, 6 FR 1114, Feb. 25, 1941. Redesignated at 36 FR 22901, 
Dec. 2, 1971, and amended at 38 FR 8593, Apr. 4, 1973]



Sec.  270.19b-1  Frequency of distribution of capital gains.

    (a) No registered investment company which is a ``regulated 
investment company'' as defined in section 851 of the Internal Revenue 
Code of 1986 (``Code'') shall distribute more than one capital gain 
dividend (``distribution''), as defined in section 852(b)(3)(C) of the 
Code, with respect to any one taxable year of the company, other than a 
distribution otherwise permitted by this rule or made pursuant to 
section 855 of the Code which is supplemental to the prior distribution 
with respect to the same taxable year of the company and which does not 
exceed 10% of the aggregate amount distributed for such taxable year.
    (b) No registered investment company which is not a ``regulated 
investment company'' as defined in section 851 of the Code shall make 
more than one distribution of long-term capital gains, as defined in the 
Code, in any one taxable year of the company: Provided, That a unit 
investment trust may distribute capital gain dividends received from a 
``regulated investment company'' within a reasonable time after receipt.
    (c) The provisions of this rule shall not apply to a unit investment 
trust (hereinafter referred to as the ``Trust'') engaged exclusively in 
the business of investing in eligible trust securities (as defined in 
Rule 14a-3(b) (17 CFR 270.14a-3(b)) under this Act); Provided, That:
    (1) The capital gain distribution is a result of--
    (i) An issuer's calling or redeeming an eligible trust security held 
by the Trust,
    (ii) The sale of an eligible trust security by the Trust to provide 
funds for redemption of Trust units when the amount received by the 
Trust for such sale exceeds the amount required to satisfy the 
redemption distribution,
    (iii) The sale of an eligible trust security to maintain 
qualification of the Trust as a ``regulated investment company'' under 
section 851 of the Code,
    (iv) Regular distributions of principal and prepayment of principal 
on eligible trust securities, or
    (v) The sale of an eligible trust security in order to maintain the 
investment stability of the Trust; and
    (2) Capital gains distributions are clearly described as such in a 
report to the unitholder which accompanies each such distribution.
    (d) For purposes of paragraph (c) of this section, sales made to 
maintain the investment stability of the Trust means sales made to 
prevent deterioration of the value of the eligible trust securities held 
in the Trust portfolio when one or more of the following factors exist:
    (1) A default in the payment of principal or interest on an eligible 
trust security;
    (2) An action involving the issuer of an eligible trust security 
which adversely affects the ability of such issuer to continue payment 
of principal or interest on its eligible trust securities; or
    (3) A change in market, revenue or credit factors which adversely 
affects the ability of such issuer to continue payment of principal or 
interest on its eligible trust securities.

[[Page 503]]

    (e) If a registered investment company because of unforeseen 
circumstances in a particular taxable year proposes to make a 
distribution which would be prohibited by the provisions of this 
section, it may file a request with the Commission for authorization to 
make such a distribution. Such request shall comply with the 
requirements of Sec.  270.0-2 of this chapter and shall set forth the 
pertinent facts and explain the circumstances which the company believes 
justify such distribution. The request shall be deemed granted unless 
the Commission within 15 days after receipt thereof shall deny such 
request as not being necessary or appropriate in the public interest or 
for the protection of investors and notify the company in writing of 
such denial.
    (f) A registered investment company may make one additional 
distribution of long-term capital gains, as defined in the Code, with 
respect to any one taxable year of the company, which distribution is 
made, in whole or in part, for the purpose of not incurring any tax 
under section 4982 of the Code. Such additional distribution may be made 
prior or subsequent to any distribution otherwise permitted by paragraph 
(a) of this section.

(Secs. 6(c), 19(b) (15 U.S.C. 80a-19(b), and sec. 38(a)))

[36 FR 22901, Dec. 2, 1971, as amended at 44 FR 29647, May 22, 1979; 44 
FR 40064, July 9, 1979; 52 FR 42428, Nov. 5, 1987]



Sec.  270.20a-1  Solicitation of proxies, consents and authorizations.

    (a) No person shall solicit or permit the use of his or her name to 
solicit any proxy, consent, or authorization with respect to any 
security issued by a registered fund, except upon compliance with 
Regulation 14A (Sec.  240.14a-1 of this chapter), Schedule 14A (Sec.  
240.14a-101 of this chapter), and all other rules and regulations 
adopted pursuant to section 14(a) of the Securities Exchange Act of 1934 
that would be applicable to such solicitation if it were made in respect 
of a security registered pursuant to section 12 of the Securities 
Exchange Act of 1934. Unless the solicitation is made in respect of a 
security registered on a national securities exchange, none of the 
soliciting material need be filed with such exchange.
    (b) If the solicitation is made by or on behalf of the management of 
the investment company, then the investment adviser or any prospective 
investment adviser and any affiliated person thereof as to whom 
information is required in the solicitation shall upon request of the 
investment company promptly transmit to the investment company all 
information necessary to enable the management of such company to comply 
with the rules and regulations applicable to such solicitation. If the 
solicitation is made by any person other than the management of the 
investment company, on behalf of and with the consent of the investment 
adviser or prospective investment adviser, then the investment adviser 
or prospective investment adviser and any affiliated person thereof as 
to whom information is required in the solicitation shall upon request 
of the person making the solicitation promptly transmit to such person 
all information necessary to enable such person to comply with the rules 
and regulations applicable to the solicitation.
    Instruction. Registrants that have made a public offering of 
securities and that hold security holder votes for which proxies, 
consents, or authorizations are not being solicited pursuant to the 
requirements of this section should refer to section 14(c) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78n(c)) and the information 
statement requirements set forth in the rules thereunder.

[25 FR 1865, Mar. 3, 1960, as amended at 37 FR 1472, Jan. 29, 1972; 52 
FR 48985, Dec. 29, 1987; 57 FR 1102, Jan. 10, 1992; 59 FR 52700, Oct. 
19, 1994; 87 FR 22446, Apr. 15, 2022]



Sec. Sec.  270.20a-2--270.20a-4  [Reserved]



Sec.  270.22c-1  Pricing of redeemable securities for distribution,
redemption and repurchase.

    (a) No registered investment company issuing any redeemable 
security, no person designated in such issuer's prospectus as authorized 
to consummate transactions in any such security, and no principal 
underwriter of, or dealer in, any such security shall sell, redeem, or 
repurchase any such security except at a price based on the current net 
asset value of such security

[[Page 504]]

which is next computed after receipt of a tender of such security for 
redemption or of an order to purchase or sell such security: Provided, 
That:
    (1) This paragraph shall not prevent a sponsor of a unit investment 
trust (hereinafter referred to as the ``Trust'') engaged exclusively in 
the business of investing in eligible trust securities (as defined in 
Rule 14a-3(b) (17 CFR 270.14a-3(b))) from selling or repurchasing Trust 
units in a secondary market at a price based on the offering side 
evaluation of the eligible trust securities in the Trust's portfolio, 
determined at any time on the last business day of each week, effective 
for all sales made during the following week, if on the days that such 
sales or repurchases are made the sponsor receives a letter from a 
qualified evaluator stating, in its opinion, that:
    (i) In the case of repurchases, the current bid price is not higher 
than the offering side evaluation, computed on the last business day of 
the previous week; and
    (ii) In the case of resales, the offering side evaluation, computed 
as of the last business day of the previous week, is not more than one-
half of one percent ($5.00 on a unit representing $1,000 principal 
amount of eligible trust securities) greater than the current offering 
price.
    (2) This paragraph shall not prevent any registered investment 
company from adjusting the price of its redeemable securities sold 
pursuant to a merger, consolidation or purchase of substantially all of 
the assets of a company which meets the conditions specified in Sec.  
270.17a-8.
    (3) Notwithstanding this paragraph (a), a registered open-end 
management investment company (but not a registered open-end management 
investment company that is regulated as a money market fund under Sec.  
270.2a-7 or an exchange-traded fund as defined in paragraph (a)(3)(v)(A) 
of this section) (a ``fund'') may use swing pricing to adjust its 
current net asset value per share to mitigate dilution of the value of 
its outstanding redeemable securities as a result of shareholder 
purchase or redemption activity, provided that it has established and 
implemented swing pricing policies and procedures in compliance with the 
paragraphs (a)(3)(i) through (v) of this section.
    (i) The fund's swing pricing policies and procedures must:
    (A) Provide that the fund must adjust its net asset value per share 
by a single swing factor or multiple factors that may vary based on the 
swing threshold(s) crossed once the level of net purchases into or net 
redemptions from such fund has exceeded the applicable swing threshold 
for the fund. In determining whether the fund's level of net purchases 
or net redemptions has exceeded the applicable swing threshold(s), the 
person(s) responsible for administering swing pricing shall be permitted 
to make such determination based on receipt of sufficient information 
about the fund investors' daily purchase and redemption activity 
(``investor flow'') to allow the fund to reasonably estimate whether it 
has crossed the swing threshold(s) with high confidence, and shall 
exclude any purchases or redemptions that are made in kind and not in 
cash. This investor flow information may consist of individual, 
aggregated, or netted orders, and may include reasonable estimates where 
necessary.
    (B) Specify the process for how the fund's swing threshold(s) shall 
be determined, considering:
    (1) The size, frequency, and volatility of historical net purchases 
or net redemptions of fund shares during normal and stressed periods;
    (2) The fund's investment strategy and the liquidity of the fund's 
portfolio investments;
    (3) The fund's holdings of cash and cash equivalents, and borrowing 
arrangements and other funding sources; and
    (4) The costs associated with transactions in the markets in which 
the fund invests.
    (C) Specify the process for how the swing factor(s) shall be 
determined, which must include: The establishment of an upper limit on 
the swing factor(s) used, which may not exceed two percent of net asset 
value per share; and the determination that the factor(s) used are 
reasonable in relationship to the costs discussed in this paragraph. In 
determining the swing factor(s) and

[[Page 505]]

the upper limit, the person(s) responsible for administering swing 
pricing may take into account only the near-term costs expected to be 
incurred by the fund as a result of net purchases or net redemptions 
that occur on the day the swing factor(s) is used, including spread 
costs, transaction fees and charges arising from asset purchases or 
asset sales resulting from those purchases or redemptions, and 
borrowing-related costs associated with satisfying redemptions.
    (ii) The fund's board of directors, including a majority of 
directors who are not interested persons of the fund must:
    (A) Approve the fund's swing pricing policies and procedures;
    (B) Approve the fund's swing threshold(s) and the upper limit on the 
swing factor(s) used, and any changes to the swing threshold(s) or the 
upper limit on the swing factor(s) used;
    (C) Designate the fund's investment adviser, officer, or officers 
responsible for administering the swing pricing policies and procedures 
(``person(s) responsible for administering swing pricing''). The 
administration of swing pricing must be reasonably segregated from 
portfolio management of the fund and may not include portfolio managers; 
and
    (D) Review, no less frequently than annually, a written report 
prepared by the person(s) responsible for administering swing pricing 
that describes:
    (1) Its review of the adequacy of the fund's swing pricing policies 
and procedures and the effectiveness of their implementation, including 
the impact on mitigating dilution;
    (2) Any material changes to the fund's swing pricing policies and 
procedures since the date of the last report; and
    (3) Its review and assessment of the fund's swing threshold(s), 
swing factor(s), and swing factor upper limit considering the 
requirements of paragraphs (a)(3)(i)(B) and (C) of this section, 
including the information and data supporting the determination of the 
swing threshold(s), swing factor(s), and swing factor upper limit.
    (iii) The fund shall maintain the policies and procedures adopted by 
the fund under this paragraph (a)(3) that are in effect, or at any time 
within the past six years were in effect, in an easily accessible place, 
and shall maintain a written copy of the report provided to the board 
under paragraph (a)(3)(ii)(C) of this section for six years, the first 
two in an easily accessible place.
    (iv) Any fund (a ``feeder fund'') that invests, pursuant to section 
12(d)(1)(E) of the Act (15 U.S.C. 80a-12(d)(1)(E)), in another fund (a 
``master fund'') may not use swing pricing to adjust the feeder fund's 
net asset value per share; however, a master fund may use swing pricing 
to adjust the master fund's net asset value per share, pursuant to the 
requirements set forth in this paragraph (a)(3).
    (v) For purposes of this paragraph (a)(3):
    (A) Exchange-traded fund means an open-end management investment 
company (or series or class thereof), the shares of which are listed and 
traded on a national securities exchange, and that has formed and 
operates under an exemptive order under the Act granted by the 
Commission or in reliance on an exemptive rule adopted by the 
Commission.
    (B) Swing factor means the amount, expressed as a percentage of the 
fund's net asset value and determined pursuant to the fund's swing 
pricing policies and procedures, by which a fund adjusts its net asset 
value per share once a fund's applicable swing threshold has been 
exceeded.
    (C) Swing pricing means the process of adjusting a fund's current 
net asset value per share to mitigate dilution of the value of its 
outstanding redeemable securities as a result of shareholder purchase 
and redemption activity, pursuant to the requirements set forth in this 
paragraph (a)(3).
    (D) Swing threshold means an amount of net purchases or net 
redemptions, expressed as a percentage of the fund's net asset value, 
that triggers the application of swing pricing.
    (E) Transaction fees and charges means brokerage commissions, 
custody fees, and any other charges, fees, and taxes associated with 
portfolio asset purchases and sales.
    (b) For the purposes of this section,

[[Page 506]]

    (1) The current net asset value of any such security shall be 
computed no less frequently than once daily, Monday through Friday, at 
the specific time or times during the day that the board of directors of 
the investment company sets, in accordance with paragraph (d) of this 
section, except on:
    (i) Days on which changes in the value of the investment company's 
portfolio securities will not materially affect the current net asset 
value of the investment company's redeemable securities;
    (ii) Days during which no security is tendered for redemption and no 
order to purchase or sell such security is received by the investment 
company; or
    (iii) Customary national business holidays described or listed in 
the prospectus and local and regional business holidays listed in the 
prospectus; and
    (2) A ``qualified evaluator'' shall mean any evaluator which 
represents it is in a position to determine, on the basis of an informal 
evaluation of the eligible trust securities held in the Trust's 
portfolio, whether--
    (i) The current bid price is higher than the offering side 
evaluation, computed on the last business day of the previous week, and
    (ii) The offering side evaluation, computed as of the last business 
day of the previous week, is more than one-half of one percent ($5.00 on 
a unit representing $1,000 principal amount of eligible trust 
securities) greater than the current offering price.
    (c) Notwithstanding the provisions above, any registered separate 
account offering variable annuity contracts, any person designated in 
such account's prospectus as authorized to consummate transactions in 
such contracts, and any principal underwriter of or dealer in such 
contracts shall be permitted to apply the initial purchase payment for 
any such contract at a price based on the current net asset value of 
such contract which is next computed:
    (1) Not later than two business days after receipt of the order to 
purchase by the insurance company sponsoring the separate account 
(``insurer''), if the contract application and other information 
necessary for processing the order to purchase (collectively, 
``application'') are complete upon receipt; or
    (2) Not later than two business days after an application which is 
incomplete upon receipt by the insurer is made complete, Provided, That, 
if an incomplete application is not made complete within five business 
days after receipt,
    (i) The prospective purchaser shall be informed of the reasons for 
the delay, and
    (ii) The initial purchase payment shall be returned immediately and 
in full, unless the prospective purchaser specifically consents to the 
insurer retaining the purchase payment until the application is made 
complete.
    (3) As used in this section:
    (i) Prospective Purchaser shall mean either an individual 
contractowner or an individual participant in a group contract.
    (ii) Initial Purchase Payment shall refer to the first purchase 
payment submitted to the insurer by, or on behalf of, a prospective 
purchaser.
    (d) The board of directors shall initially set the time or times 
during the day that the current net asset value shall be computed, and 
shall make and approve such changes as the board deems necessary.

(Secs. 6(c), 22(c) and 38(a), 15 U.S.C. 80a-6(c), 80a-22(c) and 80a-
37(a))

[44 FR 29647, May 22, 1979, as amended at 44 FR 48660, Aug. 20, 1979; 45 
FR 12409, Feb. 26, 1980; 50 FR 7911, Feb. 27, 1985; 50 FR 24763, June 
13, 1985; 50 FR 42682, Oct. 22, 1985; 58 FR 49922, Sept. 24, 1993; 81 FR 
82137, Nov. 18, 2016; 87 FR 22446, Apr. 15, 2022]



Sec.  270.22c-2  Redemption fees for redeemable securities.

    (a) Redemption fee. It is unlawful for any fund issuing redeemable 
securities, its principal underwriter, or any dealer in such securities, 
to redeem a redeemable security issued by the fund within seven calendar 
days after the security was purchased, unless it complies with the 
following requirements:
    (1) Board determination. The fund's board of directors, including a 
majority of directors who are not interested persons of the fund, must 
either:
    (i) Approve a redemption fee, in an amount (but no more than two 
percent of the value of shares redeemed) and on

[[Page 507]]

shares redeemed within a time period (but no less than seven calendar 
days), that in its judgment is necessary or appropriate to recoup for 
the fund the costs it may incur as a result of those redemptions or to 
otherwise eliminate or reduce so far as practicable any dilution of the 
value of the outstanding securities issued by the fund, the proceeds of 
which fee will be retained by the fund; or
    (ii) Determine that imposition of a redemption fee is either not 
necessary or not appropriate.
    (2) Shareholder information. With respect to each financial 
intermediary that submits orders, itself or through its agent, to 
purchase or redeem shares directly to the fund, its principal 
underwriter or transfer agent, or to a registered clearing agency, the 
fund (or on the fund's behalf, the principal underwriter or transfer 
agent) must either:
    (i) Enter into a shareholder information agreement with the 
financial intermediary (or its agent); or
    (ii) Prohibit the financial intermediary from purchasing in nominee 
name on behalf of other persons, securities issued by the fund. For 
purposes of this paragraph, ``purchasing'' does not include the 
automatic reinvestment of dividends.
    (3) Recordkeeping. The fund must maintain a copy of the written 
agreement under paragraph (a)(2)(i) of this section that is in effect, 
or at any time within the past six years was in effect, in an easily 
accessible place.
    (b) Excepted funds. The requirements of paragraph (a) of this 
section do not apply to the following funds, unless they elect to impose 
a redemption fee pursuant to paragraph (a)(1) of this section:
    (1) Money market funds;
    (2) Any fund that issues securities that are listed on a national 
securities exchange; and
    (3) Any fund that affirmatively permits short-term trading of its 
securities, if its prospectus clearly and prominently discloses that the 
fund permits short-term trading of its securities and that such trading 
may result in additional costs for the fund.
    (c) Definitions. For the purposes of this section:
    (1) Financial intermediary means:
    (i) Any broker, dealer, bank, or other person that holds securities 
issued by the fund, in nominee name;
    (ii) A unit investment trust or fund that invests in the fund in 
reliance on section 12(d)(1)(E) of the Act (15 U.S.C. 80a-12(d)(1)(E)); 
and
    (iii) In the case of a participant-directed employee benefit plan 
that owns the securities issued by the fund, a retirement plan's 
administrator under section 3(16)(A) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002(16)(A)) or any person that 
maintains the plan's participant records.
    (iv) Financial intermediary does not include any person that the 
fund treats as an individual investor with respect to the fund's 
policies established for the purpose of eliminating or reducing any 
dilution of the value of the outstanding securities issued by the fund.
    (2) Fund means an open-end management investment company that is 
registered or required to register under section 8 of the Act (15 U.S.C. 
80a-8), and includes a separate series of such an investment company.
    (3) Money market fund means an open-end management investment 
company that is registered under the Act and is regulated as a money 
market fund under Sec.  270.2a-7.
    (4) Shareholder includes a beneficial owner of securities held in 
nominee name, a participant in a participant-directed employee benefit 
plan, and a holder of interests in a fund or unit investment trust that 
has invested in the fund in reliance on section 12(d)(1)(E) of the Act. 
A shareholder does not include a fund investing pursuant to section 
12(d)(1)(G) of the Act (15 U.S.C. 80a-12(d)(1)(G)), a trust established 
pursuant to section 529 of the Internal Revenue Code (26 U.S.C. 529), or 
a holder of an interest in such a trust.
    (5) Shareholder information agreement means a written agreement 
under which a financial intermediary agrees to:
    (i) Provide, promptly upon request by a fund, the Taxpayer 
Identification Number (or in the case of non U.S. shareholders, if the 
Taxpayer Identification Number is unavailable, the International 
Taxpayer Identification Number or other government issued

[[Page 508]]

identifier) of all shareholders who have purchased, redeemed, 
transferred, or exchanged fund shares held through an account with the 
financial intermediary, and the amount and dates of such shareholder 
purchases, redemptions, transfers, and exchanges;
    (ii) Execute any instructions from the fund to restrict or prohibit 
further purchases or exchanges of fund shares by a shareholder who has 
been identified by the fund as having engaged in transactions of fund 
shares (directly or indirectly through the intermediary's account) that 
violate policies established by the fund for the purpose of eliminating 
or reducing any dilution of the value of the outstanding securities 
issued by the fund; and
    (iii) Use best efforts to determine, promptly upon request of the 
fund, whether any specific person about whom it has received the 
identification and transaction information set forth in paragraph 
(c)(5)(i) of this section, is itself a financial intermediary 
(``indirect intermediary'') and, upon further request by the fund:
    (A) Provide (or arrange to have provided) the identification and 
transaction information set forth in paragraph (c)(5)(i) of this section 
regarding shareholders who hold an account with an indirect 
intermediary; or
    (B) Restrict or prohibit the indirect intermediary from purchasing, 
in nominee name on behalf of other persons, securities issued by the 
fund.

[71 FR 58272, Oct. 3, 2006]



Sec.  270.22d-1  Exemption from section 22(d) to permit sales of
redeemable securities at prices which reflect sales loads set pursuant
to a schedule.

    A registered investment company that is the issuer of redeemable 
securities, a principal underwriter of such securities or a dealer 
therein shall be exempt from the provisions of section 22(d) to the 
extent necessary to permit the sale of such securities at prices that 
reflect scheduled variations in, or elimination of, the sales load. 
These price schedules may offer such variations in or elimination of the 
sales load to particular classes of investors or transactions, Provided, 
That:
    (a) The company, the principal underwriter and dealers in the 
company's shares apply any scheduled variation uniformly to all offerees 
in the class specified;
    (b) The company furnishes to existing shareholders and prospective 
investors adequate information concerning any scheduled variation, as 
prescribed in applicable registration statement form requirements;
    (c) Before making any new sales load variation available to 
purchasers of the company's shares, the company revises its prospectus 
and statement of additional information to describe that new variation; 
and
    (d) The company advises existing shareholders of any new sales load 
variation within one year of the date when that variation is first made 
available to purchasers of the company's shares.

(Secs. 6(c) (15 U.S.C. 80a-6(c)) and 38(a) (15 U.S.C. 80a-37(a)))

[50 FR 7911, Feb. 27, 1985]



Sec.  270.22d-2  Exemption from section 22(d) for certain registered
separate accounts.

    A registered separate account, any principal underwriter for such 
account, any dealer in contracts or units of interest or participations 
in such contracts issued by such account and any insurance company 
maintaining such account shall, with respect to any variable annuity 
contracts, units, or participations therein issued by such account, be 
exempted from section 22(d) to the extent necessary to permit the sale 
of such contracts, units or participations by such persons at prices 
which reflect variations in the sales load or in any administrative 
charge or other deductions from the purchase payments; Provided, 
however, That (a) the prospectus discloses as precisely as possible the 
amount of the variations and the circumstances, if any, in which such 
variations shall be available or describes the basis for such variations 
and the manner in which entitlement shall be determined, and (b) any 
such variations reflect differences in costs

[[Page 509]]

or services and are not unfairly discriminatory against any person.

(Secs. 6(c) (15 U.S.C. 80a-6(c)) and 38(a) (15 U.S.C. 80a-37(a)))

[40 FR 33970, Aug. 13, 1975. Redesignated at 50 FR 7911, Feb. 27, 1985]



Sec.  270.22e-1  Exemption from section 22(e) of the Act during annuity
payment period of variable annuity contracts participating in certain 
registered separate accounts.

    (a) A registered separate account, shall during the annuity payment 
period of variable annuity contracts participating in such account, be 
exempt from the provisions of section 22(e) of the Act prohibiting the 
suspension of the right of redemption or postponement of the date of 
payment or satisfaction upon redemption of any redeemable security, with 
respect to such contracts under which payments are being made based upon 
life contingencies.

(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)

[34 FR 12696, Aug. 5, 1969]



Sec.  270.22e-2  Pricing of redemption requests in accordance with 
Rule 22c-1.

    An investment company shall not be deemed to have suspended the 
right of redemption if it prices a redemption request by computing the 
net asset value of the investment company's redeemable securities in 
accordance with the provisions of Rule 22c-1.

[50 FR 24764, June 13, 1985]



Sec.  270.22e-3  Exemption for liquidation of money market funds.

    (a) Exemption. A registered open-end management investment company 
or series thereof (``fund'') that is regulated as a money market fund 
under Sec.  270.2a-7 is exempt from the requirements of section 22(e) of 
the Act (15 U.S.C. 80a-22(e)) if:
    (1) The fund, at the end of a business day, has invested less than 
ten percent of its total assets in weekly liquid assets or, in the case 
of a fund that is a government money market fund, as defined in Sec.  
270.2a-7(a)(14) or a retail money market fund, as defined in Sec.  
270.2a-7(a)(21), the fund's price per share as computed for the purpose 
of distribution, redemption and repurchase, rounded to the nearest one 
percent, has deviated from the stable price established by the board of 
directors or the fund's board of directors, including a majority of 
directors who are not interested persons of the fund, determines that 
such a deviation is likely to occur;
    (2) The fund's board of directors, including a majority of directors 
who are not interested persons of the fund, irrevocably has approved the 
liquidation of the fund; and
    (3) The fund, prior to suspending redemptions, notifies the 
Commission of its decision to liquidate and suspend redemptions by 
electronic mail directed to the attention of the Director of the 
Division of Investment Management or the Director's designee.
    (b) Conduits. Any registered investment company, or series thereof, 
that owns, pursuant to section 12(d)(1)(E) of the Act (15 U.S.C. 80a-
12(d)(1)(E)), shares of a money market fund that has suspended 
redemptions of shares pursuant to paragraph (a) of this section also is 
exempt from the requirements of section 22(e) of the Act (15 U.S.C. 80a-
22(e)). A registered investment company relying on the exemption 
provided in this paragraph must promptly notify the Commission that it 
has suspended redemptions in reliance on this section. Notification 
under this paragraph shall be made by electronic mail directed to the 
attention of the Director of the Division of Investment Management or 
the Director's designee.
    (c) Commission Orders. For the protection of shareholders, the 
Commission may issue an order to rescind or modify the exemption 
provided by this section, after appropriate notice and opportunity for 
hearing in accordance with section 40 of the Act (15 U.S.C. 80a-39).
    (d) Definitions. Each of the terms business day, total assets, and 
weekly liquid assets has the same meaning as defined in Sec.  270.2a-7.

[75 FR 10117, Mar. 4, 2010, as amended at 79 FR 47967, Aug. 14, 2014; 87 
FR 22446, Apr. 15, 2022]

[[Page 510]]



Sec.  270.22e-4  Liquidity risk management programs.

    (a) Definitions. For purposes of this section:
    (1) Acquisition (or acquire) means any purchase or subsequent 
rollover.
    (2) Business day means any day, other than Saturday, Sunday, or any 
customary business holiday.
    (3) Convertible to cash means the ability to be sold, with the sale 
settled.
    (4) Exchange-traded fund or ETF means an open-end management 
investment company (or series or class thereof), the shares of which are 
listed and traded on a national securities exchange, and that has formed 
and operates under an exemptive order under the Act granted by the 
Commission or in reliance on an exemptive rule adopted by the 
Commission.
    (5) Fund means an open-end management investment company that is 
registered or required to register under section 8 of the Act (15 U.S.C. 
80a-8) and includes a separate series of such an investment company, but 
does not include a registered open-end management investment company 
that is regulated as a money market fund under Sec.  270.2a-7 or an In-
Kind ETF.
    (6) Highly liquid investment means any cash held by a fund and any 
investment that the fund reasonably expects to be convertible into cash 
in current market conditions in three business days or less without the 
conversion to cash significantly changing the market value of the 
investment, as determined pursuant to the provisions of paragraph 
(b)(1)(ii) of this section.
    (7) Highly liquid investment minimum means the percentage of the 
fund's net assets that the fund invests in highly liquid investments 
that are assets pursuant to paragraph (b)(1)(iii) of this section.
    (8) Illiquid investment means any investment that the fund 
reasonably expects cannot be sold or disposed of in current market 
conditions in seven calendar days or less without the sale or 
disposition significantly changing the market value of the investment, 
as determined pursuant to the provisions of paragraph (b)(1)(ii) of this 
section.
    (9) In-Kind Exchange Traded Fund or In-Kind ETF means an ETF that 
meets redemptions through in-kind transfers of securities, positions, 
and assets other than a de minimis amount of cash and that publishes its 
portfolio holdings daily.
    (10) Less liquid investment means any investment that the fund 
reasonably expects to be able to sell or dispose of in current market 
conditions in seven calendar days or less without the sale or 
disposition significantly changing the market value of the investment, 
as determined pursuant to the provisions of paragraph (b)(1)(ii) of this 
section, but where the sale or disposition is reasonably expected to 
settle in more than seven calendar days.
    (11) Liquidity risk means the risk that the fund could not meet 
requests to redeem shares issued by the fund without significant 
dilution of remaining investors' interests in the fund.
    (12) Moderately liquid investment means any investment that the fund 
reasonably expects to be convertible into cash in current market 
conditions in more than three calendar days but in seven calendar days 
or less, without the conversion to cash significantly changing the 
market value of the investment, as determined pursuant to the provisions 
of paragraph (b)(1)(ii) of this section.
    (13) Person(s) designated to administer the program means the fund 
or In-Kind ETF's investment adviser, officer, or officers (which may not 
be solely portfolio managers of the fund or In-Kind ETF) responsible for 
administering the program and its policies and procedures pursuant to 
paragraph (b)(2)(ii) of this section.
    (14) Unit Investment Trust or UIT means a unit investment trust as 
defined in section 4(2) of the Act (15 U.S.C. 80a-4).
    (b) Liquidity Risk Management Program. Each fund and In-Kind ETF 
must adopt and implement a written liquidity risk management program 
(``program'') that is reasonably designed to assess and manage its 
liquidity risk.
    (1) Required program elements. The program must include policies and 
procedures reasonably designed to incorporate the following elements:
    (i) Assessment, management, and periodic review of liquidity risk. 
Each fund and In-Kind ETF must assess, manage,

[[Page 511]]

and periodically review (with such review occurring no less frequently 
than annually) its liquidity risk, which must include consideration of 
the following factors, as applicable:
    (A) The fund or In-Kind ETF's investment strategy and liquidity of 
portfolio investments during both normal and reasonably foreseeable 
stressed conditions, including whether the investment strategy is 
appropriate for an open-end fund, the extent to which the strategy 
involves a relatively concentrated portfolio or large positions in 
particular issuers, and the use of borrowings for investment purposes 
and derivatives;
    (B) Short-term and long-term cash flow projections during both 
normal and reasonably foreseeable stressed conditions;
    (C) Holdings of cash and cash equivalents, as well as borrowing 
arrangements and other funding sources; and
    (D) For an ETF:
    (1) The relationship between the ETF's portfolio liquidity and the 
way in which, and the prices and spreads at which, ETF shares trade, 
including, the efficiency of the arbitrage function and the level of 
active participation by market participants (including authorized 
participants); and
    (2) The effect of the composition of baskets on the overall 
liquidity of the ETF's portfolio.
    (ii) Classification. Each fund must, using information obtained 
after reasonable inquiry and taking into account relevant market, 
trading, and investment-specific considerations, classify each of the 
fund's portfolio investments (including each of the fund's derivatives 
transactions) as a highly liquid investment, moderately liquid 
investment, less liquid investment, or illiquid investment. A fund must 
review its portfolio investments' classifications, at least monthly in 
connection with reporting the liquidity classification for each 
portfolio investment on Form N-PORT in accordance with Sec.  270.30b1-9, 
and more frequently if changes in relevant market, trading, and 
investment-specific considerations are reasonably expected to materially 
affect one or more of its investments' classifications.

    Note to paragraph (b)(1)(ii)introductory text: If an investment 
could be viewed as either a highly liquid investment or a moderately 
liquid investment, because the period to convert the investment to cash 
depends on the calendar or business day convention used, a fund should 
classify the investment as a highly liquid investment. For a discussion 
of considerations that may be relevant in classifying the liquidity of 
the fund's portfolio investments, see Investment Company Act Release No. 
IC-32315 (Oct. 13, 2016).

    (A) The fund may generally classify and review its portfolio 
investments (including the fund's derivatives transactions) according to 
their asset class, provided, however, that the fund must separately 
classify and review any investment within an asset class if the fund or 
its adviser has information about any market, trading, or investment-
specific considerations that are reasonably expected to significantly 
affect the liquidity characteristics of that investment as compared to 
the fund's other portfolio holdings within that asset class.
    (B) In classifying and reviewing its portfolio investments or asset 
classes (as applicable), the fund must determine whether trading varying 
portions of a position in a particular portfolio investment or asset 
class, in sizes that the fund would reasonably anticipate trading, is 
reasonably expected to significantly affect its liquidity, and if so, 
the fund must take this determination into account when classifying the 
liquidity of that investment or asset class.
    (C) For derivatives transactions that the fund has classified as 
moderately liquid investments, less liquid investments, and illiquid 
investments, identify the percentage of the fund's highly liquid 
investments that it has pledged as margin or collateral in connection 
with derivatives transactions in each of these classification 
categories.

    Note to paragraph (b)(1)(ii)(C): For purposes of calculating these 
percentages, a fund that has pledged highly liquid investments and non-
highly liquid investments as margin or collateral in connection with 
derivatives transactions classified as moderately liquid, less liquid, 
or illiquid investments first should apply pledged assets that are 
highly liquid investments in connection

[[Page 512]]

with these transactions, unless it has specifically identified non-
highly liquid investments as margin or collateral in connection with 
such derivatives transactions.

    (iii) Highly liquid investment minimum. (A) Any fund that does not 
primarily hold assets that are highly liquid investments must:
    (1) Determine a highly liquid investment minimum, considering the 
factors specified in paragraphs (b)(1)(i)(A) through (D) of this 
section, as applicable (but considering those factors specified in 
paragraphs (b)(1)(i)(A) and (B) only as they apply during normal 
conditions, and during stressed conditions only to the extent they are 
reasonably foreseeable during the period until the next review of the 
highly liquid investment minimum). The highly liquid investment minimum 
determined pursuant to this paragraph may not be changed during any 
period of time that a fund's assets that are highly liquid investments 
are below the determined minimum without approval from the fund's board 
of directors, including a majority of directors who are not interested 
persons of the fund;
    (2) Periodically review, no less frequently than annually, the 
highly liquid investment minimum; and
    (3) Adopt and implement policies and procedures for responding to a 
shortfall of the fund's highly liquid investments below its highly 
liquid investment minimum, which must include requiring the person(s) 
designated to administer the program to report to the fund's board of 
directors no later than its next regularly scheduled meeting with a 
brief explanation of the causes of the shortfall, the extent of the 
shortfall, and any actions taken in response, and if the shortfall lasts 
more than 7 consecutive calendar days, must include requiring the 
person(s) designated to administer the program to report to the board 
within one business day thereafter with an explanation of how the fund 
plans to restore its minimum within a reasonable period of time.
    (B) For purposes of determining whether a fund primarily holds 
assets that are highly liquid investments, a fund must exclude from its 
calculations the percentage of the fund's assets that are highly liquid 
investments that it has pledged as margin or collateral in connection 
with derivatives transactions that the fund has classified as moderately 
liquid investments, less liquid investments, and illiquid investments, 
as determined pursuant to paragraph (b)(1)(ii)(C) of this section.
    (iv) Illiquid investments. No fund or In-Kind ETF may acquire any 
illiquid investment if, immediately after the acquisition, the fund or 
In-Kind ETF would have invested more than 15% of its net assets in 
illiquid investments that are assets. If a fund or In-Kind ETF holds 
more than 15% of its net assets in illiquid investments that are assets:
    (A) It must cause the person(s) designated to administer the program 
to report such an occurrence to the fund's or In-Kind ETF's board of 
directors within one business day of the occurrence, with an explanation 
of the extent and causes of the occurrence, and how the fund or In-Kind 
ETF plans to bring its illiquid investments that are assets to or below 
15% of its net assets within a reasonable period of time; and
    (B) If the amount of the fund's or In-Kind ETF's illiquid 
investments that are assets is still above 15% of its net assets 30 days 
from the occurrence (and at each consecutive 30 day period thereafter), 
the fund or In-Kind ETF's board of directors, including a majority of 
directors who are not interested persons of the fund or In-Kind ETF, 
must assess whether the plan presented to it pursuant to paragraph 
(b)(1)(iv)(A) continues to be in the best interest of the fund or In-
Kind ETF.
    (v) Redemptions in Kind. A fund that engages in, or reserves the 
right to engage in, redemptions in kind and any In-Kind ETF must 
establish policies and procedures regarding how and when it will engage 
in such redemptions in kind.
    (2) Board oversight. A fund or In-Kind ETF's board of directors, 
including a majority of directors who are not interested persons of the 
fund or In-Kind ETF, must:
    (i) Initially approve the liquidity risk management program;
    (ii) Approve the designation of the person(s) designated to 
administer the program; and

[[Page 513]]

    (iii) Review, no less frequently than annually, a written report 
prepared by the person(s) designated to administer the program that 
addresses the operation of the program and assesses its adequacy and 
effectiveness of implementation, including, if applicable, the operation 
of the highly liquid investment minimum, and any material changes to the 
program.
    (3) Recordkeeping. The fund or In-Kind ETF must maintain:
    (i) A written copy of the program and any associated policies and 
procedures adopted pursuant to paragraphs (b)(1) through (b)(2) of this 
section that are in effect, or at any time within the past five years 
were in effect, in an easily accessible place;
    (ii) Copies of any materials provided to the board of directors in 
connection with its approval under paragraph (b)(2)(i) of this section, 
and materials provided to the board of directors under paragraph 
(b)(2)(iii) of this section, for at least five years after the end of 
the fiscal year in which the documents were provided, the first two 
years in an easily accessible place; and
    (iii) If applicable, a written record of the policies and procedures 
related to how the highly liquid investment minimum, and any adjustments 
thereto, were determined, including assessment of the factors 
incorporated in paragraphs (b)(1)(iii)(A) through (B) of this section 
and any materials provided to the board pursuant to paragraph 
(b)(1)(iii)(A)(3) of this section, for a period of not less than five 
years (the first two years in an easily accessible place) following the 
determination of, and each change to, the highly liquid investment 
minimum.
    (c) UIT liquidity. On or before the date of initial deposit of 
portfolio securities into a registered UIT, the UIT's principal 
underwriter or depositor must determine that the portion of the illiquid 
investments that the UIT holds or will hold at the date of deposit that 
are assets is consistent with the redeemable nature of the securities it 
issues, and must maintain a record of that determination for the life of 
the UIT and for five years thereafter.

[81 FR 82264, Nov. 18, 2016, as amended at 85 FR 83295, Dec. 21, 2020]



Sec.  270.23c-1  Repurchase of securities by closed-end companies.

    (a) A registered closed-end company may purchase for cash a security 
of which it is the issuer, subject to the following conditions:
    (1) If the security is a stock entitled to cumulative dividends, 
such dividends are not in arrears.
    (2) If the security is a stock not entitled to cumulative dividends, 
at least 90 percent of the net income of the issuer for the last 
preceding fiscal year, determined in accordance with good accounting 
practice and not including profits or losses realized from the sale of 
securities or other properties, was distributed to its shareholders 
during such fiscal year or within 60 days after the close of such fiscal 
year.
    (3) If the security to be purchased is junior to any class of 
outstanding security of the issuer representing indebtedness (except 
notes or other evidences of indebtedness held by a bank or other person, 
the issuance of which did not involve a public offering) all securities 
of such class shall have an asset coverage of at least 300 percent 
immediately after such purchase; and if the security to be purchased is 
junior to any class of outstanding senior security of the issuer which 
is a stock, all securities of such class shall have an asset coverage of 
at least 200 percent immediately after such purchase, and shall not be 
in arrears as to dividends.
    (4) The seller of the security is not to the knowledge of the issuer 
an affiliated person of the issuer.
    (5) Payment of the purchase price is accompanied or preceded by a 
written confirmation of the purchase.
    (6) The purchase is made at a price not above the market value, if 
any, or the asset value of such security, whichever is lower, at the 
time of such purchase.
    (7) The issuer discloses to the seller or, if the seller is acting 
through a broker, to the seller's broker, either prior to or at the time 
of purchase the approximate or estimated asset coverage per unit of the 
security to be purchased.
    (8) No brokerage commission is paid by the issuer to any affiliated 
person of the issuer in connection with the purchase.

[[Page 514]]

    (9) The purchase is not made in a manner or on a basis which 
discriminates unfairly against any holders of the class of securities 
purchased.
    (10) If the security is a stock, the issuer has, within the 
preceding six months, informed stockholders of its intention to purchase 
stock of such class by letter or report addressed to all the 
stockholders of such class.
    (11) The issuer files with the Commission, as an exhibit to Form N-
CSR (Sec.  249.331 and Sec.  274.128), a copy of any written 
solicitation to purchase securities under this section sent or given 
during the period covered by the report by or on behalf of the issuer to 
10 or more persons.
    (b) Notwithstanding the conditions of paragraph (a) of this section, 
a closed-end company may purchase fractional interests in, or fractional 
rights to receive, any security of which it is the issuer.
    (c) This rule does not apply to purchase of securities made pursuant 
to section 23(c)(1) or (2) of the Act (54 Stat. 825; 15 U.S.C. 80a-23). 
A registered closed-end company may file an application with the 
Commission for an order under section 23(c)(3) of the Act permitting the 
purchase of any security of which it is the issuer which does not meet 
the conditions of this rule and which is not to be made pursuant to 
section 23(c)(1) or (2) of the Act.
    (d) This rule relates exclusively to the requirements of section 
23(c) of the Act, and the provisions hereof shall not be construed to 
authorize any action which contravenes any other applicable law, 
statutory or otherwise, or the provision of any indenture or other 
instrument pursuant to which securities of the issuer were issued.

[Rule N-23C-1, 7 FR 10424, Dec. 15, 1942, as amended at 68 FR 64975, 
Nov. 17, 2003]

    Cross Reference: For interpretative release applicable to Sec.  
270.23c-1, see No. 78 in tabulation, part 271 of this chapter.



Sec.  270.23c-2  Call and redemption of securities issued by registered
closed-end companies.

    (a) Notwithstanding the provisions of Sec.  270.23c-1 (Rule N-23c-
1), a registered closed-end investment company may call or redeem any 
securities of which it is the issuer, in accordance with the terms of 
such securities or the charter, indenture or other instrument pursuant 
to which such securities were issued: Provided, That, if less than all 
the outstanding securities of a class or series are to be called or 
redeemed the call or redemption shall be made by lot, on a pro rata 
basis, or in such other manner as will not discriminate unfairly against 
any holder of the securities of such class or series.
    (b) A registered closed-end investment company which proposes to 
call or redeem any securities of which it is the issuer shall file with 
the Commission notice of its intention to call or redeem such securities 
at least 30 days prior to the date set for the call or redemption; 
Provided, however, That if notice of the call or the redemption is 
required to be published in a newspaper or otherwise, notice shall be 
given to the Commission at least 10 days in advance of the date of 
publication. Such notice shall be filed in triplicate and shall include 
(1) the title of the class of securities to be called or redeemed, (2) 
the date on which the securities are to be called or redeemed, (3) the 
applicable provisions of the governing instrument pursuant to which the 
securities are to be called or redeemed and, (4) if less than all the 
outstanding securities of a class or series are to be called or 
redeemed, the principal amount or number of shares and the basis upon 
which the securities to be called or redeemed are to be selected.

[Rule N-23C-2, 7 FR 6669, Aug. 25, 1942]



Sec.  270.23c-3  Repurchase offers by closed-end companies.

    (a) Definitions. For purposes of this section:
    (1) Periodic interval shall mean an interval of three, six, or 
twelve months.
    (2) Repurchase offer shall mean an offer pursuant to this section by 
an investment company to repurchase common stock of which it is the 
issuer.
    (3) Repurchase offer amount shall mean the amount of common stock 
that is the subject of a repurchase offer, expressed as a percentage of 
such stock outstanding on the repurchase request deadline, that an 
investment company offers to repurchase in a repurchase offer. The 
repurchase offer

[[Page 515]]

amount shall not be less than five percent nor more than twenty-five 
percent of the common stock outstanding on a repurchase request 
deadline. Before each repurchase offer, the repurchase offer amount for 
that repurchase offer shall be determined by the directors of the 
company.
    (4) Repurchase payment deadline with respect to a tender of common 
stock shall mean the date by which an investment company must pay 
securities holders for any stock repurchased. A repurchase payment 
deadline shall occur seven days after the repurchase pricing date 
applicable to such tender.
    (5) Repurchase pricing date with respect to a tender of common stock 
shall mean the date on which an investment company determines the net 
asset value applicable to the repurchase of the securities. A repurchase 
pricing date shall occur no later than the fourteenth day after a 
repurchase request deadline, or the next business day if the fourteenth 
day is not a business day. In no event shall an investment company 
determine the net asset value applicable to the repurchase of the stock 
before the close of business on the repurchase request deadline.
    (i) For an investment company making a repurchase offer pursuant to 
paragraph (b) of this section, the number of days between the repurchase 
request deadline and the repurchase pricing date for a repurchase offer 
shall be the maximum number specified by the company pursuant to 
paragraph (b)(2)(i)(D) of this section.
    (ii) For an investment company making a repurchase offer pursuant to 
paragraph (c) of this section, the repurchase pricing date shall be such 
date as the company shall disclose to security holders in the 
notification pursuant to paragraph (b)(4) of this section with respect 
to such offer.
    (iii) For purposes of paragraph (b)(1) of this section, a repurchase 
pricing date may be a date earlier than the date determined pursuant to 
paragraph (a)(5) (i) or (ii) of this section if, on or immediately 
following the repurchase request deadline, it appears that the use of an 
earlier repurchase pricing date is not likely to result in significant 
dilution of the net asset value of either stock that is tendered for 
repurchase or stock that is not tendered.
    (6) Repurchase request shall mean the tender of common stock in 
response to a repurchase offer.
    (7) Repurchase request deadline with respect to a repurchase offer 
shall mean the date by which an investment company must receive 
repurchase requests submitted by security holders in response to that 
offer or withdrawals or modifications of previously submitted repurchase 
requests. The first repurchase request deadline after the effective date 
of the registration statement for the common stock that is the subject 
of a repurchase offer, or after a shareholder vote adopting the 
fundamental policy specifying a company's periodic interval, whichever 
is later, shall occur no later than two periodic intervals thereafter.
    (b) Periodic repurchase offers. A registered closed-end company or a 
business development company may repurchase common stock of which it is 
the issuer from the holders of the stock at periodic intervals, pursuant 
to repurchase offers made to all holders of the stock, Provided that:
    (1) The company shall repurchase the stock for cash at the net asset 
value determined on the repurchase pricing date and shall pay the 
holders of the stock by the repurchase payment deadline except as 
provided in paragraph (b)(3) of this section. The company may deduct 
from the repurchase proceeds only a repurchase fee, not to exceed two 
percent of the proceeds, that is paid to the company and is reasonably 
intended to compensate the company for expenses directly related to the 
repurchase. A company may not condition a repurchase offer upon the 
tender of any minimum amount of shares.
    (2)(i) The company shall repurchase the security pursuant to a 
fundamental policy, changeable only by a majority vote of the 
outstanding voting securities of the company, stating:
    (A) That the company will make repurchase offers at periodic 
intervals pursuant to this section, as this section may be amended from 
time to time;
    (B) The periodic intervals between repurchase request deadlines;

[[Page 516]]

    (C) The dates of repurchase request deadlines or the means of 
determining the repurchase request deadlines; and
    (D) The maximum number of days between each repurchase request 
deadline and the next repurchase pricing date.
    (ii) The company shall include a statement in its annual report to 
shareholders of the following:
    (A) Its policy under paragraph (b)(2)(i) of this section; and
    (B) With respect to repurchase offers by the company during the 
period covered by the annual report, the number of repurchase offers, 
the repurchase offer amount and the amount tendered in each repurchase 
offer, and the extent to which in any repurchase offer the company 
repurchased stock pursuant to the procedures in paragraph (b)(5) of this 
section.
    (iii) A company shall be deemed to be making repurchase offers 
pursuant to a policy within paragraph (b)(2)(i) of this section if:
    (A) The company makes repurchase offers to its security holders at 
periodic intervals and, before May 14, 1993, has disclosed in its 
registration statement its intention to make or consider making such 
repurchase offers; and
    (B) The company's board of directors adopts a policy specifying the 
matters required by paragraph (b)(2)(i) of this section, and the 
periodic interval specified therein conforms generally to the frequency 
of the company's prior repurchase offers.
    (3)(i) The company shall not suspend or postpone a repurchase offer 
except pursuant to a vote of a majority of the directors, including a 
majority of the directors who are not interested persons of the company, 
and only:
    (A) If the repurchase would cause the company to lose its status as 
a regulated investment company under Subchapter M of the Internal 
Revenue Code [26 U.S.C. 851-860];
    (B) If the repurchase would cause the stock that is the subject of 
the offer that is either listed on a national securities exchange or 
quoted in an inter-dealer quotation system of a national securities 
association to be neither listed on any national securities exchange nor 
quoted on any inter-dealer quotation system of a national securities 
association;
    (C) For any period during which the New York Stock Exchange or any 
other market in which the securities owned by the company are 
principally traded is closed, other than customary week-end and holiday 
closings, or during which trading in such market is restricted;
    (D) For any period during which an emergency exists as a result of 
which disposal by the company of securities owned by it is not 
reasonably practicable, or during which it is not reasonably practicable 
for the company fairly to determine the value of its net assets; or
    (E) For such other periods as the Commission may by order permit for 
the protection of security holders of the company.
    (ii) If a repurchase offer is suspended or postponed, the company 
shall provide notice to security holders of such suspension or 
postponement. If the company renews the repurchase offer, the company 
shall send a new notification to security holders satisfying the 
requirements of paragraph (b)(4) of this section.
    (4)(i) No less than twenty-one and no more than forty-two days 
before each repurchase request deadline, the company shall send to each 
holder of record and to each beneficial owner of the stock that is the 
subject of the repurchase offer a notification providing the following 
information:
    (A) A statement that the company is offering to repurchase its 
securities from security holders at net asset value;
    (B) Any fees applicable to such repurchase;
    (C) The repurchase offer amount;
    (D) The dates of the repurchase request deadline, repurchase pricing 
date, and repurchase payment deadline, the risk of fluctuation in net 
asset value between the repurchase request deadline and the repurchase 
pricing date, and the possibility that the company may use an earlier 
repurchase pricing date pursuant to paragraph (a)(5)(iii) of this 
section;
    (E) The procedures for security holders to tender their shares and 
the right of the security holders to withdraw or modify their tenders 
until the repurchase request deadline;

[[Page 517]]

    (F) The procedures under which the company may repurchase such 
shares on a pro rata basis pursuant to paragraph (b)(5) of this section;
    (G) The circumstances in which the company may suspend or postpone a 
repurchase offer pursuant to paragraph (b)(3) of this section;
    (H) The net asset value of the common stock computed no more than 
seven days before the date of the notification and the means by which 
security holders may ascertain the net asset value thereafter; and
    (I) The market price, if any, of the common stock on the date on 
which such net asset value was computed, and the means by which security 
holders may ascertain the market price thereafter.
    (ii) The company shall file three copies of the notification with 
the Commission within three business days after sending the notification 
to security holders. Those copies shall be accompanied by copies of Form 
N-23c-3 (Sec.  274.221 of this chapter) (``Notification of Repurchase 
Offer''). The format of the copies shall comply with the requirements 
for registration statements and reports under Sec.  270.8b-12 of this 
chapter.
    (iii) For purposes of sending a notification to a beneficial owner 
pursuant to paragraph (b)(4)(i) of this section, where the company knows 
that shares of common stock that is the subject of a repurchase offer 
are held of record by a broker, dealer, voting trustee, bank, 
association or other entity that exercises fiduciary powers in nominee 
name or otherwise, the company shall follow the procedures for 
transmitting materials to beneficial owners of securities that are set 
forth in Sec.  240.14a-13 of this chapter.
    (5) If security holders tender more than the repurchase offer 
amount, the company may repurchase an additional amount of stock not to 
exceed two percent of the common stock outstanding on the repurchase 
request deadline. If the company determines not to repurchase more than 
the repurchase offer amount, or if security holders tender stock in an 
amount exceeding the repurchase offer amount plus two percent of the 
common stock outstanding on the repurchase request deadline, the company 
shall repurchase the shares tendered on a pro rata basis; Provided, 
however, That this provision shall not prohibit the company from:
    (i) Accepting all stock tendered by persons who own, beneficially or 
of record, an aggregate of not more than a specified number which is 
less than one hundred shares and who tender all of their stock, before 
prorating stock tendered by others; or
    (ii) Accepting by lot stock tendered by security holders who tender 
all stock held by them and who, when tendering their stock, elect to 
have either all or none or at least a minimum amount or none accepted, 
if the company first accepts all stock tendered by security holders who 
do not so elect.
    (6) The company shall permit tenders of stock for repurchase to be 
withdrawn or modified at any time until the repurchase request deadline 
but shall not permit tenders to be withdrawn or modified thereafter.
    (7)(i) The current net asset value of the company's common stock 
shall be computed no less frequently than weekly on such day and at such 
specific time or times during the day that the board of directors of the 
company shall set.
    (ii) The current net asset value of the company's common stock shall 
be computed daily on the five business days preceding a repurchase 
request deadline at such specific time or times during the day that the 
board of directors of the company shall set.
    (iii) For purposes of section 23(b) [15 U.S.C. 80a-23(b)], the 
current net asset value applicable to a sale of common stock by the 
company shall be the net asset value next determined after receipt of an 
order to purchase such stock. During any period when the company is 
offering its common stock, the current net asset value of the common 
stock shall be computed no less frequently than once daily, Monday 
through Friday, at the specific time or times during the day that the 
board of directors of the company shall set, except on:
    (A) Days on which changes in the value of the company's portfolio 
securities will not materially affect the current net asset value of the 
common stock;

[[Page 518]]

    (B) Days during which no order to purchase its common stock is 
received, other than days when the net asset value would otherwise be 
computed pursuant to paragraph (b)(7)(i) of this section; or
    (C) Customary national, local, and regional business holidays 
described or listed in the prospectus.
    (8) The board of directors of the investment company satisfies the 
fund governance standards defined in Sec.  270.0-1(a)(7).
    (9) Any senior security issued by the company or other indebtedness 
contracted by the company either shall mature by the next repurchase 
pricing date or shall provide for the redemption or call of such 
security or the repayment of such indebtedness by the company by the 
next repurchase pricing date, either in whole or in part, without 
penalty or premium, as necessary to permit the company to repurchase 
securities in such repurchase offer amount as the directors of the 
company shall determine in compliance with the asset coverage 
requirements of section 18 [15 U.S.C. 80a-18] or 61 [15 U.S.C. 80a-60], 
as applicable.
    (10)(i) From the time a company sends a notification to shareholders 
pursuant to paragraph (b)(4) of this section until the repurchase 
pricing date, a percentage of the company's assets equal to at least 100 
percent of the repurchase offer amount shall consist of assets that can 
be sold or disposed of in the ordinary course of business, at 
approximately the price at which the company has valued the investment, 
within a period equal to the period between a repurchase request 
deadline and the repurchase payment deadline, or of assets that mature 
by the next repurchase payment deadline.
    (ii) In the event that the company's assets fail to comply with the 
requirements in paragraph (b)(10)(i) of this section, the board of 
directors shall cause the company to take such action as it deems 
appropriate to ensure compliance.
    (iii) In supervising the company's operations and portfolio 
management by the investment adviser, the company's board of directors 
shall adopt written procedures reasonably designed, taking into account 
current market conditions and the company's investment objectives, to 
ensure that the company's portfolio assets are sufficiently liquid so 
that the company can comply with its fundamental policy on repurchases, 
and comply with the liquidity requirements of paragraph (b)(10)(i) of 
this section. The board of directors shall review the overall 
composition of the portfolio and make and approve such changes to the 
procedures as the board deems necessary.
    (11) The company, or any underwriter for the company, shall comply, 
as if the company were an open-end company, with the provisions of 
section 24(b) [15 U.S.C. 80a-24(b)] and rules issued thereunder with 
respect to any advertisement, pamphlet, circular, form letter, or other 
sales literature addressed to or intended for distribution to 
prospective investors.
    (c) Discretionary repurchase offers. A registered closed-end company 
or a business development company may repurchase common stock of which 
it is the issuer from the holders of the stock pursuant to a repurchase 
offer that is not made pursuant to a fundamental policy and that is made 
to all holders of the stock not earlier than two years after another 
offer pursuant to this paragraph (c) if the company complies with the 
requirements of paragraphs (b) (1), (3), (4), (5), (6), (7)(ii), (8), 
(10)(i), and (10)(ii) of this section.
    (d) Exemption from the definition of redeemable security. A company 
that makes repurchase offers pursuant to paragraph (b) or (c) of this 
section shall not be deemed thereby to be an issuer of redeemable 
securities within section 2(a)(32) [15 U.S.C. 80a-2(a)(32)].
    (e) Registration of an indefinite amount of securities. A company 
that makes repurchase offers pursuant to paragraph (b) of this section 
shall be deemed to have registered an indefinite amount of securities 
pursuant to Section 24(f) of the Act (15 U.S.C. 80a-24(f)) upon the 
effective date of its registration statement.

[58 FR 19343, Apr. 14, 1993; 58 FR 29695, May 21, 1993, as amended at 66 
FR 3759, Jan. 16, 2001; 69 FR 46390, Aug. 2, 2004; 85 FR 33360, June 1, 
2020]

[[Page 519]]



Sec.  270.24b-1  Definitions.

    (a) The term form letter as used in section 24(b) of the Act 
includes (1) one of a series of identical sales letters, and (2) any 
sales letter a substantial portion of which consists of a statement 
which is in essence identical with similar statements in sales letters 
sent to 25 or more persons within any period of 90 consecutive days.
    (b) The term distribution as used in section 24(b) of the Act 
includes the distribution or redistribution to prospective investors of 
the content of any written sales literature, whether such distribution 
or redistribution is effected by means of written or oral 
representations or statements.
    (c) The terms rules and regulations as used in section 24 (a) and 
(c) of the Act shall include the forms for registration of securities 
under the Securities Act of 1933 and the related instructions thereto.

(Sec. 19, 48 Stat. 85, as amended, sec. 319, 53 Stat. 1173; 15 U.S.C. 
77s, 77sss)

[Rule N-24B-1, 6 FR 3020, June 21, 1941, as amended by 21 FR 1046, Feb. 
15, 1956]



Sec.  270.24b-2  Filing copies of sales literature.

    Copies of material filed with the Commission for the sole purpose of 
complying with section 24(b) of the Act (15 U.S.C. 80a-24(b)) either 
shall be accompanied by a letter of transmittal which makes appropriate 
references to said section or shall make such appropriate reference on 
the face of the material.

[70 FR 43570, July 27, 2005]



Sec.  270.24b-3  Sales literature deemed filed.

    Any advertisement, pamphlet, circular, form letter or other sales 
literature addressed to or intended for distribution to prospective 
investors shall be deemed filed with the Commission for purposes of 
section 24(b) of the Act [15 U.S.C. 80a-24(b)] upon filing with a 
national securities association registered under section 15A of the 
Securities Exchange Act of 1934 [15 U.S.C. 78o] that has adopted rules 
providing standards for the investment company advertising practices of 
its members and has established and implemented procedures to review 
that advertising.

[53 FR 3880, Feb. 10, 1988]



Sec.  270.24b-4  Filing copies of covered investment fund research
reports.

    A covered investment fund research report, as defined in paragraph 
(c)(3) of Sec.  230.139b of this chapter under the Securities Act of 
1933 (15 U.S.C. 77a et seq.), of a covered investment fund registered as 
an investment company under the Act, shall not be subject to section 
24(b) of the Act or the rules and regulations thereunder, except that 
such report shall be subject to such section and the rules and 
regulations thereunder to the extent that it is otherwise not subject to 
the content standards in the rules of any self-regulatory organization 
related to research reports, including those contained in the rules 
governing communications with the public regarding investment companies 
or substantially similar standards.

[83 FR 64222, Dec. 13, 2018]



Sec.  270.24e-1  Filing of certain prospectuses as post-effective 
amendments to registration statements under the Securities Act of 1933.

    Section 24(e) of the Act requires that when a prospectus is revised 
so that it may be available for use in compliance with section 10(a)(3) 
of the Securities Act of 1933 for a period extending beyond the time 
when the previous prospectus would have ceased to be available for such 
use, such revised prospectus, in order to meet the requirements of 
section 10 of said Act, must be filed as an amendment to the 
registration statement under said Act and such amendment must have 
become effective prior to the use of the revised prospectus. Except as 
hereinabove provided, section 24(e) of the Act shall not be deemed to 
govern the times and conditions under which post-effective amendments 
shall be filed to registration statements under the Securities Act of 
1933.

(Sec. 24, 54 Stat. 825, as amended; 15 U.S.C. 80a-24)

[20 FR 2856, Apr. 28, 1955, as amended at 62 FR 47938, Sept. 12, 1997]

[[Page 520]]



Sec.  270.24f-2  Registration under the Securities Act of 1933 of certain 
investment company securities.

    (a) General. Any face-amount certificate company, open-end 
management company, closed-end management company that makes periodic 
repurchase offers pursuant to Sec.  270.23c-3(b), or unit investment 
trust (``issuer'') that is deemed to have registered an indefinite 
amount of securities pursuant to Section 24(f) of the Act (15 U.S.C. 
80a-24(f)) must not later than 90 days after the end of any fiscal year 
during which it has publicly offered such securities, file Form 24F-2 
(17 CFR 274.24) with the Commission. Form 24F-2 must be prepared in 
accordance with the requirements of that form, and must be accompanied 
by the payment of a registration fee with respect to the securities sold 
during the fiscal year in reliance upon registration pursuant to section 
24(f) of the Act calculated in the manner specified in section 24(f) of 
the Act and in the Form. An issuer that pays the registration fee more 
than 90 days after the end of its fiscal year must pay interest in the 
manner specified in section 24(f) of the Act and in Form 24F-2.
    (b) Issuer ceasing operations; mergers and other transactions. For 
purposes of this section, if an issuer ceases operations, the date the 
issuer ceases operations will be deemed to be the end of its fiscal 
year. In the case of a liquidation, merger, or sale of all or 
substantially all of the assets (``merger'') of the issuer, the issuer 
will be deemed to have ceased operations for the purposes of this 
section on the date the merger is consummated; provided, however, that 
in the case of a merger of an issuer or a series of an issuer 
(``Predecessor Issuer'') with another issuer or a series of an issuer 
(``Successor Issuer''), the Predecessor Issuer will not be deemed to 
have ceased operations and the Successor issuer will assume the 
obligations, fees, and redemption credits of the Predecessor Issuer 
incurred pursuant to section 24(f) of the Act and Sec.  270.24e-2 (as in 
effect prior to October 11, 1997; see 17 CFR part 240 to end, revised as 
of April 1, 1997) if the Successor Issuer:
    (1) had no assets or liabilities, other than nominal assets or 
liabilities, and no operating history immediately prior to the merger;
    (2) Acquired substantially all of the assets and assumed 
substantially all of the liabilities and obligations of the Predecessor 
Issuer; and
    (3) The merger is not designed to result in the Predecessor Issuer 
merging with, or substantially all of its assets being acquired by, an 
issuer (or a series of an issuer) that would not meet the conditions of 
paragraph (b)(1) of this section.
    (c) Counting days. To determine the date on which Form 24F-2 must be 
filed with the Commission under paragraph (a) of this section, the first 
day of the 90-day period is the first calendar day of the fiscal year 
following the fiscal year for which the Form is to be filed. If the last 
day of the 90-day period falls on a Saturday, Sunday, or federal 
holiday, the period ends on the first business day thereafter.

    Note to paragraph (c): For example, a Form 24F-2 for a fiscal year 
ending on June 30 must be filed no later than September 28. If September 
28 falls on a Saturday, Sunday, the Form must be filed on the following 
Monday.

[62 FR 47938, Sept. 12, 1997, as amended at 85 FR 33360, June 1, 2020]



Sec.  270.26a-1  Payment of administrative fees to the depositor or
principal underwriter of a unit investment trust; exemptive relief for
separate accounts.

    For purposes of section 26(a)(2)(C) of the Act, payment of a fee to 
the depositor of or a principal underwriter for a registered unit 
investment trust, or to any affiliated person or agent of such depositor 
or underwriter (collectively, ``depositor''), for bookkeeping or other 
administrative services provided to the trust shall be allowed the 
custodian or trustee (``trustee'') as an expense, provided that such fee 
is an amount not greater than the expenses, without profit:
    (a) Actually paid by such depositor directly attributable to the 
services provided; and

[[Page 521]]

    (b) Increased by the services provided directly by such depositor, 
as determined in accordance with generally accepted accounting 
principles consistently applied.

[85 FR 26110, May 1, 2020]



Sec.  270.27c-1  [Reserved]



Sec.  270.27d-1  Reserve requirements for principal underwriters and
depositors to carry out the obligations to refund charges required by
section 27(d) and section 27(f) of the Act.

    (a)(1) Every depositor of or principal underwriter for the issuer of 
a periodic payment plan certificate sold subject to section 27(d) or 
section 27(f) of the Act or both, shall deposit and maintain funds in a 
segregated trust account as a reserve and as security for the purpose of 
assuring the refund of charges required by sections 27(d) and 27(f) of 
the Act.
    (2) The assets of such trust account may be held as cash or invested 
only in one or more of (i) government securities as defined in section 
2(a)(16) of the Act (except equity securities) or (ii) negotiable 
certificates of deposit issued by a bank, as defined in section 2(a)(5) 
of the Act and having capital and surplus of at least $10 million: 
Provided, That no such investment may have a maturity of more than 5 
years, no more than 50 percent of the assets may be invested in 
obligations having a maturity of more than 1 year, and certificates of 
deposit of a single issuer may not constitute more than 10 percent of 
the value of the assets in the account.
    (3) Any income, gains, or losses from assets allocated to such 
account, whether or not realized, shall be credited to or charged 
against such account without regard to other income, gains, or losses of 
the depositor or principal underwriter.
    (4) The assets of such trust account may be withdrawn only as 
permitted by paragraph (f) of this section and shall in no event be 
chargeable with liabilities arising out of any aspect of the business of 
the depositor or principal underwriter other than assuring the ability 
of the depositor or principal underwriter to refund the amounts required 
by such sections.
    (b) For purposes of this section:
    (1) ``Excess sales load'' on any payment is that portion of the 
sales load in excess of 15 percent of that payment.
    (2) ``Monthly payment'' shall be the amount of the smallest monthly 
installment scheduled to be paid during the life of the plan. If 
payments are required or permitted to be made on a basis less frequently 
than monthly, an equivalent monthly payment shall be the amount 
determined by dividing the smallest minimum payment required or 
permitted in a payment period by the number of months included in such 
period.
    (3) The assets in the segregated trust account shall be valued as 
follows: (i) With respect to securities for which market quotations are 
readily available, the market value of such securities; and (ii) with 
respect to other securities, fair value as determined in good faith by 
the depositor or principal underwriter.
    (c) For every periodic payment plan certificate governed by section 
27(d), the depositor or principal underwriter shall deposit into the 
segregated trust account not less than 45 percent of the excess sales 
load on each of the first six monthly payments or their equivalent.
    (d) For all periodic payment plan certificates governed by section 
27(d) which have not been surrendered in accordance with their terms, 
and for which the depositor or principal underwriter may be liable for 
the refund of any sales load, the depositor or principal underwriter 
shall maintain in the segregated trust account an amount equal to not 
less than 15% of the total refundable sales load on the payments made on 
those certificates. The depositor or principal underwriter shall also 
maintain in the segregated trust account such additional amounts as the 
Commission by order may require for the depositor or principal 
underwriter to carry out refund obligations pursuant to sections 27(d) 
and 27(f) of the Act.
    (e) For every periodic payment plan certificate governed by section 
27(f) of the Act, and for which the depositor or principal underwriter 
has no obligation to refund any excess sales load pursuant to section 
27(d) of the Act, the depositor or principal underwriter shall deposit 
and maintain during the refund

[[Page 522]]

period, at least the following amounts in the segregated trust account:
    (1) For certificates that require monthly payments of $100 or less, 
20 percent of the difference between the gross payments made and the net 
amount invested;
    (2) For certificates that require monthly payments in excess of $100 
and for single payment plan certificates, 30 percent of the difference 
between the gross payments made and the net amount invested;
    (3) For certificates with respect to which the holder is entitled to 
receive the greater of the refund provided by section 27(f) (of the Act) 
or a refund of total payments and upon which a total of at least $1,000 
has been paid, 100 percent of the difference between the gross payments 
made and net amount invested; and
    (4) Such additional amounts as the Commission by order may require 
to carry out the obligation to refund charges pursuant to section 27(f) 
of the Act.
    (f) Assets may be withdrawn from the segregated trust account by 
each depositor or principal underwriter:
    (1) To refund excess sales load to a certificate holder exercising 
the right of surrender specified in section 27(d) of the Act; or
    (2) To refund to a certificate holder exercising the right of 
withdrawal specified in section 27(f) of the Act the difference between 
the amount of his gross payments and the net amount invested; or
    (3) For any other purpose: Provided, however, That such withdrawal 
shall not reduce the segregated trust account to an amount less than the 
sum of (i) 130 percent of the amount required to be maintained by 
paragraph (d) of this section, if any, and (ii) 100 percent of that 
amount required to be maintained by paragraph (e) of this section, if 
any.
    (g) The minimum amounts required to be maintained by paragraphs (d) 
and (e) of this section shall be computed at least monthly. Any 
additional deposits required by paragraph (d) or (e) of this section 
shall be made immediately after such computation, and any withdrawals 
permitted by paragraph (f)(3) of this section may be made only at such 
time.
    (h) Nothing in this section shall be construed to prohibit a 
depositor or principal underwriter, acting as such for two or more 
registered investment companies issuing periodic payment plan 
certificates, from combining in a single segregated trust account the 
reserves for such companies required by this section.
    (i) The refunds required to be made to certificate holders pursuant 
to sections 27(d) and 27(f) (of the Act) shall be paid in cash not more 
than 7 days from the date the certificate is received in proper form by 
the custodian bank or such other paying agent as may be designated under 
the periodic payment plan.
    (j) Each depositor or principal underwriter shall file with the 
Commission, within the appropriate period of time specified, an 
Accounting of Segregated Trust Account. Form N-27D-1 (Sec.  274.127d-1 
of this chapter) is hereby prescribed as such accounting form.

[36 FR 13136, July 15, 1971, as amended at 40 FR 50712, Oct. 31, 1975]



Sec.  270.27d-2  [Reserved]



Sec.  270.27e-1  [Reserved]



Sec.  270.27f-1  [Reserved]



Sec.  270.27g-1  [Reserved]



Sec.  270.27h-1  [Reserved]



Sec.  270.27i-1  Exemption from Section 27(i)(2)(A) of the Act during
annuity payment period of variable annuity contracts participating in
certain registered separate accounts.

    A registered separate account, and any depositor of or underwriter 
for such account, shall, during the annuity payment period of variable 
annuity contracts participating in such account, be exempt from the 
requirement of paragraph (1) of section 27(i)(2)(A) of the Act that a 
periodic payment plan certificate be a redeemable security with respect 
to such contracts under which payments are being made based upon life 
contingencies.

[85 FR 26110, May 1, 2020, as amended at 88 FR 37987, June 12, 2023]

[[Page 523]]



Sec.  270.28b-1  Investment in loans partially or wholly guaranteed 
under the Servicemen's Readjustment Act of 1944, as amended.

    (a) The term qualified investments as used in section 28(b) of the 
Investment Company Act of 1940 shall include:
    (1) Any loan, any portion of which is guaranteed under Title III of 
the Servicemen's Readjustment Act of 1944, as amended, and which is 
secured by a first lien on real estate: Provided, The amount of the loan 
not so guaranteed does not exceed 66\2/3\ percent of the reasonable 
value of such real estate as determined by proper appraisal made by an 
appraiser designated by the Administrator of Veterans' Affairs;
    (2) Any secondary loan the full amount of which is guaranteed under 
section 505(a) of Title III of the above mentioned act and which is 
secured by a second lien on real estate:

Provided, however, That any such loan shall be deemed a qualified 
investment only so long as (i) insurance policies are required to be 
procured and maintained in an amount sufficient to protect the security 
against the risks or hazards to which it may be subjected to the extent 
customary in the locality, and (ii) the loan shall remain guaranteed 
under Title III of the Servicemen's Readjustment Act of 1944, as 
amended, to the extent specified in paragraph (a) (1) or (2) of this 
section, as the case may be.
    (b) Loans made pursuant to this section shall be valued at the 
original principal amount of the loan less all payments made thereon 
which have been applied to the reduction of such principal amount.

(Secs. 28(b), 38, 54 Stat. 832, 841; 15 U.S.C. 80a-28(b), 80a-38)

[Rule N-28B-1, 11 FR 6483, June 13, 1946]



Sec.  270.30a-1  Annual report for registered investment companies.

    Every management investment company must file an annual report on 
Form N-CEN (Sec.  274.101 of this chapter) at least every twelve months 
and not more than seventy-five calendar days after the close of each 
fiscal year. Every unit investment trust must file an annual report on 
Form N-CEN (Sec.  274.101 of this chapter) at least every twelve months 
and not more than seventy-five calendar days after the close of each 
calendar year. A registered investment company that has filed a 
registration statement with the Commission registering its securities 
for the first time under the Securities Act of 1933 is relieved of this 
reporting obligation with respect to any reporting period or portion 
thereof prior to the date on which that registration statement becomes 
effective or is withdrawn.

[81 FR 82020, Nov. 18, 2016]



Sec.  270.30a-2  Certification of Form N-CSR.

    (a) Each report filed on Form N-CSR (Sec. Sec.  249.331 and 274.128 
of this chapter) by a registered management investment company must 
include certifications in the form specified in Item 19(a)(3) of Form N-
CSR, and such certifications must be filed as an exhibit to such report. 
Each principal executive and principal financial officer of the 
investment company, or persons performing similar functions, at the time 
of filing of the report must sign a certification.
    (b) Each report on Form N-CSR filed by a registered management 
investment company under Section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and that contains 
financial statements must be accompanied by the certifications required 
by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 
U.S.C. 1350) and such certifications must be furnished as an exhibit to 
such report as specified in Item 19(b) of Form N-CSR. Each principal 
executive and principal financial officer of the investment company (or 
equivalent thereof) must sign a certification. This requirement may be 
satisfied by a single certification signed by an investment company's 
principal executive and principal financial officers.

[87 FR 73141, Nov. 27, 2022]



Sec.  270.30a-3  Controls and procedures.

    (a) Every registered management investment company, other than a 
small business investment company registered on Form N-5 (Sec. Sec.  
239.24 and 274.5

[[Page 524]]

of this chapter), must maintain disclosure controls and procedures (as 
defined in paragraph (c) of this section) and internal control over 
financial reporting (as defined in paragraph (d) of this section).
    (b) Each such registered management investment company's management 
must evaluate, with the participation of the company's principal 
executive and principal financial officers, or persons performing 
similar functions, the effectiveness of the company's disclosure 
controls and procedures, within the 90-day period prior to the filing 
date of each report on Form N-CSR (Sec. Sec.  249.331 and 274.128 of 
this chapter).
    (c) For purposes of this section, the term disclosure controls and 
procedures means controls and other procedures of a registered 
management investment company that are designed to ensure that 
information required to be disclosed by the investment company on Form 
N-CSR (Sec. Sec.  249.331 and 274.128 of this chapter) is recorded, 
processed, summarized, and reported within the time periods specified in 
the Commission's rules and forms. Disclosure controls and procedures 
include, without limitation, controls and procedures designed to ensure 
that information required to be disclosed by an investment company in 
the reports that it files or submits on Form N-CSR is accumulated and 
communicated to the investment company's management, including its 
principal executive and principal financial officers, or persons 
performing similar functions, as appropriate to allow timely decisions 
regarding required disclosure.
    (d) The term internal control over financial reporting is defined as 
a process designed by, or under the supervision of, the registered 
management investment company's principal executive and principal 
financial officers, or persons performing similar functions, and 
effected by the company's board of directors, management, and other 
personnel, to provide reasonable assurance regarding the reliability of 
financial reporting and the preparation of financial statements for 
external purposes in accordance with generally accepted accounting 
principles and includes those policies and procedures that:
    (1) Pertain to the maintenance of records that in reasonable detail 
accurately and fairly reflect the transactions and dispositions of the 
assets of the investment company;
    (2) Provide reasonable assurance that transactions are recorded as 
necessary to permit preparation of financial statements in accordance 
with generally accepted accounting principles, and that receipts and 
expenditures of the investment company are being made only in accordance 
with authorizations of management and directors of the investment 
company; and
    (3) Provide reasonable assurance regarding prevention or timely 
detection of unauthorized acquisition, use, or disposition of the 
investment company's assets that could have a material effect on the 
financial statements.

[68 FR 36671, June 18, 2003, as amended at 69 FR 11264, Mar. 9, 2004; 81 
FR 82021, Nov. 18, 2016]



Sec.  270.30a-4  Annual report for wholly-owned registered management
investment company subsidiary of registered management investment company.

    Notwithstanding the provisions of Sec.  270.30a-1, a registered 
management investment company that is a wholly-owned subsidiary of a 
registered management investment company need not file an annual report 
on Form N-CEN if financial information with respect to that subsidiary 
is reported in the parent's annual report on Form N-CEN.

[81 FR 82021, Nov. 18, 2016]



Sec. Sec.  270.30b1-1--270.b1-3  [Reserved]



Sec.  270.30b1-4  Report of proxy voting record.

    Every registered management investment company, other than a small 
business investment company registered on Form N-5 (Sec. Sec.  239.24 
and 274.5 of this chapter), shall file an annual report on Form N-PX 
(Sec.  274.129 of this chapter) not later than August 31 of each year, 
containing the registrant's proxy voting record for the most recent 
twelve-month period ended June 30.

[68 FR 6581, Feb. 7, 2003]

    Effective Date Note: At 87 FR 78809, Dec. 22, 2022, Sec.  270.30b1-4 
was amended by removing the phrase ``Form N-PX (Sec.  274.129 of this

[[Page 525]]

chapter)'' and adding in its place ``Form N-PX (Sec. Sec.  249.326 and 
274.129 of this chapter)'', effective July 1, 2024.



Sec.  270.30b1-5  [Reserved]



Sec.  270.30b1-7  Monthly report for money market funds.

    Every registered open-end management investment company, or series 
thereof, that is regulated as a money market fund under Sec.  270.2a-7 
must file with the Commission a monthly report of portfolio holdings on 
Form N-MFP (Sec.  274.201 of this chapter), current as of the last 
business day or any subsequent calendar day of the preceding month, no 
later than the fifth business day of each month.

[79 FR 47967, Aug. 14, 2014]



Sec.  270.30b1-8  Current report for money market funds.

    Every registered open-end management investment company, or series 
thereof, that is regulated as a money market fund under Sec.  270.2a-7, 
that experiences any of the events specified on Form N-CR (274.222 of 
this chapter), must file with the Commission a current report on Form N-
CR within the period specified in that form.

[79 FR 47967, Aug. 14, 2014]



Sec.  270.30b1-9  Monthly report.

    Each registered management investment company or exchange-traded 
fund organized as a unit investment trust, or series thereof, other than 
a registered open-end management investment company that is regulated as 
a money market fund under Sec.  270.2a-7 or a small business investment 
company registered on Form N-5 (Sec. Sec.  239.24 and 274.5 of this 
chapter), must file a monthly report of portfolio holdings on Form N-
PORT (Sec.  274.150 of this chapter), current as of the last business 
day, or last calendar day, of the month. A registered investment company 
that has filed a registration statement with the Commission registering 
its securities for the first time under the Securities Act of 1933 is 
relieved of this reporting obligation with respect to any reporting 
period or portion thereof prior to the date on which that registration 
statement becomes effective or is withdrawn. Each registered investment 
company that is required to file reports on Form N-PORT must maintain in 
its records the information that is required to be included on Form N-
PORT no later than 30 days after the end of each month. Such information 
shall be treated as a record under section 31(a)(1) of the Act [15 
U.S.C. 80a-30(a)(1)] and Sec.  270.31a-1(b) of this chapter subject to 
the requirements of Sec.  270.31a-2(a)(2) of this chapter. Reports on 
Form N-PORT for each month in each fiscal quarter of a registered 
investment company must be filed with the Commission no later than 60 
days after the end of such fiscal quarter.

[84 FR 7987, Mar. 6, 2019]



Sec.  270.30b1-9(T)  Temporary rule regarding monthly report.

    (a) Until April 1, 2019, each registered management investment 
company subject to Sec.  270.30b1-9 of this chapter must satisfy its 
reporting obligation under that section by maintaining in its records 
the information that is required to be included in Form N-PORT (Sec.  
274.150 of this chapter).
    (b) The information maintained in the registered management 
investment company's records under paragraph (a) of this section shall 
be treated as a record under section 31(a)(1) of the Act [15 U.S.C. 80a-
30(a)(1)] and Sec.  270.31a-1(b) of this chapter subject to the 
requirements of Sec.  270.31a-2(a)(2) of this chapter.
    (c) This section will expire and no longer be effective on March 31, 
2026.

[82 FR 58739, Dec. 14, 2017]

    Effective Date Note: At 82 FR 58739, Dec. 14, 2017, Sec.  270.30b1-
9(T) was added, effective Jan. 16, 2018, to Mar. 31, 2026.



Sec.  270.30b1-10  Current report for open-end and closed-end management
investment companies.

    Every registered open-end management investment company, or series 
thereof, and every registered closed-end management investment company, 
but not a fund that is regulated as a money market fund under Sec.  
270.2a-7, that experiences an event specified on Form N-RN, must file 
with the Commission a current report on Form N-

[[Page 526]]

RN within the period and according to the instructions specified in that 
form.

[85 FR 83295, Dec. 21, 2020]



Sec.  270.30b2-1  Filing of reports to stockholders.

    (a) Every registered management investment company shall file a 
report on Form N-CSR (Sec. Sec.  249.331 and 274.128 of this chapter) 
not later than 10 days after the transmission to stockholders of any 
report that is required to be transmitted to stockholders under Sec.  
270.30e-1.
    (b) A registered investment company shall file with the Commission a 
copy of every periodic or interim report or similar communication 
containing financial statements that is transmitted by or on behalf of 
such registered investment company to any class of such company's 
security holders and that is not required to be filed with the 
Commission under paragraph (a) of this section. The filing shall be made 
not later than 10 days after the transmission to security holders.

[68 FR 5366, Feb. 3, 2003]



Sec.  270.30d-1  Filing of copies of reports to shareholders.

    A registered management investment company, other than a small 
business investment company registered on Form N-5 (Sec. Sec.  239.24 
and 274.5 of this chapter), that is required to file annual and 
quarterly reports pursuant to section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall satisfy its 
requirement to file such reports by the filing, in accordance with the 
rules and procedures specified therefor, of reports on Form N-CSR 
(Sec. Sec.  249.331 and 274.128 of this chapter). A registered unit 
investment trust or a small business investment company registered on 
Form N-5 that is required to file annual and quarterly reports pursuant 
to section 13(a) or 15(d) of the Securities Exchange Act of 1934 shall 
satisfy its requirement to file such reports by the filing, in 
accordance with the rules and procedures specified therefor, of reports 
on Form N-CEN (Sec. Sec.  249.330 and 274.101 of this chapter).

[69 FR 11264, Mar. 9, 2004, as amended at 81 FR 82021, Nov. 18, 2016]



Sec.  270.30e-1  Reports to stockholders of management companies.

    (a) Every registered management company shall transmit to each 
stockholder of record, at least semi-annually, a report containing the 
information required to be included in such reports by the company's 
registration statement form under the 1940 Act, except that the initial 
report of a newly registered company shall be made as of a date not 
later than the close of the fiscal year or half-year occurring on or 
after the date on which the company's notification of registration under 
the 1940 Act is filed with the Commission.
    (b)(1) To satisfy its obligations under section 30(e) of the 1940 
Act, an open-end management investment company registered on Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter) also must:
    (i) Make certain materials available on a website, as described 
under paragraph (b)(2) of this section; and
    (ii) Deliver certain materials upon request, as described under 
paragraph (b)(3) of this section.
    (2) The following website availability requirements are applicable 
to an open-end management investment company registered on Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter).
    (i) The company must make the disclosures required by Items 7 
through 11 of Form N-CSR (Sec. Sec.  249.331 and 274.128 of this 
chapter) publicly accessible, free of charge, at the website address 
specified at the beginning of the report to stockholders under paragraph 
(a) of this section, no later than 60 days after the end of the fiscal 
half-year or fiscal year of the company until 60 days after the end of 
the next fiscal half-year or fiscal year of the company, respectively. 
The company may satisfy the requirement in this paragraph (b)(2)(i) by 
making its most recent report on Form N-CSR publicly accessible, free of 
charge, at the specified website address for the time period that this 
paragraph (b)(2)(i) specifies.
    (ii) Unless the company is a money market fund under Sec.  270.2a-7, 
the company must make the company's complete portfolio holdings, if any, 
as of the close of the company's most recent first and third fiscal 
quarters, after the

[[Page 527]]

date on which the company's registration statement became effective, 
presented in accordance with the schedules set forth in Sec. Sec.  
210.12-12 through 210.12-14 of this chapter (Regulation S-X), which need 
not be audited. The complete portfolio holdings required by this 
paragraph (b)(2)(ii) must be made publicly accessible, free of charge, 
at the website address specified at the beginning of the report to 
stockholders under paragraph (a) of this section, not later than 60 days 
after the close of the of the first and third fiscal quarters until 60 
days after the end of the next first and third fiscal quarters of the 
company, respectively.
    (iii) The website address relied upon for compliance with this 
section may not be the address of the Commission's electronic filing 
system.
    (iv) The materials that are accessible in accordance with paragraph 
(b)(2)(i) or (ii) of this section must be presented on the website in a 
format, or formats, that are convenient for both reading online and 
printing on paper.
    (v) Persons accessing the materials specified in paragraph (b)(2)(i) 
or (ii) of this section must be able to permanently retain, free of 
charge, an electronic version of such materials in a format, or formats, 
that meet the requirements of paragraph (b)(2)(iv) of this section.
    (vi) The requirements set forth in paragraphs (b)(2)(i) through (v) 
of this section will be deemed to be met, notwithstanding the fact that 
the materials specified in paragraphs (b)(2)(i) and (ii) of this section 
are not available for a time in the manner required by paragraphs 
(b)(2)(i) through (v) of this section, provided that:
    (A) The company has reasonable procedures in place to ensure that 
the specified materials are available in the manner required by 
paragraphs (b)(2)(i) through (v) of this section; and
    (B) The company takes prompt action to ensure that the specified 
materials become available in the manner required by paragraphs 
(b)(2)(i) through (v) of this section, as soon as practicable following 
the earlier of the time at which it knows or reasonably should have 
known that the materials are not available in the manner required by 
paragraphs (b)(2)(i) through (v) of this section.
    (vii) The materials specified in paragraph (b)(2)(i) or (ii) of this 
section may either be separately available for each series of a fund, or 
the materials may be grouped by the types of materials and/or by series, 
so long as the grouped information:
    (A) Is presented in a format designed to communicate the information 
effectively;
    (B) Clearly distinguishes the different types of materials and/or 
each series (as applicable); and
    (C) Provides a means of easily locating the relevant information 
(including, for example, a table of contents that includes hyperlinks to 
the specific materials and series).
    (3) The following requirements to deliver certain materials upon 
request are applicable to an open-end management investment company 
registered on Form N-1A (Sec. Sec.  239.15A and 274.11A of this 
chapter).
    (i) The company (or a financial intermediary through which shares of 
the company may be purchased or sold) must send, at no cost to the 
requestor and by U.S. first class mail or other reasonably prompt means, 
a paper copy of any of the materials specified in paragraph (b)(2)(i) or 
(ii) of this section, to any person requesting such a copy within three 
business days after receiving a request for a paper copy.
    (ii) The company (or a financial intermediary through which shares 
of the company may be purchased or sold) must send, at no cost to the 
requestor, and by email or other reasonably prompt means, an electronic 
copy of any of the materials specified in paragraph (b)(2)(i) or (ii) of 
this section, to any person requesting such a copy within three business 
days after receiving a request for an electronic copy. The requirement 
to send an electronic copy of the requested materials may be satisfied 
by sending a direct link to the online location of the materials; 
provided that a current version of the materials is directly accessible 
through the link from the time that the email is sent through the date 
that is six months after the date that the email is sent and the email 
explains both how long the link will remain useable and

[[Page 528]]

that, if recipients desire to retain a copy of the materials, they 
should access and save the materials.
    (c) For registered management companies other than open-end 
management investment companies registered on Form N-1A, if any matter 
was submitted during the period covered by the shareholder report to a 
vote of shareholders, through the solicitation of proxies or otherwise, 
furnish the following information:
    (1) The date of the meeting and whether it was an annual or special 
meeting.
    (2) If the meeting involved the election of directors, the name of 
each director elected at the meeting and the name of each other director 
whose term of office as a director continued after the meeting.
    (3) A brief description of each matter voted upon at the meeting and 
the number of votes cast for, against or withheld, as well as the number 
of abstentions and broker non-votes as to each such matter, including a 
separate tabulation with respect to each matter or nominee for office.
    (i) Instruction 1 to paragraph (c). The solicitation of any 
authorization or consent (other than a proxy to vote at a shareholders' 
meeting) with respect to any matter shall be deemed a submission of such 
matter to a vote of shareholders within the meaning of this paragraph 
(c).
    (ii) [Reserved]
    (d) Each report shall be transmitted within 60 days after the close 
of the period for which such report is being made.
    (e) The period of time within which any report prescribed by this 
rule shall be transmitted may be extended by the Commission upon written 
request showing good cause therefor. Section 270.0-5 shall not apply to 
such requests.
    (f)(1) A company will be considered to have transmitted a report to 
shareholders who share an address if:
    (i) The company transmits a report to the shared address;
    (ii) The company addresses the report to the shareholders as a group 
(for example, ``ABC Fund [or Corporation] Shareholders,'' ``Jane Doe and 
Household,'' ``The Smith Family'') or to each of the shareholders 
individually (for example, ``John Doe and Richard Jones''); and
    (iii) The shareholders consent in writing to delivery of one report.
    (2) The company need not obtain written consent from a shareholder 
under paragraph (f)(1)(iii) of this section if all of the following 
conditions are met:
    (i) The shareholder has the same last name as the other 
shareholders, or the company reasonably believes that the shareholders 
are members of the same family;
    (ii) The company has transmitted a notice to the shareholder at 
least 60 days before the company begins to rely on this section 
concerning transmission of reports to that shareholder. The notice must 
be a separate written statement and:
    (A) State that only one report will be delivered to the shared 
address unless the company receives contrary instructions;
    (B) Include a toll-free telephone number or be accompanied by a 
reply form that is pre-addressed with postage provided, that the 
shareholder can use to notify the company that he or she wishes to 
receive a separate report;
    (C) State the duration of the consent;
    (D) Explain how a shareholder can revoke consent;
    (E) State that the company will begin sending individual copies to a 
shareholder within 30 days after the company receives revocation of the 
shareholder's consent; and
    (F) Contain the following prominent statement, or similar clear and 
understandable statement, in bold-face type: ``Important Notice 
Regarding Delivery of Shareholder Materials''. This statement also must 
appear on the envelope in which the notice is delivered. Alternatively, 
if the notice is delivered separately from other communications to 
investors, this statement may appear either on the notice or on the 
envelope in which the notice is delivered;

    Note to paragraph (f)(2)(ii): The notice should be written in plain 
English. See Sec.  230.421(d)(2) of this chapter for a discussion of 
plain English principles.

    (iii) The company has not received the reply form or other 
notification indicating that the shareholder wishes to continue to 
receive an individual copy

[[Page 529]]

of the report, within 60 days after the company sent the notice; and
    (iv) The company transmits the report to a post office box or to a 
residential street address. The company can assume a street address is a 
residence unless it has information that indicates it is a business.
    (3) At least once a year, the company must explain to shareholders 
who have consented under paragraph (f)(1)(iii) or paragraph (f)(2) of 
this section how they can revoke their consent. The explanation must be 
reasonably designed to reach these investors. If a shareholder, orally 
or in writing, revokes consent to delivery of one report to a shared 
address, the company must begin sending individual copies to that 
shareholder within 30 days after the company receives the revocation.
    (4) For purposes of this section, address means a street address, a 
post office box number, an electronic mail address, a facsimile 
telephone number, or other similar destination to which paper or 
electronic documents are transmitted, unless otherwise provided in this 
section. If the company has reason to believe that the address is a 
street address of a multi-unit building, the address must include the 
unit number.

[46 FR 36126, July 14, 1981, as amended at 48 FR 37940, Aug. 22, 1983; 
48 FR 44477, Sept. 29, 1983; 50 FR 26160, June 25, 1985; 57 FR 56836, 
Dec. 1, 1992; 59 FR 52700, Oct. 19, 1994; 61 FR 24657, May 15, 1996; 64 
FR 62547, Nov. 16, 1999. Redesignated and amended at 66 FR 3759, Jan. 
16, 2001; 87 FR 72847, Nov. 25, 2022]



Sec.  270.30e-2  Reports to shareholders of unit investment trusts.

    (a) At least semiannually every registered unit investment trust 
substantially all the assets of which consist of securities issued by a 
management company must transmit to each shareholder of record 
(including record holders of periodic payment plan certificates), a 
report containing all the applicable information and financial 
statements or their equivalent, required by Sec.  270.30d-1 to be 
included in reports of the management company for the same fiscal 
period. Each of these reports must be transmitted within the period 
allowed the management company by Sec.  270.30e-1 for transmitting 
reports to its shareholders.
    (b) Any report required by this section will be considered 
transmitted to a shareholder of record if the unit investment trust 
satisfies the conditions set forth in Sec.  270.30e-1(f) with respect to 
that shareholder.

[64 FR 62547, Nov. 16, 1999. Redesignated and amended at 66 FR 3759, 
Jan. 16, 2001]



Sec.  270.30e-3  Internet availability of reports to shareholders.

    (a) General. A Fund may satisfy its obligation to transmit a report 
required by Sec.  270.30e-1 (``Report'') to a shareholder of record if 
all of the conditions set forth in paragraphs (b) through (e) of this 
section are satisfied.
    (b) Availability of report to shareholders and other materials. (1) 
The following materials are publicly accessible, free of charge, at the 
website address specified in the Notice from the date the Fund transmits 
the Report as required by Sec.  270.30e-1 until the Fund next transmits 
a report required by Sec.  270.30e-1 with respect to the Fund:
    (i) Current report to shareholders. The Report.
    (ii) Prior report to shareholders. Any report with respect to the 
Fund for the prior reporting period that was transmitted to shareholders 
of record pursuant to Sec.  270.30e-1.
    (iii) Complete portfolio holdings from reports containing a summary 
schedule of investments. If a report specified in paragraph (b)(1)(i) or 
(ii) of this section includes a summary schedule of investments (Sec.  
210.12-12B of this chapter) in lieu of Schedule I--Investments in 
securities of unaffiliated issuers (Sec.  210.12-12 of this chapter), 
the Fund's complete portfolio holdings as of the close of the period 
covered by the report, presented in accordance with the schedules set 
forth in Sec. Sec.  210.12-12 through 210.12-14 of Regulation S-X 
(Sec. Sec.  210.12-12 through 210.12-14 of this chapter), which need not 
be audited.
    (iv) Portfolio holdings for most recent first and third fiscal 
quarters. The Fund's complete portfolio holdings as of the close of the 
Fund's most recent first and third fiscal quarters, if any, after

[[Page 530]]

the date on which the Fund's registration statement became effective, 
presented in accordance with the schedules set forth in Sec. Sec.  
210.12-12 through 210.12-14 of Regulation S-X [Sec. Sec.  210.12-12 
through 210.12-14 of this chapter], which need not be audited. The 
complete portfolio holdings required by this paragraph (b)(1)(iv) must 
be made publicly available not later than 60 days after the close of the 
fiscal quarter.
    (2) The website address relied upon for compliance with this section 
may not be the address of the Commission's electronic filing system.
    (3) The materials that are accessible in accordance with paragraph 
(b)(1) of this section must be presented on the website in a format, or 
formats, that are convenient for both reading online and printing on 
paper.
    (4) Persons accessing the materials specified in paragraph (b)(1) of 
this section must be able to retain permanently, free of charge, an 
electronic version of such materials in a format, or formats, that meet 
the conditions of paragraph (b)(3) of this section.
    (5) The conditions set forth in paragraphs (b)(1) through (4) of 
this section shall be deemed to be met, notwithstanding the fact that 
the materials specified in paragraph (b)(1) of this section are not 
available for a time in the manner required by paragraphs (b)(1) through 
(4) of this section, provided that:
    (i) The Fund has reasonable procedures in place to ensure that the 
specified materials are available in the manner required by paragraphs 
(b)(1) through (4) of this section; and
    (ii) The Fund takes prompt action to ensure that the specified 
documents become available in the manner required by paragraphs (b)(1) 
through (4) of this section, as soon as practicable following the 
earlier of the time at which it knows or reasonably should have known 
that the documents are not available in the manner required by 
paragraphs (b)(1) through (4) of this section.
    (c) Notice. A paper notice (``Notice'') meeting the conditions of 
this paragraph (c) must be sent to the shareholder within 70 days after 
the close of the period for which the Report is being made. The Notice 
may contain only the information specified by paragraphs (c)(1), (2), 
and (3) of this section, and may include pictures, logos, or similar 
design elements so long as the design is not misleading and the 
information is clear.
    (1) The Notice must be written using plain English principles 
pursuant to paragraph (d) of this section and:
    (i) Contain a prominent legend in bold-face type that states ``[An] 
Important Report[s] to [Shareholders] of [Fund] [is/are] Now Available 
Online and In Print by Request.'' The Notice may also include 
information identifying the Fund, the Fund's sponsor (including any 
investment adviser or sub-adviser to the Fund), a variable annuity or 
variable life insurance contract or insurance company issuer thereof, or 
a financial intermediary through which shares of the Fund are held.
    (ii) State that the Report contains important information about the 
Fund, including its portfolio holdings and financial statements. The 
statement may also include a brief listing of other types of information 
contained in the Report.
    (iii) State that the Report is available at the website address 
specified in the Notice or, upon request, by mail, and encourage the 
shareholder to access and review the Report.
    (iv) Include a website address where the Report and other materials 
specified in paragraph (b)(1) of this section are available. The website 
address must be specific enough to lead investors directly to the 
documents that are required to be accessible under paragraph (b)(1) of 
this section, rather than to the home page or a section of the website 
other than on which the documents are posted. The website may be a 
central site with prominent links to each document. In addition to the 
website address, the Notice may contain any other equivalent method or 
means to access the Report or other materials specified in paragraph 
(b)(1) of this section.
    (v) Provide a toll-free (or collect) telephone number to contact the 
Fund or the shareholder's financial intermediary, and:
    (A) Provide instructions describing how a shareholder may request a 
paper

[[Page 531]]

or email copy of the Report and other materials specified in paragraph 
(b)(1) of this section at no charge, and an indication that the 
shareholder will not otherwise receive a paper or email copy;
    (B) Explain that the shareholder can at any time elect to receive 
print reports in the future and provide instructions describing how a 
shareholder may make that election (e.g., by contacting the Fund or by 
contacting the shareholder's financial intermediary); and
    (C) If applicable, provide instructions describing how a shareholder 
can elect to receive shareholder reports or other documents and 
communications by electronic delivery.
    (2) The Notice may include additional methods by which a shareholder 
can contact the Fund or the shareholder's financial intermediary (e.g., 
by email or through a website), which may include any information needed 
to identify the shareholder.
    (3) A Notice may include content from the Report if such content is 
set forth after the information required by paragraph (c)(1) of this 
section.
    (4) The Notice may not be incorporated into, or combined with, 
another document, except that the Notice may incorporate or combine one 
or more other Notices.
    (5) The Notice must be sent separately from other types of 
shareholder communications and may not accompany any other document or 
materials; provided, however, that the Notice may accompany:
    (i) One or more other Notices;
    (ii) A current Statutory Prospectus, Statement of Additional 
Information, or Notice of internet Availability of Proxy Materials under 
Sec.  240.14a-16 of this chapter;
    (iii) In the case of a Fund held in a separate account funding a 
variable annuity or variable life insurance contract, such contract or 
the Statutory Prospectus and Statement of Additional Information for 
such contract; or
    (iv) The shareholder's account statement.
    (6) A Notice required by this paragraph (c) will be considered 
transmitted to a shareholder of record if the conditions set forth in 
Sec.  270.30e-1(f), Sec.  240.14a-3(e), or Sec.  240.14c-3(c) of this 
chapter are satisfied with respect to that shareholder.
    (d) Plain English requirements. (1) To enhance the readability of 
the Notice, plain English principles must be used in the organization, 
language, and design of the Notice.
    (2) The Notice must be drafted so that, at a minimum, it 
substantially complies with each of the following plain English writing 
principles:
    (i) Short sentences;
    (ii) Definite, concrete, everyday words;
    (iii) Active voice;
    (iv) Tabular presentation or bullet lists for complex material, 
whenever possible;
    (v) No legal jargon or highly technical business terms; and
    (vi) No multiple negatives.
    (e) Delivery of paper copy upon request. A paper copy of any of the 
materials specified in paragraph (b)(1) of this section must be 
transmitted to any person requesting such a copy, at no cost to the 
requestor and by U.S. first class mail or other reasonably prompt means, 
within three business days after a request for a paper copy is received.
    (f) Investor elections to receive future reports in paper. (1) This 
section may not be relied upon to transmit a Report to a shareholder if 
the shareholder has notified the Fund (or the shareholder's financial 
intermediary) that the shareholder wishes to receive paper copies of 
shareholder reports at any time after the Fund has first notified the 
shareholder of its intent to rely on the rule or provided a Notice to 
the shareholder.
    (2) A shareholder who has notified the Fund (or the shareholder's 
financial intermediary) that the shareholder wishes to receive paper 
copies of shareholder reports with respect to a Fund will be deemed to 
have requested paper copies of shareholder reports with respect to:
    (i) Any and all current and future Funds held through an account or 
accounts with:
    (A) The Fund's transfer agent or principal underwriter or agent 
thereof for the same ``group of related investment companies'' as such 
term is defined in Sec.  270.0-10; or

[[Page 532]]

    (B) A financial intermediary; and
    (ii) Any and all Funds held currently and in the future in a 
separate account funding a variable annuity or variable life insurance 
contract.
    (g) Delivery of other documents. This section may not be relied upon 
to transmit a copy of a Fund's currently effective Statutory Prospectus 
or Statement of Additional Information, or both, under the Securities 
Act of 1933 (15 U.S.C. 77a et seq.) as otherwise permitted by paragraph 
(d) of Sec.  270.30e-1.
    (h) Definitions. For purposes of this section:
    (1) Fund means a management company registered on Form N-2 
(Sec. Sec.  239.14 and 274.11a of this chapter) or Form N-3 (Sec. Sec.  
239.17a and 274.11b of this chapter) and any separate series of the 
management company that is required to transmit a report to shareholders 
pursuant to 270.30e-1.
    (2) Statement of Additional Information means the statement of 
additional information required by Part B of the applicable registration 
form.
    (3) Statutory Prospectus means a prospectus that satisfies the 
requirements of section 10(a) of the Securities Act of 1933 (15 U.S.C. 
77(j)(a)).

    Note 1 to Sec.  270.30.e-3: For a discussion of how the conditions 
and requirements of this rule may apply in the context of investors 
holding Fund shares through financial intermediaries, see Investment 
Company Release No. 33115 (June 5, 2018).

[87 FR 72848, Nov. 25, 2022]



Sec.  270.30h-1  Applicability of section 16 of the Exchange Act
to section 30(h).

    (a) The filing of any statement prescribed under section 16(a) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) shall satisfy the 
corresponding requirements of section 30(h) of the Act (15 U.S.C. 80a-
29(h)).
    (b) The rules under section 16 of the Securities Exchange Act of 
1934 (15 U.S.C. 78p) shall apply to any duty, liability or prohibition 
imposed with respect to a transaction involving any security of a 
registered closed-end company under section 30(h) of the Act (15 U.S.C. 
80a-29(h)).
    (c) No statements need be filed pursuant to section 30(h) of the Act 
(15 U.S.C. 80a-29(h)) by an affiliated person of an investment adviser 
in his or her capacity as such if such person is solely an employee, 
other than an officer, of such investment adviser.

[67 FR 43537, June 28, 2002]



Sec.  270.31a-1  Records to be maintained by registered investment
companies, certain majority-owned subsidiaries thereof, and other 
persons having transactions with registered investment companies.

    (a) Every registered investment company, and every underwriter, 
broker, dealer, or investment adviser which is a majority-owned 
subsidiary of such a company, shall maintain and keep current the 
accounts, books, and other documents relating to its business which 
constitute the record forming the basis for financial statements 
required to be filed pursuant to section 30 of the Investment Company 
Act of 1940 and of the auditor's certificates relating thereto.
    (b) Every registered investment company shall maintain and keep 
current the following books, accounts, and other documents:
    (1) Journals (or other records of original entry) containing an 
itemized daily record in detail of all purchases and sales of securities 
(including sales and redemptions of its own securities), all receipts 
and deliveries of securities (including certificate numbers if such 
detail is not recorded by custodian or transfer agent), all receipts and 
disbursements of cash and all other debits and credits. Such records 
shall show for each such transaction the name and quantity of 
securities, the unit and aggregate purchase or sale price, commission 
paid, the market on which effected, the trade date, the settlement date, 
and the name of the person through or from whom purchased or received or 
to whom sold or delivered. In the case of a money market fund, also 
identify the provider of any Demand Feature or Guarantee (as defined in 
Sec.  270.2a-7(a)(9) or Sec.  270.2a-7(a)(16) respectively) and give a 
brief description of the nature of the Demand Feature or Guarantee 
(e.g., unconditional demand feature, conditional demand feature, letter 
of credit, or bond insurance) and, in a subsidiary portfolio investment

[[Page 533]]

record, provide the complete legal name and accounting and other 
information (including sufficient information to calculate coupons, 
accruals, maturities, puts, and calls) necessary to identify, value, and 
account for each investment.
    (2) General and auxiliary ledgers (or other records) reflecting all 
assets, liability, reserve, capital, income and expense accounts, 
including:
    (i) Separate ledger accounts (or other records) reflecting the 
following:
    (a) Securities in transfer;
    (b) Securities in physical possession;
    (c) Securities borrowed and securities loaned;
    (d) Monies borrowed and monies loaned (together with a record of the 
collateral therefor and substitutions in such collateral);
    (e) Dividends and interest received;
    (f) Dividends receivable and interest accrued.

    Instruction. (a) and (b) of this subdivision shall be stated in 
terms of securities quantities only; (c) and (d) of this subdivision 
shall be stated in dollar amounts and securities quantities as 
appropriate; (e) and (f) of this subdivision shall be stated in dollar 
amounts only.

    (ii) Separate ledger accounts (or other records) for each portfolio 
security, showing (as of trade dates) (a) the quantity and unit and 
aggregate price for each purchase, sale, receipt, and delivery of 
securities and commodities for such accounts, and (b) all other debits 
and credits for such accounts. Securities positions and money balances 
in such ledger accounts (or other records) shall be brought forward 
periodically but not less frequently than at the end of fiscal quarters. 
Any portfolio security, the salability of which is conditioned, shall be 
so noted. A memorandum record shall be available setting forth, with 
respect to each portfolio security account, the amount and declaration 
ex-dividend, and payment dates of each dividend declared thereon.
    (iii) Separate ledger accounts (or other records) for each broker-
dealer bank or other person with or through which transactions in 
portfolio securities are effected, showing each purchase or sale of 
securities with or through such persons, including details as to the 
date of the purchase or sale, the quantity and unit and aggregate price 
of such securities, and the commissions or other compensation paid to 
such persons. Purchases or sales effected during the same day at the 
same price may be aggregated.
    (iv) Separate ledger accounts (or other records), which may be 
maintained by a transfer agent or registrar, showing for each 
shareholder of record of the investment company the number of shares of 
capital stock of the company held. In respect of share accumulation 
accounts (arising from periodic investment plans, dividend reinvestment 
plans, deposit of issued shares by the owner thereof, etc.), details 
shall be available as to the dates and number of shares of each 
accumulation, and except with respect to already issued shares deposited 
by the owner thereof, prices of each such accumulation.
    (3) A securities record or ledger reflecting separately for each 
portfolio security as of trade date all ``long'' and ``short'' positions 
carried by the investment company for its own account and showing the 
location of all securities long and the off-setting position to all 
securities short. The record called for by this paragraph shall not be 
required in circumstances under which all portfolio securities are 
maintained by a bank or banks or a member or members of a national 
securities exchange as custodian under a custody agreement or as agent 
for such custodian.
    (4) Corporate charters, certificates of incorporation or trust 
agreements, and by-laws, and minute books of stockholders' and 
directors' or trustees' meetings; and minute books of directors' or 
trustees' committee and advisory board or advisory committee meetings.
    (5) A record of each brokerage order given by or in behalf of the 
investment company for, or in connection with, the purchase or sale of 
securities, whether executed or unexecuted. Such record shall include 
the name of the broker, the terms and conditions of the order and of any 
modification or cancellation thereof, the time of entry or cancellation, 
the price at which executed, and the time of receipt of report of 
execution. The record shall indicate the name of the person who placed 
the

[[Page 534]]

order in behalf of the investment company.
    (6) A record of all other portfolio purchases or sales showing 
details comparable to those prescribed in paragraph (b)(5) of this 
section.
    (7) A record of all puts, calls, spreads, straddles, and other 
options in which the investment company has any direct or indirect 
interest or which the investment company has granted or guaranteed; and 
a record of any contractual commitments to purchase, sell, receive or 
deliver securities or other property (but not including open orders 
placed with broker-dealers for the purchase or sale of securities, which 
may be cancelled by the company on notices without penalty or cost of 
any kind); containing, at least, an identification of the security, the 
number of units involved, the option price, the date of maturity, the 
date of issuance, and the person to whom issued.
    (8) A record of the proof of money balances in all ledger accounts 
(except shareholder accounts), in the form of trial balances. Such trial 
balances shall be prepared currently at least once a month.
    (9) A record for each fiscal quarter, which shall be completed 
within ten days after the end of such quarter, showing specifically the 
basis or bases upon which the allocation of orders for the purchase and 
sale of portfolio securities to named brokers or dealers and the 
division of brokerage commissions or other compensation on such purchase 
and sale orders among named persons were made during such quarter. The 
record shall indicate the consideration given to (i) sales of shares of 
the investment company by brokers or dealers, (ii) the supplying of 
services or benefits by brokers or dealers to the investment company, 
its investment adviser or principal underwriter or any persons 
affiliated therewith, and (iii) any other considerations other than the 
technical qualifications of the brokers and dealers as such. The record 
shall show the nature of the services or benefits made available, and 
shall describe in detail the application of any general or specific 
formula or other determinant used in arriving at such allocation of 
purchase and sale orders and such division of brokerage commissions or 
other compensation. The record shall also include the identities of the 
persons responsible for the determination of such allocation and such 
division of brokerage commissions or other compensation.
    (10) A record in the form of an appropriate memorandum identifying 
the person or persons, committees, or groups authorizing the purchase or 
sale of portfolio securities. Where an authorization is made by a 
committee or group, a record shall be kept of the names of its members 
who participated in the authorization. There shall be retained as part 
of the record required by this paragraph any memorandum, recommendation, 
or instruction supporting or authorizing the purchase or sale of 
portfolio securities. The requirements of this paragraph are applicable 
to the extent they are not met by compliance with the requirements of 
paragraph (b)(4) of this section.
    (11) Files of all advisory material received from the investment 
adviser, any advisory board or advisory committee, or any other persons 
from whom the investment company accepts investment advice, other than 
material which is furnished solely through uniform publications 
distributed generally.
    (12) The term ``other records'' as used in the expressions 
``journals (or other records of original entry)'' and ``ledger accounts 
(or other records)'' shall be construed to include, where appropriate, 
copies of voucher checks, confirmations, or similar documents which 
reflect the information required by the applicable rule or rules in 
appropriate sequence and in permanent form, including similar records 
developed by the use of automatic data processing systems.
    (c) Every underwriter, broker, or dealer which is a majority-owned 
subsidiary of a registered investment company shall maintain in the form 
prescribed therein such accounts, books and other documents as are 
required to be maintained by brokers and dealers by rule adopted under 
section 17 of the Securities Exchange Act of 1934.

[[Page 535]]

    (d) Every depositer of any registered investment company, and every 
principal underwriter for any registered investment company other than a 
closed-end investment company, shall maintain such accounts, books and 
other documents as are required to be maintained by brokers and dealers 
by rule adopted under section 17 of the Securities Exchange Act of 1934, 
to the extent such records are necessary or appropriate to record such 
person's transactions with such registered investment company.
    (e) Every investment advisor which is a majority-owned subsidiary of 
a registered investment company shall maintain in the form prescribed 
therein such accounts, books and other documents as are required to be 
maintained by registered investment advisers by rule adopted under 
section 204 of the Investment Advisers Act of 1940.
    (f) Every investment adviser not a majority-owned subsidiary of a 
registered investment company shall maintain such accounts, books and 
other documents as are required to be maintained by registered 
investment advisers by rule adopted under section 204 of the Investment 
Advisers Act of 1940, to the extent such records are necessary or 
appropriate to record such person's transactions with such registered 
investment company.

(Sec. 31, 54 Stat. 838; 15 U.S.C. 80a-30)

[27 FR 11993, Dec. 5, 1962, as amended at 61 FR 13983, Mar. 28, 1996; 62 
FR 64986, Dec. 9, 1997; 79 FR 47968, Aug. 14, 2014; 80 FR 58155, Sept. 
25, 2015]



Sec.  270.31a-2  Records to be preserved by registered investment
companies, certain majority-owned subsidiaries thereof, and other persons
having transactions with registered investment companies.

    (a) Every registered investment company shall:
    (1) Preserve permanently, the first two years in an easily 
accessible place, all books and records required to be made pursuant to 
paragraphs (1) through (4) of Sec.  270.31a-1(b);
    (2) Preserve for a period not less than six years from the end of 
the fiscal year in which any transaction occurred, the first two years 
in an easily accessible place, all books and records required to be made 
pursuant to Sec.  270.31a-1(b)(5) through (12) and all vouchers, 
memoranda, correspondence, checkbooks, bank statements, cancelled 
checks, cash reconciliation, cancelled stock certificates, and all 
schedules evidencing and supporting each computation of net asset value 
of the investment company shares, including schedules evidencing and 
supporting each computation of an adjustment to net asset value of the 
investment company shares based on swing pricing policies and procedures 
established and implemented pursuant to Sec.  270.22c-1(a)(3), all 
schedules evidencing and supporting each computation of a liquidity fee 
by a money market fund pursuant to Sec.  270.2a-7(c)(2), and other 
documents required to be maintained by Sec.  270.31a-1(a) and not 
enumerated in Sec.  270.31a-1(b).
    (3) Preserve for a period not less than 6 years from the end of the 
fiscal year last used, the first 2 years in an easily accessible place, 
any advertisement, pamphlet, circular, form letter or other sales 
literature addressed to or intended for distribution to prospective 
investors;
    (4) Preserve for a period not less than six years, the first two 
years in an easily accessible place, any record of the initial 
determination that a director is not an interested person of the 
investment company, and each subsequent determination that the director 
is not an interested person of the investment company. These records 
must include any questionnaire and any other document used to determine 
that a director is not an interested person of the company;
    (5) Preserve for a period not less than six years, the first two 
years in an easily accessible place, any materials used by the 
disinterested directors of an investment company to determine that a 
person who is acting as legal counsel to those directors is an 
independent legal counsel;
    (6) Preserve for a period not less than six years, the first two 
years in an easily accessible place, any documents or other written 
information considered by the directors of the investment company 
pursuant to section 15(c) of the Act (15 U.S.C. 80a-15(c)) in approving 
the terms or renewal of a contract

[[Page 536]]

or agreement between the company and an investment adviser; and
    (7) Preserve for a period not less than six years, the first two 
years in an easily accessible place, any shareholder report required by 
Sec.  270.30e-1 (including any version posted on a website or otherwise 
provided electronically) that is not filed with the Commission in the 
exact form in which it was used.
    (b) Every underwriter, broker, or dealer which is a majority-owned 
subsidiary of a registered investment company shall preserve for the 
periods prescribed therein such accounts, books and other documents as 
are required to be preserved by brokers and dealers by rule adopted 
under section 17 of the Securities Exchange Act of 1934.
    (c) Every depositor of any registered investment company, and every 
principal underwriter for any registered investment company other than a 
closed-end company, shall preserve for a period of not less than six 
years such accounts, books and other documents as are required to be 
maintained by brokers and dealers by rule adopted under section 17 of 
the Securities Exchange Act of 1934, to the extent such records are 
necessary or appropriate to record such person's transactions with such 
registered investment company.
    (d) Every investment adviser which is a majority-owned subsidiary of 
a registered investment company shall preserve for the periods 
prescribed therein such accounts, books and other documents as are 
required to be preserved by investment advisers by rule adopted under 
section 204 of the Investment Advisers Act of 1940.
    (e) Every investment adviser not a majority-owned subsidiary of a 
registered investment company shall preserve for a period of not less 
than six years such accounts, books and other documents as are required 
to be maintained by registered investment advisers by rule adopted under 
section 204 of the Investment Advisers Act of 1940, to the extent such 
records are necessary or appropriate to record such person's 
transactions with such registered investment company.
    (f) Micrographic and electronic storage permitted--(1) General. The 
records required to be maintained and preserved under this part may be 
maintained and preserved for the required time by, or on behalf of, an 
investment company on:
    (i) Micrographic media, including microfilm, microfiche, or any 
similar medium; or
    (ii) Electronic storage media, including any digital storage medium 
or system that meets the terms of this section.
    (2) General requirements. The investment company, or person that 
maintains and preserves records on its behalf, must:
    (i) Arrange and index the records in a way that permits easy 
location, access, and retrieval of any particular record;
    (ii) Provide promptly any of the following that the Commission (by 
its examiners or other representatives) or the directors of the company 
may request:
    (A) A legible, true, and complete copy of the record in the medium 
and format in which it is stored;
    (B) A legible, true, and complete printout of the record; and
    (C) Means to access, view, and print the records; and
    (iii) Separately store, for the time required for preservation of 
the original record, a duplicate copy of the record on any medium 
allowed by this section.
    (3) Special requirements for electronic storage media. In the case 
of records on electronic storage media, the investment company, or 
person that maintains and preserves records on its behalf, must 
establish and maintain procedures:
    (i) To maintain and preserve the records, so as to reasonably 
safeguard them from loss, alteration, or destruction;
    (ii) To limit access to the records to properly authorized 
personnel, the directors of the investment company, and the Commission 
(including its examiners and other representatives); and
    (iii) To reasonably ensure that any reproduction of a non-electronic 
original record on electronic storage media is complete, true, and 
legible when retrieved.
    (4) Notwithstanding the provisions of paragraphs (a) through (e) of 
this section, any record, book or other document may be destroyed in 
accordance

[[Page 537]]

with a plan previously submitted to and approved by the Commission. A 
plan shall be deemed to have been approved by the Commission if notice 
to the contrary has not been received within 90 days after submission of 
the plan to the Commission.

[27 FR 11994, Dec. 5, 1962, as amended at 38 FR 7797, Mar. 26, 1973; 51 
FR 42209, Nov. 24, 1986; 53 FR 3880, Feb. 10, 1988; 66 FR 3759, Jan. 16, 
2001; 66 FR 29228, May 30, 2001; 69 FR 46390, Aug. 2, 2004; 81 FR 82138, 
Nov. 18, 2016; 87 FR 72850, Nov. 25, 2022; 88 FR 51523, Aug. 3, 2023]



Sec.  270.31a-3  Records prepared or maintained by other than person
required to maintain and preserve them.

    (a) If the records required to be maintained and preserved pursuant 
to the provisions of Sec. Sec.  270.31a-1 and 270.31a-2 are prepared or 
maintained by others on behalf of the person required to maintain and 
preserve such records, the person required to maintain and preserve such 
records shall obtain from such other person an agreement in writing to 
the effect that such records are the property of the person required to 
maintain and preserve such records and will be surrendered promptly on 
request.
    (b) In cases where a bank or member of a national securities 
exchange acts as custodian, transfer agent, or dividend disbursing 
agent, compliance with this section shall be considered to have been met 
if such bank or exchange member agrees in writing to make any records 
relating to such service available upon request and to preserve for the 
periods prescribed in Sec.  270.31a-2 any such records as are required 
to be maintained by Sec.  270.31a-1.

(Sec. 31, 54 Stat. 838; 15 U.S.C. 80a-30)

[27 FR 11994, Dec. 5, 1962]



Sec.  270.31a-4  Records to be maintained and preserved by registered 
investment companies relating to fair value determinations.

    (a) Appropriate documentation. Every registered investment company 
shall maintain appropriate documentation to support fair value 
determinations made pursuant to Sec.  270.2a-5 for at least six years 
from the time that the determination was made, the first two years in an 
easily accessible place.
    (b) Records when designating. If the board of a registered 
investment company has designated performance of fair value 
determinations to a valuation designee under Sec.  270.2a-5(b), in 
addition to the records required in paragraph (a) of this section, the 
registered investment company must maintain copies of:
    (1) The reports and other information provided to the board as 
required under Sec.  270.2a-5(b)(1) for at least six years after the end 
of the fiscal year in which the documents were provided to the board, 
the first two years in an easily accessible place; and
    (2) A specified list of the investments or investment types whose 
fair value determination has been designated to the valuation designee 
to perform pursuant to Sec.  270.2a-5(b) for a period beginning with the 
designation and ending at least six years after the end of the fiscal 
year in which the designation was terminated, in an easily accessible 
place until two years after such termination.
    (c) Party to maintain. If the board of a registered investment 
company has designated performance of fair value determinations to its 
investment adviser under Sec.  270.2a-5(b), such investment adviser 
shall maintain the records required by this section. If the investment 
adviser is not so designated, the fund shall maintain such records.

[86 FR 808, Jan. 6, 2021]



Sec.  270.32a-1  Exemption of certain companies from affiliation
provisions of section 32(a).

    A registered investment company shall be exempt from the provisions 
of paragraph (1) of section 32(a) of the Act (54 Stat. 838; 15 U.S.C. 
80a-31), insofar as said paragraph requires that independent public 
accountants for such company be selected by a majority of certain 
members of the board of directors, if:
    (a) Such company meets the conditions of paragraphs (1) to (8), 
inclusive, of section 10(d) of the Act (54 Stat. 807; 15 U.S.C. 80a-10); 
and

[[Page 538]]

    (b) Such accountants are selected by a majority of all the members 
of the board of directors.

[Rule N-32A-1, 6 FR 6631, Dec. 23, 1941, as amended at 87 FR 22446, Apr. 
15, 2022]



Sec.  270.32a-2  Exemption for initial period from vote of security 
holders on independent public accountant for certain registered separate 
accounts.

    (a) A registered separate account shall be exempt from the 
requirement under paragraph (2) of section 32(a) of the Act that 
selection of an independent public accountant shall have been submitted 
for ratification or rejection at the next succeeding annual meeting of 
security owners, subject to the following conditions:
    (1) Such registered separate account qualifies for exemption from 
section 14(a) of the Act pursuant to Sec.  270.14a-2, or is exempt 
therefrom by order of the Commission upon application; and
    (2) The selection of such accountant shall be submitted for 
ratification or rejection to variable annuity contract owners at their 
first meeting after the effective date of the registration statement 
under the Securities Act of 1933, as amended (15 U.S.C. 77a et seq.), 
relating to contracts participating in such account: Provided, That such 
meeting shall take place within 1 year after such effective date, unless 
the time for the holding of such meeting shall be extended by the 
Commission upon written request showing good cause therefor.

(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)

[34 FR 12696, Aug. 5, 1969]



Sec.  270.32a-3  Exemption from provision of section 32(a)(1) regarding
the time period during which a registered management investment company
must select an independent public accountant.

    (a) A registered management investment company (``company'') 
organized in a jurisdiction that does not require it to hold regular 
annual meetings of its stockholders, and which does not hold a regular 
annual stockholders' meeting in a given fiscal year, shall be exempt in 
that fiscal year from the requirement of section 32(a)(1) of the Act (15 
U.S.C. 80a-31(a)(1)) that the independent public accountant 
(``accountant'') be selected at a board of directors meeting held within 
30 days before or after the beginning of the fiscal year or before the 
annual meeting of stockholders in that year, provided, that such company 
is either:
    (1) In a set of investment companies as defined in paragraph (b) of 
this section, if not all the members of such set have an identical 
fiscal year end and if such company selects an accountant at a board of 
directors meeting held within 90 days before or after the beginning of 
that fiscal year; or
    (2) Not in a set of investment companies, or is in a set, each of 
whose members has the same fiscal year end, and if such company selects 
an accountant at a board of directors meeting held within 30 days before 
or 90 days after the beginning of that fiscal year.
    (b) For purposes of this rule, ``set of investment companies'' means 
any two or more registered management investment companies that hold 
themselves out to investors as related companies for purposes of 
investment and investor services, and
    (1) That have a common investment adviser or principal underwriter, 
or
    (2) If the investment adviser or principal underwriter of one of the 
companies is an affiliated person as defined in section 2(a)(3)(C) of 
the Act (15 U.S.C. 80a-2(a)(3)(C)) of the investment adviser or 
principal underwriter of each of the other companies.

[54 FR 31332, July 28, 1989]



Sec.  270.32a-4  Independent audit committees.

    A registered management investment company or a registered face-
amount certificate company is exempt from the requirement of section 
32(a)(2) of the Act (15 U.S.C. 80a-32(a)(2)) that the selection of the 
company's independent public accountant be submitted for ratification or 
rejection at the next succeeding annual meeting of shareholders, if:
    (a) The company's board of directors has established a committee, 
composed solely of directors who are not interested persons of the 
company, that has responsibility for overseeing the fund's accounting 
and auditing processes (``audit committee'');

[[Page 539]]

    (b) The company's board of directors has adopted a charter for the 
audit committee setting forth the committee's structure, duties, powers, 
and methods of operation or set forth such provisions in the fund's 
charter or bylaws; and
    (c) The company maintains and preserves permanently in an easily 
accessible place a copy of the audit committee's charter and any 
modification to the charter.

[66 FR 3759, Jan. 16, 2001]



Sec.  270.34b-1  Sales literature deemed to be misleading.

    Any advertisement, pamphlet, circular, form letter, or other sales 
literature addressed to or intended for distribution to prospective 
investors that is required to be filed with the Commission by section 
24(b) of the Act [15 U.S.C. 80a-24(b)] (for purposes of paragraph (a) 
and (b) of this section, ``sales literature'') will have omitted to 
state a fact necessary in order to make the statements made therein not 
materially misleading unless the sales literature includes the 
information specified in paragraphs (a) and (b) of this section. Any 
registered investment company or business development company 
advertisement, pamphlet, circular, form letter, or other sales 
literature addressed to or intended for distribution to prospective 
investors in connection with a public offering (for purposes of 
paragraph (c) of this section, ``sales literature'') will have omitted 
to state a fact necessary in order to make the statements therein not 
materially misleading unless the sales literature includes the 
information specified in paragraph (c) of this section.

    Note 1 to Sec.  270.34b-1 Introductory Text:
    The fact that the sales literature includes the information 
specified in paragraphs (a) and (b) of this section does not relieve the 
investment company, underwriter, or dealer of any obligations with 
respect to the sales literature under the antifraud provisions of the 
Federal securities laws. For guidance about factors to be weighed in 
determining whether statements, representations, illustrations, and 
descriptions contained in investment company sales literature are 
misleading, see Sec.  230.156 of this chapter.

    (a) Sales literature for a money market fund shall contain the 
information required by paragraph (b)(4) of Sec.  230.482 of this 
chapter, presented in the manner required by paragraph (b)(5) of Sec.  
230.482 of this chapter.
    (b)(1) Except as provided in paragraph (b)(3) of this section:
    (i) In any sales literature that contains performance data for an 
investment company, include the disclosure required by paragraph (b)(3) 
of Sec.  230.482 of this chapter, presented in the manner required by 
paragraph (b)(5) of Sec.  230.482 of this chapter.
    (ii) In any sales literature for a money market fund:
    (A) Accompany any quotation of yield or similar quotation purporting 
to demonstrate the income earned or distributions made by the money 
market fund with a quotation of current yield specified by paragraph 
(e)(1)(i) of Sec.  230.482 of this chapter;
    (B) Accompany any quotation of the money market fund's tax 
equivalent yield or tax equivalent effective yield with a quotation of 
current yield as specified in Sec.  230.482(d)(1)(iii) of this chapter; 
and
    (C) Accompany any quotation of the money market fund's total return 
with a quotation of the money market fund's current yield specified in 
paragraph (e)(1)(i) of Sec.  230.482 of this chapter. Place the 
quotations of total return and current yield next to each other, in the 
same size print, and if there is a material difference between the 
quoted total return and the quoted current yield, include a statement 
that the yield quotation more closely reflects the current earnings of 
the money market fund than the total return quotation.
    (iii) In any sales literature for an investment company other than a 
money market fund that contains performance data:
    (A) Include the total return information required by paragraph 
(d)(3) of Sec.  230.482 of this chapter;
    (B) Accompany any quotation of performance adjusted to reflect the 
effect of taxes (not including a quotation of tax equivalent yield or 
other similar quotation purporting to demonstrate the tax equivalent 
yield earned or distributions made by the company) with

[[Page 540]]

the quotations of total return specified by paragraph (d)(4) of Sec.  
230.482 of this chapter;
    (C) If the sales literature (other than sales literature for a 
company that is permitted under Sec.  270.35d-1(a)(4) to use a name 
suggesting that the company's distributions are exempt from federal 
income tax or from both federal and state income tax) represents or 
implies that the company is managed to limit or control the effect of 
taxes on company performance, include the quotations of total return 
specified by paragraph (d)(4) of Sec.  230.482 of this chapter;
    (D) Accompany any quotation of yield or similar quotation purporting 
to demonstrate the income earned or distributions made by the company 
with a quotation of current yield specified by paragraph (d)(1) of Sec.  
230.482 of this chapter; and
    (E) Accompany any quotation of tax equivalent yield or other similar 
quotation purporting to demonstrate the tax equivalent yield earned or 
distributions made by the company with a quotation of tax equivalent 
yield specified in paragraph (d)(2) and current yield specified by 
paragraph (d)(1) of Sec.  230.482 of this chapter.
    (2) Any performance data included in sales literature under 
paragraphs (b)(1)(ii) or (iii) of this section must meet the currentness 
requirements of paragraph (g) of Sec.  230.482 of this chapter.
    (3) The requirements specified in paragraph (b)(1) of this section 
do not apply to any quarterly, semi-annual, or annual report to 
shareholders under Section 30 of the Act [15 U.S.C. 80a-29] containing 
performance data for a period commencing no earlier than the first day 
of the period covered by the report; nor do the requirements of 
paragraphs (d)(3)(ii), (d)(4)(ii), and (g) of Sec.  230.482 of this 
chapter apply to any such periodic report containing any other 
performance data.
    (c)(1) Except as provided in paragraph (c)(2) of this section:
    (i) In any sales literature that contains fee and expense figures 
for a registered investment company or business development company, 
include the disclosure required by paragraph (i) of Sec.  230.482 of 
this chapter.
    (ii) Any fee and expense information included in sales literature 
must meet the timeliness requirements of paragraph (j) of Sec.  230.482 
of this chapter.
    (2) The requirements specified in paragraph (c)(1) of this section 
do not apply to any quarterly, semi-annual, or annual report to 
shareholders under Section 30 of the Act [15 U.S.C. 80a-29] or to other 
reports pursuant to section 13 or section 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 79m or 78o(d)) containing fee and 
expense information; nor do the requirements of paragraphs (i) and (j) 
of Sec.  230.482 of this chapter or paragraph (c)(3) of Sec.  230.433 of 
this chapter apply to any such report containing fee and expense 
information.

    Note: Sales literature (except that of a money market fund) 
containing a quotation of yield or tax equivalent yield must also 
contain the total return information. In the case of sales literature, 
the currentness provisions apply from the date of distribution and not 
the date of submission for publication.

[58 FR 19055, Apr. 12, 1993; 58 FR 21927, Apr. 26, 1993, as amended at 
62 FR 64986, Dec. 9, 1997; 63 FR 13987, Mar. 23, 1998; 66 FR 9018, Feb. 
5, 2001; 68 FR 57779, Oct. 6, 2003; 87 FR 72850, Nov. 25, 2022]



Sec.  270.35d-1  Investment company names.

    (a) Materially deceptive and misleading fund names. For purposes of 
section 35(d) of the Act (15 U.S.C. 80a-34(d)), a materially deceptive 
and misleading name of a fund includes:
    (1) Names suggesting guarantee or approval by the United States 
Government. A name suggesting that the fund or the securities issued by 
it are guaranteed, sponsored, recommended, or approved by the United 
States Government or any United States Government agency or 
instrumentality, including any name that uses the words ``guaranteed'' 
or ``insured'' or similar terms in conjunction with the words ``United 
States'' or ``U.S. Government.''
    (2) Names suggesting an investment focus. A name that includes terms 
suggesting that the fund focuses its investments in: a particular type 
of investment or investments; a particular industry or group of 
industries; particular countries or geographic regions; or investments 
that have, or whose

[[Page 541]]

issuers have, particular characteristics (e.g., a name with terms such 
as ``growth'' or ``value,'' or terms indicating that the fund's 
investment decisions incorporate one or more environmental, social, or 
governance factors), unless:
    (i) The fund has adopted a policy to invest, under normal 
circumstances, at least 80% of the value of its assets in investments in 
accordance with the investment focus that the fund's name suggests. For 
a name suggesting that the fund focuses its investments in a particular 
country or geographic region, investments that are in accordance with 
the investment focus that the fund's name suggests are investments that 
are tied economically to the particular country or geographic region 
suggested by its name;
    (ii) The policy described in paragraph (a)(2)(i) of this section is 
a fundamental policy, or the fund has adopted a policy to provide the 
fund's shareholders with at least 60 days' prior notice of any change in 
the policy described in paragraph (a)(2)(i) of this section, and any 
change in the fund's name that accompanies the change, that meets the 
provisions of paragraph (e) of this section; and
    (iii) Any terms used in the fund's name that suggest that the fund 
focuses its investments as described in paragraph (a)(2)(i) of this 
section are consistent with those terms' plain English meaning or 
established industry use.
    (3) Tax-exempt funds. A name suggesting that the fund's 
distributions are exempt from Federal income tax or from both Federal 
and State income tax, unless:
    (i) The fund has adopted a fundamental policy:
    (A) To invest, under normal circumstances, at least 80% of the value 
of its assets in investments the income from which is exempt, as 
applicable, from Federal income tax or from both Federal and State 
income tax; or
    (B) To invest, under normal circumstances, its assets so that at 
least 80% of the income that it distributes will be exempt, as 
applicable, from Federal income tax or from both Federal and State 
income tax; and
    (ii) Any terms used in the fund's name that suggest that the fund 
invests its assets as described in paragraph (a)(3)(i) of this section 
are consistent with those terms' plain English meaning or established 
industry use.
    (b) Operation of policies and related recordkeeping. (1) The 
requirements of paragraph (a)(2)(i) and (a)(3)(i) of this section apply 
at the time a fund invests its assets, provided that:
    (i) The fund must review its portfolio investments' inclusion in the 
fund's 80% basket, as defined in paragraph (g) of this section, at least 
quarterly. If, subsequent to an investment, the fund identifies that the 
requirements of paragraph (a)(2)(i) or (a)(3)(i) of this section, as 
applicable, are no longer met, the fund must make future investments in 
a manner that will bring the fund into compliance with those paragraphs 
as soon as reasonably practicable, and in all circumstances within 90 
consecutive days of the fund's identification that those requirements 
are no longer met;
    (ii) If the fund departs from the requirements of paragraph 
(a)(2)(i) or (a)(3)(i) of this section, as applicable, in other-than-
normal circumstances, the fund must come back into compliance with the 
requirements of those paragraphs within 90 consecutive days, measured 
from the time of the initial departure; and
    (iii) A fund may temporarily invest less than 80% of the value of 
its assets in accordance with the fund's investment focus as otherwise 
required by paragraph (a)(2)(i) or (a)(3)(i) of this section, as 
applicable, to reposition or liquidate the fund's assets in connection 
with a reorganization, to launch the fund, or when notice of a change in 
a fund's policy as described in paragraph (a)(2)(ii) of this section has 
been provided to fund shareholders.
    (2) For the purpose of determining the fund's compliance with an 
investment policy adopted under paragraph (a)(2)(i) or (a)(3)(i)(A) of 
this section, in addition to any derivatives instrument that the fund 
includes in its 80% basket because the derivatives instrument provides 
investment exposure to investments suggested by the fund's name, a fund 
may include in its 80% basket a derivatives instrument that

[[Page 542]]

provides investment exposure to one or more of the market risk factors 
associated with the investment focus that the fund's name suggests.
    (3) A fund must maintain written records documenting its compliance 
under paragraphs (a) and (b) of this section, as applicable. A fund must 
maintain written records, at the time a fund invests its assets, 
documenting: whether the investment the fund makes is included in the 
fund's 80% basket and, if so, the basis for including such investment in 
the fund's 80% basket; and the value of the fund's 80% basket, as a 
percentage of the value of the fund's assets. A fund must maintain 
written records documenting its review of its portfolio investments' 
inclusion in the fund's 80% basket, as described in paragraph (b)(1)(i) 
of this section, including whether each investment is included in the 
fund's 80% basket and the basis for including such investment in the 80% 
basket. If during the review of portfolio investments' inclusion in the 
fund's 80% basket or otherwise, the fund identifies that the 
requirements of paragraph (a)(2)(i) or (a)(3)(i) of this section, as 
applicable, are no longer met, the fund must maintain written records 
documenting: the date this was identified; and the reason for any 
departure from the policies described in paragraphs (a)(2)(i) and 
(a)(3)(i) of this section. If the fund departs from the requirements of 
paragraph (a)(2)(i) or (a)(3)(i) of this section, as applicable, in 
other-than-normal circumstances as described in paragraph (b)(1)(ii) of 
this section, or as described in paragraph (b)(1)(iii) of this section, 
the fund must keep records documenting: the date of any departure from 
the policies described in paragraphs (a)(2)(i) and (a)(3)(i) of this 
section; and the reason for any such departure (including why the fund 
determined that circumstances are other-than-normal). A fund must 
maintain records of any notice sent to the fund's shareholders pursuant 
to paragraph (d) of this section. Written records documenting the fund's 
compliance under paragraphs (a) and (b) of this section must be 
maintained for a period of not less than six years following the 
creation of each required record (or, in the case of notices, following 
the date the notice was sent), the first two years in an easily 
accessible place.
    (c) Effect of compliance with policy adopted under paragraph 
(a)(2)(i) or (a)(3)(i). A fund name may be materially deceptive or 
misleading under section 35(d) of the Act even if the fund adopts and 
implements a policy under paragraph (a)(2)(i) or (a)(3)(i) of this 
section and otherwise complies with the requirements of paragraph (a)(2) 
or (a)(3) of this section, as applicable.
    (d) Notice. A policy to provide a fund's shareholders with notice of 
a change in a fund's policy as described in paragraph (a)(2)(ii) of this 
section must provide that:
    (1) The notice will be provided in plain English separately from any 
other documents (provided, however, that if the notice is delivered in 
paper form, it may be provided in the same envelope as other written 
documents);
    (2) The notice will contain the following prominent statement, or 
similar clear and understandable statement, in bold-face type: 
``Important Notice Regarding Change in Investment Policy [and Name]'', 
provided that:
    (i) If the notice is provided in paper form, the statement also will 
appear on the envelope in which the notice is delivered; and
    (ii) If the notice is provided electronically, the statement also 
will appear on the subject line of the email communication that includes 
the notice or an equivalent indication of the subject of the 
communication in other forms of electronic media; and
    (3) The notice must describe, as applicable, the fund's policy 
adopted under paragraph (a)(2)(i) of this section, the nature of the 
change to the policy, the fund's old and new names, and the effective 
date of any policy and/or name changes.
    (e) Unit investment trusts. The requirements of paragraphs 
(a)(2)(i), (a)(3)(i), and (b)(3) of this section shall apply to any unit 
investment trust (as defined in section 4(2) of the Act (15 U.S.C. 80a-
4(2)) only at the time of initial deposit of portfolio securities.
    (f) Unlisted registered closed-end funds and business development 
companies. Notwithstanding the requirements of paragraph (a)(2)(ii) of 
this section, if

[[Page 543]]

the fund is a closed-end company or business development company, and 
the fund does not have shares that are listed on a national securities 
exchange, any policy adopted pursuant to paragraph (a)(2) of this 
section can be changed only if authorized by the vote of the majority of 
the outstanding voting securities of such fund unless:
    (1) The fund conducts a tender or repurchase offer to allow 
shareholders to redeem shares, in accordance with all applicable 
Commission rules, in advance of any change in such policy;
    (2) The fund provides the fund's shareholders with at least 60 days' 
prior notice of any change in such policy in advance of the tender or 
repurchase offer described in paragraph (f)(1) of this section;
    (3) The tender or repurchase offer described in paragraph (f)(1) of 
this section is not oversubscribed; and
    (4) In the event of a tender offer, the fund purchases shares at 
their net asset value.
    (g) Definitions. For purposes of this section:
    Assets means net assets, plus the amount of any borrowings for 
investment purposes. In determining the value of a fund's assets for 
purposes of this section, a fund must value each derivatives instrument 
using the instrument's notional amount (which must be converted to 10-
year bond equivalents for interest rate derivatives and delta adjusted 
for options contracts) and must value each physical short position using 
the value of the asset sold short. The fund may reduce the value of its 
assets by excluding any cash and cash equivalents, and U.S. Treasury 
securities with remaining maturities of one year or less, up to the 
notional amount of the derivatives instrument(s) and the value of 
asset(s) sold short, and also exclude any closed-out derivatives 
positions if those positions result in no credit or market exposure to 
the fund. A fund must exclude from this calculation derivatives 
instruments used to hedge currency risks associated with one or more 
specific foreign-currency-denominated equity or fixed-income investments 
held by the fund, provided that such currency derivatives are entered 
into and maintained by the fund for hedging purposes and that the 
notional amounts of such derivatives do not exceed the value of the 
hedged investments (or the par value thereof, in the case of fixed-
income investments) by more than 10 percent.
    Derivatives instrument means any swap, security-based swap, futures 
contract, forward contract, option, any combination of the foregoing, or 
any similar instrument.
    Eighty percent (80%) basket means investments that are invested in 
accordance with the investment focus that the fund's name suggests (or 
as described in paragraph (a)(3)(i) of this section).
    Fund means a registered investment company or a business development 
company, including any separate series thereof.
    Fundamental policy means a policy that a fund adopts under section 
8(b)(3) of the Act (15 U.S.C. 80a-8(b)(3)) or, in the case of a business 
development company, a policy that is changeable only if authorized by 
the vote of a majority of the outstanding voting securities of the fund.
    Launch means a period, not to exceed 180 consecutive days, starting 
from the date the fund commences operations.
    Oversubscribed means shareholders have tendered or requested 
repurchase of a greater number of shares than the fund has offered to 
purchase in accordance with applicable Commission rules.

[88 FR 70509, Dec. 11, 2023]



Sec.  270.38a-1  Compliance procedures and practices of certain
investment companies.

    (a) Each registered investment company and business development 
company (``fund'') must:
    (1) Policies and procedures. Adopt and implement written policies 
and procedures reasonably designed to prevent violation of the Federal 
Securities Laws by the fund, including policies and procedures that 
provide for the oversight of compliance by each investment adviser, 
principal underwriter, administrator, and transfer agent of the fund;
    (2) Board approval. Obtain the approval of the fund's board of 
directors, including a majority of directors who are not interested 
persons of the fund,

[[Page 544]]

of the fund's policies and procedures and those of each investment 
adviser, principal underwriter, administrator, and transfer agent of the 
fund, which approval must be based on a finding by the board that the 
policies and procedures are reasonably designed to prevent violation of 
the Federal Securities Laws by the fund, and by each investment adviser, 
principal underwriter, administrator, and transfer agent of the fund;
    (3) Annual review. Review, no less frequently than annually, the 
adequacy of the policies and procedures of the fund and of each 
investment adviser, principal underwriter, administrator, and transfer 
agent and the effectiveness of their implementation;
    (4) Chief compliance officer. Designate one individual responsible 
for administering the fund's policies and procedures adopted under 
paragraph (a)(1) of this section:
    (i) Whose designation and compensation must be approved by the 
fund's board of directors, including a majority of the directors who are 
not interested persons of the fund;
    (ii) Who may be removed from his or her responsibilities by action 
of (and only with the approval of) the fund's board of directors, 
including a majority of the directors who are not interested persons of 
the fund;
    (iii) Who must, no less frequently than annually, provide a written 
report to the board that, at a minimum, addresses:
    (A) The operation of the policies and procedures of the fund and 
each investment adviser, principal underwriter, administrator, and 
transfer agent of the fund, any material changes made to those policies 
and procedures since the date of the last report, and any material 
changes to the policies and procedures recommended as a result of the 
annual review conducted pursuant to paragraph (a)(3) of this section; 
and
    (B) Each Material Compliance Matter that occurred since the date of 
the last report; and
    (iv) Who must, no less frequently than annually, meet separately 
with the fund's independent directors.
    (b) Unit investment trusts. If the fund is a unit investment trust, 
the fund's principal underwriter or depositor must approve the fund's 
policies and procedures and chief compliance officer, must receive all 
annual reports, and must approve the removal of the chief compliance 
officer from his or her responsibilities.
    (c) Undue influence prohibited. No officer, director, or employee of 
the fund, its investment adviser, or principal underwriter, or any 
person acting under such person's direction may directly or indirectly 
take any action to coerce, manipulate, mislead, or fraudulently 
influence the fund's chief compliance officer in the performance of his 
or her duties under this section.
    (d) Recordkeeping. The fund must maintain:
    (1) A copy of the policies and procedures adopted by the fund under 
paragraph (a)(1) that are in effect, or at any time within the past five 
years were in effect, in an easily accessible place; and
    (2) Copies of materials provided to the board of directors in 
connection with their approval under paragraph (a)(2) of this section, 
and written reports provided to the board of directors pursuant to 
paragraph (a)(4)(iii) of this section (or, if the fund is a unit 
investment trust, to the fund's principal underwriter or depositor, 
pursuant to paragraph (b) of this section) for at least five years after 
the end of the fiscal year in which the documents were provided, the 
first two years in an easily accessible place; and
    (3) Any records documenting the fund's annual review pursuant to 
paragraph (a)(3) of this section for at least five years after the end 
of the fiscal year in which the annual review was conducted, the first 
two years in an easily accessible place.
    (e) Definitions. For purposes of this section:
    (1) Federal Securities Laws means the Securities Act of 1933 (15 
U.S.C. 77a-aa), the Securities Exchange Act of 1934 (15 U.S.C. 78a-mm), 
the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 (2002)), 
the Investment Company Act of 1940 (15 U.S.C. 80a), the Investment 
Advisers Act of 1940 (15 U.S.C. 80b), Title V of the Gramm-Leach-Bliley 
Act (Pub. L. No. 106-102, 113 Stat. 1338 (1999), any rules adopted by 
the Commission under any of these statutes,

[[Page 545]]

the Bank Secrecy Act (31 U.S.C. 5311-5314; 5316-5332) as it applies to 
funds, and any rules adopted thereunder by the Commission or the 
Department of the Treasury.
    (2) A Material Compliance Matter means any compliance matter about 
which the fund's board of directors would reasonably need to know to 
oversee fund compliance, and that involves, without limitation:
    (i) A violation of the Federal securities laws by the fund, its 
investment adviser, principal underwriter, administrator or transfer 
agent (or officers, directors, employees or agents thereof),
    (ii) A violation of the policies and procedures of the fund, its 
investment adviser, principal underwriter, administrator or transfer 
agent, or
    (iii) A weakness in the design or implementation of the policies and 
procedures of the fund, its investment adviser, principal underwriter, 
administrator or transfer agent.

[68 FR 74729, Dec. 24, 2003]



Sec.  270.45a-1  Confidential treatment of names and addresses of 
dealers of registered investment company securities.

    (a) Exhibits calling for the names and addresses of dealers to or 
through whom principal underwriters of registered investment companies 
are currently offering securities and which are required to be furnished 
with registration statements filed pursuant to section 8(b) of the Act 
(54 Stat. 804; 15 U.S.C. 80a-8), or periodic reports filed pursuant to 
section 30(a) or section 30(b)(1) of the Act (54 Stat. 836; 15 U.S.C. 
80a-30), shall be the subject of confidential treatment and shall not be 
made available to the public, except that the Commission may by order 
make such exhibits available to the public if, after appropriate notice 
and opportunity for hearing, it finds that public disclosure of such 
material is necessary or appropriate in the public interest or for the 
protection of investors.
    (b) The exhibits referred to in paragraph (a) of this section shall 
be filed in quadruplicate with the Commission at the time the 
registration statement or periodic report is filed. Such exhibits shall 
be enclosed in a separate envelope marked ``Confidential Treatment'' and 
addressed to the Chairman, Securities and Executive Commission, 
Washington, DC. Confidential treatment requests shall be submitted in 
paper only, whether or not the registrant is required to file in 
electronic format.

[Rule N-45A-1, 7 FR 197, Jan. 10, 1942, as amended at 20 FR 7036, Sept. 
20, 1955; 58 FR 14860, Mar. 18, 1993]



Sec.  270.55a-1  Investment activities of business development companies.

    Notwithstanding section 55(a) of the Act (15 U.S.C. 80a-54(a)), a 
business development company may acquire securities purchased in 
transactions not involving any public offering from an issuer, or from 
any person who is an officer or employee of the issuer, if the issuer 
meets the requirements of sections 2(a)(46)(A) and (B) of the Act (15 
U.S.C. 80a-2(a)(46)(A) and (B)), but the issuer is not an eligible 
portfolio company because it does not meet the requirements of Sec.  
270.2a-46, and the business development company meets the requirements 
of paragraphs (i) and (ii) of section 55(a)(1)(B) of the Act (15 U.S.C. 
80a-54(a)(1)(B)(i) and (ii)).

[71 FR 64092, Oct. 31, 2006]



Sec.  270.57b-1  Exemption for downstream affiliates of business 
development companies.

    Notwithstanding subsection (b)(2) of section 57 of the Act, the 
provisions of subsection (a) of that section shall not apply to any 
person (a) solely because that person is directly or indirectly 
controlled by a business development company or (b) solely because that 
person is, within the meaning of section 2(a)(3) (C) or (D) of the Act 
[15 U.S.C. 80a-2(a)(3) (C) or (D)], an affiliated person of a person 
described in (a) of this section.

[46 FR 16674, Mar. 13, 1981]



Sec.  270.60a-1  Exemption for certain business development companies.

    Section 12(d)(1) (A) and (C) of the Act shall not apply to the 
acquisition by a business development company of the securities of a 
small business investment company licensed to do business under the 
Small Business Investment

[[Page 546]]

Act of 1958 which is operated as a wholly-owned subsidiary of the 
business development company.

[46 FR 16674, Mar. 13, 1981]



         PART 271_INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT
         COMPANY ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER-
         -Table of Contents

    Authority: 15 U.S.C. 80a et seq.

----------------------------------------------------------------------------------------------------------------
                                                      Release
                      Subject                           No.         Date            Fed. Reg. Vol. and Page
----------------------------------------------------------------------------------------------------------------
Statement of the Commission respecting distinctions        12   Nov. 16, 1940  11 FR 10991.
 between the reporting requirements of section
 16(a) of the Securities Exchange Act of 1934 and
 section 30(f) of the Investment Company Act of
 1940.
Letter of General Counsel relating to sections(b)          69   Feb. 19, 1941   Do.
 and 26(c).
Letter of the Director of the Investment Company           71   Feb. 21, 1941   Do.
 Division relating to section 19 and Rule N-19-1
 (17 CFR, 270.19a-1).
Statement by the Commission relating to section            78    Mar. 4, 1941   Do.
 23(c)(3) and Rule N-23C-1 (17 CFR, 270.23c-1).
Letter of General Counsel relating to section 22(d)        87   Mar. 14, 1941  11 FR 10992.
Letter of General Counsel relating to section 22(d)        89   Mar. 13, 1941   Do.
Letter of General Counsel relating to section 24(b)       150   June 20, 1941   Do.
Opinion of General Counsel relating to sections           167   July 23, 1941  11 FR 10993.
 8(b)(1) and 13(a).
Letter of General Counsel relating to section 10(a)       214  Sept. 15, 1941  11 FR 10994.
Extract from letter of the Director of the                446    Feb. 5, 1943   Do.
 Corporation Finance Division relating to sections
 20 and 34(b).
Excerpts from letters of the Director of the              448   Feb. 17, 1943   Do.
 Corporation Finance Division relating to section
 14 and Schedule 14A under Regulation X-14.
Letter of the Director of the Corporation Finance         735    Jan. 3, 1945  11 FR 10995.
 Division relating to section 20 of the Investment
 Company Act of 1940 and to Rule X-14A-7 under the
 Securities Exchange Act of 1934 (17 CFR, 240.14a-
 7).
Statement of the Commission on the offering of           3187    Feb. 6, 1961  26 FR 1275.
 common stock to the public at a per share price
 substantially in excess of the net asset value of
 the stock.
Opinion of the Commission that ``Equity Funding,''       3480    May 22, 1962  27 FR 5190.
 ``Secured Funding,'' or ``Life Funding''
 constitutes an investment contract and when
 publicly offered is required to be registered
 under the Securities Act of 1933.
Statement of the Commission advising all registered      3542  Sept. 21, 1962  27 FR 9652.
 investment companies to divest themselves of
 interest and securities acquired in contravention
 of the provisions of section 12(d)(3) of the
 Investment Company Act of 1940 within a reasonable
 period of time.
Statement of the Commission advising any closed-end      3548    Oct. 3, 1962  27 FR 9987.
 investment company contemplating repurchase of its
 own shares to consult with the Division of
 Corporate re nature of disclosure to be made to
 security holders.
Opinion and statement of the Commission in regard        4426    Dec. 7, 1965  30 FR 15420.
 to proper reporting of deferred income taxes
 arising from installment sales.
Statement of the Commission to clarify the meaning       4483   Jan. 19, 1966  31 FR 1005.
 of ``beneficial ownership of securities'' as
 relates to beneficial ownership of securities held
 by family members.
Statement of the Commission setting the date of May      4516   Feb. 14, 1966  31 FR 3175.
 1, 1966 after which filings must reflect
 beneficial ownership of securities held by family
 members.
Staff interpretative and no-action positions             5510    Oct. 8, 1968  33 FR 15650.
 relating to property rights of an investment
 company and its investment adviser in the
 company's name and to the status of arrangement
 funding qualified Self-Employed Individual's
 Retirement Plans with life insurance contracts and
 investment company securities. The staff's
 comments do not purport to be an official
 expression of the Commission.
Statement of the Director of the Commission's            5554    Dec. 3, 1968  33 FR 18576.
 Division of Corporate Regulation re the filing of
 supplements to investment company prospectuses
 under the Securities Act of 1933 as a result of
 changes in stock exchange rules effective December
 5, 1968 relating to ``customer-directed give ups''.
Interpretative positions of the Division of              5569   Dec. 27, 1968  34 FR 382.
 Corporate Regulation on questions relating to Rule
 22c-1 which was adopted Oct. 16, 1968; text of
 questions and answers.
Statement of the Commission setting forth emergency      5632   Mar. 12, 1969  34 FR 5547.
 procedures adopted by the Division of Corporate
 Regulation to expedite processing of registration
 statements, amendments, and proxy statements.

[[Page 547]]

 
Letter by Philip A. Loomis, Jr., General Counsel     ........   Nov. 10, 1969  34 FR 18543.
 for the Commission, explaining obligations of
 mutual fund managements and brokers with respect
 to commissions on portfolio brokerage of mutual
 funds.
Commission's statement discussing restricted             5847   Oct. 21, 1969  35 FR 19989.
 securities.
Commission's statement that disclosure requirements      6026   Apr. 13, 1970  35 FR 19991.
 set forth in release of October 21, 1969 will be
 applied to lists of portfolio securities set forth
 not only in registration statements but also in
 reports to the Commission and to shareholders, in
 sales literature and in proxy statements.
Publication of the Commission's guidelines re            6082   June 23, 1970  36 FR 12103.
 applicability of Federal securities law to offer
 and sale outside the U.S. of shares of registered
 open-end investment companies.
Statement of the Commission reminding reporting          6209   Oct. 15, 1970  35 FR 16733.
 companies of obligation re Commission's rules to
 file reports on a timely basis.
Commission's views relating to important questions       6295   Dec. 23, 1970  35 FR 19986.
 re the accounting by registered investment
 companies for investment securities in their
 financial statements and in the periodic
 computations of net asset value for the purpose of
 pricing their shares.
Publication of the Commission's procedure to be          6330   Jan. 25, 1971  36 FR 2600.
 followed if requests are to be met for no action
 or interpretative letters and responses thereto to
 be made available for public use.
First in a series of statements by the Commission        6336    Feb. 2, 1971  36 FR 2867.
 alerting registered companies, their counsel, and
 other interested persons re certain changes made
 in the Investment Company Act of 1940 by Pub. L.
 91-547 (1970 Act) such as approval of investment
 advisory contracts which should be considered in
 connection with 1971 annual meetings.
The Commission's views on the purchase, redemption,      6366    Mar. 5, 1971  36 FR 4978.
 or repurchase of fund shares.
Second in a series of statements by the Commission       6392   Mar. 19, 1971  36 FR 5840.
 calling attention to some important provisions of
 Pub. L. 91-547 (1970 Act) which in this case
 require companies that issue periodic payment
 plans and face-amount certificates to take certain
 actions.
Third in a series of statements by the Commission        6430    Apr. 2, 1971  36 FR 7897.
 on problems arising under Pub. L. 91-547 (1970
 Act) re registration and regulation of insurance
 company separate accounts used as funding vehicles
 for certain employee stock bonus, pension and
 profit sharing plans.
Publication by the Commission of certain important       6440    Apr. 6, 1971  36 FR 8729.
 amendments relating to the repeal and modification
 of certain exemptions by the Investment Company
 Amendments Act of 1970 (Pub. L. 91-547) and to the
 pyramiding of investment companies and the
 regulation of fund holding companies under the
 same act.
Commission's statement on amendments contained in        6506     May 5, 1971  36 FR 9130.
 Pub. L. 91-547 concerning policies of a registered
 investment company; ineligibility of certain
 persons to serve as employees of a registered
 company; legal standards for investment company
 reorganizations of unit investment trusts; and
 filing of certain legal documents with the
 Commission.
Commission's interpretative position relating to         6480    May 10, 1971  36 FR 9627.
 judiciary duty of Directors of a Registered
 Investment Company.
Commission's issuance of guidelines for additional       6568   June 11, 1971  36 FR 12164.
 disclosures for contractual plan prospectuses
 concerning new refund and election provisions of
 the Investment Company Amendments Act of 1970
 (Pub. L. 91-547).
Commission's guidelines relating to checking             6863   Jan. 29, 1972  37 FR 1474.
 accounts established by investment companies
 having bank custodians.
Commission endorses the establishment by all             7091    Apr. 5, 1972  37 FR 6850.
 publicly held companies of audit committees
 composed of outside directors.
Commission's statement of factors to be considered       7113   Apr. 19, 1972  37 FR 7690.
 in connection with investment company advisory
 contracts containing incentive arrangements.
Applicability of Commission's policy statement on        7170    May 18, 1972  37 FR 9988.
 the future structure of securities markets to
 selection of brokers and payment of commissions by
 institutional managers.
Commission's statement and policy on misleading pro      7204    June 9, 1972  37 FR 11559.
 rata stock distributions to shareholders.
Commission's guidelines prepared by the Division of      7220    June 9, 1972  37 FR 12790.
 Corporate Regulation for use in preparing and
 filing registration statements for open-end and
 closed-end management investment companies on
 Forms S-4 and S-5.
Guidelines prepared by the Commission's Division of      7221    June 9, 1972  37 FR 12790.
 Corporate Regulation for use in preparation and
 filing of registration statements for both open-
 end and closed-end management investment companies
 on Form N-8B-1.
Commission's guidelines on independence of               7264    July 5, 1972  37 FR 14294.
 certifying accountants; example cases and
 Commission's conclusions.
Commission's decisions on advisory committee             7390    Mar. 1, 1973  38 FR 5457.
 recommendations regarding commencement of
 enforcement proceedings and termination of staff
 investigations.
Commission's interpretation of risk-sharing in           7395    Oct. 5, 1972  37 FR 20937.
 pooling-of-interest accounting.

[[Page 548]]

 
Amendment of previous interpretation (AS-130) of         7606   Jan. 18, 1973  38 FR 1734.
 risk-sharing test in pooling-of-interest
 accounting.
Commission expresses concern with failure of             7856   July 10, 1973  38 FR 18366.
 issuers to timely file periodic and current
 reports.
Commission's conclusion as to certain problems           7955  Sept. 10, 1973  38 FR 24635.
 relating to the effect of treasury stock
 transaction on accounting for business
 combinations.
Commission request for comments on Accounting            8025   Oct. 17, 1973  38 FR 28819.
 Series Release No. 146.
Commission's statement on procedure to be followed       8236    Mar. 7, 1974  39 FR 8916.
 upon issuance of a notice pursuant to Rule 0-5.
Commission's statement of policy and                    7955A   Apr. 12, 1974  39 FR 14588.
 interpretations.
Commission's views on business combinations              8410    July 3, 1974  39 FR 26719.
 involving open-end investment companies.
Commission's guidelines for filings related to           8433   July 22, 1974  39 FR 28520.
 extractive reserves and natural gas supplies.
Commission's statement on two-tier real estate           8456   Sept. 5, 1974  39 FR 32129.
 investment companies.
Division of Investment Management Regulation             8752   Apr. 24, 1975  40 FR 17986.
 Interpretive Position Relating to Rule 22c-1.
Commission's guidelines in Accounting Series             8819   June 13, 1975  40 FR 27441.
 Release No. 148.
Commission's guidelines for filing of application        8959    Oct. 2, 1975  40 FR 45424.
 for Order permitting registration of foreign
 investment companies.
Commission's statements of investment policies of        9011   Oct. 30, 1975  40 FR 54241.
 money market funds relating to industry
 concentration.
Procedures for filing and processing registration        9426  Sept. 13, 1976  41 FR 39012.
 statements and post-effective amendments filed by                             41 FR 46851.
 registered investment companies.
Valuation of debt instruments by money market funds      9786    May 31, 1977  42 FR 28999.
 and certain other open end investment companies.
Rescission of certain accounting series releases...      9817   June 15, 1977  42 FR 33282.
Withdrawal of undertaking required of investment         9889   Aug. 12, 1977  42 FR 42196.
 companies.
Disclosure of management remuneration..............      9900   Aug. 18, 1977  42 FR 43058;
                                                                               42 FR 46047.
Bearing of distribution expenses by mutual funds...      9915   Aug. 31, 1977  42 FR 44810.
Division of investment management interpretative         9932  Sept. 15, 1977  42 FR 47553.
 position relating to rights offerings by closed-
 end investment companies below net asset value.
Disclosure of management remuneration..............     10112    Feb. 6, 1978  43 FR 6060.
Sales load variation in special offerings to permit     10419    Oct. 4, 1978  43 FR 47492;
 mutual fund shareholders to purchase additional                               43 FR 52022.
 shares.
Disclosure of management remuneration..............     10597   Feb. 22, 1979  44 FR 16368.
General statement of policy regarding exemptive         10653    Apr. 5, 1979  44 FR 21629.
 provisions relating to annuity and insurance
 contracts.
General statement of policy regarding securities        10666   Apr. 18, 1979  44 FR 25128.
 trading practices of registered investment
 companies.
Shareholder communications, shareholder                 10860   Sept. 6, 1979  44 FR 53426.
 participation in the corporate electoral process
 and corporate governance generally.
Statement of staff position on pooled income funds.     11016   Jan. 10, 1980  45 FR 3258.
Effect of credit controls on the operations of          11088   Mar. 14, 1980  45 FR 17954.
 certain registered investment companies including
 money market refunds.
Effective of the termination of credit controls on      11263   July 21, 1980  45 FR 49917.
 the operations of certain registered investment
 companies including money market funds.
Indemnification by investment companies............     11330   Sept. 4, 1980  45 FR 62423;
                                                                               45 FR 67082.
Issuance of ``Retail Repurchase Agreements'' by         11958  Sept. 25, 1981  46 FR 48637.
 banks and savings and loan associations.
Effect of revenue ruling 81-225 on issuers and          11960  Sept. 28, 1981  46 FR 48640.
 holders of certain variable annuity contracts.
Disclosure of management remuneration..............     12070    Dec. 3, 1981  46 FR 60421.
Statement of staff position on adoption of              12274    Mar. 5, 1982  47 FR 10518.
 permanent notification forms for business
 development companies.
Statement of staff position regarding securities        13005    Feb. 2, 1983  48 FR 5894.
 trading practices of registered investment
 companies.
Public statements by corporate representatives.....     13718   Jan. 13, 1984  49 FR 2469.
Statement of position of Commission's Division of       14492   Apr. 30, 1985  50 FR 19339.
 Investment Management.
Statement of the Commission Regarding Disclosure        16509    Aug. 1, 1988  53 FR 29228.
 Obligations of Companies Affected by the
 Government's Defense Contract Procurement Inquiry
 and Related Issues.
Management's discussion and analysis of financial       16961    May 18, 1989  54 FR 22427.
 condition and results of operations; certain
 investment company disclosure.
Status under the Investment Company Act of 1940 of      17681   Aug. 17, 1990  55 FR 34551.
 United States Branches or Agencies of Foreign
 Banks Issuing Securities;Interpretive Release.
Ownership reports and trading by officers,              18114   Apr. 26, 1991  56 FR 19928.
 directors and principal security holders.
Use of electronic media for delivery purposes......     21399    Oct. 6, 1995  60 FR 53467.
Use of electronic media for delivery purposes......     21945     May 9, 1996  60 FR 24651.

[[Page 549]]

 
Statement of the Commission Regarding Use of            23071   Mar. 23, 1998  63 FR 14813
 Internet Web Sites to Offer Securities, Solicit
 Securities Transactions or Advertise Investment
 Services Offshore.
Statement of the Commission Regarding Disclosure of     23366   July 29, 1998  63 FR 41404.
 Year 2000 Issues and Consequences by Public
 Companies, Investment Advisers, Investment
 Companies, and Municipal Securities Issuers.
Interpretive Matters Concerning Independent             24083   Oct. 14, 1999  64 FR 59877.
 Directors of Investment Companies..
Use of electronic media............................     24426   Apr. 28, 2000  65 FR 25857.
Commission Guidance on Mini-Tender Offers and           24564   July 24, 2000  65 FR 46588.
 Limited Partnership Tender Offers.
Exemption From Section 101(c)(1) of the Electronic      24582   July 27, 2000  65 FR 47284.
 Signatures in Global and National Commerce Act for
 Registered Investment Companies.
Application of the Electronic Signatures in Global      25003   June 14, 2001  66 FR 33176.
 and National Commerce Act to Record Retention
 Requirements Pertaining to Issuers.
Commission Guidance Regarding Prohibited Conduct in     26828   April 7, 2005  70 FR 19672.
 Connection with IPO Allocations.
Commission Guidance Regarding Accounting for Sales      27178     December 5,  70 FR 73345
 of Vaccines and Bioterror Countermeasures to the                        2005
 Federal Government for Placement Into the
 Pediatric Vaccine Stockpile or the Strategic
 National Stockpile.
Commission Guidance on the Use of Company Web Sites     28351  August 1, 2008  73 FR 45874
Commission Guidance Regarding the Definition of the  IC-31684   June 19, 2015  80 FR 37537
 Terms ``Spouse'' and ``Marriage'' Following the
 Supreme Court's Decision in United States v.
 Windsor.
Commission Guidance Regarding Revenue Recognition    IC-32784   Aug. 18, 2017  82 FR 41148
 for Bill-and-Hold Arrangements.
Updates to Commission Guidance Regarding Accounting  IC-32785   Aug. 18, 2017  82 FR 41151
 for Sales of Vaccines and Bioterror
 Countermeasures to the Federal Government for
 Placement into the Pediatric Vaccine Stockpile or
 the Strategic National Stockpile.
Commission Guidance Regarding the Proxy Voting       IC-33605   Aug. 21, 2019  84 FR 47426
 Responsibilities of Investment Advisers.
----------------------------------------------------------------------------------------------------------------



PART 274_FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940--Table of Contents



Sec.
274.0-1 Availability of forms.

                    Subpart A_Registration Statements

274.5 Form N-5, for registration statement of small business investment 
          company under the Securities Act of 1933 and the Investment 
          Company Act of 1940.
274.10 Form N-8A, for notification of registration.
274.11 [Reserved]
274.11A Form N-1A, registration statement of open-end management 
          investment companies.
274.11a-1 Form N-2, registration statement of closed end management 
          investment companies.
274.11b Form N-3, registration statement of separate accounts organized 
          as management investment companies.
274.11c Form N-4, registration statement of separate accounts organized 
          as unit investment trusts.
274.11d Form N-6, registration statement of separate accounts organized 
          as unit investment trusts that offer variable life insurance 
          policies.
274.12 Form N-8B-2, registration statement of unit investment trusts 
          which are currently issuing securities.
274.13 Form N-8B-3, registration statement of unincorporated management 
          investment companies currently issuing periodic payment plan 
          certificates.
274.14 Form N-8B-4, registration statements of face-amount certificate 
          companies.
274.15 Form N-6F, notice of intent to elect to be subject to sections 55 
          through 65 of the Investment Company Act of 1940.
274.24 Form 24F-2, annual filing of securities sold pursuant to 
          registration of certain investment company securities.
274.51 Form N-18F-1, for notification of election pursuant to Sec.  
          270.18f-1 of this chapter.
274.53 Form N-54A, notification of election to be subject to sections 55 
          through 65 of the Investment Company Act of 1940 filed 
          pursuant to section 54(a) of the Act.
274.54 Form N-54C, notification of withdrawal of election to be subject 
          to sections 55 through 65 of the Investment Company Act of 
          1940 filed pursuant to section 54(c) of the Investment Company 
          Act of 1940.

[[Page 550]]

                       Subpart B_Forms for Reports

Sec.  274.101 Form N-CEN, annual report of registered investment 
          companies.
274.102-274.126 [Reserved]
274.127d-1 Form N-27D-1, accounting of segregated trust account.
274.128 Form N-CSR, certified shareholder report.
274.129 Form N-PX, annual report of proxy voting record of registered 
          management investment company.
274.130 [Reserved]
274.150 Form N-PORT, Monthly portfolio holdings report.
274.200 Form N--17D-1, report filed by small business investment company 
          (SBIC) registered under the Investment Company Act of 1940 and 
          an affiliated bank, with respect to investments by the SBIC 
          and the bank, submitted pursuant to paragraph (d)(3) of Sec.  
          270.17d-1 of this chapter.

                  Subpart C_Forms for Other Statements

274.201 Form N-MFP, portfolio holdings of money market funds.
274.202 Form 3, initial statement of beneficial ownership of securities.
274.203 Form 4, statement of changes in beneficial ownership of 
          securities.
274.218 Form N-8F, application for deregistration of certain registered 
          investment companies.
274.219 Form N-17f-1, cover page for each certificate of accounting of 
          securities and similar investments of a management investment 
          company in the custody of a member of a national securities 
          exchange, filed pursuant to rule 17f-1.
274.220 Form N-17f-2, cover page for each certificate of accounting of 
          securities and similar investments in the custody of a 
          registered management investment company, filed pursuant to 
          rule 17f-2.
274.221 Form N-23c-3, Notification of repurchase offer.
274.222 Form N-CR, Current report of money market fund material events.
274.223 Form N-RN, Current report, open- and closed-end investment 
          company reporting.

                     Subpart D_Forms for Exemptions

274.301 Notification of claim of exemption pursuant to Rule 6e-2 or Rule 
          6e-3(T) under the Investment Company Act.

                  Subpart E_Forms for Electronic Filing

274.401 [Reserved]
274.402 Form ID, uniform application for access codes to file on EDGAR.
274.403 Form SE, form for submission of paper format exhibits by 
          electronic filers.
274.404 Form TH--Notification of reliance on temporary hardship 
          exemption.

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 
78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and 80a-37 unless otherwise 
noted.
    Section 274.128 is also issued under 15 U.S.C. 78j-1, 7202, 7233, 
7241, 7264, and 7265; and 18 U.S.C. 1350.

    Effective Date Note: At 87 FR 78809, Dec. 22, 2022, the general 
authority citation to part 274 was revised, effective July 1, 2024. For 
the convenience of the user, the revised text is set forth as follows:
    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 
78n-1, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and sec. 939A, Pub. L. 
111-203, 124 Stat. 1376, unless otherwise noted.

    Source: 33 FR 19003, Dec. 20, 1968, unless otherwise noted.



Sec.  274.0-1  Availability of forms.

    (a) This part identifies and describes the forms prescribed for use 
under the Investment Company Act of 1940.
    (b) Any person may obtain a copy of any form prescribed for use in 
this part by written request to the Securities and Exchange Commission, 
100 F Street, NE., Washington, DC 20549. Any person may inspect the 
forms at this address and at the Commission's regional offices. (See 
Sec.  200.11 of this chapter for the addresses of SEC regional offices)

[46 FR 17757, Mar. 20, 1981, as amended at 47 FR 26820, June 22, 1982; 
59 FR 5946, Feb. 9, 1994; 73 FR 32228, June 5, 2008]



                    Subpart A_Registration Statements



Sec.  274.5  Form N-5, for registration statement of small business
investment company under the Securities Act of 1933 and the Investment
Company Act of 1940.

    This form shall be used for the registration statement under both 
sections 6 and 7 of the Securities Act of 1933 (15 U.S.C. 77f, 77g) and 
section 8(b) of the Investment Company Act of 1940 (15 U.S.C. 80a-8(b)), 
by a small business investment company which is licensed as such under 
the Small Business Investment Act of 1958 or which has received 
preliminary approval of the Small Business Administration and has been 
notified by that Administration that it may submit a license 
application.

[[Page 551]]


    Editorial Note: For Federal Register citations affecting Form N-5, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.10  Form N-8A, for notification of registration.

    This form shall be used as the notification of registration filed 
with the Commission pursuant to section 8(a) of the Investment Company 
Act of 1940.

    Editorial Note: For Federal Register citations affecting Form N-8A, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.11  [Reserved]



Sec.  274.11A  Form N-1A, registration statement of open-end management
investment companies.

    Form N-1A shall be used as the registration statement to be filed 
pursuant to section 8(b) of the Investment Company Act of 1940 by open-
end management investment companies other than separate accounts of 
insurance companies or companies which issue periodic payment plan 
certificates or which are sponsors or depositors of companies issuing 
such certificates. This form shall be used for registration under the 
Securities Act of 1933 of the securities of all open-end management 
investment companies other than registered separate accounts of 
insurance companies. This form is not applicable for small business 
investment companies which register pursuant to Sec. Sec.  293.24 and 
274.5 of this chapter.

[48 FR 37940, Aug. 22, 1983, as amended at 59 FR 52701, Oct. 19, 1994]

    Editorial Note: For Federal Register citations affecting Form N-1A, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.11a-1  Form N-2, registration statement of closed end management 
investment companies.

    This form shall be used as the registration statement to be filed 
pursuant to section 8(b) of the Investment Company Act of 1940 by closed 
end management investment companies other than companies which issue 
periodic payment plan certificates or which are sponsors or depositors 
of companies issuing such certificates. This form also shall be used for 
registration under the Securities Act of 1933 of the securities of all 
closed end management investment companies. This form is not applicable 
for small business investment companies which register pursuant to 
Sec. Sec.  239.24 and 274.5 of this chapter.

[43 FR 39553, Sept. 5, 1978, as amended at 59 FR 52701, Oct. 19, 1994]

    Editorial Note: For Federal Register citations affecting Form N-2, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.11b  Form N-3, registration statement of separate accounts
organized as management investment companies.

    Form N-3 shall be used as the registration statement to be filed 
pursuant to section 8(b) of the Investment Company Act of 1940 by 
separate accounts that offer variable annuity contracts to register as 
management investment companies. This form shall also be used for 
registration under the Securities Act of 1933 of the securities of such 
separate accounts (Sec.  239.17a of this chapter).

[50 FR 26161, June 25, 1985]

    Editorial Note: For Federal Register citations affecting Form N-3, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.11c  Form N-4, registration statement of separate accounts 
organized as unit investment trusts.

    Form N-4 shall be used as the registration statement to be filed 
pursuant to section 8(b) of the Investment Company Act of 1940 by 
separate accounts that offer variable annuity contracts to register as 
unit investment trusts. This form shall also be used for registration 
under the Securities Act of 1933 of the securities of such separate 
accounts (Sec.  239.17b of this chapter).

[50 FR 26161, June 25, 1985]

    Editorial Note: For Federal Register citations affecting Form N-4, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 552]]



Sec.  274.11d  Form N-6, registration statement of separate accounts organized 
as unit investment trusts that offer variable life insurance policies.

    Form N-6 shall be used as the registration statement to be filed 
pursuant to section 8(b) of the Investment Company Act of 1940 by 
separate accounts that offer variable life insurance policies to 
register as unit investment trusts. This form shall also be used for 
registration under the Securities Act of 1933 of the securities of such 
separate accounts (Sec.  239.17c of this chapter).

[67 FR 19870, Apr. 23, 2002]

    Editorial Note: For Federal Register citations affecting Form N-6, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.12  Form N-8B-2, registration statement of unit investment trusts 
that are currently issuing securities.

    This form shall be used as the registration statement to be filed, 
pursuant to section 8(b) of the Investment Company Act of 1940, by unit 
investment trusts other than separate accounts that are currently 
issuing securities, including unit investment trusts that are issuers of 
periodic payment plan certificates.

[67 FR 19870, Apr. 23, 2002]

    Editorial Note: For Federal Register citations affecting Form N-8B-
2, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.13  Form N-8B-3, registration statement of unincorporated 
management investment companies currently issuing periodic payment plan
certificates.

    (a) This form shall be used for registration statement to be filed, 
pursuant to section 8(b) of the Investment Company Act of 1940, by 
unincorporated management investment companies currently issuing 
periodic payment plan certificates.

    Editorial Note: For Federal Register citations affecting Form N-8B-
3, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.14  Form N-8B-4, registration statements of face-amount 
certificate companies.

    This form shall be used for registration statements of face-amount 
certificate companies registered under the Investment Company Act of 
1940.

    Editorial Note: For Federal Register citations affecting Form N-8B-
4, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.15  Form N-6F, notice of intent to elect to be subject to 
sections 55 through 65 of the Investment Company Act of 1940.

    This form shall be used by a company that would be excluded from the 
definition of an investment company by section 3(c)(1) of the Investment 
Company Act of 1940 [15 U.S.C. 80a-3(c)(1)], except that at the time of 
filing it proposes to make a public offering of its securities as a 
business development company, to notify the Securities and Exchange 
Commission that the company intends in good faith to file, within 90 
days, a notification of election to become subject to the provisions of 
sections 55 through 65 of the Investment Company Act of 1940 [15 U.S.C. 
80a-54 through 64].

The text of the form is set forth in the appendix to this release. \1\
---------------------------------------------------------------------------

    \1\ A copy of Form N-6F accompanied this release as originally filed 
in the Office of the Federal Register.

---------------------------------------------------------------------------
[47 FR 10520, Mar. 11, 1982]

    Editorial Note: For Federal Register citations affecting Form N-6F, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.24  Form 24F-2, annual filing of securities sold pursuant to 
registration of certain investment company securities.

    Form 24F-2 shall be used as the annual report filed by face amount 
certificate companies, open-end management companies, and unit 
investment trusts pursuant to Sec.  270.24f-2 of this

[[Page 553]]

chapter for reporting securities sold during the fiscal year.

[62 FR 47940, Sept. 12, 1997]

    Editorial Note: For Federal Register citations affecting Form 24F-2, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.51  Form N-18F-1, for notification of election pursuant to 
Sec.  270.18f-1 of this chapter.

    (a) This form shall be filed with the Commission in triplicate as 
the notification of election pursuant to Sec.  270.18f-1 of this chapter 
by a registered open-end investment company to commit itself to pay in 
cash all redemptions requested by a shareholder of record as provided in 
said section.

[36 FR 11920, June 23, 1971 as amended at 36 FR 20504, Oct. 23, 1971; 39 
FR 36003, Oct. 7, 1974; 59 FR 52701, Oct. 19, 1994]

    Editorial Note: For Federal Register citations affecting Form N-18F-
1, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.53  Form N-54A, notification of election to be subject to
sections 55 through 65 of the Investment Company Act of 1940 filed pursuant
to section 54(a) of the Act.

    This form shall be used pursuant to section 54(a) of the Investment 
Company Act of 1940 [15 U.S.C. 80a-53(a)] by a company of the type 
defined in sections 2(a)(48) (A) and (B) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-2(a)(48) (A) and (B) to notify the Securities and 
Exchange Commission of its election to be subject to the provisions of 
sections 55 through 65 of said Act [15 U.S.C. 80a-54 through 64].

The text of the form is set forth in the appendix to this release. \2\
---------------------------------------------------------------------------

    \2\ A copy of Form N-54A accompanied this release as originally 
filed in the Office of the Federal Register.

---------------------------------------------------------------------------
[47 FR 10520, Mar. 11, 1982]

    Editorial Note: For Federal Register citations affecting Form N-54A, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.54  Form N-54C, notification of withdrawal of election to be 
subject to sections 55 through 65 of the Investment Company Act of
1940 filed pursuant to section 54(c) of the Investment Company Act of 1940.

    This form shall be used pursuant to section 54(c) of the Investment 
Company Act of 1940 [15 U.S.C. 80a-53(c)] by a business development 
company to file a notice of withdrawal of its election under section 
54(a) of the Investment Company Act of 1940 [15 U.S.C. 80a-53(a)].

The text of the form is set forth in the appendix to this release. \3\
---------------------------------------------------------------------------

    \3\ A copy of Form N-54C accompanied this release as originally 
filed in the Office of the Federal Register.

---------------------------------------------------------------------------
[47 FR 10520, Mar. 11, 1982]

    Editorial Note: For Federal Register citations affecting Form N-54C, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



                       Subpart B_Forms for Reports



Sec.  274.101  Form N-CEN, annual report of registered investment companies.

    This form shall be used by registered investment companies for 
annual reports to be filed pursuant to 17 CFR 270.30a-1.

[81 FR 82023, Nov. 18, 2016]

    Editorial Note: For Federal Register citations affecting Form N-CEN, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

    Editorial Note: For Federal Register citations affecting Form N-SAR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec. Sec.  274.102-274.126  [Reserved]



Sec.  274.127d-1  Form N-27D-1 accounting of segregated trust account.

    This form shall be completed and filed with the Commission as a 
report required by Sec.  270.27d-1 of this chapter by each depositor or 
principal underwriter, within 15 days after the close of each quarter 
during the first 2 years after the effective date of Sec.  270.27d-1 of 
this chapter, and thereafter this form

[[Page 554]]

shall be filed annually on or before January 31 of the following 
calendar year. Each investment company for which a segregated trust 
account is established shall be listed on the cover page. Two copies of 
the form, plus an additional copy for each registered investment company 
covered, shall be filed and the filing shall be signed by an authorized 
representative of the depositor or underwriter.

[36 FR 24056, Dec. 18, 1971]

    Editorial Note: For Federal Register citations affecting Form N-27D-
1, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.128  Form N-CSR, certified shareholder report.

    This form shall be used by registered management investment 
companies to file reports pursuant to Sec.  270.30b2-1(a) of this 
chapter not later than 10 days after the transmission to stockholders of 
any report that is required to be transmitted to stockholders under 
Sec.  270.30e-1 of this chapter.

[68 FR 5368, Feb. 3, 2003]

    Editorial Note: For Federal Register citations affecting Form N-CSR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.129  Form N-PX, annual report of proxy voting record of registered
management investment company.

    This form shall be used by registered management investment 
companies, other than small business investment companies registered on 
Form N-5 (Sec. Sec.  239.24 and 274.5 of this chapter), for annual 
reports to be filed not later than August 31 of each year, containing 
the company's proxy voting record for the most recent twelve-month 
period ended June 30, pursuant to section 30 of the Investment Company 
Act of 1940 and Sec.  270.30b1-4 of this chapter.

[68 FR 6584, Feb. 7, 2003]

    Editorial Note: For Federal Register citations affecting Form N-PX, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

    Effective Date Note: At 87 FR 78811, Dec. 22, 2022, the heading for 
Sec.  274.129 was revised July 1, 2024. For the convenience of the user, 
the revised text is set forth as follows:



Sec.  274.129  Form N-PX, annual report of proxy voting record.



Sec.  274.130  [Reserved]



Sec.  274.150  Form N-PORT, Monthly portfolio holdings report.

    (a) Except as provided in paragraph (b) of this section, this form 
shall be used by registered management investment companies or exchange-
traded funds organized as unit investment trusts, or series thereof, to 
file reports pursuant to Sec.  270.30b1-9 of this chapter not later than 
60 days after the end of each fiscal quarter.
    (b) Form N-PORT shall not be filed by a registered open-end 
management investment company that is regulated as a money market fund 
under Sec.  270.2a-7 of this chapter or a small business investment 
company registered on Form N-5 (Sec. Sec.  239.24 and 274.5 of this 
chapter), or series thereof.
    Note: The text of Form N-PORT will not appear in the Code of Federal 
Regulations.

[84 FR 7988, Mar. 6, 2019]

    Editorial Note: For Federal Register citations affecting Form N-
PORT, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.200  Form N-17D-1, report filed by small business investment
company (SBIC) registered under the Investment Company Act of 1940 and 
an affiliated 
          bank, with respect to investments by the SBIC and the bank, 
          submitted pursuant to paragraph (d)(3) of Sec.  270.17d-1 of 
          this chapter.

    This form shall be filed pursuant to Rule 17d-2 (Sec.  270.17d-2 of 
this chapter) as the report required, under subparagraph (d)(3) of Rule 
17d-1 (Sec.  270.17d-1(d)(3) of this chapter), to be filed, either 
jointly or separately, by a small business investment company (SBIC) 
licensed as such under the Small Business Investment Act of 1958, and by 
a bank which is an affiliated person of either the SBIC or of an 
affiliated person of the SBIC, with respect to investments in a small 
business concern by the SBIC and the bank.

[[Page 555]]


    Editorial Note: For Federal Register citations affecting Form N-17D-
1, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



                  Subpart C_Forms for Other Statements



Sec.  274.201  Form N-MFP, portfolio holdings of money market funds.

    This form shall be used by registered open-end management investment 
companies that are regulated as money market funds under Sec.  270.2a-7 
of this chapter to file reports pursuant to Sec.  270.30b1-7 of this 
chapter no later than the fifth business day of each month.

[75 FR 10118, Mar. 4, 2010]

    Editorial Note: For Federal Register citations affecting Form N-MFP, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.202  Form 3, initial statement of beneficial ownership of 
securities.

    This form shall be filed pursuant to Sec.  270.30h-1 for initial 
statements of beneficial ownership of securities required to be filed 
pursuant to section 30(h) of the Investment Company Act of 1940 (15 
U.S.C. 80a-29(h)). (Same as Sec.  249.103 of this chapter.)

[67 FR 43537, June 28, 2002]

    Editorial Note: For Federal Register citations affecting Form 3, see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.203  Form 4, statement of changes in beneficial ownership of
securities.

    This form shall be filed pursuant to Sec.  270.30h-1 for statements 
of changes in beneficial ownership of securities required to be filed 
pursuant to section 30(h) of the Investment Company Act of 1940 (15 
U.S.C. 80a-29(h)). (Same as Sec.  249.104 of this chapter.)

[67 FR 43537, June 28, 2002]

    Editorial Note: For Federal Register citations affecting Form 4, see 
the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.218  Form N-8F, application for deregistration of certain
registered investment companies.

    This form must be used as the application for an order of the 
Commission in cases in which the applicant is a registered investment 
company that:
    (a) Has sold substantially all of its assets to another registered 
investment company or merged into or consolidated with another 
registered investment company;
    (b) Has distributed substantially all of its assets to its 
shareholders and has completed, or is in the process of, winding up its 
affairs;
    (c) Qualifies for an exclusion from the definition of ``investment 
company'' under section 3(c)(1) (15 U.S.C. 80a-3(c)(1)) or section 
3(c)(7) (15 U.S.C. 80a-3(c)(7)) of the Act; or
    (d) Has become a business development company.

[64 FR 19471, Apr. 21, 1999]

    Editorial Note: For Federal Register citations affecting Form N-8F, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.219  Form N-17f-1, cover page for each certificate of accounting 
of securities and similar investments of a management investment company
in the custody of a member of a national securities exchange, filed 
          pursuant to rule 17f-1.

[54 FR 32049, Aug. 4, 1989]

    Editorial Note: For Federal Register citations affecting Form N-17f-
1, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.220  Form N-17f-2, cover page for each certificate of accounting
of securities and similar investments in the custody of a registered management 
          investment company, filed pursuant to rule 17f-2.

[54 FR 32049, Aug. 4, 1989]

    Editorial Note: For Federal Register citations affecting Form N-17f-
2, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.

[[Page 556]]



Sec.  274.221  Form N-23c-3, Notification of repurchase offer.

    Form N-23c-3 shall be filed with copies of notifications of 
repurchase offers submitted to the Commission as required under rule 
23c-3 (Sec.  270.23c-3 of this chapter).

[58 FR 19345, Apr. 14, 1993]

    Editorial Note: For Federal Register citations affecting Form N-23c-
3, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec.  274.222  Form N-CR, Current report of money market fund material
events.

    This form shall be used by registered investment companies that are 
regulated as money market funds under Sec.  270.2a-7 of this chapter to 
file current reports pursuant to Sec.  270.30b1-8 of this chapter within 
the time periods specified in the form.

[79 FR 47973, Aug. 14, 2014]

    Editorial Note: For Federal Register citations affecting Form N-CR, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.223  Form N-RN, Current report, open- and closed-end investment 
company reporting.

    This form shall be used by registered open-end management investment 
companies, or series thereof, and closed-end management investment 
companies, to file reports pursuant to Sec.  270.18f-4(c)(7) and Sec.  
270.30b1-10 of this chapter.

[85 FR 83296, Dec. 21, 2020]

    Editorial Note: For Federal Register citations affecting Form N-RN, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



                     Subpart D_Forms for Exemptions

    Authority: Secs. 6(c), (15 U.S.C. 80a-6(c)), 6(e), (15 U.S.C. 80a-
6(e)), 38(a), 15 U.S.C. 80a-37(a) of the Act.



Sec.  274.301  Notification of claim of exemption pursuant to Rule 6e-2
or Rule 6e-3(T) under the Investment Company Act.

    This form shall be filed with the Commission as required by Sec.  
270.6e-2 or Sec.  270.6e-3(T) of this chapter by each insurance company 
with respect to each separate account for which exemption is claimed 
pursuant to Sec.  270.6e-2 or Sec.  270.6e-3(T).

[49 FR 47228, Dec. 3, 1984]

    Editorial Note: For Federal Register citations affecting Form N-6EI-
1, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



                  Subpart E_Forms for Electronic Filing

    Source: 50 FR 40485, Oct. 4, 1985, unless otherwise noted.



Sec.  274.401  [Reserved]



Sec.  274.402  Form ID, uniform application for access codes to file
on EDGAR.

    Form ID must be filed by registrants, third party filers, or their 
agents, to request the following access codes to permit filing on EDGAR:
    (a) Central Index Key (CIK)--uniquely identifies each filer, filing 
agent, and training agent.
    (b) CIK Confirmation Code (CCC)--used in the header of a filing in 
conjunction with the CIK of the filer to ensure that the filing has been 
authorized by the filer.
    (c) Password (PW)--allows a filer, filing agent or training agent to 
log on to the EDGAR system, submit filings, and change its CCC.
    (d) Password Modification Authorization Code (PMAC)--allows a filer, 
filing agent or training agent to change its Password.

[69 FR 22711, Apr. 26, 2004, as amended at 86 FR 25805, May 11, 2021]

    Editorial Note: For Federal Register citations affecting Form ID, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 557]]



Sec.  274.403  Form SE, form for submission of paper format exhibits by
electronic filers.

    This form shall be used by an electronic filer for the submission of 
any paper format document relating to an otherwise electronic filing, as 
provided in rule 311 of Regulation S-T (Sec.  232.311 of this chapter).

[58 FR 14861, Mar. 18, 1993]

    Editorial Note: For Federal Register citations affecting Form SE, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  274.404  Form TH--Notification of reliance on temporary hardship
exemption.

    Form TH shall be filed by any electronic filer who submits to the 
Commission, pursuant to a temporary hardship exemption, a document in 
paper format that otherwise would be required to be submitted 
electronically, as prescribed by rule 201(a) of Regulation S-T (Sec.  
232.201(a) of this chapter).

[58 FR 14861, Mar. 18, 1993]

    Editorial Note: For Federal Register citations affecting Form TH, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



PART 275_RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940-
-Table of Contents



Sec.
275.0-2 General procedures for serving non-residents.
275.0-3 References to rules and regulations.
275.0-4 General requirements of papers and applications.
275.0-5 Procedure with respect to applications and other matters.
275.0-6 Incorporation by reference in applications.
275.0-7 Small entities under the Investment Advisers Act for purposes of 
          the Regulatory Flexibility Act.
275.202(a)(1)-1 Certain transactions not deemed assignments.
275.202(a)(11)(G)-1 Family offices.
275.202(a)(30)-1 Foreign private advisers.
275.203-1 Application for investment adviser registration.
275.203-2 Withdrawal from investment adviser registration.
275.203-3 Hardship exemptions.
275.203(l)-1 Venture capital fund defined.
275.203(m)-1 Private fund adviser exemption.
275.203A-1 Eligibility for SEC registration; switching to or from SEC 
          registration.
275.203A-2 Exemptions from prohibition on Commission registration.
275.203A-3 Definitions.
275.203A-4--203A-6 [Reserved]
275.204-1 Amendments to Form ADV
275.204-2 Books and records to be maintained by investment advisers.
275.204-3 Delivery of brochures and brochure supplements.
275.204-4 Reporting by exempt reporting advisers.
275.204-5 Delivery of Form CRS.
275.204(b)-1 Reporting by investment advisers to private funds.
275.204A-1 Investment adviser codes of ethics.
275.205-1 Definition of ``investment performance'' of an investment 
          company and ``investment record'' of an appropriate index of 
          securities prices.
275.205-2 Definition of ``specified period'' over which the asset value 
          of the company or fund under management is averaged.
275.205-3 Exemption from the compensation prohibition of section 
          205(a)(1) for investment advisers.
275.206(3)-1 Exemption of investment advisers registered as broker-
          dealers in connection with the provision of certain investment 
          advisory services.
275.206(3)-2 Agency cross transactions for advisory clients.
275.206(4)-1 Investment adviser marketing.
275.206(4)-2 Custody of funds or securities of clients by investment 
          advisers.
275.206(4)-3--275.206(4)-4 [Reserved]
275.206(4)-5 Political contributions by certain investment advisers.
275.206(4)-6 Proxy voting.
275.206(4)-7 Compliance procedures and practices.
275.206(4)-8 Pooled investment vehicles.
275.206(4)-9 [Reserved]
275.206(4)-10 Private fund adviser audits.
275.211(h)(1)-1 Definitions.
275.211(h)(1)-2 Private fund quarterly statements.
275.211(h)(2)-1 Private fund adviser restricted activities.
275.211(h)(2)-2 Adviser-led secondaries.
275.211(h)(2)-3 Preferential treatment.
275.222-1 Definitions.
275.222-2 Definition of ``client'' for purposes of the national de 
          mimimis standard.

    Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 
80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise 
noted.
    Section 275.203A-1 is also issued under 15 U.S.C. 80b-3a.
    Section 275.203A-2 is also issued under 15 U.S.C. 80b-3a.

[[Page 558]]

    Section 275.203A-3 is also issued under 15 U.S.C. 80b-3a.
    Section 275.204-1 is also issued under sec. 407 and 408, Pub. L. 
111-203, 124 Stat. 1376.
    Section 275.204-2 is also issued under 15 U.S.C. 80b-6.
    Section 275.205-3 is also issued under 15 U.S.C. 80b-5(e).
    Section 275.204-4 is also issued under sec. 407 and 408, Pub. L. 
111-203, 124 Stat. 1376.
    Section 275.204-5 is also issued under sec. 913, Public Law 111-203, 
sec. 124 Stat. 1827-28 (2010).



Sec.  275.0-2  General procedures for serving non-residents.

    (a) General procedures for serving process, pleadings, or other 
papers on non-resident investment advisers, general partners and 
managing agents. Under Forms ADV and ADV-NR [17 CFR 279.1 and 279.4], a 
person may serve process, pleadings, or other papers on a non-resident 
investment adviser, or on a non-resident general partner or non-resident 
managing agent of an investment adviser by serving any or all of its 
appointed agents:
    (1) A person may serve a non-resident investment adviser, non-
resident general partner, or non-resident managing agent by furnishing 
the Commission with one copy of the process, pleadings, or papers, for 
each named party, and one additional copy for the Commission's records.
    (2) If process, pleadings, or other papers are served on the 
Commission as described in this section, the Secretary of the Commission 
(Secretary) will promptly forward a copy to each named party by 
registered or certified mail at that party's last address filed with the 
Commission.
    (3) If the Secretary certifies that the Commission was served with 
process, pleadings, or other papers pursuant to paragraph (a)(1) of this 
section and forwarded these documents to a named party pursuant to 
paragraph (a)(2) of this section, this certification constitutes 
evidence of service upon that party.
    (b) Definitions. For purposes of this section:
    (1) Managing agent means any person, including a trustee, who 
directs or manages, or who participates in directing or managing, the 
affairs of any unincorporated organization or association other than a 
partnership.
    (2) Non-resident means:
    (i) An individual who resides in any place not subject to the 
jurisdiction of the United States;
    (ii) A corporation that is incorporated in or that has its principal 
office and place of business in any place not subject to the 
jurisdiction of the United States; and
    (iii) A partnership or other unincorporated organization or 
association that has its principal office and place of business in any 
place not subject to the jurisdiction of the United States.
    (3) Principal office and place of business has the same meaning as 
in Sec.  275.203A-3(c) of this chapter.

[65 FR 57448, Sept. 22, 2000]



Sec.  275.0-3  References to rules and regulations.

    The term rules and regulations refers to all rules and regulations 
adopted by the Commission pursuant to the Act, including the forms for 
registration and reports and the accompanying instructions thereto.

[30 FR 4129, Mar. 30, 1965]



Sec.  275.0-4  General requirements of papers and applications.

    (a) Filings. (1) All papers required to be filed with the Commission 
shall, unless otherwise provided by the rules and regulations, be 
delivered through the mails or otherwise to the Secretary of the 
Securities and Exchange Commission, Washington, DC 20549. Except as 
otherwise provided by the rules and regulations, such papers shall be 
deemed to have been filed with the Commission on the date when they are 
actually received by it.
    (2) All filings required to be made electronically with the 
Investment Adviser Registration Depository (``IARD'') shall, unless 
otherwise provided by the rules and regulations in this part, be deemed 
to have been filed with the Commission upon acceptance by the IARD. 
Filings required to be made through the IARD on a day that the IARD is 
closed shall be considered timely filed with the Commission if filed 
with the IARD no later than the following business day.
    (3) Filings required to be made through the IARD during the period 
in

[[Page 559]]

December of each year that the IARD is not available for submission of 
filings shall be considered timely filed with the Commission if filed 
with the IARD no later than the following January 7.

    Note to paragraph (a)(3): Each year the IARD shuts down to filers 
for several days during the end of December to process renewals of state 
notice filings and registrations. During this period, advisers are not 
able to submit filings through the IARD. Check the Commission's Web site 
at http://www.sec.gov/iard for the dates of the annual IARD shutdown.

    (b) Formal specifications respecting applications. Every application 
for an order under any provision of the Act, for which a form with 
instructions is not specifically prescribed, and every amendment to such 
application, shall be filed electronically pursuant to 17 CFR part 232 
(Regulation S-T). Any filings made in paper, including filings made 
pursuant to a hardship exemption under Regulation S-T, shall be filed in 
quintuplicate. One copy shall be signed by the applicant, but the other 
four copies may have facsimile or typed signatures. Such applications 
shall be on paper no larger than 8\1/2\ x 11 inches in size. To the 
extent that the reduction of larger documents would render them 
illegible, those documents may be filed on paper larger than 8\1/2\ x 11 
inches in size. The left margin should be at least 1\1/2\ inches wide 
and, if the application is bound, it should be bound on the left side. 
All typewritten or printed matter (including deficits in financial 
statements) should be set forth in black so as to permit photocopying.
    (c) Authorization respecting applications. (1) Every application for 
an order under any provision of the Act, for which a form with 
instructions is not specifically prescribed and which is executed by a 
corporation, partnership, or other company and filed with the 
Commission, shall contain a concise statement of the applicable 
provisions of the articles of incorporation, bylaws, or similar 
documents, relating to the right of the person signing and filing such 
application to take such action on behalf of the applicant, and a 
statement that all such requirements have been complied with and that 
the person signing and filing the same is fully authorized to do so. If 
such authorization is dependent on resolutions of stockholders, 
directors, or other bodies, such resolutions shall be attached as an 
exhibit to, or the pertinent provisions thereof shall be quoted in, the 
application.
    (2) If an amendment to any such application shall be filed, such 
amendment shall contain a similar statement or, in lieu thereof, shall 
state that the authorization described in the original application is 
applicable to the individual who signs such amendment and that such 
authorization still remains in effect.
    (3) When any such application or amendment is signed by an agent or 
attorney, the power of attorney evidencing his authority to sign shall 
contain similar statements and shall be filed with the Commission.
    (d) Verification of applications and statements of fact. Every 
application for an order under any provision of the Act, for which a 
form with instructions is not specifically prescribed, and every 
amendment to such application, and every statement of fact formally 
filed in support of, or in opposition to, any application or declaration 
shall be verified by the person executing the same. An instrument 
executed on behalf of a corporation shall be verified in substantially 
the following form, but suitable changes may be made in such form for 
other kinds of companies and for individuals:
    The undersigned states that he or she has duly executed the attached 
dated , 20__, for and on behalf of (Name of company); that he or she is 
the (Title of officer) of such company; and that all action by 
stockholders, directors, and other bodies necessary to authorize the 
undersigned to execute and file such instrument has been taken. The 
undersigned further states that he or she is familiar with such 
instrument, and the contents thereof, and that the facts therein set 
forth are true to the best of his or her knowledge, information and 
belief.
    (Signature)
    (e) Statement of grounds for application. Each application should 
contain a brief statement of the reasons why the applicant is deemed to 
be entitled to

[[Page 560]]

the action requested with a reference to the provisions of the Act and 
of the rules and regulations under which application is made.
    (f) Name and address. Every application shall contain the name and 
address of each applicant and the name and address of any person to whom 
any applicant wishes any question regarding the application to be 
directed.
    (g) [Reserved]
    (h) Definition of application. For purposes of this rule, an 
``application'' means any application for an order of the Commission 
under the Act other than an application for registration as an 
investment adviser.
    (i) The manually signed original (or in the case of duplicate 
originals, one duplicate original) of all registrations, applications, 
statements, reports, or other documents filed under the Investment 
Advisers Act of 1940, as amended, shall be numbered sequentially (in 
addition to any internal numbering which otherwise may be present) by 
handwritten, typed, printed, or other legible form of notation from the 
facing page of the document through the last page of that document and 
any exhibits or attachments thereto. Further, the total number of pages 
contained in a numbered original shall be set forth on the first page of 
the document.

[41 FR 39019, Sept. 14, 1976, as amended at 44 FR 4666, Jan. 23, 1979; 
47 FR 58239, Dec. 30, 1982; 68 FR 42248, July 17, 2003; 76 FR 71877, 
Nov. 21, 2011; 87 FR 38976, June 30, 2022]



Sec.  275.0-5  Procedure with respect to applications and other matters.

    The procedure hereinbelow set forth will be followed with respect to 
any proceeding initiated by the filing of an application, or upon the 
Commission's own motion, pursuant to any section of the Act or any rule 
or regulation thereunder, unless in the particular case a different 
procedure is provided:
    (a) Notice of the initiation of the proceeding will be published in 
the Federal Register and will indicate the earliest date upon which an 
order disposing of the matter may be entered. The notice will also 
provide that any interested person may, within the period of time 
specified therein, submit to the Commission in writing any facts bearing 
upon the desirability of a hearing on the matter and may request that a 
hearing be held, stating his reasons therefor and the nature of his 
interest in the matter.
    (b) An order disposing of the matter will be issued as of course 
following the expiration of the period of time referred to in paragraph 
(a) of this section, unless the Commission thereafter orders a hearing 
on the matter.
    (c) The Commission will order a hearing on the matter, if it appears 
that a hearing is necessary or appropriate in the public interest or for 
the protection of investors, (1) upon the request of any interested 
person or (2) upon its own motion.
    (d) Definition of application. For purposes of this rule, an 
``application'' means any application for an order of the Commission 
under the Act other than an application for registration as an 
investment adviser.

[41 FR 39020, Sept. 14, 1976, as amended at 61 FR 49962, Sept. 24, 1996]



Sec.  275.0-6  Incorporation by reference in applications.

    (a) Exhibits. Any document or part thereof, including any financial 
statement or part thereof, filed with the Commission pursuant to any Act 
administered by the Commission may be incorporated by reference as an 
exhibit to any application filed with the Commission by the same or any 
other person. If any modification has occurred in the text of any 
document incorporated by reference since the filing thereof, the 
registrant must file with the reference a statement containing the text 
of any such modification and the date thereof.
    (b) General. Include an express statement clearly describing the 
specific location of the information you are incorporating by reference. 
The statement must identify the document where the information was 
originally filed or submitted and the location of the information within 
that document. The statement must be made at the particular place where 
the information is required, if applicable. Information must not be 
incorporated by reference in any case where such incorporation

[[Page 561]]

would render the disclosure incomplete, unclear, or confusing. For 
example, unless expressly permitted or required, disclosure must not be 
incorporated by reference from a second document if that second document 
incorporates information pertinent to such disclosure by reference to a 
third document.
    (c) Definition of Application. For purposes of this rule, an 
``application'' means any application for an order of the Commission 
under the Act other than an application for registration as an 
investment adviser.

[84 FR 12738, Apr. 2, 2019]



Sec.  275.0-7  Small entities under the Investment Advisers Act for 
purposes of the Regulatory Flexibility Act.

    (a) For purposes of Commission rulemaking in accordance with the 
provisions of Chapter Six of the Administrative Procedure Act (5 U.S.C. 
601 et seq.) and unless otherwise defined for purposes of a particular 
rulemaking proceeding, the term small business or small organization for 
purposes of the Investment Advisers Act of 1940 shall mean an investment 
adviser that:
    (1) Has assets under management, as defined under Section 203A(a)(3) 
of the Act (15 U.S.C. 80b-3a(a)(2)) and reported on its annual updating 
amendment to Form ADV (17 CFR 279.1), of less than $25 million, or such 
higher amount as the Commission may by rule deem appropriate under 
Section 203A(a)(1)(A) of the Act (15 U.S.C. 80b-3a(a)(1)(A));
    (2) Did not have total assets of $5 million or more on the last day 
of the most recent fiscal year; and
    (3) Does not control, is not controlled by, and is not under common 
control with another investment adviser that has assets under management 
of $25 million or more (or such higher amount as the Commission may deem 
appropriate), or any person (other than a natural person) that had total 
assets of $5 million or more on the last day of the most recent fiscal 
year.
    (b) For purposes of this section:
    (1) Control means the power, directly or indirectly, to direct the 
management or policies of a person, whether through ownership of 
securities, by contract, or otherwise.
    (i) A person is presumed to control a corporation if the person:
    (A) Directly or indirectly has the right to vote 25 percent or more 
of a class of the corporation's voting securities; or
    (B) Has the power to sell or direct the sale of 25 percent or more 
of a class of the corporation's voting securities.
    (ii) A person is presumed to control a partnership if the person has 
the right to receive upon dissolution, or has contributed, 25 percent or 
more of the capital of the partnership.
    (iii) A person is presumed to control a limited liability company 
(LLC) if the person:
    (A) Directly or indirectly has the right to vote 25 percent or more 
of a class of the interests of the LLC;
    (B) Has the right to receive upon dissolution, or has contributed, 
25 percent or more of the capital of the LLC; or
    (C) Is an elected manager of the LLC.
    (iv) A person is presumed to control a trust if the person is a 
trustee or managing agent of the trust.
    (2) Total assets means the total assets as shown on the balance 
sheet of the investment adviser or other person described above under 
paragraph (a)(3) of this section, or the balance sheet of the investment 
adviser or such other person with its subsidiaries consolidated, 
whichever is larger.

[63 FR 35515, June 30, 1998, as amended at 65 FR 57448, Sept. 22, 2000; 
76 FR 43011, July 19, 2011]



Sec.  275.202(a)(1)-1  Certain transactions not deemed assignments.

    A transaction which does not result in a change of actual control or 
management of an investment adviser is not an assignment for purposes of 
section 205(a)(2) of the Act.

[51 FR 32907, Sept. 17, 1986; 64 FR 2567, Jan. 15, 1999]



Sec.  275.202(a)(11)(G)-1  Family offices.

    (a) Exclusion. A family office, as defined in this section, shall 
not be considered to be an investment adviser for purpose of the Act.
    (b) Family office. A family office is a company (including its 
directors, partners, members, managers, trustees, and employees acting 
within the scope of their position or employment) that:

[[Page 562]]

    (1) Has no clients other than family clients; provided that if a 
person that is not a family client becomes a client of the family office 
as a result of the death of a family member or key employee or other 
involuntary transfer from a family member or key employee, that person 
shall be deemed to be a family client for purposes of this section for 
one year following the completion of the transfer of legal title to the 
assets resulting from the involuntary event;
    (2) Is wholly owned by family clients and is exclusively controlled 
(directly or indirectly) by one or more family members and/or family 
entities; and
    (3) Does not hold itself out to the public as an investment adviser.
    (c) Grandfathering. A family office as defined in paragraph (a) of 
this section shall not exclude any person, who was not registered or 
required to be registered under the Act on January 1, 2010, solely 
because such person provides investment advice to, and was engaged 
before January 1, 2010 in providing investment advice to:
    (1) Natural persons who, at the time of their applicable investment, 
are officers, directors, or employees of the family office who have 
invested with the family office before January 1, 2010 and are 
accredited investors, as defined in Regulation D under the Securities 
Act of 1933;
    (2) Any company owned exclusively and controlled by one or more 
family members; or
    (3) Any investment adviser registered under the Act that provides 
investment advice to the family office and who identifies investment 
opportunities to the family office, and invests in such transactions on 
substantially the same terms as the family office invests, but does not 
invest in other funds advised by the family office, and whose assets as 
to which the family office directly or indirectly provides investment 
advice represents, in the aggregate, not more than 5 percent of the 
value of the total assets as to which the family office provides 
investment advice; provided that a family office that would not be a 
family office but for this paragraph (c) shall be deemed to be an 
investment adviser for purposes of paragraphs (1), (2) and (4) of 
section 206 of the Act.
    (d) Definitions. For purposes of this section:
    (1) Affiliated family office means a family office wholly owned by 
family clients of another family office and that is controlled (directly 
or indirectly) by one or more family members of such other family office 
and/or family entities affiliated with such other family office and has 
no clients other than family clients of such other family office.
    (2) Control means the power to exercise a controlling influence over 
the management or policies of a company, unless such power is solely the 
result of being an officer of such company.
    (3) Executive officer means the president, any vice president in 
charge of a principal business unit, division or function (such as 
administration or finance), any other officer who performs a policy-
making function, or any other person who performs similar policy-making 
functions, for the family office.
    (4) Family client means:
    (i) Any family member;
    (ii) Any former family member;
    (iii) Any key employee;
    (iv) Any former key employee, provided that upon the end of such 
individual's employment by the family office, the former key employee 
shall not receive investment advice from the family office (or invest 
additional assets with a family office-advised trust, foundation or 
entity) other than with respect to assets advised (directly or 
indirectly) by the family office immediately prior to the end of such 
individual's employment, except that a former key employee shall be 
permitted to receive investment advice from the family office with 
respect to additional investments that the former key employee was 
contractually obligated to make, and that relate to a family-office 
advised investment existing, in each case prior to the time the person 
became a former key employee.
    (v) Any non-profit organization, charitable foundation, charitable 
trust (including charitable lead trusts and charitable remainder trusts 
whose only current beneficiaries are other family

[[Page 563]]

clients and charitable or non-profit organizations), or other charitable 
organization, in each case for which all the funding such foundation, 
trust or organization holds came exclusively from one or more other 
family clients;
    (vi) Any estate of a family member, former family member, key 
employee, or, subject to the condition contained in paragraph (d)(4)(iv) 
of this section, former key employee;
    (vii) Any irrevocable trust in which one or more other family 
clients are the only current beneficiaries;
    (viii) Any irrevocable trust funded exclusively by one or more other 
family clients in which other family clients and non-profit 
organizations, charitable foundations, charitable trusts, or other 
charitable organizations are the only current beneficiaries;
    (ix) Any revocable trust of which one or more other family clients 
are the sole grantor;
    (x) Any trust of which: Each trustee or other person authorized to 
make decisions with respect to the trust is a key employee; and each 
settlor or other person who has contributed assets to the trust is a key 
employee or the key employee's current and/or former spouse or spousal 
equivalent who, at the time of contribution, holds a joint, community 
property, or other similar shared ownership interest with the key 
employee; or
    (xi) Any company wholly owned (directly or indirectly) exclusively 
by, and operated for the sole benefit of, one or more other family 
clients; provided that if any such entity is a pooled investment 
vehicle, it is excepted from the definition of ``investment company'' 
under the Investment Company Act of 1940.
    (5) Family entity means any of the trusts, estates, companies or 
other entities set forth in paragraphs (d)(4)(v), (vi), (vii), (viii), 
(ix), or (xi) of this section, but excluding key employees and their 
trusts from the definition of family client solely for purposes of this 
definition.
    (6) Family member means all lineal descendants (including by 
adoption, stepchildren, foster children, and individuals that were a 
minor when another family member became a legal guardian of that 
individual) of a common ancestor (who may be living or deceased), and 
such lineal descendants' spouses or spousal equivalents; provided that 
the common ancestor is no more than 10 generations removed from the 
youngest generation of family members.
    (7) Former family member means a spouse, spousal equivalent, or 
stepchild that was a family member but is no longer a family member due 
to a divorce or other similar event.
    (8) Key employee means any natural person (including any key 
employee's spouse or spouse equivalent who holds a joint, community 
property, or other similar shared ownership interest with that key 
employee) who is an executive officer, director, trustee, general 
partner, or person serving in a similar capacity of the family office or 
its affiliated family office or any employee of the family office or its 
affiliated family office (other than an employee performing solely 
clerical, secretarial, or administrative functions with regard to the 
family office) who, in connection with his or her regular functions or 
duties, participates in the investment activities of the family office 
or affiliated family office, provided that such employee has been 
performing such functions and duties for or on behalf of the family 
office or affiliated family office, or substantially similar functions 
or duties for or on behalf of another company, for at least 12 months.
    (9) Spousal equivalent means a cohabitant occupying a relationship 
generally equivalent to that of a spouse.

[76 FR 37994, June 29, 2011, as amended at 81 FR 60457, Sept. 1, 2016]



Sec.  275.202(a)(30)-1  Foreign private advisers.

    (a) Client. You may deem the following to be a single client for 
purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)):
    (1) A natural person, and:
    (i) Any minor child of the natural person;
    (ii) Any relative, spouse, spousal equivalent, or relative of the 
spouse or of the spousal equivalent of the natural person who has the 
same principal residence;
    (iii) All accounts of which the natural person and/or the persons 
referred

[[Page 564]]

to in this paragraph (a)(1) are the only primary beneficiaries; and
    (iv) All trusts of which the natural person and/or the persons 
referred to in this paragraph (a)(1) are the only primary beneficiaries;
    (2)(i) A corporation, general partnership, limited partnership, 
limited liability company, trust (other than a trust referred to in 
paragraph (a)(1)(iv) of this section), or other legal organization (any 
of which are referred to hereinafter as a ``legal organization'') to 
which you provide investment advice based on its investment objectives 
rather than the individual investment objectives of its shareholders, 
partners, limited partners, members, or beneficiaries (any of which are 
referred to hereinafter as an ``owner''); and
    (ii) Two or more legal organizations referred to in paragraph 
(a)(2)(i) of this section that have identical owners.
    (b) Special rules regarding clients. For purposes of this section:
    (1) You must count an owner as a client if you provide investment 
advisory services to the owner separate and apart from the investment 
advisory services you provide to the legal organization, provided, 
however, that the determination that an owner is a client will not 
affect the applicability of this section with regard to any other owner;
    (2) You are not required to count an owner as a client solely 
because you, on behalf of the legal organization, offer, promote, or 
sell interests in the legal organization to the owner, or report 
periodically to the owners as a group solely with respect to the 
performance of or plans for the legal organization's assets or similar 
matters;
    (3) A limited partnership or limited liability company is a client 
of any general partner, managing member or other person acting as 
investment adviser to the partnership or limited liability company;
    (4) You are not required to count a private fund as a client if you 
count any investor, as that term is defined in paragraph (c)(2) of this 
section, in that private fund as an investor in the United States in 
that private fund; and
    (5) You are not required to count a person as an investor, as that 
term is defined in paragraph (c)(2) of this section, in a private fund 
you advise if you count such person as a client in the United States.

    Note to paragraphs (a) and (b): These paragraphs are a safe harbor 
and are not intended to specify the exclusive method for determining who 
may be deemed a single client for purposes of section 202(a)(30) of the 
Act (15 U.S.C. 80b-2(a)(30)).

    (c) Definitions. For purposes of section 202(a)(30) of the Act (15 
U.S.C. 80b-2(a)(30)):
    (1) Assets under management means the regulatory assets under 
management as determined under Item 5.F of Form ADV (Sec.  279.1 of this 
chapter).
    (2) Investor means:
    (i) Any person who would be included in determining the number of 
beneficial owners of the outstanding securities of a private fund under 
section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-
3(c)(1)), or whether the outstanding securities of a private fund are 
owned exclusively by qualified purchasers under section 3(c)(7) of that 
Act (15 U.S.C. 80a-3(c)(7)); and
    (ii) Any beneficial owner of any outstanding short-term paper, as 
defined in section 2(a)(38) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(38)), issued by the private fund.

    Note to paragraph (c)(2): You may treat as a single investor any 
person who is an investor in two or more private funds you advise.

    (3) In the United States means with respect to:
    (i) Any client or investor, any person who is a U.S. person as 
defined in Sec.  230.902(k) of this chapter, except that any 
discretionary account or similar account that is held for the benefit of 
a person in the United States by a dealer or other professional 
fiduciary is in the United States if the dealer or professional 
fiduciary is a related person, as defined in Sec.  275.206(4)-2(d)(7), 
of the investment adviser relying on this section and is not organized, 
incorporated, or (if an individual) resident in the United States.

    Note to paragraph (c)(3)(i): A person who is in the United States 
may be treated as not being in the United States if such person was not 
in the United States at the time of becoming a client or, in the case of 
an investor

[[Page 565]]

in a private fund, each time the investor acquires securities issued by 
the fund.

    (ii) Any place of business, in the United States, as that term is 
defined in Sec.  230.902(l) of this chapter; and
    (iii) The public, in the United States, as that term is defined in 
Sec.  230.902(l) of this chapter.
    (4) Place of business has the same meaning as in Sec.  275.222-1(a).
    (5) Spousal equivalent has the same meaning as in Sec.  
275.202(a)(11)(G)-1(d)(9).
    (d) Holding out. If you are relying on this section, you shall not 
be deemed to be holding yourself out generally to the public in the 
United States as an investment adviser, within the meaning of section 
202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)), solely because you 
participate in a non-public offering in the United States of securities 
issued by a private fund under the Securities Act of 1933 (15 U.S.C. 
77a).

[76 FR 39701, July 6, 2011]



Sec.  275.203-1  Application for investment adviser registration.

    (a) Form ADV. (1) To apply for registration with the Commission as 
an investment adviser, you must complete Form ADV (17 CFR 279.1) by 
following the instructions in the form and you must file Part 1A of Form 
ADV, the firm brochure(s) required by Part 2A of Form ADV and Form CRS 
required by Part 3 of Form ADV electronically with the Investment 
Adviser Registration Depository (IARD) unless you have received a 
hardship exemption under Sec.  275.203-3. You are not required to file 
with the Commission the brochure supplements required by Part 2B of Form 
ADV.

    Note 1 to paragraph (a)(1): Information on how to file with the IARD 
is available on the Commission's website at http://www.sec.gov/iard. If 
you are not required to deliver a brochure or Form CRS to any clients, 
you are not required to prepare or file a brochure or Form CRS, as 
applicable, with the Commission. If you are not required to deliver a 
brochure supplement to any clients for any particular supervised person, 
you are not required to prepare a brochure supplement for that 
supervised person.

    (2)(i) On or after June 30, 2020, the Commission will not accept any 
initial application for registration as an investment adviser that does 
not include a Form CRS that satisfies the requirements of Part 3 of Form 
ADV.
    (ii) Beginning on May 1, 2020, any initial application for 
registration as an investment adviser filed prior to June 30, 2020, must 
include a Form CRS that satisfies the requirements of Part 3 of Form ADV 
by no later than June 30, 2020.
    (b) When filed. Each Form ADV is considered filed with the 
Commission upon acceptance by the IARD.
    (c) Filing fees. You must pay FINRA (the operator of the IARD) a 
filing fee. The Commission has approved the amount of the filing fee. No 
portion of the filing fee is refundable. Your completed application for 
registration will not be accepted by FINRA, and thus will not be 
considered filed with the Commission, until you have paid the filing 
fee.
    (d) Form ADV-NR--(1) General Requirements. Each non-resident, as 
defined in 17 CFR 275.0-2(b)(2) (Rule 0-2(b)(2)), general partner or a 
non-resident managing agent, as defined in 17 CFR 275.0-2(b)(2) (Rule 0-
2(b)(1)), of any investment adviser registered, or applying for 
registration with, the Commission must submit Form ADV-NR (17 CFR 
279.4). Form ADV-NR must be completed in connection with the adviser's 
initial registration with the Commission. If a person becomes a non-
resident general partner or a non-resident managing agent after the date 
the adviser files its initial registration with the Commission, the 
person must file Form ADV-NR with the Commission within 30 days of 
becoming a non-resident general partner or a non-resident managing 
agent. If a person serves as a general partner or managing agent for 
multiple advisers, they must submit a separate Form ADV-NR for each 
adviser.
    (2) When an amendment is required. Each non-resident general partner 
or a non-resident managing agent of any investment adviser must amend 
its Form ADV-NR within 30 days whenever any information contained in the 
form becomes inaccurate by filing with the Commission a new Form ADV-NR.
    (3) Electronic filing. Form ADV-NR (and any amendments to Form ADV-
NR) must be filed electronically

[[Page 566]]

through the Investment Adviser Registration Depository (IARD), unless a 
hardship exemption under 17 CFR 275.203-3 (Rule 203-3) has been granted.
    (4) When filed. Each Form ADV-NR is considered filed with the 
Commission upon acceptance by the IARD.
    (5) Filing fees. No fee shall be assessed for filing Form ADV-NR 
through IARD.
    (6) Form ADV-NR is a report. Each Form ADV-NR (and any amendment to 
Form ADV-NR) required to be filed under this rule is a ``report'' within 
the meaning of sections 204 and 207 of the Act.

[65 FR 57448, Sept. 22, 2000; 65 FR 81737, Dec. 27, 2000 as amended at 
84 FR 33630, July 12, 2019; 87 FR 38977, June 30, 2022]

    Editorial Note: For Federal Register citations affecting Form ADV, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  275.203-2  Withdrawal from investment adviser registration.

    (a) Form ADV-W. You must file Form ADV-W (17 CFR 279.2) to withdraw 
from investment adviser registration with the Commission (or to withdraw 
a pending registration application).
    (b) Electronic filing. Once you have filed your Form ADV (17 CFR 
279.1) (or any amendments to Form ADV) electronically with the 
Investment Adviser Registration Depository (IARD), any Form ADV-W you 
file must be filed with the IARD, unless you have received a hardship 
exemption under Sec.  275.203-3.
    (c) Effective date--upon filing. Each Form ADV-W filed under this 
section is effective upon acceptance by the IARD, provided however that 
your investment adviser registration will continue for a period of sixty 
days after acceptance solely for the purpose of commencing a proceeding 
under section 203(e) of the Act (15 U.S.C. 80b-3(e)).
    (d) Filing fees. You do not have to pay a fee to file Form ADV-W 
through the IARD.
    (e) Form ADV-W is a report. Each Form ADV-W required to be filed 
under this section is a ``report'' within the meaning of sections 204 
and 207 of the Act (15 U.S.C. 80b-4 and 80b-7).

[65 FR 57449, Sept. 22, 2000]



Sec.  275.203-3  Hardship exemptions.

    This section provides two ``hardship exemptions'' from the 
requirement to make Advisers Act filings electronically with the 
Investment Adviser Registration Depository (IARD).
    (a) Temporary hardship exemption--(1) Eligibility for exemption. If 
you are registered or are registering with the Commission as an 
investment adviser and submit electronic filings on the Investment 
Adviser Registration Depository (IARD) system, but have unanticipated 
technical difficulties that prevent you from submitting a filing to the 
IARD system, you may request a temporary hardship exemption from the 
requirements of this chapter to file electronically.
    (2) Application procedures. To request a temporary hardship 
exemption, you must:
    (i) File Form ADV-H (17 CFR 279.3) in paper format with no later 
than one business day after the filing that is the subject of the ADV-H 
was due; and
    (ii) Submit the filing that is the subject of the Form ADV-H in 
electronic format with the IARD no later than seven business days after 
the filing was due.
    (3) Effective date--upon filing. The temporary hardship exemption 
will be granted when you file a completed Form ADV-H.
    (b) Continuing hardship exemption--(1) Eligibility for exemption. If 
you are a ``small business'' (as described in paragraph (b)(5) of this 
section), you may apply for a continuing hardship exemption.
    The period of the exemption may be no longer than one year after the 
date on which you apply for the exemption.
    (2) Application procedures. To apply for a continuing hardship 
exemption, you must file Form ADV-H at least ten business days before a 
filing is due. The Commission will grant or deny your application within 
ten business days after you file Form ADV-H.
    (3) Effective date--upon approval. You are not exempt from the 
electronic filing requirements until and unless the Commission approves 
your application. If the Commission approves your application, you may 
submit your filings to FINRA in paper format for the period

[[Page 567]]

of time for which the exemption is granted.
    (4) Criteria for exemption. Your application will be granted only if 
you are able to demonstrate that the electronic filing requirements of 
this chapter are prohibitively burdensome or expensive.
    (5) Small business. You are a ``small business'' for purposes of 
this section if you are required to answer Item 12 of Form ADV (17 CFR 
279.1) and checked ``no'' to each question in Item 12 that you were 
required to answer.

    Note to paragraph (b): FINRA will charge you an additional fee 
covering its cost to convert to electronic format a filing made in 
reliance on a continuing hardship exemption.

[65 FR 57449, Sept. 22, 2000; 65 FR 81738, Dec. 27, 2000, as amended at 
68 FR 42248, July 17, 2003; 73 FR 4694, Jan. 28, 2008]



Sec.  275.203(l)-1  Venture capital fund defined.

    (a) Venture capital fund defined. For purposes of section 203(l) of 
the Act (15 U.S.C. 80b-3(l)), a venture capital fund is any entity 
described in subparagraph (A), (B), or (C) of section 203(b)(7) of the 
Act (15 U.S.C. 80b-3(b)(7)) (other than an entity that has elected to be 
regulated or is regulated as a business development company pursuant to 
section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-53)) or 
any entity described in subparagraph (A) or (B) of section 203(b)(8) of 
the Act (15 U.S.C. 80b-3(b)(8)) (other than an entity that has elected 
to be regulated or is regulated as a business development company 
pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 
80a-53)) or any private fund that:
    (1) Represents to investors and potential investors that it pursues 
a venture capital strategy;
    (2) Immediately after the acquisition of any asset, other than 
qualifying investments or short-term holdings, holds no more than 20 
percent of the amount of the fund's aggregate capital contributions and 
uncalled committed capital in assets (other than short-term holdings) 
that are not qualifying investments, valued at cost or fair value, 
consistently applied by the fund;
    (3) Does not borrow, issue debt obligations, provide guarantees or 
otherwise incur leverage, in excess of 15 percent of the private fund's 
aggregate capital contributions and uncalled committed capital, and any 
such borrowing, indebtedness, guarantee or leverage is for a non-
renewable term of no longer than 120 calendar days, except that any 
guarantee by the private fund of a qualifying portfolio company's 
obligations up to the amount of the value of the private fund's 
investment in the qualifying portfolio company is not subject to the 120 
calendar day limit;
    (4) Only issues securities the terms of which do not provide a 
holder with any right, except in extraordinary circumstances, to 
withdraw, redeem or require the repurchase of such securities but may 
entitle holders to receive distributions made to all holders pro rata; 
and
    (5) Is not registered under section 8 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-8), and has not elected to be treated as a 
business development company pursuant to section 54 of that Act (15 
U.S.C. 80a-53).
    (b) Certain pre-existing venture capital funds. For purposes of 
section 203(l) of the Act (15 U.S.C. 80b-3(l)) and in addition to any 
venture capital fund as set forth in paragraph (a) of this section, a 
venture capital fund also includes any private fund that:
    (1) Has represented to investors and potential investors at the time 
of the offering of the private fund's securities that it pursues a 
venture capital strategy;
    (2) Prior to December 31, 2010, has sold securities to one or more 
investors that are not related persons, as defined in Sec.  275.206(4)-
2(d)(7), of any investment adviser of the private fund; and
    (3) Does not sell any securities to (including accepting any 
committed capital from) any person after July 21, 2011.
    (c) Definitions. For purposes of this section:
    (1) Committed capital means any commitment pursuant to which a 
person is obligated to:
    (i) Acquire an interest in the private fund; or
    (ii) Make capital contributions to the private fund.
    (2) Equity security has the same meaning as in section 3(a)(11) of 
the Securities Exchange Act of 1934 (15 U.S.C.

[[Page 568]]

78c(a)(11)) and Sec.  240.3a11-1 of this chapter.
    (3) Qualifying investment means:
    (i) An equity security issued by a qualifying portfolio company that 
has been acquired directly by the private fund from the qualifying 
portfolio company;
    (ii) Any equity security issued by a qualifying portfolio company in 
exchange for an equity security issued by the qualifying portfolio 
company described in paragraph (c)(3)(i) of this section; or
    (iii) Any equity security issued by a company of which a qualifying 
portfolio company is a majority-owned subsidiary, as defined in section 
2(a)(24) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(24)), 
or a predecessor, and is acquired by the private fund in exchange for an 
equity security described in paragraph (c)(3)(i) or (c)(3)(ii) of this 
section.
    (4) Qualifying portfolio company means any company that:
    (i) At the time of any investment by the private fund, is not 
reporting or foreign traded and does not control, is not controlled by 
or under common control with another company, directly or indirectly, 
that is reporting or foreign traded;
    (ii) Does not borrow or issue debt obligations in connection with 
the private fund's investment in such company and distribute to the 
private fund the proceeds of such borrowing or issuance in exchange for 
the private fund's investment; and
    (iii) Is not an investment company, a private fund, an issuer that 
would be an investment company but for the exemption provided by Sec.  
270.3a-7 of this chapter, or a commodity pool.
    (5) Reporting or foreign traded means, with respect to a company, 
being subject to the reporting requirements under section 13 or 15(d) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), or having 
a security listed or traded on any exchange or organized market 
operating in a foreign jurisdiction.
    (6) Short-term holdings means cash and cash equivalents, as defined 
in Sec.  270.2a51-1(b)(7)(i) of this chapter, U.S. Treasuries with a 
remaining maturity of 60 days or less, and shares of an open-end 
management investment company registered under section 8 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-8) that is regulated as a 
money market fund under Sec.  270.2a-7 of this chapter.

    Note: For purposes of this section, an investment adviser may treat 
as a private fund any issuer formed under the laws of a jurisdiction 
other than the United States that has not offered or sold its securities 
in the United States or to U.S. persons in a manner inconsistent with 
being a private fund, provided that the adviser treats the issuer as a 
private fund under the Act (15 U.S.C. 80b) and the rules thereunder for 
all purposes.

[76 FR 39702, July 6, 2011, as amended at 83 FR 1302, Jan. 11, 2018; 85 
FR 13741, Mar. 10, 2020]



Sec.  275.203(m)-1  Private fund adviser exemption.

    (a) United States investment advisers. For purposes of section 
203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its 
principal office and place of business in the United States is exempt 
from the requirement to register under section 203 of the Act if the 
investment adviser:
    (1) Acts solely as an investment adviser to one or more qualifying 
private funds; and
    (2) Manages private fund assets of less than $150 million.
    (b) Non-United States investment advisers. For purposes of section 
203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its 
principal office and place of business outside of the United States is 
exempt from the requirement to register under section 203 of the Act if:
    (1) The investment adviser has no client that is a United States 
person except for one or more qualifying private funds; and
    (2) All assets managed by the investment adviser at a place of 
business in the United States are solely attributable to private fund 
assets, the total value of which is less than $150 million.
    (c) Frequency of Calculations. For purposes of this section, 
calculate private fund assets annually, in accordance with General 
Instruction 15 to Form ADV (Sec.  279.1 of this chapter).
    (d) Definitions. For purposes of this section:

[[Page 569]]

    (1) Assets under management means the regulatory assets under 
management as determined under Item 5.F of Form ADV (Sec.  279.1 of this 
chapter), except the following shall be excluded from the definition of 
assets under management for purposes of this section:
    (i) The regulatory assets under management attributable to a private 
fund that is an entity described in subparagraph (A), (B), or (C) of 
section 203(b)(7) of the Act (15 U.S.C. 80b- 3(b)(7)) (other than an 
entity that has elected to be regulated or is regulated as a business 
development company pursuant to section 54 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-53)); and
    (ii) The regulatory assets under management attributable to a 
private fund that is an entity described in subparagraph (A) or (B) of 
section 203(b)(8) of the Act (15 U.S.C. 80b-3(b)(8)) (other than an 
entity that has elected to be regulated or is regulated as a business 
development company pursuant to section 54 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-53).
    (2) Place of business has the same meaning as in Sec.  275.222-1(a).
    (3) Principal office and place of business of an investment adviser 
means the executive office of the investment adviser from which the 
officers, partners, or managers of the investment adviser direct, 
control, and coordinate the activities of the investment adviser.
    (4) Private fund assets means the investment adviser's assets under 
management attributable to a qualifying private fund.
    (5) Qualifying private fund means any private fund that is not 
registered under section 8 of the Investment Company Act of 1940 (15 
U.S.C. 80a-8) and has not elected to be treated as a business 
development company pursuant to section 54 of that Act (15 U.S.C. 80a-
53). For purposes of this section, an investment adviser may treat as a 
private fund an issuer that qualifies for an exclusion from the 
definition of an ``investment company,'' as defined in section 3 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3), in addition to those 
provided by section 3(c)(1) or 3(c)(7) of that Act (15 U.S.C. 80a-
3(c)(1) or 15 U.S.C. 80a-3(c)(7)), provided that the investment adviser 
treats the issuer as a private fund under the Act (15 U.S.C. 80b) and 
the rules thereunder for all purposes.
    (6) Related person has the same meaning as in Sec.  275.206(4)-
2(d)(7).
    (7) United States has the same meaning as in Sec.  230.902(l) of 
this chapter.
    (8) United States person means any person that is a U.S. person as 
defined in Sec.  230.902(k) of this chapter, except that any 
discretionary account or similar account that is held for the benefit of 
a United States person by a dealer or other professional fiduciary is a 
United States person if the dealer or professional fiduciary is a 
related person of the investment adviser relying on this section and is 
not organized, incorporated, or (if an individual) resident in the 
United States.

    Note to paragraph (d)(8): A client will not be considered a United 
States person if the client was not a United States person at the time 
of becoming a client.

[76 FR 39703, July 6, 2011, as amended at 83 FR 1302, Jan. 11, 2018; 85 
FR 13741, Mar. 10, 2020]



Sec.  275.203A-1  Eligibility for SEC registration; Switching to or
from SEC registration.

    (a) Eligibility for SEC registration of mid-sized investment 
advisers. If you are an investment adviser described in section 
203A(a)(2)(B) of the Act (15 U.S.C. 80b-3a(a)(2)(B)):
    (1) Threshold for SEC registration and registration buffer. You may, 
but are not required to register with the Commission if you have assets 
under management of at least $100,000,000 but less than $110,000,000, 
and you need not withdraw your registration unless you have less than 
$90,000,000 of assets under management.
    (2) Exceptions. This paragraph (a) does not apply if:
    (i) You are an investment adviser to an investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a) or 
to a company which has elected to be a business development company 
pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 
80a-54), and has not withdrawn the election; or
    (ii) You are eligible for an exemption described in Sec.  275.203A-2 
of this chapter.

[[Page 570]]

    (b) Switching to or from SEC registration--(1) State-registered 
advisers--switching to SEC registration. If you are registered with a 
state securities authority, you must apply for registration with the 
Commission within 90 days of filing an annual updating amendment to your 
Form ADV reporting that you are eligible for SEC registration and are 
not relying on an exemption from registration under sections 203(l) or 
203(m) of the Act (15 U.S.C. 80b-3(l), (m)).
    (2) SEC-registered advisers--switching to State registration. If you 
are registered with the Commission and file an annual updating amendment 
to your Form ADV reporting that you are not eligible for SEC 
registration and are not relying on an exemption from registration under 
sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)), you must 
file Form ADV-W (17 CFR 279.2) to withdraw your SEC registration within 
180 days of your fiscal year end (unless you then are eligible for SEC 
registration). During this period while you are registered with both the 
Commission and one or more state securities authorities, the Act and 
applicable State law will apply to your advisory activities.

[76 FR 43011, July 19, 2011]



Sec.  275.203A-2  Exemptions from prohibition on Commission registration.

    The prohibition of section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) 
does not apply to:
    (a) Pension consultants. (1) An investment adviser that is a 
``pension consultant,'' as defined in this section, with respect to 
assets of plans having an aggregate value of at least $200,000,000.
    (2) An investment adviser is a pension consultant, for purposes of 
paragraph (a) of this section, if the investment adviser provides 
investment advice to:
    (i) Any employee benefit plan described in section 3(3) of the 
Employee Retirement Income Security Act of 1974 (``ERISA'') [29 U.S.C. 
1002(3)];
    (ii) Any governmental plan described in section 3(32) of ERISA (29 
U.S.C. 1002(32)); or
    (iii) Any church plan described in section 3(33) of ERISA (29 U.S.C. 
1002(33)).
    (3) In determining the aggregate value of assets of plans, include 
only that portion of a plan's assets for which the investment adviser 
provided investment advice (including any advice with respect to the 
selection of an investment adviser to manage such assets). Determine the 
aggregate value of assets by cumulating the value of assets of plans 
with respect to which the investment adviser was last employed or 
retained by contract to provide investment advice during a 12-month 
period ended within 90 days of filing an annual updating amendment to 
Form ADV (17 CFR 279.1).
    (b) Investment advisers controlling, controlled by, or under common 
control with an investment adviser registered with the Commission. An 
investment adviser that controls, is controlled by, or is under common 
control with, an investment adviser eligible to register, and registered 
with, the Commission (``registered adviser''), provided that the 
principal office and place of business of the investment adviser is the 
same as that of the registered adviser. For purposes of this paragraph, 
control means the power to direct or cause the direction of the 
management or policies of an investment adviser, whether through 
ownership of securities, by contract, or otherwise. Any person that 
directly or indirectly has the right to vote 25 percent or more of the 
voting securities, or is entitled to 25 percent or more of the profits, 
of an investment adviser is presumed to control that investment adviser.
    (c) Investment advisers expecting to be eligible for Commission 
registration within 120 Days. An investment adviser that:
    (1) Immediately before it registers with the Commission, is not 
registered or required to be registered with the Commission or a state 
securities authority of any State and has a reasonable expectation that 
it would be eligible to register with the Commission within 120 days 
after the date the investment adviser's registration with the Commission 
becomes effective;
    (2) Indicates on Schedule D of its Form ADV (17 CFR 279.1) that it 
will withdraw from registration with the

[[Page 571]]

Commission if, on the 120th day after the date the investment adviser's 
registration with the Commission becomes effective, the investment 
adviser would be prohibited by section 203A(a) of the Act (15 U.S.C. 
80b-3a(a)) from registering with the Commission; and
    (3) Notwithstanding Sec.  275.203A-1(b)(2) of this chapter, files a 
completed Form ADV-W (17 CFR 279.2) withdrawing from registration with 
the Commission within 120 days after the date the investment adviser's 
registration with the Commission becomes effective.
    (d) Multi-state investment advisers. An investment adviser that:
    (1) Upon submission of its application for registration with the 
Commission, is required by the laws of 15 or more States to register as 
an investment adviser with the state securities authority in the 
respective States, and thereafter would, but for this section, be 
required by the laws of at least 15 States to register as an investment 
adviser with the state securities authority in the respective States;
    (2) Elects to rely on paragraph (d) of this section by:
    (i) Indicating on Schedule D of its Form ADV that the investment 
adviser has reviewed the applicable State and federal laws and has 
concluded that, in the case of an application for registration with the 
Commission, it is required by the laws of 15 or more States to register 
as an investment adviser with the state securities authorities in the 
respective States or, in the case of an amendment to Form ADV, it would 
be required by the laws of at least 15 States to register as an 
investment adviser with the state securities authorities in the 
respective States, within 90 days prior to the date of filing Form ADV; 
and
    (ii) Undertaking on Schedule D of its Form ADV to withdraw from 
registration with the Commission if the adviser indicates on an annual 
updating amendment to Form ADV that the investment adviser would be 
required by the laws of fewer than 15 States to register as an 
investment adviser with the state securities authority in the respective 
States, and that the investment adviser would be prohibited by section 
203A(a) of the Act (15 U.S.C. 80b-3a(a)) from registering with the 
Commission, by filing a completed Form ADV-W within 180 days of the 
adviser's fiscal year end (unless the adviser then is eligible for SEC 
registration); and
    (3) Maintains in an easily accessible place a record of the States 
in which the investment adviser has determined it would, but for the 
exemption, be required to register for a period of not less than five 
years from the filing of a Form ADV that includes a representation that 
is based on such record.
    (e) Internet investment advisers. (1) An investment adviser that:
    (i) Provides investment advice to all of its clients exclusively 
through an interactive website, except that the investment adviser may 
provide investment advice to fewer than 15 clients through other means 
during the preceding twelve months;
    (ii) Maintains, in an easily accessible place, for a period of not 
less than five years from the filing of a Form ADV that includes a 
representation that the adviser is eligible to register with the 
Commission under paragraph (e) of this section, a record demonstrating 
that it provides investment advice to its clients exclusively through an 
interactive website in accordance with the limits in paragraph (e)(1)(i) 
of this section; and
    (iii) Does not control, is not controlled by, and is not under 
common control with, another investment adviser that registers with the 
Commission under paragraph (b) of this section solely in reliance on the 
adviser registered under paragraph (e) of this section as its registered 
adviser.
    (2) For purposes of paragraph (e) of this section, interactive 
website means a website in which computer software-based models or 
applications provide investment advice to clients based on personal 
information each client supplies through the website.
    (3) An investment adviser may rely on the definition of client in 
Sec.  275.202(a)(30)-1 in determining whether it provides investment 
advice to fewer than 15 clients under paragraph (e)(1)(i) of this 
section.

[62 FR 28133, May 22, 1997, as amended at 63 FR 39715, 39716, July 24, 
1998; 65 FR 57450, Sept. 22, 2000; 67 FR 77625, Dec. 18, 2003; 76 FR 
43012, July 19, 2011]

[[Page 572]]



Sec.  275.203A-3  Definitions.

    For purposes of section 203A of the Act (15 U.S.C. 80b-3a) and the 
rules thereunder:
    (a)(1) Investment adviser representative. ``Investment adviser 
representative'' of an investment adviser means a supervised person of 
the investment adviser:
    (i) Who has more than five clients who are natural persons (other 
than excepted persons described in paragraph (a)(3)(i) of this section); 
and
    (ii) More than ten percent of whose clients are natural persons 
(other than excepted persons described in paragraph (a)(3)(i) of this 
section).
    (2) Notwithstanding paragraph (a)(1) of this section, a supervised 
person is not an investment adviser representative if the supervised 
person:
    (i) Does not on a regular basis solicit, meet with, or otherwise 
communicate with clients of the investment adviser; or
    (ii) Provides only impersonal investment advice.
    (3) For purposes of this section:
    (i) ``Excepted person'' means a natural person who is a qualified 
client as described in Sec.  275.205-3(d)(1).
    (ii) ``Impersonal investment advice'' means investment advisory 
services provided by means of written material or oral statements that 
do not purport to meet the objectives or needs of specific individuals 
or accounts.
    (4) Supervised persons may rely on the definition of ``client'' in 
Sec.  275.202(a)(30)-1 to identify clients for purposes of paragraph 
(a)(1) of this section, except that supervised persons need not count 
clients that are not residents of the United States.
    (b) Place of business. ``Place of business'' of an investment 
adviser representative means:
    (1) An office at which the investment adviser representative 
regularly provides investment advisory services, solicits, meets with, 
or otherwise communicates with clients; and
    (2) Any other location that is held out to the general public as a 
location at which the investment adviser representative provides 
investment advisory services, solicits, meets with, or otherwise 
communicates with clients.
    (c) Principal office and place of business. ``Principal office and 
place of business'' of an investment adviser means the executive office 
of the investment adviser from which the officers, partners, or managers 
of the investment adviser direct, control, and coordinate the activities 
of the investment adviser.
    (d) Assets under management. Determine ``assets under management'' 
by calculating the securities portfolios with respect to which an 
investment adviser provides continuous and regular supervisory or 
management services as reported on the investment adviser's Form ADV (17 
CFR 279.1).
    (e) State securities authority. ``State securities authority'' means 
the securities commissioner or commission (or any agency, office or 
officer performing like functions) of any State.

[62 FR 28134, May 22, 1997, as amended at 63 FR 39715, July 24, 1998; 69 
FR 72088, Dec. 10, 2004; 76 FR 43012, July 19, 2011]



Sec. Sec.  275.203A-4--275.203A-6  [Reserved]



Sec.  275.204-1  Amendments to Form ADV.

    (a) When amendment is required. You must amend your Form ADV (17 CFR 
279.1):
    (1) Parts 1 and 2:
    (i) At least annually, within 90 days of the end of your fiscal 
year; and
    (ii) More frequently, if required by the instructions to Form ADV.
    (2) Part 3 at the frequency required by the instructions to Form 
ADV.
    (b) Electronic filing of amendments. (1) Subject to paragraph (c) of 
this section, you must file all amendments to Part 1A, Part 2A, and Part 
3 of Form ADV electronically with the IARD, unless you have received a 
continuing hardship exemption under Sec.  275.203-3. You are not 
required to file with the Commission amendments to brochure supplements 
required by Part 2B of Form ADV.
    (2) If you have received a continuing hardship exemption under Sec.  
275.203-3, you must, when you are required to amend your Form ADV, file 
a completed Part 1A, Part 2A and Part 3 of Form ADV on paper with the 
SEC by mailing it to FINRA.
    (c) Filing fees. You must pay FINRA (the operator of the IARD) an 
initial filing fee when you first electronically file Part 1A of Form 
ADV. After you

[[Page 573]]

pay the initial filing fee, you must pay an annual filing fee each time 
you file your annual updating amendment. No portion of either fee is 
refundable. The Commission has approved the filing fees. Your amended 
Form ADV will not be accepted by FINRA, and thus will not be considered 
filed with the Commission, until you have paid the filing fee.
    (d) Amendments to Form ADV are reports. Each amendment required to 
be filed under this section is a ``report'' within the meaning of 
sections 204 and 207 of the Act (15 U.S.C. 80b-4 and 80b-7).
    (e) Transition to Filing Form CRS. If you are registered with the 
Commission or have an application for registration pending with the 
Commission prior to June 30, 2020, you must amend your Form ADV by 
electronically filing with IARD your initial Form CRS that satisfies the 
requirements of Part 3 of Form ADV (as amended effective September 30, 
2019) beginning on May 1, 2020 and by no later than June 30, 2020.

    Note 1 to paragraphs (e): This note applies to paragraphs (a), (b), 
and (e) of this section. Information on how to file with the IARD is 
available on our website at http://www.sec.gov/iard. For the annual 
updating amendment: Summaries of material changes that are not included 
in the adviser's brochure must be filed with the Commission as an 
exhibit to Part 2A in the same electronic file; and if you are not 
required to prepare a brochure, a summary of material changes, an annual 
updating amendment to your brochure, or Form CRS you are not required to 
file them with the Commission. See the instructions for Part 2A and Part 
3 of Form ADV.

[65 FR 57450, Sept. 22, 2000; 65 FR 81738, Dec. 27, 2000, as amended at 
68 FR 42248, July 17, 2003; 73 FR 4694, Jan. 28, 2008; 75 FR 49267, Aug. 
12, 2010; 76 FR 43013, July 19, 2011; 81 FR 60458, Sept. 1, 2016; 84 FR 
33630, July 12, 2019]



Sec.  275.204-2  Books and records to be maintained by investment advisers.

    (a) Every investment adviser registered or required to be registered 
under section 203 of the Act (15 U.S.C. 80b-3) shall make and keep true, 
accurate and current the following books and records relating to its 
investment advisory business;
    (1) A journal or journals, including cash receipts and 
disbursements, records, and any other records of original entry forming 
the basis of entries in any ledger.
    (2) General and auxiliary ledgers (or other comparable records) 
reflecting asset, liability, reserve, capital, income and expense 
accounts.
    (3) A memorandum of each order given by the investment adviser for 
the purchase or sale of any security, of any instruction received by the 
investment adviser concerning the purchase, sale, receipt or delivery of 
a particular security, and of any modification or cancellation of any 
such order or instruction. Such memoranda shall show the terms and 
conditions of the order, instruction, modification or cancellation; 
shall identify the person connected with the investment adviser who 
recommended the transaction to the client and the person who placed such 
order; and shall show the account for which entered, the date of entry, 
and the bank, broker or dealer by or through whom executed where 
appropriate. Orders entered pursuant to the exercise of discretionary 
power shall be so designated.
    (4) All check books, bank statements, cancelled checks and cash 
reconciliations of the investment adviser.
    (5) All bills or statements (or copies thereof), paid or unpaid, 
relating to the business of the investment adviser as such.
    (6) All trial balances, financial statements, and internal audit 
working papers relating to the business of such investment adviser.
    (7) Originals of all written communications received and copies of 
all written communications sent by such investment adviser relating to:
    (i) Any recommendation made or proposed to be made and any advice 
given or proposed to be given;
    (ii) Any receipt, disbursement or delivery of funds or securities;
    (iii) The placing or execution of any order to purchase or sell any 
security; and, for any transaction that is subject to the requirements 
of Sec.  240.15c6-2(a) of this chapter, each confirmation received, and 
any allocation and each affirmation sent or received, with a date and 
time stamp for each allocation and affirmation that indicates when the 
allocation and affirmation was sent or received;

[[Page 574]]

    (iv) Predecessor performance (as defined in Sec.  275.206(4)-
1(e)(12) of this chapter) and the performance or rate of return of any 
or all managed accounts, portfolios (as defined in Sec.  275.206(4)-
1(e)(11) of this chapter), or securities recommendations; Provided, 
however:
    (A) That the investment adviser shall not be required to keep any 
unsolicited market letters and other similar communications of general 
public distribution not prepared by or for the investment adviser; and
    (B) That if the investment adviser sends any notice, circular, or 
other advertisement (as defined in Sec.  275.206(4)-1(e)(1) of this 
chapter) offering any report, analysis, publication or other investment 
advisory service to more than ten persons, the investment adviser shall 
not be required to keep a record of the names and addresses of the 
persons to whom it was sent; except that if such notice, circular, or 
advertisement is distributed to persons named on any list, the 
investment adviser shall retain with the copy of such notice, circular, 
or advertisement a memorandum describing the list and the source 
thereof; and
    (v) Any notice required pursuant to Sec.  275.211(h)(2)-3 as well as 
a record of each addressee and the corresponding date(s) sent.
    (8) A list or other record of all accounts in which the investment 
adviser is vested with any discretionary power with respect to the 
funds, securities or transactions of any client.
    (9) All powers of attorney and other evidences of the granting of 
any discretionary authority by any client to the investment adviser, or 
copies thereof.
    (10) All written agreements (or copies thereof) entered into by the 
investment adviser with any client or otherwise relating to the business 
of such investment adviser as such.
    (11)(i) A copy of each
    (A) Advertisement (as defined in Sec.  275.206(4)-1(e)(1) of this 
chapter) that the investment adviser disseminates, directly or 
indirectly, except:
    (1) For oral advertisements, the adviser may instead retain a copy 
of any written or recorded materials used by the adviser in connection 
with the oral advertisement; and
    (2) For compensated oral testimonials and endorsements (as defined 
in Sec.  275.206(4)-1(e)(17) and (5) of this chapter), the adviser may 
instead make and keep a record of the disclosures provided to clients or 
investors pursuant to Sec.  275.206(4)-1(b)(1) of this chapter; and
    (B) Notice, circular, newspaper article, investment letter, 
bulletin, or other communication that the investment adviser 
disseminates, directly or indirectly, to ten or more persons (other than 
persons associated with such investment adviser); and
    (C) If such notice, circular, advertisement, newspaper article, 
investment letter, bulletin, or other communication recommends the 
purchase or sale of a specific security and does not state the reasons 
for such recommendation, a memorandum of the investment adviser 
indicating the reasons therefor; and
    (ii) A copy of any questionnaire or survey used in the preparation 
of a third-party rating included or appearing in any advertisement in 
the event the adviser obtains a copy of the questionnaire or survey.
    (12)(i) A copy of the investment adviser's code of ethics adopted 
and implemented pursuant to Sec.  275.204A-1 that is in effect, or at 
any time within the past five years was in effect;
    (ii) A record of any violation of the code of ethics, and of any 
action taken as a result of the violation; and
    (iii) A record of all written acknowledgments as required by Sec.  
275.204A-1(a)(5) for each person who is currently, or within the past 
five years was, a supervised person of the investment adviser.
    (13)(i) A record of each report made by an access person as required 
by Sec.  275.204A-1(b), including any information provided under 
paragraph (b)(3)(iii) of that section in lieu of such reports;
    (ii) A record of the names of persons who are currently, or within 
the past five years were, access persons of the investment adviser; and
    (iii) A record of any decision, and the reasons supporting the 
decision, to approve the acquisition of securities by access persons 
under Sec.  275.204A-1(c), for at least five years after the end of the

[[Page 575]]

fiscal year in which the approval is granted.
    (14)(i) A copy of each brochure, brochure supplement and Form CRS, 
and each amendment or revision to the brochure, brochure supplement and 
Form CRS, that satisfies the requirements of Part 2 or Part 3 of Form 
ADV, as applicable [17 CFR 279.1]; any summary of material changes that 
satisfies the requirements of Part 2 of Form ADV but is not contained in 
the brochure; and a record of the dates that each brochure, brochure 
supplement and Form CRS, each amendment or revision thereto, and each 
summary of material changes not contained in a brochure given to any 
client or to any prospective client who subsequently becomes a client.
    (ii) Documentation describing the method used to compute managed 
assets for purposes of Item 4.E of Part 2A of Form ADV, if the method 
differs from the method used to compute regulatory assets under 
management in Item 5.F of Part 1A of Form ADV.
    (iii) A memorandum describing any legal or disciplinary event listed 
in Item 9 of Part 2A or Item 3 of Part 2B (Disciplinary Information) and 
presumed to be material, if the event involved the investment adviser or 
any of its supervised persons and is not disclosed in the brochure or 
brochure supplement described in paragraph (a)(14)(i) of this section. 
The memorandum must explain the investment adviser's determination that 
the presumption of materiality is overcome, and must discuss the factors 
described in Item 9 of Part 2A of Form ADV or Item 3 of Part 2B of Form 
ADV.
    (15)(i) If not included in the advertisement, a record of the 
disclosures provided to clients or investors pursuant to Sec.  
275.206(4)-1(b)(1)(ii) and (iii) of this chapter;
    (ii) Documentation substantiating the adviser's reasonable basis for 
believing that a testimonial or endorsement (as defined in Sec.  
275.206(4)-1(e)(17) and (5) of this chapter) complies with Sec.  
275.206(4)-1 and that the third-party rating (as defined in Sec.  
275.206(4)-1(e)(18) of this chapter) complies with Sec.  275.206(4)-
1(c)(1) of this chapter; and
    (iii) A record of the names of all persons who are an investment 
adviser's partners, officers, directors, or employees, or a person that 
controls, is controlled by, or is under common control with the 
investment adviser, or is a partner, officer, director or employee of 
such a person pursuant to Sec.  275.206(4)-1(b)(4)(ii) of this chapter.
    (16) All accounts, books, internal working papers, and any other 
records or documents that are necessary to form the basis for or 
demonstrate the calculation of any performance or rate of return of any 
or all managed accounts, portfolios (as defined in Sec.  275.206(4)-
1(e)(11) of this chapter), or securities recommendations presented in 
any notice, circular, advertisement (as defined in Sec.  275.206(4)-
1(e)(1) of this chapter), newspaper article, investment letter, 
bulletin, or other communication that the investment adviser 
disseminates, directly or indirectly, to any person (other than persons 
associated with such investment adviser), including copies of all 
information provided or offered pursuant to Sec.  275.206(4)-1(d)(6) of 
this chapter; provided, however, that, with respect to the performance 
of managed accounts, the retention of all account statements, if they 
reflect all debits, credits, and other transactions in a client's or 
investor's account for the period of the statement, and all worksheets 
necessary to demonstrate the calculation of the performance or rate of 
return of all managed accounts shall be deemed to satisfy the 
requirements of this paragraph.
    (17)(i) A copy of the investment adviser's policies and procedures 
formulated pursuant to Sec.  275.206(4)-7(a) of this chapter that are in 
effect, or at any time within the past five years were in effect;
    (ii) Any records documenting the investment adviser's annual review 
of those policies and procedures conducted pursuant to Sec.  275.206(4)-
7(b) of this chapter;
    (iii) A copy of any internal control report obtained or received 
pursuant to Sec.  275.206(4)-2(a)(6)(ii).
    (18)(i) Books and records that pertain to Sec.  275.206(4)-5 
containing a list or other record of:
    (A) The names, titles and business and residence addresses of all 
covered associates of the investment adviser;

[[Page 576]]

    (B) All government entities to which the investment adviser provides 
or has provided investment advisory services, or which are or were 
investors in any covered investment pool to which the investment adviser 
provides or has provided investment advisory services, as applicable, in 
the past five years, but not prior to September 13, 2010;
    (C) All direct or indirect contributions made by the investment 
adviser or any of its covered associates to an official of a government 
entity, or direct or indirect payments to a political party of a State 
or political subdivision thereof, or to a political action committee; 
and
    (D) The name and business address of each regulated person to whom 
the investment adviser provides or agrees to provide, directly or 
indirectly, payment to solicit a government entity for investment 
advisory services on its behalf, in accordance with Sec.  275.206(4)-
5(a)(2).
    (ii) Records relating to the contributions and payments referred to 
in paragraph (a)(18)(i)(C) of this section must be listed in 
chronological order and indicate:
    (A) The name and title of each contributor;
    (B) The name and title (including any city/county/State or other 
political subdivision) of each recipient of a contribution or payment;
    (C) The amount and date of each contribution or payment; and
    (D) Whether any such contribution was the subject of the exception 
for certain returned contributions pursuant to Sec.  275.206(4)-5(b)(2).
    (iii) An investment adviser is only required to make and keep 
current the records referred to in paragraphs (a)(18)(i)(A) and (C) of 
this section if it provides investment advisory services to a government 
entity or a government entity is an investor in any covered investment 
pool to which the investment adviser provides investment advisory 
services.
    (iv) For purposes of this section, the terms ``contribution,'' 
``covered associate,'' ``covered investment pool,'' ``government 
entity,'' ``official,'' ``payment,'' ``regulated person,'' and 
``solicit'' have the same meanings as set forth in Sec.  275.206(4)-5.
    (19) A record of who the ``intended audience'' is pursuant to Sec.  
275.206(4)-1(d)(6) and(e)(10)(ii)(B) of this chapter.
    (20)(i) A copy of any quarterly statement distributed pursuant to 
Sec.  275.211(h)(1)-2, along with a record of each addressee and the 
corresponding date(s) sent; and
    (ii) All records evidencing the calculation method for all expenses, 
payments, allocations, rebates, offsets, waivers, and performance listed 
on any statement delivered pursuant to Sec.  275.211(h)(1)-2.
    (21) For each private fund client:
    (i) A copy of any audited financial statements prepared and 
distributed pursuant to Sec.  275.206(4)-10, along with a record of each 
addressee and the corresponding date(s) sent; or
    (ii) A record documenting steps taken by the adviser to cause a 
private fund client that the adviser does not control, is not controlled 
by, and with which it is not under common control to undergo a financial 
statement audit pursuant to Sec.  275.206(4)-10.
    (22) Documentation substantiating the adviser's determination that a 
private fund client is a liquid fund or an illiquid fund pursuant to 
Sec.  275.211(h)(1)-2.
    (23) A copy of any fairness opinion or valuation opinion and 
material business relationship summary distributed pursuant to Sec.  
275.211(h)(2)-2, along with a record of each addressee and the 
corresponding date(s) sent.
    (24) A copy of any notification, consent or other document 
distributed or received pursuant to Sec.  275.211(h)(2)-1, along with a 
record of each addressee and the corresponding date(s) sent for each 
such document distributed by the adviser.
    (b) If an investment adviser subject to paragraph (a) of this 
section has custody or possession of securities or funds of any client, 
the records required to be made and kept under paragraph (a) of this 
section shall include:
    (1) A journal or other record showing all purchases, sales, receipts 
and deliveries of securities (including certificate numbers) for such 
accounts and all other debits and credits to such accounts.
    (2) A separate ledger account for each such client showing all 
purchases,

[[Page 577]]

sales, receipts and deliveries of securities, the date and price of each 
purchase and sale, and all debits and credits.
    (3) Copies of confirmations of all transactions effected by or for 
the account of any such client.
    (4) A record for each security in which any such client has a 
position, which record shall show the name of each such client having 
any interest in such security, the amount or interest of each such 
client, and the location of each such security.
    (5) A memorandum describing the basis upon which you have determined 
that the presumption that any related person is not operationally 
independent under Sec.  275.206(4)-2(d)(5) has been overcome.
    (c)(1) Every investment adviser subject to paragraph (a) of this 
section who renders any investment supervisory or management service to 
any client shall, with respect to the portfolio being supervised or 
managed and to the extent that the information is reasonably available 
to or obtainable by the investment adviser, make and keep true, accurate 
and current:
    (i) Records showing separately for each such client the securities 
purchased and sold, and the date, amount and price of each such purchase 
and sale.
    (ii) For each security in which any such client has a current 
position, information from which the investment adviser can promptly 
furnish the name of each such client, and the current amount or interest 
of such client.
    (2) Every investment adviser subject to paragraph (a) of this 
section that exercises voting authority with respect to client 
securities shall, with respect to those clients, make and retain the 
following:
    (i) Copies of all policies and procedures required by Sec.  
275.206(4)-6.
    (ii) A copy of each proxy statement that the investment adviser 
receives regarding client securities. An investment adviser may satisfy 
this requirement by relying on a third party to make and retain, on the 
investment adviser's behalf, a copy of a proxy statement (provided that 
the adviser has obtained an undertaking from the third party to provide 
a copy of the proxy statement promptly upon request) or may rely on 
obtaining a copy of a proxy statement from the Commission's Electronic 
Data Gathering, Analysis, and Retrieval (EDGAR) system.
    (iii) A record of each vote cast by the investment adviser on behalf 
of a client. An investment adviser may satisfy this requirement by 
relying on a third party to make and retain, on the investment adviser's 
behalf, a record of the vote cast (provided that the adviser has 
obtained an undertaking from the third party to provide a copy of the 
record promptly upon request).
    (iv) A copy of any document created by the adviser that was material 
to making a decision how to vote proxies on behalf of a client or that 
memorializes the basis for that decision.
    (v) A copy of each written client request for information on how the 
adviser voted proxies on behalf of the client, and a copy of any written 
response by the investment adviser to any (written or oral) client 
request for information on how the adviser voted proxies on behalf of 
the requesting client.
    (d) Any books or records required by this section may be maintained 
by the investment adviser in such manner that the identity of any client 
to whom such investment adviser renders investment supervisory services 
is indicated by numerical or alphabetical code or some similar 
designation.
    (e)(1) All books and records required to be made under the 
provisions of paragraphs (a) to (c)(1)(i), inclusive, and (c)(2) of this 
section (except for books and records required to be made under the 
provisions of paragraphs (a)(11), (a)(12)(i), (a)(12)(iii), (a)(13)(ii), 
(a)(13)(iii), (a)(16), and (a)(17)(i) of this section), shall be 
maintained and preserved in an easily accessible place for a period of 
not less than five years from the end of the fiscal year during which 
the last entry was made on such record, the first two years in an 
appropriate office of the investment adviser.
    (2) Partnership articles and any amendments thereto, articles of 
incorporation, charters, minute books, and stock certificate books of 
the investment adviser and of any predecessor,

[[Page 578]]

shall be maintained in the principal office of the investment adviser 
and preserved until at least three years after termination of the 
enterprise.
    (3)(i) Books and records required to be made under the provisions of 
paragraphs (a)(11) and (a)(16) of this rule shall be maintained and 
preserved in an easily accessible place for a period of not less than 
five years, the first two years in an appropriate office of the 
investment adviser, from the end of the fiscal year during which the 
investment adviser last published or otherwise disseminated, directly or 
indirectly, the notice, circular, advertisement, newspaper article, 
investment letter, bulletin or other communication.
    (ii) Transition rule. If you are an investment adviser that was, 
prior to July 21, 2011, exempt from registration under section 203(b)(3) 
of the Act (15 U.S.C. 80b-3(b)(3)), as in effect on July 20, 2011, 
paragraph (e)(3)(i) of this section does not require you to maintain or 
preserve books and records that would otherwise be required to be 
maintained or preserved under the provisions of paragraph (a)(16) of 
this section to the extent those books and records pertain to the 
performance or rate of return of such private fund (as defined in 
section 202(a)(29) of the Act (15 U.S.C. 80b-2(a)(29)), or other account 
you advise for any period ended prior to your registration, provided 
that you continue to preserve any books and records in your possession 
that pertain to the performance or rate of return of such private fund 
or other account for such period.
    (f) An investment adviser subject to paragraph (a) of this section, 
before ceasing to conduct or discontinuing business as an investment 
adviser shall arrange for and be responsible for the preservation of the 
books and records required to be maintained and preserved under this 
section for the remainder of the period specified in this section, and 
shall notify the Commission in writing, at its principal office, 
Washington, D.C. 20549, of the exact address where such books and 
records will be maintained during such period.
    (g) Micrographic and electronic storage permitted--(1) General. The 
records required to be maintained and preserved pursuant to this part 
may be maintained and preserved for the required time by an investment 
adviser on:
    (i) Micrographic media, including microfilm, microfiche, or any 
similar medium; or
    (ii) Electronic storage media, including any digital storage medium 
or system that meets the terms of this section.
    (2) General requirements. The investment adviser must:
    (i) Arrange and index the records in a way that permits easy 
location, access, and retrieval of any particular record;
    (ii) Provide promptly any of the following that the Commission (by 
its examiners or other representatives) may request:
    (A) A legible, true, and complete copy of the record in the medium 
and format in which it is stored;
    (B) A legible, true, and complete printout of the record; and
    (C) Means to access, view, and print the records; and
    (iii) Separately store, for the time required for preservation of 
the original record, a duplicate copy of the record on any medium 
allowed by this section.
    (3) Special requirements for electronic storage media. In the case 
of records on electronic storage media, the investment adviser must 
establish and maintain procedures:
    (i) To maintain and preserve the records, so as to reasonably 
safeguard them from loss, alteration, or destruction;
    (ii) To limit access to the records to properly authorized personnel 
and the Commission (including its examiners and other representatives); 
and
    (iii) To reasonably ensure that any reproduction of a non-electronic 
original record on electronic storage media is complete, true, and 
legible when retrieved.
    (h)(1) Any book or other record made, kept, maintained and preserved 
in compliance with Sec. Sec.  240.17a-3 and 240.17a-4 of this chapter 
under the Securities Exchange Act of 1934, or with rules adopted by the 
Municipal Securities Rulemaking Board, which is substantially the same 
as the book or other record required to be made, kept, maintained and 
preserved under this section, shall be deemed to be made,

[[Page 579]]

kept, maintained and preserved in compliance with this section.
    (2) A record made and kept pursuant to any provision of paragraph 
(a) of this section, which contains all the information required under 
any other provision of paragraph (a) of this section, need not be 
maintained in duplicate in order to meet the requirements of the other 
provision of paragraph (a) of this section.
    (i) As used in this section the term ``discretionary power'' shall 
not include discretion as to the price at which or the time when a 
transaction is or is to be effected, if, before the order is given by 
the investment adviser, the client has directed or approved the purchase 
or sale of a definite amount of the particular security.
    (j)(1) Except as provided in paragraph (j)(3) of this section, each 
non-resident investment adviser registered or applying for registration 
pursuant to section 203 of the Act shall keep, maintain and preserve, at 
a place within the United States designated in a notice from him as 
provided in paragraph (j)(2) of this section true, correct, complete and 
current copies of books and records which he is required to make, keep 
current, maintain or preserve pursuant to any provisions of any rule or 
regulation of the Commission adopted under the Act.
    (2) Except as provided in paragraph (j)(3) of this section, each 
nonresident investment adviser subject to this paragraph (j) shall 
furnish to the Commission a written notice specifying the address of the 
place within the United States where the copies of the books and records 
required to be kept and preserved by him pursuant to paragraph (j)(1) of 
this section are located. Each non-resident investment adviser 
registered or applying for registration when this paragraph becomes 
effective shall file such notice within 30 days after such rule becomes 
effective. Each non-resident investment adviser who files an application 
for registration after this paragraph becomes effective shall file such 
notice with such application for registration.
    (3) Notwithstanding the provisions of paragraphs (j)(1) and (2) of 
this section, a non-resident investment adviser need not keep or 
preserve within the United States copies of the books and records 
referred to in said paragraphs (j)(1) and (2), if:
    (i) Such non-resident investment adviser files with the Commission, 
at the time or within the period provided by paragraph (j)(2) of this 
section, a written undertaking, in form acceptable to the Commission and 
signed by a duly authorized person, to furnish to the Commission, upon 
demand, at its principal office in Washington, DC, or at any Regional 
Office of the Commission designated in such demand, true, correct, 
complete and current copies of any or all of the books and records which 
he is required to make, keep current, maintain or preserve pursuant to 
any provision of any rule or regulation of the Commission adopted under 
the Act, or any part of such books and records which may be specified in 
such demand. Such undertaking shall be in substantially the following 
form:

    The undersigned hereby undertakes to furnish at its own expense to 
the Securities and Exchange Commission at its principal office in 
Washington, DC or at any Regional Office of said Commission specified in 
a demand for copies of books and records made by or on behalf of said 
Commission, true, correct, complete and current copies of any or all, or 
any part, of the books and records which the undersigned is required to 
make, keep current or preserve pursuant to any provision of any rule or 
regulation of the Securities and Exchange Commission under the 
Investment Advisers Act of 1940. This undertaking shall be suspended 
during any period when the undersigned is making, keeping current, and 
preserving copies of all of said books and records at a place within the 
United States in compliance with Rule 204-2(j) under the Investment 
Advisers Act of 1940. This undertaking shall be binding upon the 
undersigned and the heirs, successors and assigns of the undersigned, 
and the written irrevocable consents and powers of attorney of the 
undersigned, its general partners and managing agents filed with the 
Securities and Exchange Commission shall extend to and cover any action 
to enforce same.


and
    (ii) Such non-resident investment adviser furnishes to the 
Commission, at his own expense 14 days after written demand therefor 
forwarded to him by registered mail at his last address of record filed 
with the Commission and signed by the Secretary of the Commission or 
such person as the Commission may authorize to act in its behalf,

[[Page 580]]

true, correct, complete and current copies of any or all books and 
records which such investment adviser is required to make, keep current 
or preserve pursuant to any provision of any rule or regulation of the 
Commission adopted under the Act, or any part of such books and records 
which may be specified in said written demand. Such copies shall be 
furnished to the Commission at its principal office in Washington, DC, 
or at any Regional Office of the Commission which may be specified in 
said written demand.
    (4) For purposes of this rule the term non-resident investment 
adviser shall have the meaning set out in Sec.  275.0-2(d)(3) under the 
Act.
    (k) Every investment adviser that registers under section 203 of the 
Act (15 U.S.C. 80b-3) after July 8, 1997 shall be required to preserve 
in accordance with this section the books and records the investment 
adviser had been required to maintain by the State in which the 
investment adviser had its principal office and place of business prior 
to registering with the Commission.

[26 FR 5002, June 6, 1961]

    Editorial Note: For Federal Register citations affecting Sec.  
275.204-2, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  275.204-3  Delivery of brochures and brochure supplements.

    (a) General requirements. If you are registered under the Act as an 
investment adviser, you must deliver a brochure and one or more brochure 
supplements to each client or prospective client that contains all 
information required by Part 2 of Form ADV [17 CFR 279.1].
    (b) Delivery requirements. You (or a supervised person acting on 
your behalf) must:
    (1) Deliver to a client or prospective client your current brochure 
before or at the time you enter into an investment advisory contract 
with that client.
    (2) Deliver to each client, annually within 120 days after the end 
of your fiscal year and without charge, if there are material changes in 
your brochure since your last annual updating amendment:
    (i) A current brochure, or
    (ii) The summary of material changes to the brochure as required by 
Item 2 of Form ADV, Part 2A that offers to provide your current brochure 
without charge, accompanied by the Web site address (if available) and 
an e-mail address (if available) and telephone number by which a client 
may obtain the current brochure from you, and the Web site address for 
obtaining information about you through the Investment Adviser Public 
Disclosure (IAPD) system.
    (3) Deliver to each client or prospective client a current brochure 
supplement for a supervised person before or at the time that supervised 
person begins to provide advisory services to the client; provided, 
however, that if investment advice for a client is provided by a team 
comprised of more than five supervised persons, a current brochure 
supplement need only be delivered to that client for the five supervised 
persons with the most significant responsibility for the day-to-day 
advice provided to that client. For purposes of this section, a 
supervised person will provide advisory services to a client if that 
supervised person will:
    (i) Formulate investment advice for the client and have direct 
client contact; or
    (ii) Make discretionary investment decisions for the client, even if 
the supervised person will have no direct client contact.
    (4) Deliver the following to each client promptly after you create 
an amended brochure or brochure supplement, as applicable, if the 
amendment adds disclosure of an event, or materially revises information 
already disclosed about an event, in response to Item 9 of Part 2A of 
Form ADV or Item 3 of Part 2B of Form ADV (Disciplinary Information), 
respectively, (i) the amended brochure or brochure supplement, as 
applicable, along with a statement describing the material facts 
relating to the change in disciplinary information, or (ii) a statement 
describing the material facts relating to the change in disciplinary 
information.

[[Page 581]]

    (c) Exceptions to delivery requirement. (1) You are not required to 
deliver a brochure to a client:
    (i) That is an investment company registered under the Investment 
Company Act of 1940 [15 U.S.C. 80a-1 to 80a-64] or a business 
development company as defined in that Act, provided that the advisory 
contract with that client meets the requirements of section 15(c) of 
that Act [15 U.S.C. 80a-15(c)]; or
    (ii) Who receives only impersonal investment advice for which you 
charge less than $500 per year.
    (2) You are not required to deliver a brochure supplement to a 
client:
    (i) To whom you are not required to deliver a brochure under 
subparagraph (c)(1) of this section;
    (ii) Who receives only impersonal investment advice; or
    (iii) Who is an officer, employee, or other person related to the 
adviser that would be a ``qualified client'' of your firm under Sec.  
275.205-3(d)(1)(iii).
    (d) Wrap fee program brochures. (1) If you are a sponsor of a wrap 
fee program, then the brochure that paragraph (b) of this section 
requires you to deliver to a client or prospective client of the wrap 
fee program must be a wrap fee program brochure containing all the 
information required by Part 2A, Appendix 1 of Form ADV. Any additional 
information in a wrap fee program brochure must be limited to 
information applicable to wrap fee programs that you sponsor.
    (2) You do not have to deliver a wrap fee program brochure if 
another sponsor of the wrap fee program delivers, to the client or 
prospective client of the wrap fee program, a wrap fee program brochure 
containing all the information required by Part 2A, Appendix 1 of Form 
ADV.

    Note to paragraph (d): A wrap fee program brochure does not take the 
place of any brochure supplements that you are required to deliver under 
paragraph (b) of this section.

    (e) Multiple brochures. If you provide substantially different 
advisory services to different clients, you may provide them with 
different brochures, so long as each client receives all information 
about the services and fees that are applicable to that client. The 
brochure you deliver to a client may omit any information required by 
Part 2A of Form ADV if the information does not apply to the advisory 
services or fees that you will provide or charge, or that you propose to 
provide or charge, to that client.
    (f) Other disclosure obligations. Delivering a brochure or brochure 
supplement in compliance with this section does not relieve you of any 
other disclosure obligations you have to your advisory clients or 
prospective clients under any federal or state laws or regulations.
    (g) Definitions. For purposes of this section:
    (1) Impersonal investment advice means investment advisory services 
that do not purport to meet the objectives or needs of specific 
individuals or accounts.
    (2) Current brochure and current brochure supplement mean the most 
recent revision of the brochure or brochure supplement, including all 
amendments to date.
    (3) Sponsor of a wrap fee program means an investment adviser that 
is compensated under a wrap fee program for sponsoring, organizing, or 
administering the program, or for selecting, or providing advice to 
clients regarding the selection of, other investment advisers in the 
program.
    (4) Supervised person means any of your officers, partners or 
directors (or other persons occupying a similar status or performing 
similar functions) or employees, or any other person who provides 
investment advice on your behalf.
    (5) Wrap fee program means an advisory program under which a 
specified fee or fees not based directly upon transactions in a client's 
account is charged for investment advisory services (which may include 
portfolio management or advice concerning the selection of other 
investment advisers) and the execution of client transactions.

[75 FR 49268, Aug. 12, 2010, as amended at 81 FR 60458, Oct. 31, 2016; 
84 FR 33630, July 12, 2019; 87 FR 22447, Apr. 15, 2022]



Sec.  275.204-4  Reporting by exempt reporting advisers.

    (a) Exempt reporting advisers. If you are an investment adviser 
relying on

[[Page 582]]

the exemption from registering with the Commission under section 203(l) 
or (m) of the Act (15 U.S.C. 80b-3(l) or 80b-3(m)), you must complete 
and file reports on Form ADV (17 CFR 279.1) by following the 
instructions in the Form, which specify the information that an exempt 
reporting adviser must provide.
    (b) Electronic filing. You must file Form ADV electronically with 
the Investment Adviser Registration Depository (IARD) unless you have 
received a hardship exemption under paragraph (e) of this section.

    Note to paragraph (b): Information on how to file with the IARD is 
available on the Commission's Web site at http://www.sec.gov/iard.

    (c) When filed. Each Form ADV is considered filed with the 
Commission upon acceptance by the IARD.
    (d) Filing fees. You must pay FINRA (the operator of the IARD) a 
filing fee. The Commission has approved the amount of the filing fee. No 
portion of the filing fee is refundable. Your completed Form ADV will 
not be accepted by FINRA, and thus will not be considered filed with the 
Commission, until you have paid the filing fee.
    (e) Temporary hardship exemption--(1) Eligibility for exemption. If 
you have unanticipated technical difficulties that prevent submission of 
a filing to the IARD, you may request a temporary hardship exemption 
from the requirements of this chapter to file electronically.
    (2) Application procedures. To request a temporary hardship 
exemption, you must:
    (i) File Form ADV-H (17 CFR 279.3) in paper format no later than one 
business day after the filing that is the subject of the ADV-H was due; 
and
    (ii) Submit the filing that is the subject of the Form ADV-H in 
electronic format with the IARD no later than seven business days after 
the filing was due.
    (3) Effective date--upon filing. The temporary hardship exemption 
will be granted when you file a completed Form ADV-H.
    (f) Final report. You must file a final report in accordance with 
instructions in Form ADV when:
    (1) You cease operation as an investment adviser;
    (2) You no longer meet the definition of exempt reporting adviser 
under paragraph (a); or
    (3) You apply for registration with the Commission.

    Note to paragraph (f): You do not have to pay a filing fee to file a 
final report on Form ADV through the IARD.

[76 FR 43013, July 19, 2011]



Sec.  275.204-5  Delivery of Form CRS.

    (a) General requirements. If you are registered under the Act as an 
investment adviser, you must deliver Form CRS, required by Part 3 of 
Form ADV [17 CFR 279.1], to each retail investor.
    (b) Delivery requirements. You (or a supervised person acting on 
your behalf) must:
    (1) Deliver to each retail investor your current Form CRS before or 
at the time you enter into an investment advisory contract with that 
retail investor.
    (2) Deliver to each retail investor who is an existing client your 
current Form CRS before or at the time you:
    (i) Open a new account that is different from the retail investor's 
existing account(s);
    (ii) Recommend that the retail investor roll over assets from a 
retirement account into a new or existing account or investment; or
    (iii) Recommend or provide a new investment advisory service or 
investment that does not necessarily involve the opening of a new 
account and would not be held in an existing account.
    (3) Post the current Form CRS prominently on your website, if you 
have one, in a location and format that is easily accessible for retail 
investors.
    (4) Communicate any changes made to Form CRS to each retail investor 
who is an existing client within 60 days after the amendments are 
required to be made and without charge. The communication can be made by 
delivering the amended Form CRS or by communicating the information 
through another disclosure that is delivered to the retail investor.
    (5) Deliver a current Form CRS to each retail investor within 30 
days upon request.
    (c) Other disclosure obligations. Delivering Form CRS in compliance 
with

[[Page 583]]

this section does not relieve you of any other disclosure obligations 
you have to your retail investors under any Federal or State laws or 
regulations.
    (d) Definitions. For purposes of this section:
    (1) Current Form CRS means the most recent version of the Form CRS.
    (2) Retail investor means a natural person, or the legal 
representative of such natural person, who seeks to receive or receives 
services primarily for personal, family or household purposes.
    (3) Supervised person means any of your officers, partners or 
directors (or other persons occupying a similar status or performing 
similar functions) or employees, or any other person who provides 
investment advice on your behalf.
    (e) Transition rule. (1) Within 30 days after the date by which you 
are first required by Sec.  275.204-1(b) to electronically file your 
Form CRS with the Commission, you must deliver to each of your existing 
clients who is a retail investor your current Form CRS as required by 
Part 3 of Form ADV.
    (2) As of the date by which you are first required to electronically 
file your Form CRS with the Commission, you must begin using your Form 
CRS as required by Part 3 of Form ADV to comply with the requirements of 
paragraph (b) of this section.

[84 FR 33631, July 12, 2019, as amended at 87 FR 22447, Apr. 15, 2022]



Sec.  275.204(b)-1  Reporting by investment advisers to private funds.

    (a) Reporting by investment advisers to private funds on Form PF. If 
you are an investment adviser registered or required to be registered 
under section 203 of the Act (15 U.S.C. 80b-3), you act as an investment 
adviser to one or more private funds and, as of the end of your most 
recently completed fiscal year, you managed private fund assets of at 
least $150 million, you must complete and file a report on Form PF (17 
CFR 279.9) by following the instructions in the Form, which specify the 
information that an investment adviser must provide. Your initial report 
on Form PF is due no later than the last day on which your next update 
would be timely in accordance with paragraph (e) if you had previously 
filed the Form; provided that you are not required to file Form PF with 
respect to any fiscal quarter or fiscal year ending prior to the date on 
which your registration becomes effective.
    (b) Electronic filing. You must file Form PF electronically with the 
Form PF filing system on the Investment Adviser Registration Depository 
(IARD).

    Note to paragraph (b): Information on how to file Form PF is 
available on the Commission's Web site at http://www.sec.gov/iard.

    (c) When filed. Each Form PF is considered filed with the Commission 
upon acceptance by the Form PF filing system.
    (d) Filing fees. You must pay the operator of the Form PF filing 
system a filing fee as required by the instructions to Form PF. The 
Commission has approved the amount of the filing fee. No portion of the 
filing fee is refundable. Your completed Form PF will not be accepted by 
the operator of the Form PF filing system, and thus will not be 
considered filed with the Commission, until you have paid the filing 
fee.
    (e) Updates to Form PF. You must file an updated Form PF:
    (1) At least annually, no later than the date specified in the 
instructions to Form PF; and
    (2) More frequently, if required by the instructions to Form PF. You 
must file all updated reports electronically with the Form PF filing 
system.
    (f) Temporary hardship exemption. (1) If you have unanticipated 
technical difficulties that prevent you from submitting Form PF on a 
timely basis through the Form PF filing system, you may request a 
temporary hardship exemption from the requirements of this section to 
file electronically.
    (2) To request a temporary hardship exemption, you must:
    (i) Complete and file in paper format, in accordance with the 
instructions to Form PF, Item A of Section 1a and Section 5 of Form PF, 
checking the box in Section 1a indicating that you are requesting a 
temporary hardship exemption, no later than one business day after the 
electronic Form PF filing was due; and
    (ii) Submit the filing that is the subject of the Form PF paper 
filing in electronic format with the Form PF

[[Page 584]]

filing system no later than seven business days after the filing was 
due.
    (3) The temporary hardship exemption will be granted when you file 
Item A of Section 1a and Section 5 of Form PF, checking the box in 
Section 1a indicating that you are requesting a temporary hardship 
exemption.
    (4) The hardship exemptions available under Sec.  275.203-3 do not 
apply to Form PF.
    (g) Definitions. For purposes of this section:
    (1) Assets under management means the regulatory assets under 
management as determined under Item 5.F of Form ADV (Sec.  279.1 of this 
chapter).
    (2) Private fund assets means the investment adviser's assets under 
management attributable to private funds.

[76 FR 71174, Nov. 16, 2011]

    Effective Date Notes: 1. At 88 FR 38202, June 12, 2023, Sec.  
275.204(b)-1 was amended by revising paragraphs (f)(2)(i) and (f)(3), 
effective June 11, 2024. For the convenience of the user, the revised 
text is set forth as follows:



Sec.  275.204(b)-1  Reporting by investment advisers to private funds.

                                * * * * *

    (f) * * *
    (2) * * *
    (i) Complete and file in paper format, in accordance with the 
instructions to Form PF, Item A of Section 1a and Section 7 of Form PF, 
checking the box in Section 1a indicating that you are requesting a 
temporary hardship exemption, no later than one business day after the 
electronic Form PF filing was due; and

                                * * * * *

    (3) The temporary hardship exemption will be granted when you file 
Item A of Section 1a and Section 7 of Form PF, checking the box in 
Section 1a indicating that you are requesting a temporary hardship 
exemption.

                                * * * * *

    Effective Date Notes: 2. At 89 FR 18060, Mar. 12, 2024, Sec.  
275.204(b)-1 was amended by:
    a. Removing the phrases ``in paper format,'' and ``, Item A of 
Section 1a and Section 5 of Form PF, checking the box in Section 1a 
indicating that you are requesting a temporary hardship exemption'' from 
paragraph (f)(2)(i),
    b. Redesignating paragraph (f)(4) as paragraph (f)(5), and
    c. Adding new paragraph (f)(4), effective Mar. 12, 2025.
    For the convenience of the user, the added text is set forth as 
follows:



Sec.  275.204(b)-1  Reporting by investment advisers to private funds.

                                * * * * *

    (f) * * *
    (4) A request for a temporary hardship exemption is considered filed 
upon the earlier of the date the request is postmarked or the date it is 
received by the Commission.

                                * * * * *



Sec.  275.204A-1  Investment adviser codes of ethics.

    (a) Adoption of code of ethics. If you are an investment adviser 
registered or required to be registered under section 203 of the Act (15 
U.S.C. 80b-3), you must establish, maintain and enforce a written code 
of ethics that, at a minimum, includes:
    (1) A standard (or standards) of business conduct that you require 
of your supervised persons, which standard must reflect your fiduciary 
obligations and those of your supervised persons;
    (2) Provisions requiring your supervised persons to comply with 
applicable Federal securities laws;
    (3) Provisions that require all of your access persons to report, 
and you to review, their personal securities transactions and holdings 
periodically as provided below;
    (4) Provisions requiring supervised persons to report any violations 
of your code of ethics promptly to your chief compliance officer or, 
provided your chief compliance officer also receives reports of all 
violations, to other persons you designate in your code of ethics; and
    (5) Provisions requiring you to provide each of your supervised 
persons with a copy of your code of ethics and any amendments, and 
requiring your supervised persons to provide you with a written 
acknowledgment of their receipt of the code and any amendments.
    (b) Reporting requirements--(1) Holdings reports. The code of ethics 
must require your access persons to submit to your chief compliance 
officer or other persons you designate in your code of ethics a report 
of the access person's

[[Page 585]]

current securities holdings that meets the following requirements:
    (i) Content of holdings reports. Each holdings report must contain, 
at a minimum:
    (A) The title and type of security, and as applicable the exchange 
ticker symbol or CUSIP number, number of shares, and principal amount of 
each reportable security in which the access person has any direct or 
indirect beneficial ownership;
    (B) The name of any broker, dealer or bank with which the access 
person maintains an account in which any securities are held for the 
access person's direct or indirect benefit; and
    (C) The date the access person submits the report.
    (ii) Timing of holdings reports. Your access persons must each 
submit a holdings report:
    (A) No later than 10 days after the person becomes an access person, 
and the information must be current as of a date no more than 45 days 
prior to the date the person becomes an access person.
    (B) At least once each 12-month period thereafter on a date you 
select, and the information must be current as of a date no more than 45 
days prior to the date the report was submitted.
    (2) Transaction reports. The code of ethics must require access 
persons to submit to your chief compliance officer or other persons you 
designate in your code of ethics quarterly securities transactions 
reports that meet the following requirements:
    (i) Content of transaction reports. Each transaction report must 
contain, at a minimum, the following information about each transaction 
involving a reportable security in which the access person had, or as a 
result of the transaction acquired, any direct or indirect beneficial 
ownership:
    (A) The date of the transaction, the title, and as applicable the 
exchange ticker symbol or CUSIP number, interest rate and maturity date, 
number of shares, and principal amount of each reportable security 
involved;
    (B) The nature of the transaction (i.e., purchase, sale or any other 
type of acquisition or disposition);
    (C) The price of the security at which the transaction was effected;
    (D) The name of the broker, dealer or bank with or through which the 
transaction was effected; and
    (E) The date the access person submits the report.
    (ii) Timing of transaction reports. Each access person must submit a 
transaction report no later than 30 days after the end of each calendar 
quarter, which report must cover, at a minimum, all transactions during 
the quarter.
    (3) Exceptions from reporting requirements. Your code of ethics need 
not require an access person to submit:
    (i) Any report with respect to securities held in accounts over 
which the access person had no direct or indirect influence or control;
    (ii) A transaction report with respect to transactions effected 
pursuant to an automatic investment plan;
    (iii) A transaction report if the report would duplicate information 
contained in broker trade confirmations or account statements that you 
hold in your records so long as you receive the confirmations or 
statements no later than 30 days after the end of the applicable 
calendar quarter.
    (c) Pre-approval of certain investments. Your code of ethics must 
require your access persons to obtain your approval before they directly 
or indirectly acquire beneficial ownership in any security in an initial 
public offering or in a limited offering.
    (d) Small advisers. If you have only one access person (i.e., 
yourself), you are not required to submit reports to yourself or to 
obtain your own approval for investments in any security in an initial 
public offering or in a limited offering, if you maintain records of all 
of your holdings and transactions that this section would otherwise 
require you to report.
    (e) Definitions. For the purpose of this section:
    (1) Access person means:
    (i) Any of your supervised persons:
    (A) Who has access to nonpublic information regarding any clients' 
purchase or sale of securities, or nonpublic information regarding the 
portfolio holdings of any reportable fund, or
    (B) Who is involved in making securities recommendations to clients, 
or

[[Page 586]]

who has access to such recommendations that are nonpublic.
    (ii) If providing investment advice is your primary business, all of 
your directors, officers and partners are presumed to be access persons.
    (2) Automatic investment plan means a program in which regular 
periodic purchases (or withdrawals) are made automatically in (or from) 
investment accounts in accordance with a predetermined schedule and 
allocation. An automatic investment plan includes a dividend 
reinvestment plan.
    (3) Beneficial ownership is interpreted in the same manner as it 
would be under Sec.  240.16a-1(a)(2) of this chapter in determining 
whether a person has beneficial ownership of a security for purposes of 
section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) and 
the rules and regulations thereunder. Any report required by paragraph 
(b) of this section may contain a statement that the report will not be 
construed as an admission that the person making the report has any 
direct or indirect beneficial ownership in the security to which the 
report relates.
    (4) Federal securities laws means the Securities Act of 1933 (15 
U.S.C. 77a-aa), the Securities Exchange Act of 1934 (15 U.S.C. 78a-mm), 
the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 (2002)), 
the Investment Company Act of 1940 (15 U.S.C. 80a), the Investment 
Advisers Act of 1940 (15 U.S.C. 80b), title V of the Gramm-Leach-Bliley 
Act (Pub. L. 106-102, 113 Stat. 1338 (1999), any rules adopted by the 
Commission under any of these statutes, the Bank Secrecy Act (31 U.S.C. 
5311-5314; 5316-5332) as it applies to funds and investment advisers, 
and any rules adopted thereunder by the Commission or the Department of 
the Treasury.
    (5) Fund means an investment company registered under the Investment 
Company Act.
    (6) Initial public offering means an offering of securities 
registered under the Securities Act of 1933 (15 U.S.C. 77a), the issuer 
of which, immediately before the registration, was not subject to the 
reporting requirements of sections 13 or 15(d) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)).
    (7) Limited offering means an offering that is exempt from 
registration under the Securities Act of 1933 pursuant to section 
4(a)(2) or section 4(a)(5) (15 U.S.C. 77d(a)(2) or 77d(a)(5)) or 
pursuant to Sec. Sec.  230.504 or 230.506 of this chapter.
    (8) Purchase or sale of a security includes, among other things, the 
writing of an option to purchase or sell a security.
    (9) Reportable fund means:
    (i) Any fund for which you serve as an investment adviser as defined 
in section 2(a)(20) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(20)) (i.e., in most cases you must be approved by the fund's 
board of directors before you can serve); or
    (ii) Any fund whose investment adviser or principal underwriter 
controls you, is controlled by you, or is under common control with you. 
For purposes of this section, control has the same meaning as it does in 
section 2(a)(9) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(9)).
    (10) Reportable security means a security as defined in section 
202(a)(18) of the Act (15 U.S.C. 80b-2(a)(18)), except that it does not 
include:
    (i) Direct obligations of the Government of the United States;
    (ii) Bankers' acceptances, bank certificates of deposit, commercial 
paper and high quality short-term debt instruments, including repurchase 
agreements;
    (iii) Shares issued by money market funds;
    (iv) Shares issued by open-end funds other than reportable funds; 
and
    (v) Shares issued by unit investment trusts that are invested 
exclusively in one or more open-end funds, none of which are reportable 
funds.

[69 FR 41708, July 9, 2004, as amended at 76 FR 81806, Dec. 29, 2011; 81 
FR 83554, Nov. 21, 2016]



Sec.  275.205-1  Definition of ``investment performance'' of an 
investment company and ``investment record'' of an appropriate index 
of securities prices.

    (a) Investment performance of an investment company for any period 
shall mean the sum of:
    (1) The change in its net asset value per share during such period;

[[Page 587]]

    (2) The value of its cash distributions per share accumulated to the 
end of such period; and
    (3) The value of capital gains taxes per share paid or payable on 
undistributed realized long-term capital gains accumulated to the end of 
such period; expressed as a percentage of its net asset value per share 
at the beginning of such period. For this purpose, the value of 
distributions per share of realized capital gains, of dividends per 
share paid from investment income and of capital gains taxes per share 
paid or payable on undistributed realized long-term capital gains shall 
be treated as reinvested in shares of the investment company at the net 
asset value per share in effect at the close of business on the record 
date for the payment of such distributions and dividends and the date on 
which provision is made for such taxes, after giving effect to such 
distributions, dividends and taxes.
    (b) Investment record of an appropriate index of securities prices 
for any period shall mean the sum of:
    (1) The change in the level of the index during such period; and
    (2) The value, computed consistently with the index, of cash 
distributions made by companies whose securities comprise the index 
accumulated to the end of such period; expressed as a percentage of the 
index level at the beginning of such period. For this purpose cash 
distributions on the securities which comprise the index shall be 
treated as reinvested in the index at least as frequently as the end of 
each calendar quarter following the payment of the dividend.

                                                    Exhibit I
[Method of computing the investment record of the standard & poor's 500 stock composite index for calendar 1971]
----------------------------------------------------------------------------------------------------------------
                                                                             Quarterly dividend yield-composite
                                                                                           index
                                                                          --------------------------------------
                  Quarterly ending--                     Index value \1\                       Quarterly percent
                                                                             Annual percent      \3\ (\1/4\ of
                                                                                  \2\         annual)
----------------------------------------------------------------------------------------------------------------
Dec. 1970.............................................              92.15  .................  ..................
Mar. 1971.............................................             100.31               3.10                0.78
June 1971.............................................              99.70               3.11                 .78
Sept. 1971............................................              98.34               3.14                 .79
Dec. 1971.............................................             102.09               3.01                 .75
----------------------------------------------------------------------------------------------------------------
\1\ Source: Standard & Poor's Trade and Securities Statistics, Jan. 1972, p. 33.
\2\ Id. See Standard & Poor's Trade and Securities Statistics Security and Price Index Record--1970 Edition, p.
  133 for explanation of quarterly dividend yield.
\3\ Quarterly percentages have been founded to two decimal places.

Change in index value for 1971: 102.09 - 92.15 = 9.94.
Accumulated value of dividends for 1971:
[GRAPHIC] [TIFF OMITTED] TC14NO91.094

    Aggregate value of dividends paid, assuming quarterly reinvestment 
and computed consistently with the index:
    (Percent yield as computed above) x (ending index value) = Aggregate 
value of dividends paid
    For 1971:

.0314 x 102.09 = 3.21

    Investment record of Standard & Poor's 500 stock composite index 
assuming quarterly reinvestment dividends:
[GRAPHIC] [TIFF OMITTED] TC14NO91.095

    The same method can be extended to cases where an investment 
company's fiscal quarters do not coincide with the fiscal quarters of 
the S & P dividend record or to instances where a ``rolling period'' is 
used for performance comparisons as indicated by the following example 
of the calculation of the investment record of the Standard & Poor's 500 
Stock Composite Index for the 12 months ended November 1971:

[[Page 588]]



Index value Nov. 30, 1971.....................................     93.99
Index value Nov. 30, 1970.....................................     87.20
                                                               ---------
 Change in index value........................................      6.79
 


------------------------------------------------------------------------
                                    Dividend yield       Rate for each
                                 --------------------  month of quarter
        Quarter ending--           Annual   \1/4\ of      (\1/12\ of
                                    rate     annual   annual)
------------------------------------------------------------------------
Dec. 1970.......................      3.41      0.85            0.28
Mar. 1971.......................      3.10       .78             .26
June 1971.......................      3.11       .78             .26
Sept. 1971......................      3.14       .79             .26
Dec. 1971.......................      3.01       .75             .25
------------------------------------------------------------------------

    Accumulated value of dividends reinvested:

    December = 1.0028
    January-March = 1.0078
    April-June = 1.0078
    July-September = 1.0079
    October-November = 1.0053 \4\
---------------------------------------------------------------------------

    \4\ The rate for October and November would be two-thirds of the 
yield for the quarter ended Sept. 30 (i.e. .667 x .79 = 5269) since the 
yield for the quarter ended Dec. 31 would not be available as of Nov. 
30.

    Dividend yield:

       (1.0028 x 1.0078 x 1.0078 x 1.0079 x 1.0053) - 1.00 = .0320

    Aggregate value of dividends paid computed consistently with the 
index:

.0320 x 93.99 = 3.01

    Investment record of the Standard & Poor's 500 Stock Composite Index 
for the 12 months ended November 30, 1971:
[GRAPHIC] [TIFF OMITTED] TC14NO91.096


                                                   Exhibit II
  [Method of Computing the Investment Record of the New York Stock Exchange Composite Index for Calendar 1971]
----------------------------------------------------------------------------------------------------------------
                                                                            (4)--Quarterly
                                                         (3)--Aggregate        value of
                                                        market value of     estimated cash      (5)--Estimated
                                     (2)--Index value   shares listed on     payments of          yield \4\
        (1)--Quarter ending                \1\           the NYSE as of    shares listed on       (quarterly
                                                         end of quarter        the NYSE      percent)
                                                          (billions of       (millions of
                                                          dollars) \2\       dollars) \3\
----------------------------------------------------------------------------------------------------------------
Dec. 1970.........................              50.23
Mar. 1971.........................              55.44               $709             $5,106                0.72
June 1971.........................              55.09                710              4,961                 .70
Sept. 1971........................              54.33                709              5,006                 .71
Dec. 1971.........................              56.43                742              5,183                 .70
----------------------------------------------------------------------------------------------------------------
\1\ Source: New York Stock Exchange Composite Index as reported daily by the New York Stock Exchange.
\2\ Source: Monthly Review, New York Stock Exchange.
\3\ Source: The Exchange, New York Stock Exchange magazine, May, Aug., Nov. 1971 and Feb. 1972 editions. Upon
  request the Statistics Division of the Research Department of the NYSE will make this figure available within
  10 days of the end of each quarter.
\4\ The ratio of column 4 to column 3.

Change in NYSE Composite Index value for 1971: 56.43 - 50.23 = 6.20.
Accumulated Value of Dividends of NYSE Composite Index for 1971:
[GRAPHIC] [TIFF OMITTED] TC14NO91.097

    Aggregate value of dividends paid on NYSE Composite Index assuming 
quarterly reinvestment:
    For 1971:

.0286 x 56.43 = 1.61

    Investment record of the New York Stock Exchange Composite Index 
assuming quarterly reinvestment of dividends:
[GRAPHIC] [TIFF OMITTED] TC14NO91.098

    The same method can be extended to cases where an investment 
company's fiscal quarters do not coincide with the fiscal quarters of 
the NYSE dividend record or to instances where a ``rolling period'' is 
used for performance comparisons as indicated by the following example 
of the calculation of the investment record of the NYSE Composite

[[Page 589]]

Index for the 12 months ended November 1971:

Index value Nov. 30, 1971.....................................     51.84
Index value Nov. 30, 1970.....................................     47.41
                                                               ---------
 Change in index value........................................      4.43
 


------------------------------------------------------------------------
                                           Dividend      Rate for each
                                             yield     month of quarter
             Quarter ending                quarterly      (\1/12\ of
                                            percent   annual)
------------------------------------------------------------------------
Dec. 1970...............................        0.79            0.26
Mar. 1971...............................         .72             .24
June 1971...............................         .70             .23
Sept. 1971..............................         .71             .24
Dec. 1971...............................         .70             .23
------------------------------------------------------------------------

    Accumulated value of dividends reinvested:

    December = 1.0026
    January-March = 1.0072
    April-June = 1.0070
    July-September = 1.0071
    October-November = 1.0047 \4\
---------------------------------------------------------------------------

    \4\ The rate for October and November would be two thirds of the 
yield for the quarter ended September 30 (i.e. .667 x .71 = 4736), since 
the yield for the quarter ended December 31 would not be available as of 
November 30.

    Dividend yield:

       (1.0026 x 1.0072 x 1.0070 x 1.0071 x 1.0047) - 1.00 = .0289

    Aggregate value of dividends paid computed consistently with the 
index:

.0289 x 51.84 = 1.50

    Investment record of the NYSE Composite Index for the 12 months 
ended November 30, 1971:
[GRAPHIC] [TIFF OMITTED] TC14NO91.099


(Secs. 205, 211, 54 Stat. 852, 74 Stat. 887, 15 U.S.C. 80b-205, 80b-211; 
sec. 25, 84 Stat. 1432, 1433, Pub. L. 91-547)

[37 FR 17468, Aug. 29, 1972]



Sec.  275.205-2  Definition of ``specified period'' over which the asset
value of the company or fund under management is averaged.

    (a) For purposes of this rule:
    (1) Fulcrum fee shall mean the fee which is paid or earned when the 
investment company's performance is equivalent to that of the index or 
other measure of performance.
    (2) Rolling period shall mean a period consisting of a specified 
number of subperiods of definite length in which the most recent 
subperiod is substituted for the earliest subperiod as time passes.
    (b) The specified period over which the asset value of the company 
or fund under management is averaged shall mean the period over which 
the investment performance of the company or fund and the investment 
record of an appropriate index of securities prices or such other 
measure of investment performance are computed.
    (c) Notwithstanding paragraph (b) of this section, the specified 
period over which the asset value of the company or fund is averaged for 
the purpose of computing the fulcrum fee may differ from the period over 
which the asset value is averaged for computing the performance related 
portion of the fee, only if:
    (1) The performance related portion of the fee is computed over a 
rolling period and the total fee is payable at the end of each subperiod 
of the rolling period; and
    (2) The fulcrum fee is computed on the basis of the asset value 
averaged over the most recent subperiod or subperiods of the rolling 
period.

(Secs. 205, 106A, 211; 54 Stat. 852, 855; 84 Stat. 1433, 15 U.S.C. 80b-
5, 80b-6a, 80b-11)

[37 FR 24896, Nov. 22, 1972]



Sec.  275.205-3  Exemption from the compensation prohibition of
section 205(a)(1) for investment advisers.

    (a) General. The provisions of section 205(a)(1) of the Act (15 
U.S.C. 80b-5(a)(1)) will not be deemed to prohibit an investment adviser 
from entering into, performing, renewing or extending an investment 
advisory contract that provides for compensation to the investment 
adviser on the basis of a share of the capital gains upon, or the 
capital appreciation of, the funds, or any portion of the funds, of a 
client, Provided, That the client entering into the contract subject to 
this section is a qualified client, as defined in paragraph (d)(1) of 
this section.
    (b) Identification of the client. In the case of a private 
investment company, as defined in paragraph (d)(3) of this section, an 
investment company registered under the Investment Company Act of 1940, 
or a business development company, as defined in section

[[Page 590]]

202(a)(22) of the Act (15 U.S.C. 80b-2(a)(22)), each equity owner of any 
such company (except for the investment adviser entering into the 
contract and any other equity owners not charged a fee on the basis of a 
share of capital gains or capital appreciation) will be considered a 
client for purposes of paragraph (a) of this section.
    (c) Transition rules--(1) Registered investment advisers. If a 
registered investment adviser entered into a contract and satisfied the 
conditions of this section that were in effect when the contract was 
entered into, the adviser will be considered to satisfy the conditions 
of this section; Provided, however, that if a natural person or company 
who was not a party to the contract becomes a party (including an equity 
owner of a private investment company advised by the adviser), the 
conditions of this section in effect at that time will apply with regard 
to that person or company.
    (2) Registered investment advisers that were previously not 
registered. If an investment adviser was not required to register with 
the Commission pursuant to section 203 of the Act (15 U.S.C. 80b-3) and 
was not registered, section 205(a)(1) of the Act will not apply to an 
advisory contract entered into when the adviser was not required to 
register and was not registered, or to an account of an equity owner of 
a private investment company advised by the adviser if the account was 
established when the adviser was not required to register and was not 
registered; Provided, however, that section 205(a)(1) of the Act will 
apply with regard to a natural person or company who was not a party to 
the contract and becomes a party (including an equity owner of a private 
investment company advised by the adviser) when the adviser is required 
to register.
    (3) Certain transfers of interests. Solely for purposes of 
paragraphs (c)(1) and (c)(2) of this section, a transfer of an equity 
ownership interest in a private investment company by gift or bequest, 
or pursuant to an agreement related to a legal separation or divorce, 
will not cause the transferee to ``become a party'' to the contract and 
will not cause section 205(a)(1) of the Act to apply to such transferee.
    (d) Definitions. For the purposes of this section:
    (1) The term qualified client means:
    (i) A natural person who, or a company that, immediately after 
entering into the contract has, under the management of the investment 
adviser, at least the applicable dollar amount specified in the most 
recent order;
    (ii) A natural person who, or a company that, the investment adviser 
entering into the contract (and any person acting on his behalf) 
reasonably believes, immediately prior to entering into the contract, 
either:
    (A) Has a net worth (together, in the case of a natural person, with 
assets held jointly with a spouse) of more than the applicable dollar 
amount specified in the most recent order. For purposes of calculating a 
natural person's net worth:
    (1) The person's primary residence must not be included as an asset;
    (2) Indebtedness secured by the person's primary residence, up to 
the estimated fair market value of the primary residence at the time the 
investment advisory contract is entered into may not be included as a 
liability (except that if the amount of such indebtedness outstanding at 
the time of calculation exceeds the amount outstanding 60 days before 
such time, other than as a result of the acquisition of the primary 
residence, the amount of such excess must be included as a liability); 
and
    (3) Indebtedness that is secured by the person's primary residence 
in excess of the estimated fair market value of the residence must be 
included as a liability; or
    (B) Is a qualified purchaser as defined in section 2(a)(51)(A) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(51)(A)) at the 
time the contract is entered into; or
    (iii) A natural person who immediately prior to entering into the 
contract is:
    (A) An executive officer, director, trustee, general partner, or 
person serving in a similar capacity, of the investment adviser; or
    (B) An employee of the investment adviser (other than an employee 
performing solely clerical, secretarial or administrative functions with 
regard

[[Page 591]]

to the investment adviser) who, in connection with his or her regular 
functions or duties, participates in the investment activities of such 
investment adviser, provided that such employee has been performing such 
functions and duties for or on behalf of the investment adviser, or 
substantially similar functions or duties for or on behalf of another 
company for at least 12 months.
    (2) The term company has the same meaning as in section 202(a)(5) of 
the Act (15 U.S.C. 80b-2(a)(5)), but does not include a company that is 
required to be registered under the Investment Company Act of 1940 but 
is not registered.
    (3) The term private investment company means a company that would 
be defined as an investment company under section 3(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-3(a)) but for the exception provided 
from that definition by section 3(c)(1) of such Act (15 U.S.C. 80a-
3(c)(1)).
    (4) The term executive officer means the president, any vice 
president in charge of a principal business unit, division or function 
(such as sales, administration or finance), any other officer who 
performs a policy-making function, or any other person who performs 
similar policy-making functions, for the investment adviser.
    (5) The term most recent order means the most recently issued 
Commission order in accordance with paragraph (e) of this section and as 
published in the Federal Register.
    (e) Inflation adjustments. Pursuant to section 205(e) of the Act, 
the dollar amounts referenced in paragraphs (d)(1)(i) and (d)(1)(ii)(A) 
of this section shall be adjusted, by order of the Commission, issued on 
or about May 1, 2026, and approximately every five years thereafter. The 
adjusted dollar amounts established in such orders shall be computed by:
    (1) Dividing the year-end value of the Personal Consumption 
Expenditures Chain-Type Price Index (or any successor index thereto), as 
published by the United States Department of Commerce, for the calendar 
year preceding the calendar year in which the order is being issued, by 
the year-end value of such index (or successor) for the calendar year 
1997;
    (2) For the dollar amount in paragraph (d)(1)(i) of this section, 
multiplying $750,000 times the quotient obtained in paragraph (e)(1) of 
this section and rounding the product to the nearest multiple of 
$100,000; and
    (3) For the dollar amount in paragraph (d)(1)(ii)(A) of this 
section, multiplying $1,500,000 times the quotient obtained in paragraph 
(e)(1) of this section and rounding the product to the nearest multiple 
of $100,000.

[63 FR 39027, July 21, 1998, as amended at 69 FR 72088, Dec. 10, 2004; 
77 FR 10368, Feb. 22, 2012; 86 FR 62475, Nov. 10, 2021



Sec.  275.206(3)-1  Exemption of investment advisers registered as 
broker-dealers in connection with the provision of certain investment
advisory services.

    (a) An investment adviser which is a broker or dealer registered 
pursuant to section 15 of the Securities Exchange Act of 1934 shall be 
exempt from section 206(3) in connection with any transaction in 
relation to which such broker or dealer is acting as an investment 
adviser solely (1) by means of publicly distributed written materials or 
publicly made oral statements; (2) by means of written materials or oral 
statements which do not purport to meet the objectives or needs of 
specific individuals or accounts; (3) through the issuance of 
statistical information containing no expressions of opinion as to the 
investment merits of a particular security; or (4) any combination of 
the foregoing services: Provided, however, That such materials and oral 
statements include a statement that if the purchaser of the advisory 
communication uses the services of the adviser in connection with a sale 
or purchase of a security which is a subject of such communication, the 
adviser may act as principal for its own account or as agent for another 
person.
    (b) For the purpose of this Rule, publicly distributed written 
materials are those which are distributed to 35 or more persons who pay 
for such materials, and publicly made oral statements are those made 
simultaneously to 35 or more persons who pay for access to such 
statements.


[[Page 592]]


    Note: The requirement that the investment adviser disclose that it 
may act as principal or agent for another person in the sale or purchase 
of a security that is the subject of investment advice does not relieve 
the investment adviser of any disclosure obligation which, depending 
upon the nature of the relationship between the investment adviser and 
the client, may be imposed by subparagraphs (1) or (2) of section 206 or 
the other provisions of the federal securities laws.

[40 FR 38159, Aug. 27, 1975]



Sec.  275.206(3)-2  Agency cross transactions for advisory clients.

    (a) An investment adviser, or a person registered as a broker-dealer 
under section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) 
and controlling, controlled by, or under common control with an 
investment adviser, shall be deemed in compliance with the provisions of 
sections 206(3) of the Act (15 U.S.C. 80b-6(3)) in effecting an agency 
cross transaction for an advisory client, if:
    (1) The advisory client has executed a written consent prospectively 
authorizing the investment adviser, or any other person relying on this 
rule, to effect agency cross transactions for such advisory client, 
provided that such written consent is obtained after full written 
disclosure that with respect to agency cross transactions the investment 
adviser or such other person will act as broker for, receive commissions 
from, and have a potentially conflicting division of loyalties and 
responsibilities regarding, both parties to such transactions;
    (2) The investment adviser, or any other person relying on this 
rule, sends to each such client a written confirmation at or before the 
completion of each such transaction, which confirmation includes (i) a 
statement of the nature of such transaction, (ii) the date such 
transaction took place, (iii) an offer to furnish upon request, the time 
when such transaction took place, and (iv) the source and amount of any 
other remuneration received or to be received by the investment adviser 
and any other person relying on this rule in connection with the 
transaction, Provided, however, That if, in the case of a purchase, 
neither the investment adviser nor any other person relying on this rule 
was participating in a distribution, or in the case of a sale, neither 
the investment adviser nor any other person relying on this rule was 
participating in a tender offer, the written confirmation may state 
whether any other remuneration has been or will be received and that the 
source and amount of such other remuneration will be furnished upon 
written request of such customer;
    (3) The investment adviser, or any other person relying in this 
rule, sends to each such client, at least annually, and with or as part 
of any written statement or summary of such account from the investment 
adviser or such other person, a written disclosure statement identifying 
the total number of such transactions during the period since the date 
of the last such statement or summary, and the total amount of all 
commissions or other remuneration received or to be received by the 
investment adviser or any other person relying on this rule in 
connection with such transactions during such period;
    (4) Each written disclosure statement and confirmation required by 
this rule includes a conspicuous statement that the written consent 
referred to in paragraph (a)(1) of this section may be revoked at any 
time by written notice to the investment adviser, or to any other person 
relying on this rule, from the advisory client; and
    (5) No such transaction is effected in which the same investment 
adviser or an investment adviser and any person controlling, controlled 
by or under common control with such investment adviser recommended the 
transaction to both any seller and any purchaser.
    (b) For purposes of this rule the term agency cross transaction for 
an advisory client shall mean a transaction in which a person acts as an 
investment adviser in relation to a transaction in which such investment 
adviser, or any person controlling, controlled by, or under common 
control with such investment adviser, acts as broker for both such 
advisory client and for another person on the other side of the 
transaction.
    (c) This rule shall not be construed as relieving in any way the 
investment adviser or another person relying on

[[Page 593]]

this rule from acting in the best interests of the advisory client, 
including fulfilling the duty with respect to the best price and 
execution for the particular transaction for the advisory client; nor 
shall it relieve such person or persons from any disclosure obligation 
which may be imposed by subparagraphs (1) or (2) of section 206 of the 
Act or by other applicable provisions of the federal securities laws.

[42 FR 29301 June 8, 1977, as amended at 48 FR 41379, Sept. 15, 1983; 62 
FR 28135, May 22, 1997]



Sec.  275.206(4)-1  Investment adviser marketing.

    As a means reasonably designed to prevent fraudulent, deceptive, or 
manipulative acts, practices, or courses of business within the meaning 
of section 206(4) of the Act (15 U.S.C. 80b-6(4)), it is unlawful for 
any investment adviser registered or required to be registered under 
section 203 of the Act (15 U.S.C. 80b-3), directly or indirectly, to 
disseminate any advertisement that violates any of paragraphs (a) 
through (d) of this section.
    (a) General prohibitions. An advertisement may not:
    (1) Include any untrue statement of a material fact, or omit to 
state a material fact necessary in order to make the statement made, in 
the light of the circumstances under which it was made, not misleading;
    (2) Include a material statement of fact that the adviser does not 
have a reasonable basis for believing it will be able to substantiate 
upon demand by the Commission;
    (3) Include information that would reasonably be likely to cause an 
untrue or misleading implication or inference to be drawn concerning a 
material fact relating to the investment adviser;
    (4) Discuss any potential benefits to clients or investors connected 
with or resulting from the investment adviser's services or methods of 
operation without providing fair and balanced treatment of any material 
risks or material limitations associated with the potential benefits;
    (5) Include a reference to specific investment advice provided by 
the investment adviser where such investment advice is not presented in 
a manner that is fair and balanced;
    (6) Include or exclude performance results, or present performance 
time periods, in a manner that is not fair and balanced; or
    (7) Otherwise be materially misleading.
    (b) Testimonials and endorsements. An advertisement may not include 
any testimonial or endorsement, and an adviser may not provide 
compensation, directly or indirectly, for a testimonial or endorsement, 
unless the investment adviser complies with the conditions in paragraphs 
(b)(1) through (3) of this section, subject to the exemptions in 
paragraph (b)(4) of this section.
    (1) Required disclosures. The investment adviser discloses, or 
reasonably believes that the person giving the testimonial or 
endorsement discloses, the following at the time the testimonial or 
endorsement is disseminated:
    (i) Clearly and prominently:
    (A) That the testimonial was given by a current client or investor, 
and the endorsement was given by a person other than a current client or 
investor, as applicable;
    (B) That cash or non-cash compensation was provided for the 
testimonial or endorsement, if applicable; and
    (C) A brief statement of any material conflicts of interest on the 
part of the person giving the testimonial or endorsement resulting from 
the investment adviser's relationship with such person;
    (ii) The material terms of any compensation arrangement, including a 
description of the compensation provided or to be provided, directly or 
indirectly, to the person for the testimonial or endorsement; and
    (iii) A description of any material conflicts of interest on the 
part of the person giving the testimonial or endorsement resulting from 
the investment adviser's relationship with such person and/or any 
compensation arrangement.
    (2) Adviser oversight and compliance. The investment adviser must 
have:
    (i) A reasonable basis for believing that the testimonial or 
endorsement complies with the requirements of this section; and

[[Page 594]]

    (ii) A written agreement with any person giving a testimonial or 
endorsement that describes the scope of the agreed-upon activities and 
the terms of compensation for those activities.
    (3) Disqualification. An investment adviser may not compensate a 
person, directly or indirectly, for a testimonial or endorsement if the 
adviser knows, or in the exercise of reasonable care should know, that 
the person giving the testimonial or endorsement is an ineligible person 
at the time the testimonial or endorsement is disseminated. This 
paragraph shall not disqualify any person for any matter(s) that 
occurred prior to May 4, 2021, if such matter(s) would not have 
disqualified such person under Sec.  275.206(4)-3(a)(1)(ii) of this 
chapter, as in effect prior to May 4, 2021.
    (4) Exemptions. (i) A testimonial or endorsement disseminated for no 
compensation or de minimis compensation is not required to comply with 
paragraphs (b)(2)(ii) and (3) of this section;
    (ii) A testimonial or endorsement by the investment adviser's 
partners, officers, directors, or employees, or a person that controls, 
is controlled by, or is under common control with the investment 
adviser, or is a partner, officer, director or employee of such a person 
is not required to comply with paragraphs (b)(1) and (2)(ii) of this 
section, provided that the affiliation between the investment adviser 
and such person is readily apparent to or is disclosed to the client or 
investor at the time the testimonial or endorsement is disseminated and 
the investment adviser documents such person's status at the time the 
testimonial or endorsement is disseminated;
    (iii) A testimonial or endorsement by a broker or dealer registered 
with the Commission under section 15(b) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78o(a)) is not required to comply with:
    (A) Paragraph (b)(1) of this section if the testimonial or 
endorsement is a recommendation subject to Sec.  240.15l-1 of this 
chapter (Regulation Best Interest) under that Act;
    (B) Paragraphs (b)(1)(ii) and (iii) of this section if the 
testimonial or endorsement is provided to a person that is not a retail 
customer (as that term is defined in Sec.  240.15l-1 of this chapter 
(Regulation Best Interest) under the Securities Exchange Act of 1934 (15 
U.S.C. 78o(a)); and
    (C) Paragraph (b)(3) of this section if the broker or dealer is not 
subject to statutory disqualification, as defined under section 3(a)(39) 
of that Act; and
    (iv) A testimonial or endorsement by a person that is covered by 
rule 506(d) of Regulation D under the Securities Act of 1933 (Sec.  
230.506(d) of this chapter) with respect to a rule 506 securities 
offering under the Securities Act of 1933 (Sec.  230.506 of this 
chapter) and whose involvement would not disqualify the offering under 
that rule is not required to comply with paragraph (b)(3) of this 
section.
    (c) Third-party ratings. An advertisement may not include any third-
party rating, unless the investment adviser:
    (1) Has a reasonable basis for believing that any questionnaire or 
survey used in the preparation of the third-party rating is structured 
to make it equally easy for a participant to provide favorable and 
unfavorable responses, and is not designed or prepared to produce any 
predetermined result; and
    (2) Clearly and prominently discloses, or the investment adviser 
reasonably believes that the third-party rating clearly and prominently 
discloses:
    (i) The date on which the rating was given and the period of time 
upon which the rating was based;
    (ii) The identity of the third party that created and tabulated the 
rating; and
    (iii) If applicable, that compensation has been provided directly or 
indirectly by the adviser in connection with obtaining or using the 
third-party rating.
    (d) Performance. An investment adviser may not include in any 
advertisement:
    (1) Any presentation of gross performance, unless the advertisement 
also presents net performance:
    (i) With at least equal prominence to, and in a format designed to 
facilitate comparison with, the gross performance; and
    (ii) Calculated over the same time period, and using the same type 
of return and methodology, as the gross performance.

[[Page 595]]

    (2) Any performance results, of any portfolio or any composite 
aggregation of related portfolios, in each case other than any private 
fund, unless the advertisement includes performance results of the same 
portfolio or composite aggregation for one-, five-, and ten-year 
periods, each presented with equal prominence and ending on a date that 
is no less recent than the most recent calendar year-end; except that if 
the relevant portfolio did not exist for a particular prescribed period, 
then the life of the portfolio must be substituted for that period.
    (3) Any statement, express or implied, that the calculation or 
presentation of performance results in the advertisement has been 
approved or reviewed by the Commission.
    (4) Any related performance, unless it includes all related 
portfolios; provided that related performance may exclude any related 
portfolios if:
    (i) The advertised performance results are not materially higher 
than if all related portfolios had been included; and
    (ii) The exclusion of any related portfolio does not alter the 
presentation of any applicable time periods prescribed by paragraph 
(d)(2) of this section.
    (5) Any extracted performance, unless the advertisement provides, or 
offers to provide promptly, the performance results of the total 
portfolio from which the performance was extracted.
    (6) Any hypothetical performance unless the investment adviser:
    (i) Adopts and implements policies and procedures reasonably 
designed to ensure that the hypothetical performance is relevant to the 
likely financial situation and investment objectives of the intended 
audience of the advertisement;
    (ii) Provides sufficient information to enable the intended audience 
to understand the criteria used and assumptions made in calculating such 
hypothetical performance; and
    (iii) Provides (or, if the intended audience is an investor in a 
private fund, provides, or offers to provide promptly) sufficient 
information to enable the intended audience to understand the risks and 
limitations of using such hypothetical performance in making investment 
decisions; Provided that the investment adviser need not comply with the 
other conditions on performance in paragraphs (d)(2), (4), and (5) of 
this section.
    (7) Any predecessor performance unless:
    (i) The person or persons who were primarily responsible for 
achieving the prior performance results manage accounts at the 
advertising adviser;
    (ii) The accounts managed at the predecessor investment adviser are 
sufficiently similar to the accounts managed at the advertising 
investment adviser that the performance results would provide relevant 
information to clients or investors;
    (iii) All accounts that were managed in a substantially similar 
manner are advertised unless the exclusion of any such account would not 
result in materially higher performance and the exclusion of any account 
does not alter the presentation of any applicable time periods 
prescribed in paragraph (d)(2) of this section; and
    (iv) The advertisement clearly and prominently includes all relevant 
disclosures, including that the performance results were from accounts 
managed at another entity.
    (e) Definitions. For purposes of this section:
    (1) Advertisement means:
    (i) Any direct or indirect communication an investment adviser makes 
to more than one person, or to one or more persons if the communication 
includes hypothetical performance, that offers the investment adviser's 
investment advisory services with regard to securities to prospective 
clients or investors in a private fund advised by the investment adviser 
or offers new investment advisory services with regard to securities to 
current clients or investors in a private fund advised by the investment 
adviser, but does not include:
    (A) Extemporaneous, live, oral communications;
    (B) Information contained in a statutory or regulatory notice, 
filing, or other required communication, provided that such information 
is reasonably designed to satisfy the requirements of such notice, 
filing, or other required communication; or

[[Page 596]]

    (C) A communication that includes hypothetical performance that is 
provided:
    (1) In response to an unsolicited request for such information from 
a prospective or current client or investor in a private fund advised by 
the investment adviser; or
    (2) To a prospective or current investor in a private fund advised 
by the investment adviser in a one-on-one communication; and
    (ii) Any endorsement or testimonial for which an investment adviser 
provides compensation, directly or indirectly, but does not include any 
information contained in a statutory or regulatory notice, filing, or 
other required communication, provided that such information is 
reasonably designed to satisfy the requirements of such notice, filing, 
or other required communication.
    (2) De minimis compensation means compensation paid to a person for 
providing a testimonial or endorsement of a total of $1,000 or less (or 
the equivalent value in non-cash compensation) during the preceding 12 
months.
    (3) A disqualifying Commission action means a Commission opinion or 
order barring, suspending, or prohibiting the person from acting in any 
capacity under the Federal securities laws.
    (4) A disqualifying event is any of the following events that 
occurred within ten years prior to the person disseminating an 
endorsement or testimonial:
    (i) A conviction by a court of competent jurisdiction within the 
United States of any felony or misdemeanor involving conduct described 
in paragraph (2)(A) through (D) of section 203(e) of the Act;
    (ii) A conviction by a court of competent jurisdiction within the 
United States of engaging in, any of the conduct specified in paragraphs 
(1), (5), or (6) of section 203(e) of the Act;
    (iii) The entry of any final order by any entity described in 
paragraph (9) of section 203(e) of the Act, or by the U.S. Commodity 
Futures Trading Commission or a self-regulatory organization (as defined 
in the Form ADV Glossary of Terms)), of the type described in paragraph 
(9) of section 203(e) of the Act;
    (iv) The entry of an order, judgment or decree described in 
paragraph (4) of section 203(e) of the Act, and still in effect, by any 
court of competent jurisdiction within the United States; and
    (v) A Commission order that a person cease and desist from 
committing or causing a violation or future violation of:
    (A) Any scienter-based anti-fraud provision of the Federal 
securities laws, including without limitation section 17(a)(1) of the 
Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and Sec.  240.10b-5 
of this chapter, section 15(c)(1) of the Securities Exchange Act of 1934 
(15 U.S.C. 78o(c)(1)), and section 206(1) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation 
thereunder; or
    (B) Section 5 of the Securities Act of 1933 (15 U.S.C. 77e);
    (vi) A disqualifying event does not include an event described in 
paragraphs (e)(4)(i) through (v) of this section with respect to a 
person that is also subject to:
    (A) An order pursuant to section 9(c) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-9) with respect to such event; or
    (B) A Commission opinion or order with respect to such event that is 
not a disqualifying Commission action; provided that for each applicable 
type of order or opinion described in paragraphs (e)(4)(vi)(A) and (B) 
of this section:
    (1) The person is in compliance with the terms of the order or 
opinion, including, but not limited to, the payment of disgorgement, 
prejudgment interest, civil or administrative penalties, and fines; and
    (2) For a period of ten years following the date of each order or 
opinion, the advertisement containing the testimonial or endorsement 
must include a statement that the person providing the testimonial or 
endorsement is subject to a Commission order or opinion regarding one or 
more disciplinary action(s), and include the order or opinion or a link 
to the order or opinion on the Commission's website.
    (5) Endorsement means any statement by a person other than a current 
client

[[Page 597]]

or investor in a private fund advised by the investment adviser that:
    (i) Indicates approval, support, or recommendation of the investment 
adviser or its supervised persons or describes that person's experience 
with the investment adviser or its supervised persons;
    (ii) Directly or indirectly solicits any current or prospective 
client or investor to be a client of, or an investor in a private fund 
advised by, the investment adviser; or
    (iii) Refers any current or prospective client or investor to be a 
client of, or an investor in a private fund advised by, the investment 
adviser.
    (6) Extracted performance means the performance results of a subset 
of investments extracted from a portfolio.
    (7) Gross performance means the performance results of a portfolio 
(or portions of a portfolio that are included in extracted performance, 
if applicable) before the deduction of all fees and expenses that a 
client or investor has paid or would have paid in connection with the 
investment adviser's investment advisory services to the relevant 
portfolio.
    (8) Hypothetical performance means performance results that were not 
actually achieved by any portfolio of the investment adviser.
    (i) Hypothetical performance includes, but is not limited to;
    (A) Performance derived from model portfolios;
    (B) Performance that is backtested by the application of a strategy 
to data from prior time periods when the strategy was not actually used 
during those time periods; and
    (C) Targeted or projected performance returns with respect to any 
portfolio or to the investment advisory services with regard to 
securities offered in the advertisement, however:
    (ii) Hypothetical performance does not include:
    (A) An interactive analysis tool where a client or investor, or 
prospective client, or investor, uses the tool to produce simulations 
and statistical analyses that present the likelihood of various 
investment outcomes if certain investments are made or certain 
investment strategies or styles are undertaken, thereby serving as an 
additional resource to investors in the evaluation of the potential 
risks and returns of investment choices; provided that the investment 
adviser:
    (1) Provides a description of the criteria and methodology used, 
including the investment analysis tool's limitations and key 
assumptions;
    (2) Explains that the results may vary with each use and over time;
    (3) If applicable, describes the universe of investments considered 
in the analysis, explains how the tool determines which investments to 
select, discloses if the tool favors certain investments and, if so, 
explains the reason for the selectivity, and states that other 
investments not considered may have characteristics similar or superior 
to those being analyzed; and
    (4) Discloses that the tool generates outcomes that are hypothetical 
in nature; or
    (B) Predecessor performance that is displayed in compliance with 
paragraph (d)(7) of this section.
    (9) Ineligible person means a person who is subject to a 
disqualifying Commission action or is subject to any disqualifying 
event, and the following persons with respect to the ineligible person:
    (i) Any employee, officer, or director of the ineligible person and 
any other individuals with similar status or functions within the scope 
of association with the ineligible person;
    (ii) If the ineligible person is a partnership, all general 
partners; and
    (iii) If the ineligible person is a limited liability company 
managed by elected managers, all elected managers.
    (10) Net performance means the performance results of a portfolio 
(or portions of a portfolio that are included in extracted performance, 
if applicable) after the deduction of all fees and expenses that a 
client or investor has paid or would have paid in connection with the 
investment adviser's investment advisory services to the relevant 
portfolio, including, if applicable, advisory fees, advisory fees paid 
to underlying investment vehicles, and payments by the investment 
adviser for which the client or investor reimburses the investment 
adviser. For purposes of this rule, net performance:

[[Page 598]]

    (i) May reflect the exclusion of custodian fees paid to a bank or 
other third-party organization for safekeeping funds and securities; 
and/or
    (ii) If using a model fee, must reflect one of the following:
    (A) The deduction of a model fee when doing so would result in 
performance figures that are no higher than if the actual fee had been 
deducted; or
    (B) The deduction of a model fee that is equal to the highest fee 
charged to the intended audience to whom the advertisement is 
disseminated.
    (11) Portfolio means a group of investments managed by the 
investment adviser. A portfolio may be an account or a private fund and 
includes, but is not limited to, a portfolio for the account of the 
investment adviser or its advisory affiliate (as defined in the Form ADV 
Glossary of Terms).
    (12) Predecessor performance means investment performance achieved 
by a group of investments consisting of an account or a private fund 
that was not advised at all times during the period shown by the 
investment adviser advertising the performance.
    (13) Private fund has the same meaning as in section 202(a)(29) of 
the Act.
    (14) Related performance means the performance results of one or 
more related portfolios, either on a portfolio-by-portfolio basis or as 
a composite aggregation of all portfolios falling within stated 
criteria.
    (15) Related portfolio means a portfolio with substantially similar 
investment policies, objectives, and strategies as those of the services 
being offered in the advertisement.
    (16) Supervised person has the same meaning as in section 202(a)(25) 
of the Act.
    (17) Testimonial means any statement by a current client or investor 
in a private fund advised by the investment adviser:
    (i) About the client or investor's experience with the investment 
adviser or its supervised persons;
    (ii) That directly or indirectly solicits any current or prospective 
client or investor to be a client of, or an investor in a private fund 
advised by, the investment adviser; or
    (iii) That refers any current or prospective client or investor to 
be a client of, or an investor in a private fund advised by, the 
investment adviser.
    (18) Third-party rating means a rating or ranking of an investment 
adviser provided by a person who is not a related person (as defined in 
the Form ADV Glossary of Terms), and such person provides such ratings 
or rankings in the ordinary course of its business.

[86 FR 13024, Mar. 5, 2021, as amended at 87 FR 22447, Apr. 15, 2022]



Sec.  275.206(4)-2  Custody of funds or securities of clients by
investment advisers.

    (a) Safekeeping required. If you are an investment adviser 
registered or required to be registered under section 203 of the Act (15 
U.S.C. 80b-3), it is a fraudulent, deceptive, or manipulative act, 
practice or course of business within the meaning of section 206(4) of 
the Act (15 U.S.C. 80b-6(4)) for you to have custody of client funds or 
securities unless:
    (1) Qualified custodian. A qualified custodian maintains those funds 
and securities:
    (i) In a separate account for each client under that client's name; 
or
    (ii) In accounts that contain only your clients' funds and 
securities, under your name as agent or trustee for the clients.
    (2) Notice to clients. If you open an account with a qualified 
custodian on your client's behalf, either under the client's name or 
under your name as agent, you notify the client in writing of the 
qualified custodian's name, address, and the manner in which the funds 
or securities are maintained, promptly when the account is opened and 
following any changes to this information. If you send account 
statements to a client to which you are required to provide this notice, 
include in the notification provided to that client and in any 
subsequent account statement you send that client a statement urging the 
client to compare the account statements from the custodian with those 
from the adviser.
    (3) Account statements to clients. You have a reasonable basis, 
after due inquiry, for believing that the qualified custodian sends an 
account statement,

[[Page 599]]

at least quarterly, to each of your clients for which it maintains funds 
or securities, identifying the amount of funds and of each security in 
the account at the end of the period and setting forth all transactions 
in the account during that period.
    (4) Independent verification. The client funds and securities of 
which you have custody are verified by actual examination at least once 
during each calendar year, except as provided below, by an independent 
public accountant, pursuant to a written agreement between you and the 
accountant, at a time that is chosen by the accountant without prior 
notice or announcement to you and that is irregular from year to year. 
The written agreement must provide for the first examination to occur 
within six months of becoming subject to this paragraph, except that, if 
you maintain client funds or securities pursuant to this section as a 
qualified custodian, the agreement must provide for the first 
examination to occur no later than six months after obtaining the 
internal control report. The written agreement must require the 
accountant to:
    (i) File a certificate on Form ADV-E (17 CFR 279.8) with the 
Commission within 120 days of the time chosen by the accountant in 
paragraph (a)(4) of this section, stating that it has examined the funds 
and securities and describing the nature and extent of the examination;
    (ii) Upon finding any material discrepancies during the course of 
the examination, notify the Commission within one business day of the 
finding, by means of a facsimile transmission or electronic mail, 
followed by first class mail, directed to the attention of the Director 
of the Office of Compliance Inspections and Examinations; and
    (iii) Upon resignation or dismissal from, or other termination of, 
the engagement, or upon removing itself or being removed from 
consideration for being reappointed, file within four business days Form 
ADV-E accompanied by a statement that includes:
    (A) The date of such resignation, dismissal, removal, or other 
termination, and the name, address, and contact information of the 
accountant; and
    (B) An explanation of any problems relating to examination scope or 
procedure that contributed to such resignation, dismissal, removal, or 
other termination.
    (5) Special rule for limited partnerships and limited liability 
companies. If you or a related person is a general partner of a limited 
partnership (or managing member of a limited liability company, or hold 
a comparable position for another type of pooled investment vehicle), 
the account statements required under paragraph (a)(3) of this section 
must be sent to each limited partner (or member or other beneficial 
owner).
    (6) Investment advisers acting as qualified custodians. If you 
maintain, or if you have custody because a related person maintains, 
client funds or securities pursuant to this section as a qualified 
custodian in connection with advisory services you provide to clients:
    (i) The independent public accountant you retain to perform the 
independent verification required by paragraph (a)(4) of this section 
must be registered with, and subject to regular inspection as of the 
commencement of the professional engagement period, and as of each 
calendar year-end, by, the Public Company Accounting Oversight Board in 
accordance with its rules; and
    (ii) You must obtain, or receive from your related person, within 
six months of becoming subject to this paragraph and thereafter no less 
frequently than once each calendar year a written internal control 
report prepared by an independent public accountant:
    (A) The internal control report must include an opinion of an 
independent public accountant as to whether controls have been placed in 
operation as of a specific date, and are suitably designed and are 
operating effectively to meet control objectives relating to custodial 
services, including the safeguarding of funds and securities held by 
either you or a related person on behalf of your advisory clients, 
during the year;
    (B) The independent public accountant must verify that the funds and 
securities are reconciled to a custodian other than you or your related 
person; and

[[Page 600]]

    (C) The independent public accountant must be registered with, and 
subject to regular inspection as of the commencement of the professional 
engagement period, and as of each calendar year-end, by, the Public 
Company Accounting Oversight Board in accordance with its rules.
    (7) Independent representatives. A client may designate an 
independent representative to receive, on his behalf, notices and 
account statements as required under paragraphs (a)(2) and (a)(3) of 
this section.
    (b) Exceptions. (1) Shares of mutual funds. With respect to shares 
of an open-end company as defined in section 5(a)(1) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-5(a)(1)) (``mutual fund''), you may 
use the mutual fund's transfer agent in lieu of a qualified custodian 
for purposes of complying with paragraph (a) of this section.
    (2) Certain privately offered securities. (i) You are not required 
to comply with paragraph (a)(1) of this section with respect to 
securities that are:
    (A) Acquired from the issuer in a transaction or chain of 
transactions not involving any public offering;
    (B) Uncertificated, and ownership thereof is recorded only on the 
books of the issuer or its transfer agent in the name of the client; and
    (C) Transferable only with prior consent of the issuer or holders of 
the outstanding securities of the issuer.
    (ii) Notwithstanding paragraph (b)(2)(i) of this section, the 
provisions of this paragraph (b)(2) are available with respect to 
securities held for the account of a limited partnership (or a limited 
liability company, or other type of pooled investment vehicle) only if 
the limited partnership is audited, and the audited financial statements 
are distributed, as described in paragraph (b)(4) of this section.
    (3) Fee deduction. Notwithstanding paragraph (a)(4) of this section, 
you are not required to obtain an independent verification of client 
funds and securities maintained by a qualified custodian if:
    (i) you have custody of the funds and securities solely as a 
consequence of your authority to make withdrawals from client accounts 
to pay your advisory fee; and
    (ii) if the qualified custodian is a related person, you can rely on 
paragraph (b)(6) of this section.
    (4) Limited partnerships subject to annual audit. You are not 
required to comply with paragraphs (a)(2) and (a)(3) of this section and 
you shall be deemed to have complied with paragraph (a)(4) of this 
section with respect to the account of a limited partnership (or limited 
liability company, or another type of pooled investment vehicle) that is 
subject to audit (as defined in rule 1-02(d) of Regulation S-X (17 CFR 
210.1-02(d))):
    (i) At least annually and distributes its audited financial 
statements prepared in accordance with generally accepted accounting 
principles to all limited partners (or members or other beneficial 
owners) within 120 days of the end of its fiscal year;
    (ii) By an independent public accountant that is registered with, 
and subject to regular inspection as of the commencement of the 
professional engagement period, and as of each calendar year-end, by, 
the Public Company Accounting Oversight Board in accordance with its 
rules; and
    (iii) Upon liquidation and distributes its audited financial 
statements prepared in accordance with generally accepted accounting 
principles to all limited partners (or members or other beneficial 
owners) promptly after the completion of such audit.
    (5) Registered investment companies. You are not required to comply 
with this section (17 CFR 275.206(4)-2) with respect to the account of 
an investment company registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 to 80a-64).
    (6) Certain Related Persons. Notwithstanding paragraph (a)(4) of 
this section, you are not required to obtain an independent verification 
of client funds and securities if:
    (i) you have custody under this rule solely because a related person 
holds, directly or indirectly, client funds or securities, or has any 
authority to obtain possession of them, in connection with advisory 
services you provide to clients; and
    (ii) your related person is operationally independent of you.

[[Page 601]]

    (c) Delivery to Related Person. Sending an account statement under 
paragraph (a)(5) of this section or distributing audited financial 
statements under paragraph (b)(4) of this section shall not satisfy the 
requirements of this section if such account statements or financial 
statements are sent solely to limited partners (or members or other 
beneficial owners) that themselves are limited partnerships (or limited 
liability companies, or another type of pooled investment vehicle) and 
are your related persons.
    (d) Definitions. For the purposes of this section:
    (1) Control means the power, directly or indirectly, to direct the 
management or policies of a person, whether through ownership of 
securities, by contract, or otherwise. Control includes:
    (i) Each of your firm's officers, partners, or directors exercising 
executive responsibility (or persons having similar status or functions) 
is presumed to control your firm;
    (ii) A person is presumed to control a corporation if the person:
    (A) Directly or indirectly has the right to vote 25 percent or more 
of a class of the corporation's voting securities; or
    (B) Has the power to sell or direct the sale of 25 percent or more 
of a class of the corporation's voting securities;
    (iii) A person is presumed to control a partnership if the person 
has the right to receive upon dissolution, or has contributed, 25 
percent or more of the capital of the partnership;
    (iv) A person is presumed to control a limited liability company if 
the person:
    (A) Directly or indirectly has the right to vote 25 percent or more 
of a class of the interests of the limited liability company;
    (B) Has the right to receive upon dissolution, or has contributed, 
25 percent or more of the capital of the limited liability company; or
    (C) Is an elected manager of the limited liability company; or
    (v) A person is presumed to control a trust if the person is a 
trustee or managing agent of the trust.
    (2) Custody means holding, directly or indirectly, client funds or 
securities, or having any authority to obtain possession of them. You 
have custody if a related person holds, directly or indirectly, client 
funds or securities, or has any authority to obtain possession of them, 
in connection with advisory services you provide to clients. Custody 
includes:
    (i) Possession of client funds or securities (but not of checks 
drawn by clients and made payable to third parties) unless you receive 
them inadvertently and you return them to the sender promptly but in any 
case within three business days of receiving them;
    (ii) Any arrangement (including a general power of attorney) under 
which you are authorized or permitted to withdraw client funds or 
securities maintained with a custodian upon your instruction to the 
custodian; and
    (iii) Any capacity (such as general partner of a limited 
partnership, managing member of a limited liability company or a 
comparable position for another type of pooled investment vehicle, or 
trustee of a trust) that gives you or your supervised person legal 
ownership of or access to client funds or securities.
    (3) Independent public accountant means a public accountant that 
meets the standards of independence described in rule 2-01(b) and (c) of 
Regulation S-X (17 CFR 210.2-01(b) and (c)).
    (4) Independent representative means a person that:
    (i) Acts as agent for an advisory client, including in the case of a 
pooled investment vehicle, for limited partners of a limited partnership 
(or members of a limited liability company, or other beneficial owners 
of another type of pooled investment vehicle) and by law or contract is 
obliged to act in the best interest of the advisory client or the 
limited partners (or members, or other beneficial owners);
    (ii) Does not control, is not controlled by, and is not under common 
control with you; and
    (iii) Does not have, and has not had within the past two years, a 
material business relationship with you.
    (5) Operationally independent: for purposes of paragraph (b)(6) of 
this section, a related person is presumed not to be operationally 
independent unless each of the following conditions is met

[[Page 602]]

and no other circumstances can reasonably be expected to compromise the 
operational independence of the related person: (i) Client assets in the 
custody of the related person are not subject to claims of the adviser's 
creditors; (ii) advisory personnel do not have custody or possession of, 
or direct or indirect access to client assets of which the related 
person has custody, or the power to control the disposition of such 
client assets to third parties for the benefit of the adviser or its 
related persons, or otherwise have the opportunity to misappropriate 
such client assets; (iii) advisory personnel and personnel of the 
related person who have access to advisory client assets are not under 
common supervision; and (iv) advisory personnel do not hold any position 
with the related person or share premises with the related person.
    (6) Qualified custodian means:
    (i) A bank as defined in section 202(a)(2) of the Advisers Act (15 
U.S.C. 80b-2(a)(2)) or a savings association as defined in section 
3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)) that 
has deposits insured by the Federal Deposit Insurance Corporation under 
the Federal Deposit Insurance Act (12 U.S.C. 1811);
    (ii) A broker-dealer registered under section 15(b)(1) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(1)), holding the 
client assets in customer accounts;
    (iii) A futures commission merchant registered under section 4f(a) 
of the Commodity Exchange Act (7 U.S.C. 6f(a)), holding the client 
assets in customer accounts, but only with respect to clients' funds and 
security futures, or other securities incidental to transactions in 
contracts for the purchase or sale of a commodity for future delivery 
and options thereon; and
    (iv) A foreign financial institution that customarily holds 
financial assets for its customers, provided that the foreign financial 
institution keeps the advisory clients' assets in customer accounts 
segregated from its proprietary assets.
    (7) Related person means any person, directly or indirectly, 
controlling or controlled by you, and any person that is under common 
control with you.

[75 FR 1484, Jan. 11, 2010]



Sec. Sec.  275.206(4)-(3)--275.206(4)-4  [Reserved]



Sec.  275.206(4)-5  Political contributions by certain investment advisers.

    (a) Prohibitions. As a means reasonably designed to prevent 
fraudulent, deceptive or manipulative acts, practices, or courses of 
business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-
6(4)), it shall be unlawful:
    (1) For any investment adviser registered (or required to be 
registered) with the Commission, or unregistered in reliance on the 
exemption available under section 203(b)(3) of the Advisers Act (15 
U.S.C. 80b-3(b)(3)), or that is an exempt reporting adviser, as defined 
in section 275.204-4(a), to provide investment advisory services for 
compensation to a government entity within two years after a 
contribution to an official of the government entity is made by the 
investment adviser or any covered associate of the investment adviser 
(including a person who becomes a covered associate within two years 
after the contribution is made); and
    (2) For any investment adviser registered (or required to be 
registered) with the Commission, or unregistered in reliance on the 
exemption available under section 203(b)(3) of the Advisers Act (15 
U.S.C. 80b-3(b)(3)), or that is an exempt reporting adviser, or any of 
the investment adviser's covered associates:
    (i) To provide or agree to provide, directly or indirectly, payment 
to any person to solicit a government entity for investment advisory 
services on behalf of such investment adviser unless such person is:
    (A) A regulated person; or
    (B) An executive officer, general partner, managing member (or, in 
each case, a person with a similar status or function), or employee of 
the investment adviser; and
    (ii) To coordinate, or to solicit any person or political action 
committee to make, any:
    (A) Contribution to an official of a government entity to which the 
investment adviser is providing or seeking to provide investment 
advisory services; or
    (B) Payment to a political party of a State or locality where the 
investment

[[Page 603]]

adviser is providing or seeking to provide investment advisory services 
to a government entity.
    (b) Exceptions--(1) De minimis exception. Paragraph (a)(1) of this 
section does not apply to contributions made by a covered associate, if 
a natural person, to officials for whom the covered associate was 
entitled to vote at the time of the contributions and which in the 
aggregate do not exceed $350 to any one official, per election, or to 
officials for whom the covered associate was not entitled to vote at the 
time of the contributions and which in the aggregate do not exceed $150 
to any one official, per election.
    (2) Exception for certain new covered associates. The prohibitions 
of paragraph (a)(1) of this section shall not apply to an investment 
adviser as a result of a contribution made by a natural person more than 
six months prior to becoming a covered associate of the investment 
adviser unless such person, after becoming a covered associate, solicits 
clients on behalf of the investment adviser.
    (3) Exception for certain returned contributions. (i) An investment 
adviser that is prohibited from providing investment advisory services 
for compensation pursuant to paragraph (a)(1) of this section as a 
result of a contribution made by a covered associate of the investment 
adviser is excepted from such prohibition, subject to paragraphs 
(b)(3)(ii) and (b)(3)(iii) of this section, upon satisfaction of the 
following requirements:
    (A) The investment adviser must have discovered the contribution 
which resulted in the prohibition within four months of the date of such 
contribution;
    (B) Such contribution must not have exceeded $350; and
    (C) The contributor must obtain a return of the contribution within 
60 calendar days of the date of discovery of such contribution by the 
investment adviser.
    (ii) In any calendar year, an investment adviser that has reported 
on its annual updating amendment to Form ADV (17 CFR 279.1) that it has 
more than 50 employees is entitled to no more than three exceptions 
pursuant to paragraph (b)(3)(i) of this section, and an investment 
adviser that has reported on its annual updating amendment to Form ADV 
that it has 50 or fewer employees is entitled to no more than two 
exceptions pursuant to paragraph (b)(3)(i) of this section.
    (iii) An investment adviser may not rely on the exception provided 
in paragraph (b)(3)(i) of this section more than once with respect to 
contributions by the same covered associate of the investment adviser 
regardless of the time period.
    (c) Prohibitions as applied to covered investment pools. For 
purposes of this section, an investment adviser to a covered investment 
pool in which a government entity invests or is solicited to invest 
shall be treated as though that investment adviser were providing or 
seeking to provide investment advisory services directly to the 
government entity.
    (d) Further prohibition. As a means reasonably designed to prevent 
fraudulent, deceptive or manipulative acts, practices, or courses of 
business within the meaning of section 206(4) of Advisers Act (15 U.S.C. 
80b-6(4)), it shall be unlawful for any investment adviser registered 
(or required to be registered) with the Commission, or unregistered in 
reliance on the exemption available under section 203(b)(3) of the 
Advisers Act (15 U.S.C. 80b-3(b)(3)), or that is an exempt reporting 
adviser, or any of the investment adviser's covered associates to do 
anything indirectly which, if done directly, would result in a violation 
of this section.
    (e) Exemptions. The Commission, upon application, may conditionally 
or unconditionally exempt an investment adviser from the prohibition 
under paragraph (a)(1) of this section. In determining whether to grant 
an exemption, the Commission will consider, among other factors:
    (1) Whether the exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Advisers 
Act (15 U.S.C. 80b);
    (2) Whether the investment adviser:
    (i) Before the contribution resulting in the prohibition was made, 
adopted

[[Page 604]]

and implemented policies and procedures reasonably designed to prevent 
violations of this section; and
    (ii) Prior to or at the time the contribution which resulted in such 
prohibition was made, had no actual knowledge of the contribution; and
    (iii) After learning of the contribution:
    (A) Has taken all available steps to cause the contributor involved 
in making the contribution which resulted in such prohibition to obtain 
a return of the contribution; and
    (B) Has taken such other remedial or preventive measures as may be 
appropriate under the circumstances;
    (3) Whether, at the time of the contribution, the contributor was a 
covered associate or otherwise an employee of the investment adviser, or 
was seeking such employment;
    (4) The timing and amount of the contribution which resulted in the 
prohibition;
    (5) The nature of the election (e.g, Federal, State or local); and
    (6) The contributor's apparent intent or motive in making the 
contribution which resulted in the prohibition, as evidenced by the 
facts and circumstances surrounding such contribution.
    (f) Definitions. For purposes of this section:
    (1) Contribution means any gift, subscription, loan, advance, or 
deposit of money or anything of value made for:
    (i) The purpose of influencing any election for Federal, State or 
local office;
    (ii) Payment of debt incurred in connection with any such election; 
or
    (iii) Transition or inaugural expenses of the successful candidate 
for State or local office.
    (2) Covered associate of an investment adviser means:
    (i) Any general partner, managing member or executive officer, or 
other individual with a similar status or function;
    (ii) Any employee who solicits a government entity for the 
investment adviser and any person who supervises, directly or 
indirectly, such employee; and
    (iii) Any political action committee controlled by the investment 
adviser or by any person described in paragraphs (f)(2)(i) and 
(f)(2)(ii) of this section.
    (3) Covered investment pool means:
    (i) An investment company registered under the Investment Company 
Act of 1940 (15 U.S.C. 80a) that is an investment option of a plan or 
program of a government entity; or
    (ii) Any company that would be an investment company under section 
3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)), but for 
the exclusion provided from that definition by either section 3(c)(1), 
section 3(c)(7) or section 3(c)(11) of that Act (15 U.S.C. 80a-3(c)(1), 
(c)(7) or (c)(11)).
    (4) Executive officer of an investment adviser means:
    (i) The president;
    (ii) Any vice president in charge of a principal business unit, 
division or function (such as sales, administration or finance);
    (iii) Any other officer of the investment adviser who performs a 
policy-making function; or
    (iv) Any other person who performs similar policy-making functions 
for the investment adviser.
    (5) Government entity means any State or political subdivision of a 
State, including:
    (i) Any agency, authority, or instrumentality of the State or 
political subdivision;
    (ii) A pool of assets sponsored or established by the State or 
political subdivision or any agency, authority or instrumentality 
thereof, including, but not limited to a ``defined benefit plan'' as 
defined in section 414(j) of the Internal Revenue Code (26 U.S.C. 
414(j)), or a State general fund;
    (iii) A plan or program of a government entity; and
    (iv) Officers, agents, or employees of the State or political 
subdivision or any agency, authority or instrumentality thereof, acting 
in their official capacity.
    (6) Official means any person (including any election committee for 
the person) who was, at the time of the contribution, an incumbent, 
candidate or successful candidate for elective office of a government 
entity, if the office:
    (i) Is directly or indirectly responsible for, or can influence the 
outcome

[[Page 605]]

of, the hiring of an investment adviser by a government entity; or
    (ii) Has authority to appoint any person who is directly or 
indirectly responsible for, or can influence the outcome of, the hiring 
of an investment adviser by a government entity.
    (7) Payment means any gift, subscription, loan, advance, or deposit 
of money or anything of value.
    (8) Plan or program of a government entity means any participant-
directed investment program or plan sponsored or established by a State 
or political subdivision or any agency, authority or instrumentality 
thereof, including, but not limited to, a ``qualified tuition plan'' 
authorized by section 529 of the Internal Revenue Code (26 U.S.C. 529), 
a retirement plan authorized by section 403(b) or 457 of the Internal 
Revenue Code (26 U.S.C. 403(b) or 457), or any similar program or plan.
    (9) Regulated person means:
    (i) An investment adviser registered with the Commission that has 
not, and whose covered associates have not, within two years of 
soliciting a government entity:
    (A) Made a contribution to an official of that government entity, 
other than as described in paragraph (b)(1) of this section; and
    (B) Coordinated or solicited any person or political action 
committee to make any contribution or payment described in paragraphs 
(a)(2)(ii)(A) and (B) of this section;
    (ii) A ``broker,'' as defined in section 3(a)(4) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(4)) or a ``dealer,'' as defined 
in section 3(a)(5) of that Act (15 U.S.C. 78c(a)(5)), that is registered 
with the Commission, and is a member of a national securities 
association registered under 15A of that Act (15 U.S.C. 78o-3), provided 
that:
    (A) The rules of the association prohibit members from engaging in 
distribution or solicitation activities if certain political 
contributions have been made; and
    (B) The Commission, by order, finds that such rules impose 
substantially equivalent or more stringent restrictions on broker-
dealers than this section imposes on investment advisers and that such 
rules are consistent with the objectives of this section; and
    (iii) A ``municipal advisor'' registered with the Commission under 
section 15B of the Exchange Act and subject to rules of the Municipal 
Securities Rulemaking Board, provided that:
    (A) Such rules prohibit municipal advisors from engaging in 
distribution or solicitation activities if certain political 
contributions have been made; and
    (B) The Commission, by order, finds that such rules impose 
substantially equivalent or more stringent restrictions on municipal 
advisors than this section imposes on investment advisers and that such 
rules are consistent with the objectives of this section.
    (10) Solicit means:
    (i) With respect to investment advisory services, to communicate, 
directly or indirectly, for the purpose of obtaining or retaining a 
client for, or referring a client to, an investment adviser; and
    (ii) With respect to a contribution or payment, to communicate, 
directly or indirectly, for the purpose of obtaining or arranging a 
contribution or payment.

[75 FR 41069, July 14, 2010, as amended at 76 FR 43013, July 19, 2011; 
77 FR 28477, May 15, 2012]



Sec.  275.206(4)-6  Proxy voting.

    If you are an investment adviser registered or required to be 
registered under section 203 of the Act (15 U.S.C. 80b-3), it is a 
fraudulent, deceptive, or manipulative act, practice or course of 
business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-
6(4)), for you to exercise voting authority with respect to client 
securities, unless you:
    (a) Adopt and implement written policies and procedures that are 
reasonably designed to ensure that you vote client securities in the 
best interest of clients, which procedures must include how you address 
material conflicts that may arise between your interests and those of 
your clients;
    (b) Disclose to clients how they may obtain information from you 
about how you voted with respect to their securities; and
    (c) Describe to clients your proxy voting policies and procedures 
and, upon request, furnish a copy of the

[[Page 606]]

policies and procedures to the requesting client.

[68 FR 6593, Feb. 7, 2003]



Sec.  275.206(4)-7  Compliance procedures and practices.

    If you are an investment adviser registered or required to be 
registered under section 203 of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-3), it shall be unlawful within the meaning of section 206 of 
the Act (15 U.S.C. 80b-6) for you to provide investment advice to 
clients unless you:
    (a) Policies and procedures. Adopt and implement written policies 
and procedures reasonably designed to prevent violation, by you and your 
supervised persons, of the Act and the rules that the Commission has 
adopted under the Act;
    (b) Annual review. Review and document in writing, no less 
frequently than annually, the adequacy of the policies and procedures 
established pursuant to this section and the effectiveness of their 
implementation; and
    (c) Chief compliance officer. Designate an individual (who is a 
supervised person) responsible for administering the policies and 
procedures that you adopt under paragraph (a) of this section.

[68 FR 74730, Dec. 24, 2003, as amended at 88 FR 63386, Sept. 14, 2023]



Sec.  275.206(4)-8  Pooled investment vehicles.

    (a) Prohibition. It shall constitute a fraudulent, deceptive, or 
manipulative act, practice, or course of business within the meaning of 
section 206(4) of the Act (15 U.S.C. 80b-6(4)) for any investment 
adviser to a pooled investment vehicle to:
    (1) Make any untrue statement of a material fact or to omit to state 
a material fact necessary to make the statements made, in the light of 
the circumstances under which they were made, not misleading, to any 
investor or prospective investor in the pooled investment vehicle; or
    (2) Otherwise engage in any act, practice, or course of business 
that is fraudulent, deceptive, or manipulative with respect to any 
investor or prospective investor in the pooled investment vehicle.
    (b) Definition. For purposes of this section ``pooled investment 
vehicle'' means any investment company as defined in section 3(a) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3(a)) or any company that 
would be an investment company under section 3(a) of that Act but for 
the exclusion provided from that definition by either section 3(c)(1) or 
section 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or (7)).

[72 FR 44761, Aug. 9, 2007]



Sec.  275.206(4)-9  [Reserved]



Sec.  275.206(4)-10  Private fund adviser audits.

    (a) As a means reasonably designed to prevent such acts, practices, 
and courses of business as are fraudulent, deceptive, or manipulative, 
an investment adviser that is registered or required to be registered 
under section 203 of the Investment Advisers Act of 1940 shall cause 
each private fund that it advises (other than a securitized asset fund), 
directly or indirectly, to undergo a financial statement audit (as 
defined in Sec.  210.1-02(d) of this chapter (rule 1-02(d) of Regulation 
S-X)) that meets the requirements of Sec.  275.206(4)-2(b)(4)(i) through 
(b)(4)(iii) and shall cause audited financial statements to be delivered 
in accordance with Sec.  275.206(4)-2(c), if the private fund does not 
otherwise undergo such an audit;
    (b) For a private fund (other than a securitized asset fund) that 
the adviser does not control and is neither controlled by nor under 
common control with, the adviser is prohibited from providing investment 
advice, directly or indirectly, to the private fund if the adviser fails 
to take all reasonable steps to cause the private fund to undergo a 
financial statement audit that meets the requirements of Sec.  
275.206(4)-2(b)(4) and to cause audited financial statements to be 
delivered in accordance with Sec.  275.206(4)-2(c), if the private fund 
does not otherwise undergo such an audit; and
    (c) For purposes of this section, defined terms shall have the 
meanings set forth in Sec.  275.206(4)-2(d), except for the term 
securitized asset fund, which shall have the meaning set forth in Sec.  
275.211(h)(1)-1.

[88 FR 63386, Sept. 14, 2023]

[[Page 607]]



Sec.  275.211(h)(1)-1  Definitions.

    For purposes of Sec. Sec.  275.206(4)-10, 275.211(h)(1)-2, 
275.211(h)(2)-1, 275.211(h)(2)-2, and 275.211(h)(2)-3:
    Adviser clawback means any obligation of the adviser, its related 
persons, or their respective owners or interest holders to restore or 
otherwise return performance-based compensation to the private fund 
pursuant to the private fund's governing agreements.
    Adviser-led secondary transaction means any transaction initiated by 
the investment adviser or any of its related persons that offers private 
fund investors the choice between:
    (1) Selling all or a portion of their interests in the private fund; 
and
    (2) Converting or exchanging all or a portion of their interests in 
the private fund for interests in another vehicle advised by the adviser 
or any of its related persons.
    Committed capital means any commitment pursuant to which a person is 
obligated to acquire an interest in, or make capital contributions to, 
the private fund.
    Control means the power, directly or indirectly, to direct the 
management or policies of a person, whether through ownership of 
securities, by contract, or otherwise. For the purposes of this 
definition, control includes:
    (1) Each of an investment adviser's officers, partners, or directors 
exercising executive responsibility (or persons having similar status or 
functions) is presumed to control the investment adviser;
    (2) A person is presumed to control a corporation if the person:
    (i) Directly or indirectly has the right to vote 25 percent or more 
of a class of the corporation's voting securities; or
    (ii) Has the power to sell or direct the sale of 25 percent or more 
of a class of the corporation's voting securities;
    (3) A person is presumed to control a partnership if the person has 
the right to receive upon dissolution, or has contributed, 25 percent or 
more of the capital of the partnership;
    (4) A person is presumed to control a limited liability company if 
the person:
    (i) Directly or indirectly has the right to vote 25 percent or more 
of a class of the interests of the limited liability company;
    (ii) Has the right to receive upon dissolution, or has contributed, 
25 percent or more of the capital of the limited liability company; or
    (iii) Is an elected manager of the limited liability company;
    (5) A person is presumed to control a trust if the person is a 
trustee or managing agent of the trust.
    Covered portfolio investment means a portfolio investment that 
allocated or paid the investment adviser or its related persons 
portfolio investment compensation during the reporting period.
    Distribute, distributes, or distributed means send or sent to all of 
the private fund's investors, unless the context otherwise requires; 
provided that, if an investor is a pooled investment vehicle that is 
controlling, controlled by, or under common control with (a ``control 
relationship'') the adviser or its related persons, the adviser must 
look through that pool (and any pools in a control relationship with the 
adviser or its related persons) in order to send to investors in those 
pools.
    Election form means a written solicitation distributed by, or on 
behalf of, the adviser or any related person requesting private fund 
investors to make a binding election to participate in an adviser-led 
secondary transaction.
    Fairness opinion means a written opinion stating that the price 
being offered to the private fund for any assets being sold as part of 
an adviser-led secondary transaction is fair.
    Fund-level subscription facilities means any subscription 
facilities, subscription line financing, capital call facilities, 
capital commitment facilities, bridge lines, or other indebtedness 
incurred by the private fund that is secured by the unfunded capital 
commitments of the private fund's investors.
    Gross IRR means an internal rate of return that is calculated gross 
of all fees, expenses, and performance-based compensation borne by the 
private fund.
    Gross MOIC means a multiple of invested capital that is calculated 
gross of all fees, expenses, and performance-based compensation borne by 
the private fund.

[[Page 608]]

    Illiquid fund means a private fund that:
    (1) Is not required to redeem interests upon an investor's request; 
and
    (2) Has limited opportunities, if any, for investors to withdraw 
before termination of the fund.
    Independent opinion provider means a person that:
    (1) Provides fairness opinions or valuation opinions in the ordinary 
course of its business; and
    (2) Is not a related person of the adviser.
    Internal rate of return means the discount rate that causes the net 
present value of all cash flows throughout the life of the fund to be 
equal to zero.
    Liquid fund means a private fund that is not an illiquid fund.
    Multiple of invested capital means, as of the end of the applicable 
fiscal quarter:
    (1) The sum of:
    (i) The unrealized value of the illiquid fund; and
    (ii) The value of all distributions made by the illiquid fund;
    (2) Divided by the total capital contributed to the illiquid fund by 
its investors.
    Net IRR means an internal rate of return that is calculated net of 
all fees, expenses, and performance-based compensation borne by the 
private fund.
    Net MOIC means a multiple of invested capital that is calculated net 
of all fees, expenses, and performance-based compensation borne by the 
private fund.
    Performance-based compensation means allocations, payments, or 
distributions of capital based on the private fund's (or any of its 
investments') capital gains, capital appreciation and/or other profit.
    Portfolio investment means any entity or issuer in which the private 
fund has directly or indirectly invested.
    Portfolio investment compensation means any compensation, fees, and 
other amounts allocated or paid to the investment adviser or any of its 
related persons by the portfolio investment attributable to the private 
fund's interest in such portfolio investment, including, but not limited 
to, origination, management, consulting, monitoring, servicing, 
transaction, administrative, advisory, closing, disposition, directors, 
trustees or similar fees or payments.
    Related person means:
    (1) All officers, partners, or directors (or any person performing 
similar functions) of the adviser;
    (2) All persons directly or indirectly controlling or controlled by 
the adviser;
    (3) All current employees (other than employees performing only 
clerical, administrative, support or similar functions) of the adviser; 
and
    (4) Any person under common control with the adviser.
    Reporting period means the private fund's fiscal quarter covered by 
the quarterly statement or, for the initial quarterly statement of a 
newly formed private fund, the period covering the private fund's first 
two full fiscal quarters of operating results.
    Securitized asset fund means any private fund whose primary purpose 
is to issue asset backed securities and whose investors are primarily 
debt holders.
    Similar pool of assets means a pooled investment vehicle (other than 
an investment company registered under the Investment Company Act of 
1940, a company that elects to be regulated as such, or a securitized 
asset fund) with substantially similar investment policies, objectives, 
or strategies to those of the private fund managed by the investment 
adviser or its related persons.
    Statement of contributions and distributions means a document that 
presents:
    (1) All capital inflows the private fund has received from investors 
and all capital outflows the private fund has distributed to investors 
since the private fund's inception, with the value and date of each 
inflow and outflow; and
    (2) The net asset value of the private fund as of the end of the 
reporting period.
    Unfunded capital commitments means committed capital that has not 
yet been contributed to the private fund by investors.
    Valuation opinion means a written opinion stating the value (as a 
single amount or a range) of any assets being sold as part of an 
adviser-led secondary transaction.

[88 FR 63387, Sept. 14, 2023]

[[Page 609]]



Sec.  275.211(h)(1)-2  Private fund quarterly statements.

    (a) Quarterly statements. As a means reasonably designed to prevent 
such acts, practices, and courses of business as are fraudulent, 
deceptive, or manipulative, an investment adviser that is registered or 
required to be registered under section 203 of the Investment Advisers 
Act of 1940 shall prepare a quarterly statement that complies with 
paragraphs (a) through (g) of this section for any private fund (other 
than a securitized asset fund) that it advises, directly or indirectly, 
that has at least two full fiscal quarters of operating results, and 
distribute the quarterly statement to the private fund's investors, if 
such private fund is not a fund of funds, within 45 days after the end 
of each of the first three fiscal quarters of each fiscal year of the 
private fund and 90 days after the end of each fiscal year of the 
private fund and, if such private fund is a fund of funds, within 75 
days after the end of the first three fiscal quarters of each fiscal 
year and 120 days after the end of each fiscal year, in either case, 
unless such a quarterly statement is prepared and distributed by another 
person.
    (b) Fund table. The quarterly statement must include a table for the 
private fund that discloses, at a minimum, the following information, 
presented both before and after the application of any offsets, rebates, 
or waivers for the information required by paragraphs (b)(1) and (2) of 
this section:
    (1) A detailed accounting of all compensation, fees, and other 
amounts allocated or paid to the investment adviser or any of its 
related persons by the private fund during the reporting period, with 
separate line items for each category of allocation or payment 
reflecting the total dollar amount, including, but not limited to, 
management, advisory, sub-advisory, or similar fees or payments, and 
performance-based compensation;
    (2) A detailed accounting of all fees and expenses allocated to or 
paid by the private fund during the reporting period (other than those 
listed in paragraph (b)(1) of this section), with separate line items 
for each category of fee or expense reflecting the total dollar amount, 
including, but not limited to, organizational, accounting, legal, 
administration, audit, tax, due diligence, and travel fees and expenses; 
and
    (3) The amount of any offsets or rebates carried forward during the 
reporting period to subsequent periods to reduce future payments or 
allocations to the adviser or its related persons.
    (c) Portfolio investment table. The quarterly statement must include 
a separate table for the private fund's covered portfolio investments 
that discloses, at a minimum, the following information for each covered 
portfolio investment: a detailed accounting of all portfolio investment 
compensation allocated or paid to the investment adviser or any of its 
related persons by the covered portfolio investment during the reporting 
period, with separate line items for each category of allocation or 
payment reflecting the total dollar amount, presented both before and 
after the application of any offsets, rebates, or waivers.
    (d) Calculations and cross-references. The quarterly statement must 
include prominent disclosure regarding the manner in which all expenses, 
payments, allocations, rebates, waivers, and offsets are calculated and 
include cross references to the sections of the private fund's 
organizational and offering documents that set forth the applicable 
calculation methodology.
    (e) Performance. (1) No later than the time the adviser sends the 
initial quarterly statement, the adviser must determine that the private 
fund is an illiquid fund or a liquid fund.
    (2) The quarterly statement must present the following with equal 
prominence:
    (i) Liquid funds. For a liquid fund:
    (A) Annual net total returns for each fiscal year over the past 10 
fiscal years or since inception, whichever time period is shorter;
    (B) Average annual net total returns over the one-, five-, and 10-
fiscal-year periods; and
    (C) The cumulative net total return for the current fiscal year as 
of the end of the most recent fiscal quarter covered by the quarterly 
statement.
    (ii) Illiquid funds. For an illiquid fund:

[[Page 610]]

    (A) The following performance measures, shown since inception of the 
illiquid fund through the end of the quarter covered by the quarterly 
statement (or, to the extent quarter-end numbers are not available at 
the time the adviser distributes the quarterly statement, through the 
most recent practicable date) and computed with and without the impact 
of any fund-level subscription facilities:
    (1) Gross IRR and gross MOIC for the illiquid fund;
    (2) Net IRR and net MOIC for the illiquid fund; and
    (3) Gross IRR and gross MOIC for the realized and unrealized 
portions of the illiquid fund's portfolio, with the realized and 
unrealized performance shown separately.
    (B) A statement of contributions and distributions for the illiquid 
fund.
    (iii) Other matters. The quarterly statement must include the date 
as of which the performance information is current through and prominent 
disclosure of the criteria used and assumptions made in calculating the 
performance.
    (f) Consolidated reporting. To the extent doing so would provide 
more meaningful information to the private fund's investors and would 
not be misleading, the adviser must consolidate the reporting required 
by paragraphs (a) through (e) of this section to cover similar pools of 
assets.
    (g) Format and content. The quarterly statement must use clear, 
concise, plain English and be presented in a format that facilitates 
review from one quarterly statement to the next.
    (h) Definitions. For purposes of this section, defined terms shall 
have the meanings set forth in Sec.  275.211(h)(1)-1.

[88 FR 63387, Sept. 14, 2023]



Sec.  275.211(h)(2)-1  Private fund adviser restricted activities.

    (a) An investment adviser to a private fund (other than a 
securitized asset fund) may not, directly or indirectly, do the 
following with respect to the private fund, or any investor in that 
private fund:
    (1) Charge or allocate to the private fund fees or expenses 
associated with an investigation of the adviser or its related persons 
by any governmental or regulatory authority, unless the investment 
adviser requests each investor of the private fund to consent to, and 
obtains written consent from at least a majority in interest of the 
private fund's investors that are not related persons of the adviser 
for, such charge or allocation; provided, however, that the investment 
adviser may not charge or allocate to the private fund fees or expenses 
related to an investigation that results or has resulted in a court or 
governmental authority imposing a sanction for a violation of the 
Investment Advisers Act of 1940 or the rules promulgated thereunder;
    (2) Charge or allocate to the private fund any regulatory or 
compliance fees or expenses, or fees or expenses associated with an 
examination, of the adviser or its related persons, unless the 
investment adviser distributes a written notice of any such fees or 
expenses, and the dollar amount thereof, to the investors of such 
private fund client in writing within 45 days after the end of the 
fiscal quarter in which the charge occurs;
    (3) Reduce the amount of an adviser clawback by actual, potential, 
or hypothetical taxes applicable to the adviser, its related persons, or 
their respective owners or interest holders, unless the investment 
adviser distributes a written notice to the investors of such private 
fund client that sets forth the aggregate dollar amounts of the adviser 
clawback before and after any reduction for actual, potential, or 
hypothetical taxes within 45 days after the end of the fiscal quarter in 
which the adviser clawback occurs;
    (4) Charge or allocate fees or expenses related to a portfolio 
investment (or potential portfolio investment) on a non-pro rata basis 
when multiple private funds and other clients advised by the adviser or 
its related persons (other than a securitized asset fund) have invested 
(or propose to invest) in the same portfolio investment, unless:
    (i) The non-pro rata charge or allocation is fair and equitable 
under the circumstances; and
    (ii) Prior to charging or allocating such fees or expenses to a 
private fund client, the investment adviser distributes to each investor 
of the private

[[Page 611]]

fund a written notice of the non-pro rata charge or allocation and a 
description of how it is fair and equitable under the circumstances; and
    (5) Borrow money, securities, or other private fund assets, or 
receive a loan or an extension of credit, from a private fund client, 
unless the adviser:
    (i) Distributes to each investor a written description of the 
material terms of, and requests each investor to consent to, such 
borrowing, loan, or extension of credit; and
    (ii) Obtains written consent from at least a majority in interest of 
the private fund's investors that are not related persons of the 
adviser.
    (b) Paragraphs (a)(1) and (a)(5) of this section shall not apply 
with respect to contractual agreements governing a private fund (and, 
with respect to paragraph (a)(5) of this section, contractual agreements 
governing a borrowing, loan, or extension of credit entered into by a 
private fund) that has commenced operations as of the compliance date 
and that were entered into in writing prior to the compliance date if 
paragraph (a)(1) or (a)(5) of this section, as applicable, would require 
the parties to amend such governing agreements; provided that this 
paragraph (b) does not permit an investment adviser to such a fund to 
charge or allocate to the private fund fees or expenses related to an 
investigation that results or has resulted in a court or governmental 
authority imposing a sanction for a violation of the Investment Advisers 
Act of 1940 or the rules promulgated thereunder.
    (c) For purposes of this section, defined terms shall have the 
meanings set forth in Sec.  275.211(h)(1)-1.

[88 FR 63387, Sept. 14, 2023]



Sec.  275.211(h)(2)-2  Adviser-led secondaries.

    (a) As a means reasonably designed to prevent fraudulent, deceptive, 
or manipulative acts, practices, or courses of business within the 
meaning of section 206(4) of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-6(4), an investment adviser that is registered or required to 
be registered under section 203 of the Act (15 U.S.C. 80b-3) conducting 
an adviser-led secondary transaction with respect to any private fund 
that it advises (other than a securitized asset fund) shall comply with 
paragraphs (a)(1) and (2) of this section. The investment adviser shall:
    (1) Obtain, and distribute to investors in the private fund, a 
fairness opinion or valuation opinion from an independent opinion 
provider; and
    (2) Prepare, and distribute to investors in the private fund, a 
written summary of any material business relationships the adviser or 
any of its related persons has, or has had within the two-year period 
immediately prior to the issuance of the fairness opinion or valuation 
opinion, with the independent opinion provider; in each case, prior to 
the due date of the election form in respect of the adviser-led 
secondary transaction.
    (b) For purposes of this section, defined terms shall have the 
meanings set forth in Sec.  275.211(h)(1)-1.

[88 FR 63387, Sept. 14, 2023]



Sec.  275.211(h)(2)-3  Preferential treatment.

    (a) An investment adviser to a private fund (other than a 
securitized asset fund) may not, directly or indirectly, do the 
following with respect to the private fund, or any investor in that 
private fund:
    (1) Grant an investor in the private fund or in a similar pool of 
assets the ability to redeem its interest on terms that the adviser 
reasonably expects to have a material, negative effect on other 
investors in that private fund or in a similar pool of assets, except:
    (i) If such ability to redeem is required by the applicable laws, 
rules, regulations, or orders of any relevant foreign or U.S. 
Government, State, or political subdivision to which the investor, the 
private fund, or any similar pool of assets is subject; or
    (ii) If the investment adviser has offered the same redemption 
ability to all other existing investors, and will continue to offer such 
redemption ability to all future investors, in the private fund and any 
similar pool of assets;
    (2) Provide information regarding the portfolio holdings or 
exposures of the private fund, or of a similar pool of assets, to any 
investor in the private fund if the adviser reasonably expects

[[Page 612]]

that providing the information would have a material, negative effect on 
other investors in that private fund or in a similar pool of assets, 
except if the investment adviser offers such information to all other 
existing investors in the private fund and any similar pool of assets at 
the same time or substantially the same time.
    (b) An investment adviser to a private fund (other than a 
securitized asset fund) may not, directly or indirectly, provide any 
preferential treatment to any investor in the private fund unless the 
adviser provides written notices as follows:
    (1) Advance written notice for prospective investors in a private 
fund. The investment adviser shall provide to each prospective investor 
in the private fund, prior to the investor's investment in the private 
fund, a written notice that provides specific information regarding any 
preferential treatment related to any material economic terms that the 
adviser or its related persons provide to other investors in the same 
private fund.
    (2) Written notice for current investors in a private fund. The 
investment adviser shall distribute to current investors:
    (i) For an illiquid fund, as soon as reasonably practicable 
following the end of the private fund's fundraising period, written 
disclosure of all preferential treatment the adviser or its related 
persons has provided to other investors in the same private fund;
    (ii) For a liquid fund, as soon as reasonably practicable following 
the investor's investment in the private fund, written disclosure of all 
preferential treatment the adviser or its related persons has provided 
to other investors in the same private fund; and
    (iii) On at least an annual basis, a written notice that provides 
specific information regarding any preferential treatment provided by 
the adviser or its related persons to other investors in the same 
private fund since the last written notice provided in accordance with 
this section, if any.
    (c) For purposes of this section, defined terms shall have the 
meanings set forth in Sec.  275.211(h)(1)-1.
    (d) Paragraph (a) of this section shall not apply with respect to 
contractual agreements governing a private fund that has commenced 
operations as of the compliance date and that were entered into in 
writing prior to the compliance date if paragraph (a) of this section 
would require the parties to amend such governing agreements.

[88 FR 63387, Sept. 14, 2023]



Sec.  275.222-1  Definitions.

    For purposes of section 222 (15 U.S.C. 80b-18a) of the Act:
    (a) Place of business. ``Place of business'' of an investment 
adviser means:
    (1) An office at which the investment adviser regularly provides 
investment advisory services, solicits, meets with, or otherwise 
communicates with clients; and
    (2) Any other location that is held out to the general public as a 
location at which the investment adviser provides investment advisory 
services, solicits, meets with, or otherwise communicates with clients.
    (b) Principal office and place of business. ``Principal office and 
place of business'' of an investment adviser means the executive office 
of the investment adviser from which the officers, partners, or managers 
of the investment adviser direct, control, and coordinate the activities 
of the investment adviser.

[62 FR 28135, May 22, 1997, as amended at 76 FR 43014, July 19, 2011]



Sec.  275.222-2  Definition of ``client'' for purposes of the national
de minimis standard.

    For purposes of section 222(d)(2) of the Act (15 U.S.C. 80b-
18a(d)(2)), an investment adviser may rely upon the definition of 
``client'' provided by Sec.  275.202(a)(30)-1, without giving regard to 
paragraph (b)(4) of that section.

[76 FR 43014, July 19, 2011]

[[Page 613]]



        PART 276_INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT
        ADVISERS ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER-
        -Table of Contents

    Authority: 15 U.S.C. 80b et seq.

----------------------------------------------------------------------------------------------------------------
                                                      Release
                      Subject                           No.         Date            Fed. Reg. Vol. and Page
----------------------------------------------------------------------------------------------------------------
Opinion of General Counsel relating to section              2   Oct. 28, 1940  11 FR 10996.
 202(a)(11)(C) of the Investment Advisers Act of
 1940.
Opinion of the General Counsel relating to the use          8   Dec. 12, 1940   Do.
 of the name ``investment counsel'' under section
 208(c) of the Investment Advisers Act of 1940.
Opinion of Director of Trading and Exchange                40    Feb. 5, 1945  11 FR 10997.
 Division, relating to section 206 of the
 Investment Advisers Act of 1940, section 17(a) of
 the Securities Act of 1933, and sections 10(b) and
 15(c)(1) of the Securities Exchange Act of 1934.
Opinion of the General Counsel relating to the use         58   Apr. 10, 1951  16 FR 3387.
 of ``hedge clauses'' by brokers, dealers,
 investment advisers, and others.
Statement of the Commission to clarify the meaning        194   Jan. 25, 1966  31 FR 1005.
 of ``beneficial ownership of securities'' as
 relates to beneficial ownership of securities held
 by family members.
Statement of the Commission setting the date of May       196   Feb. 14, 1966  31 FR 3175.
 1, 1966 after which filings must reflect
 beneficial ownership of securities held by family
 members.
Statement of the Commission describing nature of          201    June 1, 1966  31 FR 7821.
 examination required to be made of all funds and
 securities held by an investment adviser and the
 content of related accountant's certificate.
Publication of the Commission's procedure to be           281   Jan. 25, 1971  36 FR 2600.
 followed if requests are to be met for no action
 or interpretative letters and responses thereto to
 be made available for public use.
Commission's statement of factors to be considered        315   Apr. 19, 1972  37 FR 7690.
 in connection with investment company advisory
 contracts containing incentive arrangements.
Applicability of Commission's policy statement on         318    May 18, 1972  37 FR 9988.
 the future structure of securities markets to
 selection of brokers and payment of commissions by
 institutional managers.
Commission's decisions on advisory committee              336    Mar. 1, 1973  38 FR 5457.
 recommendations regarding commencement of
 enforcement proceedings and termination of staff
 investigations.
Commission's statement on obligations of                  377   June 29, 1973  38 FR 17201.
 underwriters with respect to discretionary
 accounts.
Applicability of investment advisers act to certain       563   Jan. 10, 1977  42 FR 2953;
 publications.                                                                 42 FR 8140.
Contingent advisory compensation arrangements......       721    May 16, 1980  45 FR 34876.
Applicability of investment advisers act to               770   Aug. 13, 1981  46 FR 41771.
 financial planners, pension consultants, and other
 persons who provide investment advisory services
 as an integral component of other financially
 related services.
Statement of position of Commission's Division of         969   Apr. 30, 1985  50 FR 19341.
 Investment Management.
Statement of staff interpretive position regarding       1000    Dec. 3, 1985  50 FR 49835.
 certain rules and forms; uniform registration,
 disclolsure, and reporting requirements.
Applicability of the investment Advisers Act to          1092    Oct. 8, 1987  52 FR 38400.
 financial planners, pension consultants, and other
 persons who provide investment advisory services
 as a component of other financial services.
Registration of Successors to Broker-Dealers and         1357    Jan. 4, 1993  58 FR 11.
 Investment Advisors.
Use of electronic media for delivery purposes......      1562     May 9, 1996  61 FR 24651.
Statement of the Commission Regarding Use of             1710   Mar. 23, 1998  63 FR 14814
 Internet Web Sites to Offer Securities, Solicit
 Securities Transactions or Advertise Investment
 Services Offshore.
Interpretation of Section 206(3) of the Investment       1732   July 17, 1998  63 FR 39508
 Advisers Act of 1940.
Statement of the Commission Regarding Disclosure of      1738   July 29, 1998  63 FR 41404
 Year 2000 Issues and Consequences by Public
 Companies, Investment Advisers, Investment
 Companies, and Municipal Securities Issuers.
Release No. IA-2969................................  ........   Dec. 30, 2009  75 FR 1494
Commission Guidance Regarding the Definition of the   IA-4122   June 19, 2015  80 FR 37537
 Terms ``Spouse'' and ``Marriage'' Following the
 Supreme Court's Decision in United States v.
 Windsor.
Commission Interpretation Regarding Standard of       IA-5248    June 5, 2019  84 FR 33681
 Conduct for Investment Advisers.
Commission Interpretation Regarding the Solely        IA-5249    June 5, 2019  84 FR 33689
 Incidental Prong of the Broker-Dealer Exclusion
 from the Definition of Investment Adviser.
Commission Guidance Regarding the Proxy Voting        IA-5325   Aug. 21, 2019  84 FR 47427
 Responsibilities of Investment Advisers.
Supplement to Commission Guidance Regarding the       IA-5547   Sept. 3, 2020  85 FR 55157
 Proxy Voting Responsibilities of Investment
 Advisers.

[[Page 614]]

 
Supplement to Commission Guidance Regarding the       IA-6068   July 19, 2022  87 FR 43197
 Proxy Voting Responsibilities of Investment
 Advisers.
----------------------------------------------------------------------------------------------------------------



PART 279_FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS ACT OF 1940--Table of Contents



Sec.
279.0-1 Availability of forms.
279.1 Form ADV, for application for registration of investment adviser 
          and for amendments to such registration statement.
279.2 Form ADV-W, notice of withdrawal from registration as investment 
          adviser.
279.3 Form ADV-H, application for a temporary or continuing hardship 
          exemption.
279.4 Form ADV-NR, appointment of agent for service of process by non-
          resident general partner and non-resident managing agent of an 
          investment adviser.
279.5-279.7 [Reserved]
279.8 Form ADV-E, cover page for certificate of accounting of securities 
          and funds in possession or custody of an investment adviser.
279.9 Form PF, reporting by investment advisers to private funds.

    Authority: The Investment Advisers Act of 1940, 15 U.S.C. 80b-1, et 
seq., Pub. L. 111-203, 124 Stat. 1376.

    Source: 33 FR 19005, Dec. 20, 1968, unless otherwise noted.



Sec.  279.0-1  Availability of forms.

    (a) This part identifies and describes the forms prescribed for use 
under the Investment Advisers Act of 1940.
    (b) Any person may obtain a copy of any form prescribed for use in 
this part by written request to the Securities and Exchange Commission, 
100 F Street, NE., Washington, DC 20549. Any person may inspect the 
forms at this address and at the Commission's regional offices. (See 
Sec.  200.11 of this chapter for the addresses of SEC regional offices.)

[46 FR 17757, Mar. 20, 1981, as amended at 47 FR 26820, June 22, 1982; 
59 FR 5946, Feb. 9, 1994; 73 FR 32229, June 5, 2008]



Sec.  279.1  Form ADV, for application for registration of investment
adviser and for amendments to such registration statement.

    This form shall be filed pursuant to Rule 203-1 (Sec.  275.203-1 of 
this chapter) as an application for registration of an investment 
adviser pursuant to sections 203(c) or 203(g) of the Investment Advisers 
Act of 1940, and also as an amendment to registration pursuant to Rule 
204-1 (Sec.  275.204-1 of this chapter).

[44 FR 21008, Apr. 9, 1979]

    Editorial Note: For Federal Register citations affecting Form ADV, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  279.2  Form ADV-W, notice of withdrawal from registration as 
investment adviser.

    This form shall be filed pursuant to Rule 203-2 (Sec.  275.203-2 of 
this chapter) by a registered investment adviser as a notice of 
withdrawal from registration as such under the Investment Advisers Act 
of 1940.

    Editorial Note: For Federal Register citations affecting Form ADV-W, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  279.3  Form ADV-H, application for a temporary or continuing
hardship exemption.

    An investment adviser must file this form under Sec.  275.203-3 of 
this chapter to request a temporary hardship exemption or apply for a 
continuing hardship exemption.

[65 FR 57451, Sept. 22, 2000]

    Editorial Note: For Federal Register citations affecting Form ADV-H, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 615]]



Sec.  279.4  Form ADV-NR, appointment of agent for service of process
by non-resident general partner and non-resident managing agent of an
investment adviser.

    This form shall be filed and amended pursuant to Sec.  275.203-1 of 
this chapter (Rule 203-1) as an appointment of agent for service of 
process by non-resident general partners and non-resident managing 
agents of an investment adviser pursuant to section 203 of the 
Investment Advisers Act of 1940.

[87 FR 38978, June 30, 2022]

    Editorial Note: For Federal Register citations affecting Form ADV-
NR, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.



Sec. Sec.  279.5-279.7  [Reserved]



Sec.  279.8  Form ADV-E, cover page for certificate of accounting of
securities and funds in possession or custody of an investment adviser.

[54 FR 32049, Aug. 4, 1989]

    Editorial Note: For Federal Register citations affecting Form ADV-E, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  279.9  Form PF, reporting by investment advisers to private funds.

    This form shall be filed pursuant to Rule 204(b)-1 (Sec.  
275.204(b)-1 of this chapter) by certain investment advisers registered 
or required to register under section 203 of the Act (15 U.S.C. 80b-3) 
that act as an investment adviser to one or more private funds.

[76 FR 71175, Nov. 16, 2011]

    Editorial Note: For Federal Register citations affecting Form PF, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



                 PART 281_INTERPRETATIVE RELEASES RELATING TO CORPORATE REORGANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY ACT--Table of Contents

----------------------------------------------------------------------------------------------------------------
                                                Release
                   Subject                        No.                Date               Fed. Reg. Vol. and Page
----------------------------------------------------------------------------------------------------------------
Letter of the Commission with respect to              1  Sept. 26, 1938.............  11 FR 10997.
 transmission to the Commission of all
 petitions, answers, orders, applications,
 reports and other papers filed under Chapter
 X of the Bankruptcy Act.
Statement by the Commission summarizing               2  ......do...................  11 FR 10998.
 Chapter X of the Bankruptcy Act.
----------------------------------------------------------------------------------------------------------------



PART 285_RULES AND REGULATIONS PURSUANT TO SECTION 15(a) OF THE BRETTON
WOODS AGREEMENTS ACT--Table of Contents



Sec.
285.1 Applicability of part.
285.2 Periodic reports.
285.3 Reports with respect to proposed distribution of primary 
          obligations.
285.4 Preparation and filing of reports.

Schedule A to Part 285

    Authority: Secs. 19, 23, 48 Stat. 85, as amended, 901, as amended, 
sec. 15, 63 Stat. 298; 15 U.S.C. 77s, 78w 22 U.S.C. 286k-1.



Sec.  285.1  Applicability of part.

    This part (Regulation BW), prescribes the reports to be filed with 
the Securities and Exchange Commission by the International Bank for 
Reconstruction and Development pursuant to section 15(a) of the Bretton 
Woods Agreements Act.

[Reg. BW, 15 FR 281, Jan. 17, 1950]



Sec.  285.2  Periodic reports.

    (a) Within 45 days after the end of each of its fiscal quarters, the 
Bank shall file with the Commission the following information:

[[Page 616]]

    (1) Information as to any purchases or sales by the Bank of its 
primary obligations during such quarter.
    (2) Copies of the Bank's regular quarterly financial statements.
    (3) Copies of any material modifications or amendments during such 
quarter of any exhibits (other than (i) constituent documents defining 
the rights of holders of securities of other issuers guaranteed by the 
Bank and (ii) loan and guaranty agreements to which the Bank is a party) 
previously filed with the Commission under any statute.
    (b) Copies of each annual report of the Bank to its Board of 
Governors shall be filed with the Commission within 10 days after the 
submission of such report to the Board of Governors.

[20 FR 588, Jan. 27, 1955]



Sec.  285.3  Reports with respect to proposed distribution of primary
obligations.

    The Bank shall file with the Commission, on or prior to the date on 
which it sells any of its primary obligations in connection with a 
distribution of such obligations in the United States, a report 
containing the information and documents specified in Schedule A below. 
The term ``sell'' as used in this section and in Schedule A means the 
making of a completed sale or a firm commitment to sell.

[46 FR 48179, Oct. 1, 1981]



Sec.  285.4  Preparation and filing of reports.

    (a) Every report required by this part shall be filed under cover of 
a letter of transmittal which shall state the nature of the report and 
indicate the particular rule and subdivision thereof pursuant to which 
the report is filed. At least the original of every such letter shall be 
signed on behalf of the Bank by a duly authorized officer thereof.
    (b) Two copies of every report, including the letter of transmittal, 
exhibits and other papers and documents comprising a part of the report, 
shall be filed with the Commission.
    (c) The report shall be in the English language. If any exhibit or 
other paper or document filed with the report is in a foreign language, 
it shall be accompanied by a translation into the English language.
    (d) Reports pursuant to Sec.  285.3 (Rule 3) may be filed in the 
form of a prospectus to the extent that such prospectus contains the 
information specified in Schedule A.

[Reg. BW, 15 FR 281, Jan. 17, 1950]

                         Schedule A to Part 285

    This schedule specifies the information and documents to be 
furnished in a report pursuant to Sec.  285.3 (Rule 3) with respect to a 
proposed distribution of primary obligations of the Bank. Information 
not available at the time of filing the report shall be filed as 
promptly thereafter as possible.
    Item 1. Description of obligations. As to each issue of primary 
obligations of the Bank which is to be distributed, furnish the 
following information:
    (a) The title and date of the issue.
    (b) The interest rate and interest payment dates.
    (c) The maturity date or if serial, the plan of serial maturities. 
If the maturity of the obligation may be accelerated, state the 
circumstances under which it may be so accelerated.
    (d) A brief outline of (1) any redemption provisions and (2) any 
amortization, sinking fund or retirement provisions, stating the annual 
amount, if any, which the Bank will be under obligation to apply for the 
satisfaction of such provisions.
    (e) If secured by any lien, the kind and priority thereof, and the 
nature of the property subject to the lien; if any other indebtedness is 
secured by an equal or prior lien on the same property, state the nature 
of such other liens.
    (f) If any obligations issued or to be issued by the Bank will, as 
to the payment of interest or principal, rank prior to the obligations 
to be distributed, describe the nature and extent of such priority.
    (g) Outline briefly any provisions of the governing instruments 
under which the terms of the obligations to be distributed may be 
amended or modified by the holders thereof or otherwise.
    (h) Outline briefly any other material provisions of the governing 
instruments pertaining to the rights of the holders of the obligations 
to be distributed or pertaining to the duties of the Bank with respect 
thereto.
    (i) The name and address of the fiscal or paying agent of the Bank, 
if any.
    Item 2. Distribution of obligations. (a) Outline briefly the plan of 
distribution of the obligations and state the amount of the 
participation of each principal underwriter, if any.
    (b) Describe any arrangements known to the Bank or to any principal 
underwriter

[[Page 617]]

named above designed to stabilize the market for the obligations for the 
account of the Bank or the principal underwriters as a group and 
indicate whether any transactions have already been effected to 
accomplish that purpose.
    (c) Describe any arrangements for withholding commissions, or 
otherwise, to hold each underwriter or dealer responsible for the 
distribution of his participation.
    Item 3. Distribution spread. The following information shall be 
given, in substantially the tabular form indicated, as to all 
obligations which are to be offered for cash (estimate, if necessary):

------------------------------------------------------------------------
                                                   Selling
                                       Price to   discounts    Proceeds
                                          the        and        to the
                                        public   commissions     Bank
------------------------------------------------------------------------
Per..................................  ........  ...........  ..........
Total................................  ........  ...........  ..........
------------------------------------------------------------------------

    Item 4. Discounts and commissions to subunderwriters and dealers. 
State briefly the discounts and commissions to be allowed or paid to 
dealers. If any dealers are to act in the capacity of sub-underwriters 
and are to be allowed or paid any additional discounts or commissions 
for acting in such capacity, a general statement to that effect will 
suffice, without giving the additional amounts so paid or to be so paid.
    Item 5. Other expenses of distribution. Furnish a reasonably 
itemized statement of all expenses of the Bank in connection with the 
issuance and distribution of the obligations, except underwriters' or 
dealers' discounts and commissions.
    Instructions: Insofar as practicable, the itemization shall include 
transfer agents' fees, cost of printing and engraving, and legal and 
accounting fees. The information may be given as subject to future 
contingencies. If the amounts of any items are not known, estimates, 
designated as such, shall be given.
    Item 6. Application of proceeds. Make a reasonably itemized 
statement of the purposes, so far as determinable, for which the net 
proceeds to the Bank from the obligations are to be used, and state the 
approximate amount to be used for each such purpose.
    Item 7. Exhibits to be furnished. The following documents shall be 
attached to or otherwise furnished as a part of the report:
    (a) Copies of the constituent instruments defining the rights 
evidenced by the obligations.
    (b) Copies of an opinion of counsel, in the English language, as to 
the legality of the obligations.
    (c) Copies of all material contracts pertaining to the issuance or 
distribution of the obligations to which the Bank or any principal 
underwriter of the obligations is or is to be a party, except selling 
group agreements.
    (d) Copies of any prospectus or other sales literature to be 
provided by the Bank or any of the principal underwriters for general 
use in connection with the initial distribution of the obligations to 
the public.

[Reg. BW, 15 FR 281, Jan. 17, 1950, as amended at 20 FR 588, Jan. 27, 
1955]



PART 286_GENERAL RULES AND REGULATIONS PURSUANT TO SECTION 11(a) OF 
THE INTER-AMERICAN DEVELOPMENT BANK ACT--Table of Contents



Sec.
286.1 Applicability of this part.
286.2 Periodic reports.
286.3 Reports with respect to proposed distribution of primary 
          obligations.
286.4 Preparation and filing of reports.

Schedule A to Part 286

    Authority: Secs. 3-9, 11, 12, 73 Stat. 299-301; 22 U.S.C. 283a-283i.

    Source: 25 FR 10452, Nov. 1, 1960, unless otherwise noted.



Sec.  286.1  Applicability of this part.

    This part (Regulation IA) prescribes the reports to be filed with 
the Securities and Exchange Commission by the Inter-American Development 
Bank pursuant to section 11(a) of the Inter-American Development Bank 
Act.



Sec.  286.2  Periodic reports.

    (a) Within 45 days after the end of each of its fiscal quarters, the 
Bank shall file with the Commission the following information:
    (1) Information as to any purchases or sales by the Bank of its 
primary obligations during such quarter.
    (2) Copies of the Bank's regular quarterly financial statement.
    (3) Copies of any material modifications or amendments during such 
quarter of any exhibits (other than (i) constituent documents defining 
the rights of holders of securities of other issuers guaranteed by the 
Bank, and (ii) loans and guaranty agreements to which the Bank is a 
party) previously filed with the Commission under any statute.
    (b) Copies of each annual report of the Bank to its Board of 
Governors shall be filed with the Commission

[[Page 618]]

within 10 days after the submission of such report to the Board of 
Governors.



Sec.  286.3  Reports with respect to proposed distribution of primary 
obligations.

    The Bank shall file with the Commission, on or prior to the date on 
which it sells any of its primary obligations in connection with a 
distribution of such obligations in the United States, a report 
containing the information and documents specified in Schedule A below. 
The term ``sell'' as used in this section and in Schedule A means the 
making of a completed sale or a firm commitment to sell.

[46 FR 48179, Oct. 2, 1981]



Sec.  286.4  Preparation and filing of reports.

    (a) Every report required by this part shall be filed under cover of 
a letter of transmittal which shall state the nature of the report and 
indicate the particular rule and subdivision thereof pursuant to which 
the report is filed. At least the original of every such letter shall be 
signed on behalf of the Bank by a duly authorized officer thereof.
    (b) Two copies of every report, including the letter of transmittal, 
exhibits and other papers and documents comprising a part of the report, 
shall be filed with the Commission.
    (c) The report shall be in the English language. If any exhibit or 
other paper or document filed with the report is in a foreign language, 
it shall be accompanied by a translation into the English language.
    (d) Reports pursuant to Sec.  286.3 may be filed in the form of a 
prospectus to the extent that such prospectus contains the information 
specified in Schedule A.



                       Sec. Schedule A to Part 286

    This schedule specifies the information and documents to be 
furnished in a report pursuant to Sec.  286.3 with respect to a proposed 
distribution of primary obligations of the Bank. Information not 
available at the time of filing the report shall be filed as promptly 
thereafter as possible.

                   Item 1. Description of obligations

    As to each issue of primary obligations of the Bank which is to be 
distributed, furnish the following information:
    (a) The title and date of the issue.
    (b) The interest rate and interest payment dates.
    (c) The maturity date or, if serial, the plan of serial maturities. 
If the maturity of the obligation may be accelerated, state the 
circumstances under which it may be so accelerated.
    (d) A brief outline of (1) any redemption provisions and (2) any 
amortization, sinking fund or retirement provisions, stating the annual 
amount, if any, which the Bank will be under obligation to apply for the 
satisfaction of such provisions.
    (e) If secured by any lien, the kind and priority thereof, and the 
nature of the property subject to the lien; if any other indebtedness is 
secured by an equal or prior lien on the same property, state the nature 
of such other liens.
    (f) If any obligations issued or to be issued by the Bank will, as 
the payment of interest or principal, rank prior to the obligations to 
be distributed, describe the nature and extent of such priority.
    (g) Outline briefly any provisions of the governing instruments 
under which the terms of the obligations to be distributed may be 
amended or modified by the holders thereof or otherwise.
    (h) Outline briefly any other material provisions of the governing 
instruments pertaining to the rights of the holders of the obligations 
to be distributed or pertaining to the duties of the Bank with respect 
thereto.
    (i) The name and address4 of the fiscal or paying agent of the Bank, 
if any.

                   Item 2. Distribution of obligations

    (a) Outline briefly the plan of distribution of the obligations and 
state the amount of the participation of each principal underwriter, if 
any.
    (b) Describe any arrangements known to the Bank or to any principal 
underwriter named above designed to stabilize the market for the 
obligations for the account of the Bank or the principal underwriters as 
a group and indicate whether any transactions have already been effected 
to accomplish that purpose.
    (c) Describe any arrangements for withholding commissions, or 
otherwise, to hold each underwriter or dealer responsible for the 
distribution of his participation.

                       Item 3. Distribution spread

    The following information shall be given, in substantially the 
tabular form indicated, as to all obligations which are to be offered 
for cash (estimate, if necessary):

[[Page 619]]



------------------------------------------------------------------------
                                                   Selling
                                       Price to   discounts    Proceeds
                                          the        and        to the
                                        public   commissions     bank
------------------------------------------------------------------------
Per unit.............................  ........  ...........  ..........
Total................................  ........  ...........  ..........
------------------------------------------------------------------------

    Item 4. Discounts and commissions to sub-underwriters and dealers

    State briefly the discounts and commissions to be allowed or paid to 
dealers. If any dealers are to act in the capacity of sub-underwriters 
and are to be allowed or paid any additional discounts or commissions 
for acting in such capacity, a general statement to that effect will 
suffice, without giving the additional amounts to be so paid.

                 Item 5. Other expenses of distribution

    Furnish a reasonably itemized statement of all expenses of the Bank 
in connection with the issuance and distribution of the obligations, 
except underwriters' or dealers' discounts and commissions.
    Instruction. Insofar as practicable, the itemization shall include 
transfer agents' fees, cost of printing and engraving, and legal and 
accounting fees. The information may be given as subject to future 
contingencies. If the amounts of any items are not known, estimates, 
designated as such, shall be given.

                     Item 6. Application of proceeds

    Make a reasonably itemized statement of the purposes, so far as 
determinable, for which the net proceeds to the Bank from the 
obligations are to be used, and state the approximate amount to be used 
for each such purpose.

                    Item 7. Exhibits to be furnished

    The following documents shall be attached to or otherwise furnished 
as a part of the report:
    (a) Copies of the constituent instruments defining the rights 
evidenced by the obligations.
    (b) Copies of an opinion of counsel, in the English language, as to 
the legality of the obligations.
    (c) Copies of all material contracts pertaining to the issuance or 
distributions of the obligations, to which the Bank or any principal 
underwriter of the obligations is or is to be a party, except selling 
group agreements.
    (d) Copies of any prospectus or other sales literature to be 
provided by the Bank or any of the principal underwriters for general 
use in connection with the initial distribution of the obligations to 
the public.



PART 287_GENERAL RULES AND REGULATIONS PURSUANT TO SECTION 11(a) OF 
THE ASIAN DEVELOPMENT BANK ACT--Table of Contents



Sec.
287.1 Applicability of this part.
287.2 Periodic reports.
287.3 Reports with respect to proposed distribution of primary 
          obligations.
287.4 Preparation and filing of reports.
287.101 Schedule A--Information required in reports pursuant to Sec.  
          287.3.

    Authority: Sec. 11, 80 Stat. 73; 22 U.S.C. 285h.

    Source: AD1, 33 FR 259, Jan. 9, 1968, unless otherwise noted.



Sec.  287.1  Applicability of this part.

    This part (Regulation AD) prescribes the reports to be filed with 
the Securities and Exchange Commission by the Asian Development Bank 
pursuant to section 11(a) of the Asian Development Bank Act.



Sec.  287.2  Periodic reports.

    (a) Within 60 days after the end of each of its fiscal quarters, the 
Bank shall file with the Commission the following information:
    (1) Information as to any purchases or sales by the Bank of its 
primary obligations during such quarter.
    (2) Copies of the Bank's regular quarterly financial statement.
    (3) Copies of any material modifications or amendments during such 
quarter of any exhibits (other than (i) constituent documents defining 
the rights of holders of securities of other issuers guaranteed by the 
Bank, and (ii) loans and guaranty agreements to which the Bank is a 
party) previously filed with the Commission under any statute.
    (b) Copies of each annual report of the Bank to its Board of 
Governors shall be filed with the Commission within 10 days after the 
submission of such report to the Board of Governors.



Sec.  287.3  Reports with respect to proposed distribution of primary 
obligations.

    The Bank shall file with the Commission, on or prior to the date on 
which it sells any of its primary obligations in connection with a 
distribution of such obligations in the United States,

[[Page 620]]

a report containing the information and documents specified in Schedule 
A below. The term ``sell'' as used in this section and in Schedule A 
means the making of a completed sale or a firm commitment to sell.

[46 FR 48179, Oct. 1, 1981]



Sec.  287.4  Preparation and filing of reports.

    (a) Every report required by this regulation shall be filed under 
cover of a letter of transmittal which shall state the nature of the 
report and indicate the particular rule and subdivision thereof pursuant 
to which the report is filed. At least the original of every such letter 
shall be signed on behalf of the Bank by a duly authorized officer 
thereof.
    (b) Two copies of every report, including the letter of transmittal, 
exhibits and other papers and documents comprising a part of the report, 
shall be filed with the Commission.
    (c) The report shall be in the English language. If any exhibit or 
other paper or document filed with the report is in a foreign language, 
it shall be accompanied by a translation into the English language.
    (d) Reports pursuant to Rule 3 (17 CFR 287.3) may be filed in the 
form of a prospectus to the extent that such prospectus contains the 
information specified in Schedule A (17 CFR 287.101).



Sec.  287.101  Schedule A--Information required in reports pursuant
to Sec.  287.3.

    This schedule specifies the information and documents to be 
furnished in a report pursuant to Rule 3 (17 CFR 287.3) with respect to 
a proposed distribution of primary obligations of the Bank. Information 
not available at the time of filing the report shall be filed as 
promptly thereafter as possible.

    Item 1. Description of obligations. As to each issue of primary 
obligations of the Bank which is to be distributed, furnish the 
following information:
    (a) The title and date of the issue.
    (b) The interest rate and interest payment dates.
    (c) The maturity date or, if serial, the plan of serial maturities. 
If the maturity of the obligation may be accelerated, state the 
circumstances under which it may be so accelerated.
    (d) A brief outline of (1) any redemption provisions and (2) any 
amortization, sinking fund or retirement provisions, stating the annual 
amount, if any, which the Bank will be under obligation to apply for the 
satisfaction of such provisions.
    (e) If secured by any lien, the kind and priority thereof, and the 
nature of the property subject to the lien; if any other indebtedness is 
secured by an equal or prior lien on the same property, state the nature 
of such other liens.
    (f) If any obligations issued or to be issued by the Bank will, as 
to the payment of interest or principal, rank prior to the obligations 
to be distributed, describe the nature and extent of such priority.
    (g) Outline briefly any provisions of the governing instruments 
under which the terms of the obligations to be distributed may be 
amended or modified by the holders thereof or otherwise.
    (h) Outline briefly any other material provisions of the governing 
instruments pertaining to the rights of the holders of the obligations 
to be distributed or pertaining to the duties of the Bank with respect 
thereto.
    (i) The name and address of the fiscal or paying agent of the Bank, 
if any.
    Item 2. Distribution of obligations. (a) Outline briefly the plan of 
distribution of the obligations and state the amount of the 
participation of each principal underwriter, if any.
    (b) Describe any arrangements known to the Bank or to any principal 
underwriter named above designed to stabilize the market for the 
obligations for the account of the Bank or the principal underwriters as 
a group and indicate whether any transactions have already been effected 
to accomplish that purpose.
    (c) Describe any arrangements for withholding commissions, or 
otherwise, to hold each underwriter or dealer responsible for the 
distribution of his participation.
    Item 3. Distribution spread. The following information shall be 
given, in substantially the tabular form indicated, as to all 
obligations which are to be offered for cash (estimate, if necessary):

------------------------------------------------------------------------
                                                   Selling
                                       Price to   discounts    Proceeds
                                          the        and        to the
                                        public   commissions     bank
------------------------------------------------------------------------
Per unit.............................  ........  ...........  ..........
Total................................  ........  ...........  ..........
------------------------------------------------------------------------

    Item 4. Discounts and commissions to subunderwriters and dealers. 
State briefly the discounts and commission to be allowed or paid to 
dealers. If any dealers are to act in the capacity of subunderwriters 
and are to be allowed or paid any additional discounts or commissions 
for action in such capacity,

[[Page 621]]

a general statement to that effect will suffice, without giving the 
additional amounts to be so paid.
    Item 5. Other expenses of distribution. Furnish a reasonably 
itemized statement of all expenses of the Bank in connection with the 
issuance and distribution of the obligations, except underwriters' or 
dealers' discounts and commissions.
    Instruction. Insofar as practicable, the itemization shall include 
transfer agents' fees, cost of printing and engraving, and legal and 
accounting fees. The information may be given as subject to future 
contingencies. If the amounts of any items are not known, estimates, 
designated as such, shall be given.
    Item 6. Application of proceeds. Make a reasonably itemized 
statement of the purposes, so far as determinable, for which the net 
proceeds to the Bank from the obligations are to be used, and state the 
approximate amount to be used for each such purpose.
    Item 7. Exhibits to be furnished. The following documents shall be 
attached to or otherwise furnished as a part of the report:
    (a) Copies of the constituent instruments defining the rights 
evidenced by the obligations.
    (b) Copies of an opinion of counsel, in the English language, as to 
the legality of the obligations.
    (c) Copies of all material contracts pertaining to the issuance or 
distributions of the obligations, to which the Bank or any principal 
underwriter of the obligations is or is to be a party, except selling 
group agreements.
    (d) Copies of any prospectus or other sales literature to be 
provided by the Bank or any of the principal underwriters for general 
use in connection with the initial distribution of the obligations to 
the public.



PART 288_GENERAL RULES AND REGULATIONS PURSUANT TO SECTION 9(a) OF 
THE AFRICAN DEVELOPMENT BANK ACT--Table of Contents



Sec.
288.1 Applicability of this part.
288.2 Periodic reports.
288.3 Reports with respect to proposed distribution of primary 
          obligations.
288.4 Preparation and filing of reports.
288.101 Schedule A. Information required in reports pursuant to Sec.  
          288.3

    Authority: Sec. 9(a), 95 Stat. 743, 22 U.S.C. 290i-9a; sec. 19(a), 
48 Stat. 85, 15 U.S.C. 77s(a).

    Source: 50 FR 26191, June 25, 1985, unless otherwise noted.



Sec.  288.1  Applicability of this part.

    This part (Regulation AFDB) prescribes the reports to be filed with 
the Securities and Exchange Commission by the African Development Bank 
pursuant to section 9(a) of the African Development Bank Act.



Sec.  288.2  Periodic reports.

    (a) Within 60 days after the end of each of its fiscal quarters, the 
Bank shall file with the Commission the following information:
    (1) Information as to any purchases or sales by the Bank of its 
primary obligations during such quarter;
    (2) Two copies of the Bank's regular quarterly financial statement; 
and
    (3) Two copies of any material modifications or amendments during 
such quarter of any exhibits (other than (i) constituent documents 
defining the rights of holders of securities of other issuers guaranteed 
by the Bank, and (ii) loans and guaranty agreements to which the Bank is 
a party) previously filed with the Commission under any statute.
    (b) Two copies of each annual report of the Bank to its Board of 
Governors shall be filed with the Commission within 10 days after the 
submission of such report to the Board of Governors.



Sec.  288.3  Reports with respect to proposed distribution of primary
obligations.

    The Bank shall file with the Commission, on or prior to the date on 
which it sells any of its primary obligations in connection with a 
distribution of such obligations in the United States, a report 
containing the information and documents specified in Schedule A (17 CFR 
288.101). The term ``sell' as used in this section and in Schedule A 
means the making of a completed sale or a firm commitment to sell.



Sec.  288.4  Preparation and filing of reports.

    (a) Every report required by this regulation shall be filed under 
cover of a letter of transmittal which shall state the nature of the 
report and indicate the particular rule and subdivision thereof pursuant 
to which the report is filed. At least the original of every such letter 
shall be signed on behalf of

[[Page 622]]

the Bank by a duly authorized officer thereof.
    (b) Two copies of every report, including the letter of transmittal, 
exhibits and other papers and documents comprising a part of the report, 
shall be filed with the Commission.
    (c) The report shall be in the English language. If any exhibit or 
other paper or document filed with the report is in a foreign language, 
it shall be accompanied by a translation into the English language.
    (d) Reports pursuant to Rule 3 (17 CFR 288.3) may be filed in the 
form of prospectus to the extent that such prospectus contains the 
information specified in Schedule A (17 CFR 288.101).



Sec.  288.101  Schedule A. Information required in reports pursuant
to Sec.  288.3.

    This schedule specifies the information and documents to be 
furnished in a report pursuant to Rule 3 (17 CFR 288.3) with respect to 
a proposed distribution of primary obligations of the Bank. Information 
not available at the time of filing the report shall be filed as 
promptly thereafter as possible.

                   Item 1: Description of obligations.

    As to each issue of primary obligations of the Bank which is to be 
distributed, furnish the following information:
    (a) The title and date of the issue.
    (b) The interest rate and interest payment dates.
    (c) The maturity date or, if serial, the plan of serial maturities. 
If the maturity of the obligation may be accelerated, state the 
circumstances under which it may be so accelerated.
    (d) A brief outline of (i) any redemption provisions and (ii) any 
amortization, sinking fund or retirement provisions, stating the annual 
amount, if any, which the Bank will be under obligation to apply for the 
satisfaction of such provisions.
    (e) If secured by any lien, the kind and priority thereof, and the 
nature of the property subject to the lien; if any other indebtedness is 
secured by an equal or prior lien on the same property, state the nature 
of such other liens.
    (f) If any obligations issued or to be issued by the Bank will, as 
to the payment of interest or principal, rank prior to the obligations 
to be distributed, describe the nature and extent of such priority.
    (g) Outline briefly any provisions of the governing instruments 
under which the terms of the obligations to be distributed may be 
amended or modified by the holders thereof or otherwise.
    (h) Outline briefly any other material provisions of the governing 
instruments pertaining to the rights of the holders of the obligations 
to be distributed or pertaining to the duties of the Bank with respect 
thereto.
    (i) The name and address of the fiscal or paying agent of the Bank, 
if any.

                  Item 2. Distribution of obligations.

    (a) Outline briefly the plan of distribution of the obligations and 
state the amount of the participation of each principal underwriter, if 
any.
    (b) Describe any arrangements known to the Bank or to any principal 
underwriter named above designed to stabilize the market for the 
obligations for the acount of the Bank or the principal underwriters as 
a group and indicate whether any transactions have already been effected 
to accomplish that purpose.
    (c) Describe any arrangements for withholding commissions, or 
otherwise, to hold each underwriter or dealer responsible for the 
distribution of his participation.

                      Item 3. Distribution spread.

    The following information shall be given, in substantially the 
tabular form indicated, as to all obligations which are to be offered 
for cash (estimate, if necessary):

------------------------------------------------------------------------
                                                  Selling
                                     Price to    discounts   Proceeds to
                                    the public      and        the bank
                                                commissions
------------------------------------------------------------------------
Per Unit.........................  ...........  ...........  ...........
      Total......................  ...........  ...........  ...........
------------------------------------------------------------------------

   Item 4. Discounts and commissions to sub-underwriters and dealers.

    State briefly the discounts and commissions to be allowed or paid to 
dealers. If any dealers are to act in the capacity of sub-underwriters 
and are to be allowed or paid any additional discounts or commissions 
for acting in such capacity, a general statement to that effect will 
suffice, without giving the additional amounts to be so paid.

               Item 5. Other expenses of the distribution.

    Furnish a reasonably itemized statement of all expenses of the Bank 
in connection with the issuance and distribution of the obligations, 
except underwriters' or dealers' discounts and commissions.
    Instruction. Insofar as practicable, the itemization shall include 
transfer agents' fees, cost of printing and engraving, and legal and 
accounting fees. The information may be given as subject to future 
contingencies. If the amounts of any items are not known, estimates, 
designated as such, shall be given.

[[Page 623]]

                    Item 6. Application of proceeds.

    Make a reasonable itemized statement of the purposes, so far as 
determinable, for which the net proceeds to the Bank from the 
obligations are to be used, and state the approximate amount to be used 
for each such purpose.

                    Item 7. Exhibits to be furnished.

    The following documents shall be attached to or otherwise furnished 
as a part of the report:
    (a) Copies of the constituent instruments defining the rights 
evidenced by the obligations.
    (b) Copies of an opinion of counsel, in the English language, as to 
the legality of the obligations.
    (c) Copies of all material contracts pertaining to the issuance or 
distributions of the obligations, to which the Bank or any principal 
underwriter of the obligations is or is to be a party, except selling 
group agreements.
    (d) Copies of any prospectus or other sales literature to be 
provided by the Bank or any of the principal underwriters for general 
use in connection with the initial distribution of the obligations to 
the public.



PART 289_GENERAL RULES AND REGULATIONS PURSUANT TO SECTION 13(a) OF 
THE INTERNATIONAL FINANCE CORPORATION ACT--Table of Contents



Sec.
289.1 Applicability of this part.
289.2 Periodic reports.
289.3 Reports with respect to proposed distribution of primary 
          obligations.
289.4 Preparation and filing of reports.
289.101 Schedule A. Information required in reports pursuant to Sec.  
          289.3.

    Authority: 15 U.S.C. 77s(a); 22 U.S.C. 282m.

    Source: 56 FR 32079, July 15, 1991, unless otherwise noted.



Sec.  289.1  Applicability of this part.

    This part (Regulation IFC) prescribes the reports to be filed with 
the Securities and Exchange Commission by the International Finance 
Corporation (``IFC'') pursuant to section 13(a) of the International 
Finance Corporation Act.



Sec.  289.2  Periodic reports.

    (a) Within 45 days after the end of each of its fiscal quarters the 
IFC shall file with the Commission the following information:
    (1) Two copies of information as to any purchases or sales by the 
IFC of its primary obligations during such quarter;
    (2) Two copies of the IFC's regular quarterly financial statement; 
and
    (3) Two copies of any material modifications or amendments during 
such quarter of any exhibits (other than constituent documents defining 
the rights of holders of securities of other issuers guaranteed by the 
IFC, and loan and guaranty agreements to which the IFC is a party) 
previously filed with the Commission under any statute.
    (b) Each annual report of the IFC to its Board of Governors shall be 
filed with the Commission within 10 days after the submission of such 
report to the Board of Governors.



Sec.  289.3  Reports with respect to proposed distribution of primary 
obligations.

    The IFC shall file with the Commission, on or prior to the date on 
which it sells any of its primary obligations in connection with a 
distribution of such obligations in the United States, a report 
containing the information and documents specified in Schedule A of this 
part. The term ``sell'' as used in this section and in Schedule A of 
this Part means a completed sale, or a firm commitment to sell to an 
underwriter.



Sec.  289.4  Preparation and filing of reports.

    (a) Every report required by this regulation shall be filed under 
cover of a letter of transmittal which shall state the nature of the 
report and indicate the particular rule and subdivision thereof pursuant 
to which the report is filed. At least the original of every such letter 
shall be signed on behalf of the IFC by a duly authorized officer 
thereof.
    (b) Two copies of every report, including the letter of transmittal, 
exhibits and other papers and documents comprising a part of the report, 
shall be filed with the Commission.
    (c) The report shall be in the English language. If any exhibit or 
other paper or document filed with the report is in

[[Page 624]]

a foreign language, it shall be accompanied by a translation into the 
English language.
    (d) Reports pursuant to Sec.  289.3 may be filed in the form of a 
prospectus to the extent that such prospectus contains the information 
specified in Schedule A of this Part.



Sec.  289.101  Schedule A. Information required in reports pursuant
to Sec.  289.3.

    This schedule specifies the information and documents to be 
furnished in a report pursuant to Sec.  289.3 with respect to a proposed 
distribution of primary obligations of the IFC. Information not 
available at the time of filing the report shall be filed as promptly 
thereafter as possible.
    Item 1: Description of obligations.
    As to each issue of primary obligations of the IFC that is to be 
distributed, furnish the following information:
    (a) The title and date of the issue.
    (b) The interest rate and interest payments dates.
    (c) The maturity date or, if serial, the plan of serial maturities. 
If the maturity of the obligation may be accelerated, state the 
circumstances under which it may be so accelerated.
    (d) A brief outline of:
    (i) Any redemption provisions, and
    (ii) Any amortization, sinking fund or retirement provisions, 
stating the annual amount, if any, which the IFC will be under 
obligation to apply for the satisfaction of such provisions.
    (e) If secured by any lien, the kind and priority thereof, and the 
nature of the property subject to the lien; if any other indebtedness is 
secured by an equal or prior lien on the same property, state the nature 
of such other liens.
    (f) If any obligations issued or to be issued by the IFC will, as to 
the payment of interest and principal, rank prior to the obligations to 
be distributed, describe the nature and extent of such priority, to the 
extent known.
    (g) Outline briefly any provisions of the governing instruments 
under which the terms of the obligations to be distributed may be 
amended or modified by the holder thereof or otherwise.
    (h) Outline briefly any other material provisions of the governing 
instruments pertaining to the rights of the holders of the obligations 
to be distributed or pertaining to the duties of the IFC with respect 
thereto.
    (i) The name and address of the fiscal or paying agent of the IFC, 
if any.
    Item 2: Distribution of obligations.
    (a) Outline briefly the plan of distribution of the obligations and 
state the amount of the participation of each principal underwriter, if 
any.
    (b) Describe any arrangements known to the IFC or to any principal 
underwriter named above designed to stabilize the market for the 
obligations for the account of the IFC or the principal underwriters as 
a group and indicate whether any transactions have already been effected 
to accomplish that purpose.
    (c) Describe any arrangements for withholding commissions, or 
otherwise, to hold each underwriter or dealer responsible for the 
distribution of his participation.
    Item 3: Distribution spread.
    The following information shall be given, in substantially the 
tabular form indicated, as to all primary obligations that are to be 
offered for cash (estimate, if necessary):

------------------------------------------------------------------------
                                               Selling      Proceeds to
                                 Price to    discounts &  the IFC
------------------------------------------------------------------------
Per Unit.....................  ____         ____          ____
Total........................  ____         ____          ____
------------------------------------------------------------------------

    Item 4: Discounts and commissions to sub-underwriters and dealers.
    State briefly the discounts and commissions to be allowed or paid to 
dealers. If any dealers are to act in the capacity of sub-underwriters 
and are to be allowed or paid any additional discounts or commissions 
for acting in such capacity, a general statement to that effect will 
suffice, without giving the additional amounts to be so paid.
    Item 5: Other expenses of the distribution.

[[Page 625]]

    Furnish a reasonably itemized statement of all expenses of the IFC 
in connection with the issuance and distribution of the obligations, 
except underwriters' or dealers' discounts and commissions that are 
provided in Items 2, 3 and 4.

                               Instruction

    Insofar as practicable, the itemization shall include transfer 
agents' fees, cost of printing and engraving, and legal and accounting 
fees. The information may be given as subject to future contingencies. 
If the amounts of any items are not known, estimates, designated as 
such, shall be given.

    Item 6: Application of proceeds.
    Make a reasonably itemized statement of the purposes, so far as 
determinable, for which the net proceeds to the IFC from the obligations 
are to be used, and state the approximate amount to be used for each 
such purpose.
    Item 7: Exhibits to be furnished.
    A copy of each of the following documents shall be attached to or 
otherwise furnished as a part of the report:
    (a) Each constituent instrument defining the rights evidenced by the 
obligations.
    (b) An opinion of counsel, written in the English language, as to 
the legality of the obligations.
    (c) Each material contract pertaining to the issuance or 
distribution of the obligations, to which the IFC or any principal 
underwriter of the obligations is or is to be party, except selling 
group agreements.
    (d) Each prospectus or other sales literature to be provided by the 
IFC or any of the principal underwriters for general use in connection 
with the initial distribution of the obligations to the public.



PART 290_GENERAL RULES AND REGULATIONS PURSUANT TO SECTION 9(a) OF
THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT ACT--Table of Contents



Sec.
290.1 Applicability of this part.
290.2 Periodic reports.
290.3 Reports with respect to proposed distribution of obligations.
290.4 Preparation and filing of reports.
290.101 Schedule A. Information required in reports pursuant to Sec.  
          290.3.

    Authority: 15 U.S.C. 77s(a); 22 U.S.C. 2901-9.

    Source: 56 FR 32082, July 15, 1991, unless otherwise noted.



Sec.  290.1  Applicability of this part.

    This part (Regulation EBRD) prescribes the reports to be filed with 
the Securities and Exchange Commission by the European Bank for 
Reconstruction and Development (``EBRD'') pursuant to section 9(a) of 
the European Bank for Reconstruction and Development Act.



Sec.  290.2  Periodic reports.

    (a) Within 45 days after the end of each of its fiscal quarters the 
EBRD shall file with the Commission the following information:
    (1) Two copies of information as to any purchases or sales by the 
EBRD of its primary obligations during such quarter;
    (2) Two copies of the EBRD's regular quarterly financial statement; 
and
    (3) Two copies of any material modifications or amendments during 
such quarter of any exhibits (other than constituent documents defining 
the rights of holders of securities of other issuers guaranteed by the 
EBRD, and loan guaranty agreements to which the EBRD is a party) 
previously filed with the Commission under any statute.
    (b) Each annual report of the EBRD to its Board of Governors shall 
be filed with the Commission within 10 days after the submission of such 
report to the Board of Governors.



Sec.  290.3  Reports with respect to proposed distribution of obligations.

    The EBRD shall file with the Commission, on or prior to the date on 
which it sells any of its primary obligations in connection with a 
distribution of such obligations in the United States, a report 
containing the information and documents specified in Schedule A of this 
part. The term ``sell'' as used in this section and in Schedule A of 
this part means a completed sale, or a firm committment to sell to an 
underwriter.

[[Page 626]]



Sec.  290.4  Preparation and filing of reports.

    (a) Every report required by this regulation shall be filed under 
cover of a letter of transmittal which shall state the nature of the 
report and indicate the particular rule and subdivision thereof pursuant 
to which the report is filed. At least the original of every such letter 
shall be signed on behalf of the EBRD by a duly authorized officer 
thereof.
    (b) Two copies of every report, including the letter of transmittal, 
exhibits and other papers and documents comprising a part of the report, 
shall be filed with the Commission.
    (c) The report shall be in the English language. If any exhibit or 
other paper or document filed with the report is in a foreign language, 
it shall be accompanied by a translation into the English language.
    (d) Reports pursuant to Sec.  290.3 may be filed in the form of a 
prospectus to the extent that such prospectus contains the information 
specified in Schedule A of this Part.



Sec.  290.101  Schedule A. Information required in reports pursuant to
Sec.  290.3.

    This schedule specifies the information and documents to be 
furnished in a report pursuant to Sec.  290.3 with respect to a proposed 
distribution of primary obligations of the EBRD. Information not 
available at the time of filing the report shall be filed as promptly 
thereafter as possible.
    Item 1: Description of obligations.
    As to each issue of primary obligations of the EBRD that is to be 
distributed, furnish the following information:
    (a) The title and date of the issue.
    (b) The interest rate and interest payment dates.
    (c) The maturity date or, if serial, the plan of serial maturities. 
If the maturity of the obligation may be accelerated, state the 
circumstances under which it may be so accelerated.
    (d) A brief outline of:
    (i) Any redemption provisions and
    (ii) Any amortization, sinking fund or retirement provisions, 
stating the annual amount, if any, which the EBRD will be under 
obligation to apply for the satisfaction of such provisions.
    (e) If secured by any lien, the kind and priority thereof, and the 
nature of the property subject to the lien; if any other indebtedness is 
secured by an equal or prior lien on the same property, state the nature 
of such other liens.
    (f) If any obligations issued or to be issued by the EBRD will, as 
to the payment of interest and principal, rank prior to the obligations 
to be distributed, describe the nature and extent of such priority, to 
the extent known.
    (g) Outline briefly any provisions of the governing instruments 
under which the terms of the obligations to be distributed may be 
amended or modified by the holders thereof or otherwise.
    (h) Outline briefly any other material provisions of the governing 
instruments pertaining to the rights of the holders of the obligations 
to be distributed or pertaining to the duties of the EBRD with respect 
thereto.
    (i) The name and address of the fiscal or paying agent of the EBRD, 
if any.
    Item 2: Distribution of obligations.
    (a) Outline briefly the plan of distribution of obligations and 
state the amount of the participation of each principal underwriter, if 
any.
    (b) Describe any arrangements known to the EBRD or to any principal 
underwriter named above designed to stabilize the market for the 
obligations for the account of the EBRD or the principal underwriters as 
a group and indicate whether any transactions have already been effected 
to accomplish that purpose.
    (c) Describe any arrangements for withholding commissions, or 
otherwise, to hold each underwriter or dealer responsible for the 
distribution of his participation.
    Item 3: Distribution spread.
    The following information shall be given, in substantially the 
tabular form indicated, as to all primary obligations that are to be 
offered for cash (estimate, if necessary):

------------------------------------------------------------------------
                                              Selling
                                 Price to   discounts &  Proceeds to the
                                the public  commissions  EBRD
------------------------------------------------------------------------
Per Unit.....................  ____         ____         ____
Total........................  ____         ____         ____
------------------------------------------------------------------------


[[Page 627]]

    Item 4: Discounts and commissions to sub-underwriters and dealers.
    State briefly the discounts and commissions to be allowed or paid to 
dealers. If any dealers are to act in the capacity of sub-underwriters 
and are to be allowed or paid any additional discounts or commissions 
for acting in such capacity, a general statement to that effect will 
suffice, without giving the additional amounts to be so paid.
    Item 5: Other expenses of the distribution.
    Furnish a reasonably itemized statement of all expenses of the EBRD 
in connection with the issuance and distribution of the obligations, 
except underwriters' or dealers' discounts and commissions that are 
provided in Items 2, 3 and 4.

                               Instruction

    Insofar as practicable, the itemization shall include transfer 
agents' fees, cost of printing and engraving, and legal and accounting 
fees. The information may be given as subject future contingencies. If 
the amounts of any items are not known, estimates, designated as such, 
shall be given.

    Item 6: Application of proceeds.
    Make a reasonably itemized statement of the purposes, so far as 
determinable, for which the net proceeds to the EBRD from the 
obligations are to be used, and state the approximate amount to be used 
for each such purpose.
    Item 7: Exhibits to be furnished.
    A copy of each of the following documents shall be attached to or 
otherwise furnished as a part of the report:
    (a) Each constituent instrument defining the rights evidenced by the 
obligations.
    (b) An opinion of counsel, written in the English language, as to 
the legality of the obligations.
    (c) Each material contract pertaining to the issuance or 
distribution of the obligations, to which the EBRD or any principal 
underwriter of the obligations is or is to be a party, except selling 
group agreements.
    (d) Any prospectus or other sales literature to be provided by the 
EBRD or any of the principal underwriters for general use in connection 
with the initial distribution of the obligations to the public.



PART 300_RULES OF THE SECURITIES INVESTOR PROTECTION CORPORATION-
-Table of Contents



           Accounts of ``Separate'' Customers of SIPC Members

Sec.
300.100 General.
300.101 Individual accounts.
300.102 Accounts held by executors, administrators, guardians, etc.
300.103 Accounts held by a corporation, partnership or unincorporated 
          association.
300.104 Trust accounts.
300.105 Joint accounts.

             Accounts Introduced by Other Brokers or Dealers

300.200 General.
300.201 Accounts introduced by same or different broker or dealer.

         Closeout or Completion of Open Contractual Commitments

300.300 Definitions.
300.301 Contracts to be closed out or completed.
300.302 Mechanics of closeout or completion.
300.303 Report to trustee.
300.304 Retained rights of brokers or dealers.
300.305 Excluded contracts.
300.306 Completion or closeout pursuant to SIPC direction.
300.307 Completion with cash or securities of customer.
300.400 Satisfaction of customer claims for standardized options.

Rules Relating to Satisfaction of a ``Claim for Cash'' or a ``Claim for 
                              Securities''

300.500 General.
300.501 Claim for cash.
300.502 Claim for securities.
300.503 Voidable securities transactions.

        Rules Relating to Supplemental Report on SIPC Membership

300.600 Rules relating to supplemental report on SIPC membership.

    Authority: 15 U.S.C. 78ccc.

    Source: 44 FR 5077, Jan. 25, 1979, unless otherwise noted.
    Note: The numbers to the right of the decimal points correspond with 
the respective rule numbers of the rules of the Securities Investor 
Protection Corporation (hereinafter referred to as ``SIPC'').

    Explanatory Note: Pursuant to section 3(e)(2)(D) of the Securities 
Investor Protection Act of 1970 (hereinafter referred to as

[[Page 628]]

``the Act''), the Securities and Exchange Commission (hereinafter 
referred to as ``the Commission'') shall approve a proposed rule change 
submitted by the Securities Investor Protection Corporation if it finds 
that such proposed rule change is in the public interest and is 
consistent with the purposes of the Act, and any proposed rule change so 
approved shall be given force and effect as if promulgated by the 
Commission. The rules of this part 300 have been so approved.

           Accounts of ``Separate'' Customers of SIPC Members



Sec.  300.100  General.

    (a) For the purpose of sections 9(a)(2) and 16(12) of the Securities 
Investor Protection Act (hereinafter referred to as ``the Act''), these 
rules will be applied in determining what accounts held by a person with 
a member of SIPC (hereinafter called a ``member'') are to be deemed 
accounts held in a capacity other than his individual capacity.
    (b) Accounts held by a customer in different capacities, as 
specified by these rules, shall be deemed to be accounts of ``separate'' 
customers.
    (c) A ``person'' as used in these rules includes, but is not limited 
to, an individual, a corporation, a partnership, an association, a joint 
stock company, a trust, an unincorporated organization, or a government 
or political subdivision thereof.
    (d) The burden shall be upon the customer to establish each capacity 
in which he claims to hold accounts separate from his individual 
capacity.



Sec.  300.101  Individual accounts.

    (a) Except as otherwise provided in these rules, all accounts held 
with a member by a person in his own name, and those which under these 
rules are deemed his individual accounts, shall be combined so as to 
constitute a single account of a separate customer.
    (b) An account held with a member by an agent or nominee for another 
person as a principal or beneficial owner shall, except as otherwise 
provided in these rules, be deemed to be an individual account of such 
principal or beneficial owner.



Sec.  300.102  Accounts held by executors, administrators, guardians, etc.

    (a) Accounts held with a member in the name of a decedent or in the 
name of his estate or in the name of the executor or administrator of 
the estate of the decedent shall be combined so as to constitute a 
single account of a separate customer.
    (b) An account held with a member by a guardian, custodian, or 
conservator for the benefit of a ward or for the benefit of a minor 
under the Uniform Gifts to Minors Act or in a similar capacity shall be 
deemed to be held by such guardian, custodian, or conservator in a 
different capacity from any account or accounts maintained by such 
person in his individual capacity.



Sec.  300.103  Accounts held by a corporation, partnership or unincorporated 
association.

    A corporation, partnership or unincorporated association holding an 
account with a member shall be deemed to be a separate customer distinct 
from the person or persons owning such corporation or comprising such 
partnership or unincorporated association if on the filing date it 
existed for a purpose other than primarily to obtain or increase 
protection under the Act.



Sec.  300.104  Trust accounts.

    (a) A trust account held with a member shall be deemed a 
``qualifying trust account'' if it is held on behalf of a valid and 
subsisting express trust created by a written instrument. No account 
held on behalf of a trust that on the filing date existed primarily to 
obtain or increase protection under the Act shall be deemed to be a 
qualifying trust account.
    (b) A qualifying trust account held with a member shall be deemed 
held by a separate customer of the member, distinct from the trustee, 
the testator or his estate, the settlor, or any beneficiary of the 
trust.
    (c) Any account held with a member on behalf of a trust which does 
not meet the requirements of paragraph (a) of this rule shall be deemed 
to be an individual account of the settlor of the trust on behalf of 
which the account is held.

[[Page 629]]



Sec.  300.105  Joint accounts.

    (a) A joint account shall be deemed to be a ``qualifying joint 
account'' if it is owned jointly, whether by the owners thereof as joint 
tenants with the right of survivorship, as tenants by the entirety or as 
tenants in common, or by husband and wife as community property, but 
only if each co-owner possesses authority to act with respect to the 
entire account.
    (b) Subject to paragraph (c) of this rule, each qualifying joint 
account with a member shall be deemed held by one separate customer of 
the member.
    (c) All qualifying joint accounts with a member owned by the same 
persons shall be deemed held by the same customer so that the maximum 
protection afforded to such accounts in the aggregate shall be the 
protection afforded to one separate customer of the member
    (d) A joint account with a member which does not meet the 
requirements of paragraph (a) of this rule shall be deemed to be an 
individual or qualifying joint account of the co-owner or co-owners 
having the exclusive power to act with respect to it.

             Accounts Introduced by Other Brokers or Dealers



Sec.  300.200  General.

    A person having one or more accounts cleared by the member on a 
fully disclosed basis for one or more introducing brokers or dealers is 
a customer of the member and shall be protected with respect to such 
account or accounts without regard to the protection available for any 
other account or accounts he may have with the member.



Sec.  300.201  Accounts introduced by same or different broker or dealer.

    All accounts of a person which are introduced by the same broker or 
dealer shall be combined and protected as the single account of a 
separate customer, unless such accounts are maintained in different 
capacities as specified in Sec. Sec.  300.100 through 300.105; accounts 
introduced by different brokers or dealers shall be protected 
separately.

         Closeout or Completion of Open Contractual Commitments

    Authority: Sec. 3, 6(d), Pub. L. 91-598, 84 Stat. 1636 (15 U.S.C. 
78ccc, 78fff(d)), as amended by secs. 3, 5, 9, Pub. L. 95-283, 92 Stat. 
249.

    Source: Sections 300.300 through 300.307 appear at 44 FR 21211, Apr. 
9, 1979, unless otherwise noted.



Sec.  300.300  Definitions.

    For the purpose of these rules, adopted pursuant to section 8(e) of 
the Securities Investor Protection Act of 1970, as amended (hereinafter 
referred to as ``the Act''):
    (a) The term failed to receive shall mean a contractual commitment 
of the debtor made in the ordinary course of business to pay to another 
broker or dealer the contract price in cash upon receipt from such 
broker or dealer of securities purchased: Provided, That the respective 
obligations of the parties remained outstanding until the close of 
business on the filing date as defined in section 16(7) of the Act 
(hereinafter referred to as the ``filing date'').
    (b) The term failed to deliver shall mean a contractual commitment 
of the debtor, made in the ordinary course of business, to deliver 
securities to another broker or dealer against receipt from such broker 
or dealer of the contract price in cash: Provided, That the respective 
obligations of the parties remained outstanding until the close of 
business on the filing date.
    (c) The term open contractual commitment shall mean a failed to 
receive or a failed to deliver which had a settlement date prior to the 
filing date and the respective obligations of the parties remained 
outstanding on the filing date or had a settlement date which occurs on 
or within three business days subsequent to the filing date: Provided, 
however, That the term ``open contractual commitment'' shall not include 
any contractual commitment for which the security which is the subject 
of the trade had not been issued by the issuer as of the trade date.
    (d) The term customer shall mean a person (other than a broker or 
dealer) in whose behalf a broker or dealer has executed a transaction 
out of which arose an open contractual commitment with the debtor, but 
shall not include

[[Page 630]]

any person to the extent that such person at the filing date (1) had a 
claim for property which by contract, agreement of understanding, or by 
operation of law, was a part of the capital of the broker or dealer who 
executed such transaction or was subordinated to the claims of creditors 
of such broker or dealer, or (2) had a relationship with the debtor 
which is specified in section 9(a)(4) of the Act.

[44 FR 21211, Apr. 9, 1979, as amended at 62 FR 10451, Mar. 7, 1997]



Sec.  300.301  Contracts to be closed out or completed.

    An open contractual commitment shall be closed out or completed if:
    (a) The open contractual commitment:
    (1) Arises from a transaction in which a customer (as defined in 
Sec.  300.300) of the other broker or dealer had an interest. For the 
purposes of this rule a customer is deemed to have an interest in a 
transaction if (i) the other broker was acting as agent for the customer 
or (ii) the other dealer was not a market maker in the security 
involved, to the extent such other dealer held a firm order from the 
customer and in connection therewith: In the case of a buy order, prior 
to executing such customer's order purchased as principal the same 
number of shares or purchased shares to accumulate the number of shares 
necessary to complete the order; or in the case of a sell order, prior 
to executing such customer's order sold the same number of shares or a 
portion thereof; and
    (2)(i) Had a settlement date on or within 30 calendar days prior to 
the filing date and the respective obligations of the parties remained 
outstanding on the filing date or had a settlement date which occurs on 
or within three business days subsequent to the filing date; and
    (ii) Had a trade date on or within three business days prior to such 
settlement date; and
    (b) The other broker or dealer can establish to the satisfaction of 
the trustee through appropriate documentation that:
    (1) In the case of a broker or dealer who maintains his records on a 
specific identification basis:
    (i) The open contractual commitment arose out of a transaction in 
which his customer had such an interest, and
    (ii) In the case of a failed to deliver of the debtor, as of the 
filing date such broker's or dealer's customer's interest had not been 
sold to such broker or dealer; or
    (2) In the case of a broker or dealer who maintains his records 
other than on a specific identification basis, he has determined that a 
customer had such an interest in a manner consistent with that used by 
such broker or dealer prior to the filing date to allocate fails to 
receive and fails to deliver in computing the special reserve bank 
account requirement pursuant to the provisions of Rule 15c3-3 under the 
Securities Exchange Act of 1934 (17 CFR 240.15c3-3); or
    (3) In the case of a broker or dealer not described in paragraph 
(b)(1) or (2) of this section, he has made the determination in a manner 
which the trustee finds to be fair and equitable.

[44 FR 21211, Apr. 9, 1979, as amended at 62 FR 10451, Mar. 7, 1997]



Sec.  300.302  Mechanics of closeout or completion.

    (a) The closeout or completion of an open contractual commitment 
meeting the requirements of Sec.  300.301 shall be effected only:
    (1) By the buy-in or sell-out of the commitment by the other broker 
or dealer in accordance with the usual trade practices initiated by the 
other broker or dealer within or promptly upon the expiration of a 
period of 30 calendar days after settlement date; or
    (2) At the option of the trustee by the delivery of securities 
against receipt of the contract price or payment of the contract price 
against the receipt of the securities at any time within 30 calendar 
days after settlement date unless the commitment previously has been 
bought-in or sold-out in accordance with paragraph (a)(1) of this 
section; or
    (3) In the event of the refusal of the other broker or dealer to 
accept completion of an open contractual commitment in accordance with 
paragraph (a)(2) of this section, or the failure of the other broker or 
dealer to promptly

[[Page 631]]

buy-in or sell-out a commitment in accordance with paragraph (a)(1) of 
this section, or in the event of the failure of the other broker or 
dealer to provide the trustee with appropriate documentation as required 
by Sec.  300.303, by delivery of securities against receipt of the 
contract price or payment of the contract price against receipt of 
securities, or the buy-in or sell-out of the commitment or cancellation 
of the commitment or otherwise, as may be appropriate, as the trustee in 
his discretion will most benefit the estate of the debtor.
    (b) In the event of a close-out of an open contractual commitment 
pursuant to paragraph (a)(1) of this section, the money differences 
resulting from such close-out shall be payable by the other broker or 
dealer to the trustee or by the trustee to the other broker or dealer, 
whichever would be entitled to receive such difference under the usual 
trade practices: Provided, however, (1) That prior to the payment of any 
such money difference by the trustee to such other broker or dealer with 
respect to transactions executed by such other broker or dealer for any 
separate customer account, all open contractual commitments with respect 
to such account which meet the requirements of Sec.  300.301 must have 
been completed by delivery of securities against receipt of the contract 
price or by payment of the contract price against receipt of the 
securities in conformity with paragraph (a)(2) of this section, or by 
buy-in or sell-out in conformity with paragraph (a)(1) of this section, 
and (2) that the net amount so payable by the trustee to the other 
broker or dealer shall not exceed $40,000 with respect to any separate 
customer account.



Sec.  300.303  Report to trustee.

    Promptly upon the expiration of 30 calendar days after the filing 
date, or if by the expiration of such 30-day period notice pursuant to 
section 8(a) of the Act of the commencement of proceedings has not been 
published, then as soon as practicable after publication of such notice, 
a broker or dealer who had executed transactions in securities out of 
which arose open contractual commitments with the debtor shall furnish 
to the trustee such information with respect to the buy-in, sell-out or 
other status of open contractual commitments as called for by Forms 300-
A, B and C (Sec. Sec.  301.300a-301.300c of this chapter) including 
appropriate supporting documentation and schedules.



Sec.  300.304  Retained rights of brokers or dealers.

    (a) Nothing stated in these rules shall be construed to prejudice 
the right of a broker or dealer to any claim against the debtor's 
estate, or the right of the trustee to make any claim against a broker 
or dealer, with respect to a commitment of the debtor which was 
outstanding on the filing date, but (1) which is not described in Sec.  
300.300(c), or (2) which, although described in Sec.  300.300(c), does 
not meet the requirements specified in Sec.  300.301 or was not closed 
out of completed in accordance with Sec.  300.302 or was not reported to 
the trustee in conformity with Sec.  300.303 or was not supported by 
appropriate documentation.
    (b) Nothing stated in these rules shall be construed to prejudice 
the right of a broker or dealer to a claim against the debtor's estate 
for the amount by which the money difference due the broker or dealer 
upon a buy-in or sell-out may exceed the amount paid by the trustee to 
such broker or dealer.



Sec.  300.305  Excluded contracts.

    Notwithstanding the fact that an open contractual commitment 
described in Sec.  300.300(c) meets the requirements of Sec.  300.301 
and the other requirements of these rules, a court shall not be 
precluded from canceling such commitment, awarding damages, or granting 
such other remedy as it shall deem fair and equitable if, on application 
of the trustee or SIPC, it determines that such commitment was not 
entered into in the ordinary course of business or was entered into by 
the debtor, or the broker or dealer or his customer, for the purposes of 
creating a commitment in contemplation of a liquidation proceeding under 
the Act. Such a determination shall be made after notice and opportunity 
for hearing by the debtor, such broker or dealer, or such customer, and 
may be made before or after the delivery of securities or payment of the 
contract price or before or

[[Page 632]]

after any buy-in or sell-out of the open contractual commitment, or 
otherwise.



Sec.  300.306  Completion or closeout pursuant to SIPC direction.

    In its discretion SIPC may, in order to prevent a substantial 
detrimental impact upon the finanical condition of one or more brokers 
or dealers, direct the closeout or completion of an open contractual 
commitment, irrespective of whether it is described in Sec.  300.300(c) 
or meets the requirements of Sec.  300.301 or has been reported in 
conformity with Sec.  300.303 or is supported by appropriate 
documentation. SIPC shall consult with the Securities and Exchange 
Commission before SIPC makes any determinations under this section.



Sec.  300.307  Completion with cash or securities of customer.

    The trustee may, if authorized by the court, complete an open 
contractual commitment of the debtor, regardless of whether it is 
described in Sec.  300.300(c) or meets the requirements of Sec.  300.301 
or has been reported to the trustee in conformity with Sec.  300.303, to 
the extent that such commitment is completed with customer name 
securities of the customer of the debtor for whose account the 
commitment was made, or with cash or securities paid or delivered by or 
for the account of such customer to the debtor or trustee after the 
filing date.



Sec.  300.400  Satisfaction of customer claims for standardized options.

    (a) For the purpose of sections 7(b)(1), 8 (b) and (d), and 16(11) 
of the Securities Investor Protection Act (hereinafter referred to as 
``the Act''), this rule will be applied in determining what a customer 
will receive in either (1) a liquidation proceeding pursuant to the Act 
or (2) a direct payment procedure pursuant to section 10 of the Act, in 
satisfaction of a claim based upon Standardized Options positions.
    (b) As promptly as practicable after the initiation of a liquidation 
proceeding or a direct payment procedure under the Act, the trustee in a 
liquidation proceeding, or SIPC in a direct payment procedure, shall 
liquidate or cause to be liquidated, by sale or purchase, all 
Standardized Options positions held for the accounts of customers except 
to the extent that the trustee, with SIPC's consent, or SIPC as trustee, 
as the case may be, has arranged or is able promptly to arrange, a 
transfer of some or all of such positions to another SIPC member.
    (c) A trustee in a liquidation proceeding, or SIPC in a direct 
payment procedure, shall calculate the dollar amount of all Standardized 
Options positions held for the account of a customer in accordance with 
section 16(11) of the Act, and credit or debit, as appropriate, the 
dollar amount so calculated to the account of such customer.
    (d) Notwithstanding paragraph (b) of this section, neither the 
trustee in a liquidation proceeding nor SIPC in a direct payment 
procedure shall be required under this rule to liquidate any short 
position in Standardized Options covered by the deposit of (1) the 
underlying securities, in the case of a call option, or (2) treasury 
bills, in the case of a put option, by or on behalf of a customer with a 
bank or other depository. Any such positions that are not liquidated 
shall be excluded from the calculation provided for in paragraph (c) of 
this section.
    (e) In no event will Standardized Options positions be delivered to 
or on behalf of customers in satisfaction of claims pursuant to section 
7(b)(1) of the Act except to the extent that such positions have been 
transferred as provided in paragraph (b) of this section.
    (f) In no event will Standardized Options be purchased for delivery 
to customers pursuant to section 8(d) of the Act.
    (g) This rule shall not be construed as limiting or restricting in 
any way the exercise of any right of a broker or registered clearing 
agency to liquidate or cause the liquidation of Standardized Options 
Positions.
    (h) As used in this rule the term Standardized Options means options 
traded on a national securities exchange, an automated quotation system 
of a registered securities association, or a foreign securities 
exchange, and any other option that is a security under section 16(14) 
of the Act, 15 U.S.C. 78lll(14), and is issued by a securities clearing 
agency registered under

[[Page 633]]

section 17A of the Securities Exchange Act of 1934, 15 U.S.C. 78q-1, or 
a foreign securities clearing agency.

[48 FR 49840, Oct. 28, 1983, as amended at 79 FR 2781, Jan. 16, 2014]

Rules Relating to Satisfaction of a ``Claim for Cash'' or a ``Claim for 
                              Securities''

    Source: Sections 300.500 through 300.503 appear at 53 FR 10369, Mar. 
31, 1988, unless otherwise noted.



Sec.  300.500  General.

    These rules will be applied in determining whether a securities 
transaction gives rise to a ``claim for cash'' or a ``claim for 
securities'' on the filing date of either a liquidation proceeding 
pursuant to the Securities Investor Protection Act (hereinafter referred 
to as ``the Act'') or a direct payment procedure pursuant to section 10 
of the Act.



Sec.  300.501  Claim for cash.

    (a) Where a SIPC member (``Debtor'') held securities in an account 
for a customer, the customer has a ``claim for cash'' with respect to 
any authorized securities sale:
    (1) If the Debtor has sent written confirmation to the customer that 
the securities in question have been sold for or purchased from the 
customer's account; or
    (2) Whether or not such a written confirmation has been sent, if the 
securities in question have become the subject of a completed or 
executory contract for sale for or purchase from the account.
    (b) Where the Debtor held cash in an account for a customer, the 
customer has a ``claim for cash'', notwithstanding the fact that the 
customer has ordered securities purchased for the account, unless:
    (1) The Debtor has sent written confirmation to the customer that 
the securities in question have been purchased for or sold to the 
customer's account; or
    (2) Whether or not such a written confirmation has been sent, if the 
securities in question have become the subject of a completed or 
executory contract for purchase for or sale to the account.



Sec.  300.502  Claim for securities.

    (a) Where the Debtor held cash in an account for a customer, the 
customer has a ``claim for securities'' with respect to any authorized 
securities purchase:
    (1) If the Debtor has sent written confirmation to the customer that 
the securities in question have been purchased for or sold to the 
customer's account; or
    (2) Whether or not such a written confirmation has been sent, if the 
securities in question have become the subject of completed or executory 
contract for sale for or purchase from the account.
    (b) Where the Debtor held securities in an account for a customer, 
the customer has a ``claim for securities'', notwithstanding the fact 
that the customer has ordered the securities sold for the account, 
unless:
    (1) The Debtor has sent written confirmation to the customer that 
the securities in question have been sold for or purchased from the 
customer's account; or
    (2) Whether or not written confirmation of the purchase has been 
sent, if the securities in question have become the subject of completed 
or executory contract for sale for or purchase form the account.



Sec.  300.503  Voidable securities transactions.

    (a) Nothing in these Series 500 Rules shall be construed as limiting 
the rights of a trustee in a liquidation proceeding under the Act to 
avoid any securities transaction as fraudulent, preferential, or 
otherwise voidable under applicable law.
    (b) Nothing in these Series 500 Rules shall be construed as limiting 
the right of the Securities Investor Protection Corporation, in a direct 
payment procedure under section 10 of the Act, to reject a claim for 
cash or a claim for securities if such claim arose out of a securities 
transaction which could have been avoided in a liquidation proceeding 
under the Act.

[[Page 634]]

        Rules Relating to Supplemental Report on SIPC Membership



Sec.  300.600  Rules relating to supplemental report on SIPC membership.

    (a)(1) Who must file the supplemental report. Except as provided in 
paragraph (a)(2) of this section, a broker or dealer must file with 
SIPC, within 60 days after the end of its fiscal year, a supplemental 
report on the status of its membership in SIPC (commonly referred to as 
the ``Independent Accountants' Report on Applying Agreed-Upon 
Procedures'') if a rule of the Securities and Exchange Commission (SEC) 
requires the broker or dealer to file audited financial statements 
annually.
    (2) If the broker or dealer is a member of SIPC, the broker or 
dealer is not required to file the supplemental report for any year in 
which it reports $500,000 or less in total revenues in its annual 
audited statement of income filed with the SEC.
    (b) Requirements of the supplemental report. The supplemental report 
must cover the SIPC Annual General Assessment Reconciliation Form (Form 
SIPC-7) or the Certification of Exclusion From Membership Form (Form 
SIPC-3) for each year for which an SEC Rule requires audited financial 
statements to be filed. The supplemental report must include the 
following:
    (1) A copy of the form filed or a schedule of assessment payments 
showing any overpayments applied and overpayments carried forward, 
including payment dates, amounts, and name of SIPC collection agent to 
whom mailed; or
    (2) If exclusion from membership was claimed, a statement that the 
broker or dealer qualified for exclusion from membership under the 
Securities Investor Protection Act of 1970, as amended, and the date the 
Form SIPC-3 was filed with SIPC; and
    (3) An independent public accountant's report. The independent 
public accountant, who must be independent in accordance with the 
provisions of 17 CFR 210.2-01, must be engaged to perform the following 
agreed-upon procedures in accordance with standards of the Public 
Company Accounting Oversight Board (PCAOB):
    (i) Compare assessment payments made in accordance with the General 
Assessment Payment Form (Form SIPC-6) and applied to the General 
Assessment calculation on the Form SIPC-7 with respective cash 
disbursements record entries;
    (ii) For all or any portion of a fiscal year, compare amounts 
reflected in the audited financial statements required by an SEC rule 
with amounts reported in the Form SIPC-7;
    (iii) Compare adjustments reported in the Form SIPC-7 with 
supporting schedules and working papers supporting the adjustments;
    (iv) Verify the arithmetical accuracy of the calculations reflected 
in the Form SIPC-7 and in the schedules and working papers supporting 
any adjustments; and
    (v) Compare the amount of any overpayment applied with the Form 
SIPC-7 on which it was computed; or
    (vi) If exclusion from membership is claimed, compare the income or 
loss reported in the audited financial statements required by an SEC 
rule with the Form SIPC-3.

[81 FR 14374, Mar. 17, 2016]



PART 301_FORMS, SECURITIES INVESTOR PROTECTION CORPORATION-
-Table of Contents



Sec.
301.0-1 Availability of forms.

    Forms for Closeout or Completion of Open Contractual Commitments

301.300a Form 300-A, for summary of buy-ins or sell-outs of all open 
          contractual commitments.
301.300b Form 300-B, for report of all fails to deliver.
301.300c Form 300-C, for report of all fails to receive.

    Authority: Sec. 3, 84 Stat. 1636 (15 U.S.C. 78ccc), as amended by 
sec. 3, Pub. L. 95-283, 92 Stat. 249.

    Source: 44 FR 21213, Apr. 9, 1979, unless otherwise noted.
    Note: Pursuant to section 3(e)(2)(D) of the Securities Investor 
Protection Act of 1970 (the ``Act''), the Securities and Exchange 
Commission (``Commission'') shall approve a proposed rule change 
submitted by the Securities Investor Protection Corporation (``SIPC'') 
if the Commission finds the rule

[[Page 635]]

change is in the public interest and is consistent with the purposes of 
the Act. Any rule change so approved shall be given force and effect as 
if promulgated by the Commission. The forms described in this part have 
been so approved.



Sec.  301.0-1  Availability of forms.

    The forms prescribed for use under the Securities Investor 
Protection Act of 1970, as amended, (the ``Act'') and under part 300 of 
this chapter are identified and described in this part. Copies of these 
forms may be obtained upon request to, as appropriate, the Securities 
Investor Protection Corporation (``SIPC'') at 900 Seventeenth Street, 
NW., Washington, DC 20006, or the trustee appointed in a liquidation 
proceeding under section 5 of the Act.

    Forms for Closeout or Completion of Open Contractual Commitments



Sec.  301.300a  Form 300-A, for summary of buy-ins or sell-outs of
all open contractual commitments.

    This form shall be filed as required by Sec.  300.303 of this 
chapter with the trustee in a proceeding under section 5 of the Act by a 
broker-dealer who executed transactions out of which arose open 
contractual commitments, as defined by Sec.  300.300(c) of this chapter, 
with the debtor in the proceeding. The form shall be used to summarize 
the buy-ins and sell-outs of those open contractual commitments and 
shall be accompanied by the forms described in Sec. Sec.  301.300b and 
301.300c.

    Editorial Note: For Federal Register citations affecting Form 300-A, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  301.300b  Form 300-B, for report of all fails to deliver.

    This form shall be filed as required by Sec.  300.303 of this 
chapter with the trustee in a proceeding under section 5 of the Act by a 
broker-dealer who executed transactions out of which arose open 
contractual commitments, as defined by Sec.  300.300(c) of this chapter, 
with the debtor in the proceeding. The form shall be used to report all 
the fails to deliver, as defined by Sec.  300.300(b) of this chapter, 
that were open on the filing date, as well as any subsequent closeouts. 
This form shall accompany the form described in Sec.  300.300a.

    Editorial Note: For Federal Register citations affecting Form 300-B, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



Sec.  301.300c  Form 300-C, for report of all fails to receive.

    This form shall be filed as required by Sec.  300.303 of this 
chapter with the trustee in a proceeding under section 5 of the Act by a 
broker-dealer who executed transactions out of which arose open 
contractual commitments, as defined by Sec.  300.300(c) of this chapter, 
with the debtor in the proceeding. The form shall be used to report all 
the fails to receive, as defied by Sec.  300.300(a) of this chapter, 
that were open on the filing date, as well as any subsequent closeouts. 
This form shall accompany the form described in Sec.  300.300a.

    Editorial Note: For Federal Register citations affecting Form 300-C, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.



PART 302_ORDERLY LIQUIDATION OF COVERED BROKERS OR DEALERS-
-Table of Contents



Sec.
302.100 Definitions.
302.101 Appointment of receiver and trustee for covered broker or 
          dealer.
302.102 Notice and application for protective decree for covered broker 
          or dealer.
302.103 Bridge broker or dealer.
302.104 Claims of customers and other creditors of a covered broker or 
          dealer.
302.105 Priorities for unsecured claims against a covered broker or 
          dealer.
302.106 Administrative expenses of SIPC.
302.107 Qualified Financial Contracts.

    Authority: 12 U.S.C. 5385(h).

    Source: 85 FR 53668, Oct. 30, 2020, unless otherwise noted.



Sec.  302.100  Definitions.

    For purposes of Sec. Sec.  302.100 through 302.107, the following 
terms shall have the following meanings:
    (a) Appointment date. The term appointment date means the date of 
the appointment of the Corporation as receiver for a covered financial 
company that is a covered broker or dealer. This

[[Page 636]]

date shall constitute the filing date as that term is used in SIPA.
    (b) Bridge broker or dealer. The term bridge broker or dealer means 
a new financial company organized by the Corporation in accordance with 
12 U.S.C. 5390(h) for the purpose of resolving a covered broker or 
dealer.
    (c) Commission. The term Commission means the Securities and 
Exchange Commission.
    (d) Covered broker or dealer. The term covered broker or dealer 
means a covered financial company that is a qualified broker or dealer.
    (e) Customer. The term customer of a covered broker or dealer shall 
have the same meaning as in 15 U.S.C. 78lll(2) provided that the 
references therein to debtor shall mean the covered broker or dealer.
    (f) Customer name securities. The term customer name securities 
shall have the same meaning as in 15 U.S.C. 78lll(3) provided that the 
references therein to debtor shall mean the covered broker or dealer and 
the references therein to filing date shall mean the appointment date.
    (g) Customer property. The term customer property shall have the 
same meaning as in 15 U.S.C. 78lll(4) provided that the references 
therein to debtor shall mean the covered broker or dealer.
    (h) Net equity. The term net equity shall have the same meaning as 
in 15 U.S.C. 78lll(11) provided that the references therein to debtor 
shall mean the covered broker or dealer and the references therein to 
filing date shall mean the appointment date.
    (i) Qualified broker or dealer. The term qualified broker or dealer 
means a broker or dealer that (A) is registered with the Commission 
under Section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(b)); and (B) is a member of SIPC.
    (j) SIPA. The term SIPA means the Securities Investor Protection Act 
of 1970, 15 U.S.C. 78aaa-lll.
    (k) SIPC. The term SIPC means the Securities Investor Protection 
Corporation.
    (l) Corporation. The term Corporation means the Federal Deposit 
Insurance Corporation.
    (m) Dodd-Frank Act. The term Dodd-Frank Act means the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 
Stat. 1376, enacted July 21, 2010.



Sec.  302.101  Appointment of receiver and trustee for covered broker
or dealer.

    Upon the appointment of the Corporation as receiver for a covered 
broker or dealer, the Corporation shall appoint SIPC to act as trustee 
for the covered broker or dealer.



Sec.  302.102  Notice and application for protective decree for covered
broker or dealer.

    (a) SIPC and the Corporation, upon consultation with the Commission, 
shall jointly determine the terms of a notice and application for a 
protective decree that will be filed promptly with the Federal district 
court for the district within which the principal place of business of 
the covered broker or dealer is located; provided that if a case or 
proceeding under SIPA with respect to such covered broker or dealer is 
then pending, then such notice and application for a protective decree 
will be filed promptly with the Federal district court in which such 
case or proceeding under SIPA is pending. If such notice and application 
for a protective decree is filed on a date other than the appointment 
date, such filing shall be deemed to have occurred on the appointment 
date for the purposes of Sec. Sec.  302.100 through 302.107.
    (b) A notice and application for a protective decree may, among 
other things, provide for notice--
    (1) Of the appointment of the Corporation as receiver and the 
appointment of SIPC as trustee for the covered broker or dealer; and
    (2) That the provisions of Title II of the Dodd-Frank Act and any 
regulations promulgated thereunder may apply, including without 
limitation the following:
    (i) Any existing case or proceeding with respect to a covered broker 
or dealer under the Bankruptcy Code or SIPA shall be dismissed effective 
as of the appointment date and no such case or proceeding may be 
commenced with respect to a covered broker or dealer at

[[Page 637]]

any time while the Corporation is receiver for such covered broker or 
dealer;
    (ii) The revesting of assets in a covered broker or dealer to the 
extent that they have vested in any entity other than the covered broker 
or dealer as a result of any case or proceeding commenced with respect 
to the covered broker or dealer under the Bankruptcy Code, SIPA, or any 
similar provision of State liquidation or insolvency law applicable to 
the covered broker or dealer; provided that any such revesting shall not 
apply to assets held by the covered broker or dealer, including customer 
property, transferred prior to the appointment date pursuant to an order 
entered by the bankruptcy court presiding over the case or proceeding 
with respect to the covered broker or dealer;
    (iii) The request of the Corporation as receiver for a stay in any 
judicial action or proceeding (other than actions dismissed in 
accordance with paragraph (b)(i) of this section) in which the covered 
broker or dealer is or becomes a party for a period of up to 90 days 
from the appointment date;
    (iv) Except as provided in paragraph (b)(v) of this section with 
respect to qualified financial contracts, no person may exercise any 
right or power to terminate, accelerate or declare a default under any 
contract to which the covered broker or dealer is a party (and no 
provision in any such contract providing for such default, termination 
or acceleration shall be enforceable), or to obtain possession of or 
exercise control over any property of the covered broker or dealer or 
affect any contractual rights of the covered broker or dealer without 
the consent of the Corporation as receiver of the covered broker or 
dealer upon consultation with SIPC during the 90-day period beginning 
from the appointment date; and
    (v) The exercise of rights and the performance of obligations by 
parties to qualified financial contracts with the covered broker or 
dealer may be affected, stayed, or delayed pursuant to the provisions of 
Title II of the Dodd-Frank Act (including 12 U.S.C. 5390(c)) and the 
regulations promulgated thereunder.



Sec.  302.103  Bridge broker or dealer.

    (a) The Corporation, as receiver for one or more covered brokers or 
dealers or in anticipation of being appointed receiver for one or more 
covered broker or dealers, may organize one or more bridge brokers or 
dealers with respect to a covered broker or dealer.
    (b) If the Corporation establishes one or more bridge brokers or 
dealers with respect to a covered broker or dealer, then, subject to 
paragraph (d) of this section, the Corporation as receiver for such 
covered broker or dealer shall transfer all customer accounts and all 
associated customer name securities and customer property to such bridge 
brokers or dealers unless the Corporation determines, after consultation 
with the Commission and SIPC, that:
    (1) The customer accounts, customer name securities, and customer 
property are likely to be promptly transferred to one or more qualified 
brokers or dealers such that the use of a bridge broker or dealer would 
not facilitate such transfer to one or more qualified brokers or 
dealers; or
    (2) The transfer of such customer accounts to a bridge broker or 
dealer would materially interfere with the ability of the Corporation to 
avoid or mitigate serious adverse effects on financial stability or 
economic conditions in the United States.
    (c) The Corporation, as receiver for such covered broker or dealer, 
also may transfer any other assets and liabilities of the covered broker 
or dealer (including non-customer accounts and any associated property 
and any assets and liabilities associated with any trust or custody 
business) to such bridge brokers or dealers as the Corporation may, in 
its discretion, determine to be appropriate in accordance with, and 
subject to the requirements of, 12 U.S.C. 5390(h), including 12 U.S.C. 
5390(h)(1) and 5390(h)(5), and any regulations promulgated thereunder.
    (d) In connection with customer accounts transferred to the bridge 
broker or dealer pursuant to paragraph (b) of this section, claims for 
net equity shall not be transferred but shall remain with the covered 
broker or dealer. Customer property transferred from the covered broker 
or dealer, along with advances from SIPC, shall be allocated

[[Page 638]]

to customer accounts at the bridge broker or dealer in accordance with 
Sec.  302.104(a)(3). Such allocations initially may be based upon 
estimates, and such estimates may be based upon the books and records of 
the covered broker or dealer or any other information deemed relevant in 
the discretion of the Corporation, as receiver, in consultation with 
SIPC, as trustee. Such estimates may be adjusted from time to time as 
additional information becomes available. With respect to each account 
transferred to the bridge broker or dealer pursuant to paragraph (b) or 
(c) of this section, the bridge broker or dealer shall undertake the 
obligations of a broker or dealer only with respect to property 
transferred to and held by the bridge broker or dealer, and allocated to 
the account as provided in Sec.  302.104(a)(3), including any customer 
property and any advances from SIPC. The bridge broker or dealer shall 
have no obligations with respect to any customer property or other 
property that is not transferred from the covered broker or dealer to 
the bridge broker or dealer. The transfer of customer property to such 
an account shall have no effect on calculation of the amount of the 
affected accountholder's net equity, but the value, as of the 
appointment date, of the customer property and advances from SIPC so 
transferred shall be deemed to satisfy any such claim, in whole or in 
part.
    (e) The transfer of assets or liabilities held by a covered broker 
or dealer, including customer accounts and all associated customer name 
securities and customer property, assets and liabilities held by a 
covered broker or dealer for any non-customer creditor, and assets and 
liabilities associated with any trust or custody business, to a bridge 
broker or dealer, shall be effective without any consent, authorization, 
or approval of any person or entity, including but not limited to, any 
customer, contract party, governmental authority, or court.
    (f) Any succession to or assumption by a bridge broker or dealer of 
rights, powers, authorities, or privileges of a covered broker or dealer 
shall be effective without any consent, authorization, or approval of 
any person or entity, including but not limited to, any customer, 
contract party, governmental authority, or court, and any such bridge 
broker or dealer shall upon its organization by the Corporation 
immediately and by operation of law--
    (1) Be established and deemed registered with the Commission under 
the Securities Exchange Act of 1934;
    (2) Be deemed to be a member of SIPC; and
    (3) Succeed to any and all registrations and memberships of the 
covered broker or dealer with or in any self-regulatory organizations.
    (g) Except as provided in paragraph (f) of this section, the bridge 
broker or dealer shall be subject to applicable Federal securities laws 
and all requirements with respect to being a member of a self-regulatory 
organization and shall operate in accordance with all such laws and 
requirements and in accordance with its articles of association; 
provided, however, that the Commission may, in its discretion, exempt 
the bridge broker or dealer from any such requirements if the Commission 
deems such exemption to be necessary or appropriate in the public 
interest or for the protection of investors.
    (h) At the end of the term of existence of a bridge broker or 
dealer, any proceeds that remain after payment of all administrative 
expenses of such bridge broker or dealer and all other claims against 
such bridge broker or dealer shall be distributed to the receiver for 
the related covered broker or dealer.



Sec.  302.104  Claims of customers and other creditors of a covered
broker or dealer.

    (a) Trustee's role. (1) SIPC, as trustee for a covered broker or 
dealer, shall determine customer status, claims for net equity, claims 
for customer name securities, and whether property of the covered broker 
or dealer qualifies as customer property. SIPC, as trustee for a covered 
broker or dealer, shall make claims determinations in accordance with 
SIPA and with paragraph (a)(3) of this section, but such determinations, 
and any claims related thereto, shall be governed by the procedures set 
forth in paragraph (b) of this section.

[[Page 639]]

    (2) SIPC shall make advances in accordance with, and subject to the 
limitations imposed by, 15 U.S.C. 78fff-3. Where appropriate, SIPC shall 
make such advances by delivering cash or securities to the customer 
accounts established at the bridge broker or dealer.
    (3) Customer property held by a covered broker or dealer shall be 
allocated as follows:
    (i) First, to SIPC in repayment of advances made by SIPC pursuant to 
12 U.S.C. 5385(f) and 15 U.S.C. 78fff-3(c)(1), to the extent such 
advances effected the release of securities which then were apportioned 
to customer property pursuant to 15 U.S.C. 78fff(d);
    (ii) Second, to customers of such covered broker or dealer, or in 
the case that customer accounts are transferred to a bridge broker or 
dealer, then to such customer accounts at a bridge broker or dealer, who 
shall share ratably in such customer property on the basis and to the 
extent of their respective net equities;
    (iii) Third, to SIPC as subrogee for the claims of customers; and
    (iv) Fourth, to SIPC in repayment of advances made by SIPC pursuant 
to 15 U.S.C. 78fff-3(c)(2).
    (4) The determinations and advances made by SIPC as trustee for a 
covered broker or dealer under Sec. Sec.  302.100 through 302.107 shall 
be made in a manner consistent with SIPC's customary practices under 
SIPA. The allocation of customer property, advances from SIPC, and 
delivery of customer name securities to each customer or to its customer 
account at a bridge broker or dealer, in partial or complete 
satisfaction of such customer's net equity claims as of the close of 
business on the appointment date, shall be in a manner, including form 
and timing, and in an amount at least as beneficial to such customer as 
would have been the case had the covered broker or dealer been 
liquidated under SIPA. Any claims related to determinations made by SIPC 
as trustee for a covered broker or dealer shall be governed by the 
procedures set forth in paragraph (b) of this section.
    (b) Receiver's role. Any claim shall be determined in accordance 
with the procedures set forth in 12 U.S.C. 5390(a)(2)-(5) and the 
regulations promulgated by the Corporation thereunder, provided however, 
that--
    (1) Notice requirements. The notice of the appointment of the 
Corporation as receiver for a covered broker or dealer shall also 
include notice of the appointment of SIPC as trustee. The Corporation as 
receiver shall coordinate with SIPC as trustee to post the notice on 
SIPC's public website in addition to the publication procedures set 
forth in 12 CFR 380.33.
    (2) Procedures for filing a claim. The Corporation as receiver shall 
consult with SIPC, as trustee, regarding a claim form and filing 
instructions with respect to claims against the Corporation as receiver 
for a covered broker or dealer, and such information shall be provided 
on SIPC's public website in addition to the Corporation's public 
website. Any such claim form shall contain a provision permitting a 
claimant to claim status as a customer of the broker or dealer, if 
applicable.
    (3) Claims bar date. The Corporation as receiver shall establish a 
claims bar date in accordance with 12 U.S.C. 5390(a)(2)(B)(i) and any 
regulations promulgated thereunder by which date creditors of a covered 
broker or dealer, including all customers of the covered broker or 
dealer, shall present their claims, together with proof. The claims bar 
date for a covered broker or dealer shall be the date following the 
expiration of the six-month period beginning on the date a notice to 
creditors to file their claims is first published in accordance with 12 
U.S.C. 5390(a)(2)(B)(i) and any regulations promulgated thereunder. Any 
claim filed after the claims bar date shall be disallowed, and such 
disallowance shall be final, as provided by 12 U.S.C. 5390(a)(3)(C)(i) 
and any regulations promulgated thereunder, except that a claim filed 
after the claims bar date shall be considered by the receiver as 
provided by 12 U.S.C. 5390(a)(3)(C)(ii) and any regulations promulgated 
thereunder. In accordance with section 8(a)(3) of SIPA, 15 U.S.C. 78fff-
2(a)(3), any claim for net equity filed more than sixty days after the 
date the notice to creditors to file claims is first published need not 
be paid or satisfied in whole or in part out of customer property and, 
to the extent

[[Page 640]]

such claim is paid by funds advanced by SIPC, it shall be satisfied in 
cash or securities, or both, as SIPC, as trustee, determines is most 
economical to the receivership estate.
    (c) Decision period. The Corporation as receiver of a covered broker 
or dealer shall notify a claimant whether it allows or disallows the 
claim, or any portion of a claim or any claim of a security, preference, 
set-off, or priority, within the 180-day period set forth in 12 U.S.C. 
5390(a)(3)(A) and any regulations promulgated thereunder (as such 180-
day period may be extended by written agreement as provided therein) or 
within the 90-day period set forth in 12 U.S.C. 5390(a)(5)(B) and any 
regulations promulgated thereunder, whichever is applicable. In 
accordance with paragraph (a) of this section, the Corporation, as 
receiver, shall issue the notice required by this paragraph (c), which 
shall utilize the determination made by SIPC, as trustee, in a manner 
consistent with SIPC's customary practices in a liquidation under SIPA, 
with respect to any claim for net equity or customer name securities. 
The process established herein for the determination, within the 180-day 
period set forth in 12 U.S.C. 5390(a)(3)(A) and any regulations 
promulgated thereunder (as such 180-day period may be extended by 
written agreement as provided therein), of claims by customers of a 
covered broker or dealer for customer property or customer name 
securities shall constitute the exclusive process for the determination 
of such claims, and any procedure for expedited relief established 
pursuant to 12 U.S.C. 5390(a)(5) and any regulations promulgated 
thereunder shall be inapplicable to such claims.
    (d) Judicial review. The claimant may seek a judicial determination 
of any claim disallowed, in whole or in part, by the Corporation as 
receiver, including any claim disallowed based upon any determination(s) 
of SIPC as trustee made pursuant to Sec.  302.104(a), by the appropriate 
district or territorial court of the United States in accordance with 12 
U.S.C. 5390(a)(4) or (5), whichever is applicable, and any regulations 
promulgated thereunder.



Sec.  302.105  Priorities for unsecured claims against a covered broker
or dealer.

    Allowed claims not satisfied pursuant to Sec.  302.103(d), including 
allowed claims for net equity to the extent not satisfied after final 
allocation of customer property in accordance with Sec.  302.104(a)(3), 
shall be paid in accordance with the order of priority set forth in 12 
CFR 380.21 subject to the following adjustments:
    (a) Administrative expenses of SIPC incurred in performing its 
responsibilities as trustee for a covered broker or dealer shall be 
included as administrative expenses of the receiver as defined in 12 CFR 
380.22 and shall be paid pro rata with such expenses in accordance with 
12 CFR 380.21(c).
    (b) Amounts paid by the Corporation to customers or SIPC shall be 
included as amounts owed to the United States as defined in 12 CFR 
380.23 and shall be paid pro rata with such amounts in accordance with 
12 CFR 380.21(c).
    (c) Amounts advanced by SIPC for the purpose of satisfying customer 
claims for net equity shall be paid following the payment of all amounts 
owed to the United States pursuant to 12 CFR 380.21(a)(3) but prior to 
the payment of any other class or priority of claims described in 12 CFR 
380.21(a)(4) through (11).



Sec.  302.106  Administrative expenses of SIPC.

    (a) In carrying out its responsibilities, SIPC, as trustee for a 
covered broker or dealer, may utilize the services of third parties, 
including private attorneys, accountants, consultants, advisors, outside 
experts, and other third party professionals. SIPC shall have an allowed 
claim for administrative expenses for any amounts paid by SIPC for such 
services to the extent that such services are available in the private 
sector, and utilization of such services is practicable, efficient, and 
cost effective. The term administrative expenses of SIPC includes the 
costs and expenses of such attorneys, accountants, consultants, 
advisors, outside experts, and other third party professionals, and 
other expenses that would be allowable to a third party trustee under 15 
U.S.C. 78eee(b)(5)(A), including

[[Page 641]]

the costs and expenses of SIPC employees that would be allowable 
pursuant to 15 U.S.C. 78fff(e).
    (b) The term administrative expenses of SIPC shall not include 
advances from SIPC to satisfy customer claims for net equity.



Sec.  302.107  Qualified Financial Contracts.

    The rights and obligations of any party to a qualified financial 
contract to which a covered broker or dealer is a party shall be 
governed exclusively by 12 U.S.C. 5390, including the limitations and 
restrictions contained in 12 U.S.C. 5390(c)(10)(B), and any regulations 
promulgated thereunder.

                        PARTS 303	399 [RESERVED]

[[Page 643]]



                 CHAPTER IV--DEPARTMENT OF THE TREASURY




  --------------------------------------------------------------------

 SUBCHAPTER A--REGULATIONS UNDER SECTION 15C OF THE SECURITIES EXCHANGE 
                               ACT OF 1934
Part                                                                Page
400             Rules of general application................         645
401             Exemptions..................................         651
402             Financial responsibility....................         656
403             Protection of customer securities and 
                    balances................................         680
404             Recordkeeping and preservation of records...         688
405             Reports and audit...........................         693
420             Large position reporting....................         698
449             Forms, Section 15C of the Securities 
                    Exchange Act of 1934....................         711
 SUBCHAPTER B--REGULATIONS UNDER TITLE II OF THE GOVERNMENT SECURITIES 
                               ACT OF 1986
450             Custodial holdings of government securities 
                    by depository institutions..............         713
451-499

[Reserved]

[[Page 645]]



 SUBCHAPTER A_REGULATIONS UNDER SECTION 15C OF THE SECURITIES EXCHANGE 
                               ACT OF 1934





PART 400_RULES OF GENERAL APPLICATION--Table of Contents



Sec.
400.1 Scope of regulations.
400.2 Office responsible for regulations; filing of requests for 
          exemptions, for interpretations, and of other materials.
400.3 Definitions.
400.4 Information concerning associated persons of financial 
          institutions that are government securities brokers or 
          dealers.
400.5 Amendments to application for registration and to notice of status 
          as a government securities broker or dealer.
400.6 Notice of withdrawal from business as a government securities 
          broker or dealer by a financial institution.

    Authority: 15 U.S.C. 78o-5.

    Source: 52 FR 27926, July 24, 1987, unless otherwise noted.



Sec.  400.1  Scope of regulations.

    (a) Title I of the Government Securities Act of 1986 (Pub. L. 99-
571, 100 Stat. 3208) amends the Securities Exchange Act of 1934 (48 
Stat. 881-905; 15 U.S.C. chapter 2B) (``Act'') by adding section 15C, 
authorizing the Secretary of the Treasury to promulgate regulations 
concerning the financial responsibility, protection of customer 
securities and balances, recordkeeping and reporting of brokers and 
dealers in government securities. Those regulations constitute 
subchapter A of this chapter. Unless otherwise explicitly provided, all 
regulations in this subchapter apply to all government securities 
brokers or dealers, including registered brokers or dealers and 
financial institutions. Registered brokers or dealers include OTC 
derivatives dealers.
    (b) Section 15C(a)(1)(A) of the Act (15 U.S.C. 78o-5(a)(1)(A)) 
requires all government securities brokers and government securities 
dealers, except those who are brokers or dealers registered pursuant to 
section 15 or section 15B of the Act or financial institutions, to 
register with the Securities and Exchange Commission (``Commission''). 
Regulations concerning registration are at Sec.  240.15Ca2-1 et seq. of 
this title. The Commission is responsible for the interpretation of the 
definitions of government securities broker and government securities 
dealer and of the regulations at Sec.  240.15Ca2-1 et seq.
    (c) Section 15C(a)(1)(B)(i) of the Act (15 U.S.C. 78o-5(a)(1)(B)(i)) 
requires all government securities brokers or dealers that are also 
registered brokers or dealers to notify the Commission of their status 
as government securities brokers or dealers. Regulations concerning 
notice are at Sec.  240.15Ca1-1 of this title.
    (d) Section 15C(a)(1)(B)(i) of the Act also requires all government 
securities brokers or dealers that are financial institutions to notify 
the appropriate regulatory agency, as defined in section 3(a)(34)(G) of 
the Act (15 U.S.C. 78c(a)(34)(G)), of their status as government 
securities brokers or dealers. The form of notice, Form G-FIN, is at 
Sec.  449.1 of this chapter. Forms are available from the appropriate 
regulatory agency.
    (e) Section 104 of the Government Securities Act Amendments of 1993 
(Pub. L. 103-202, 107 Stat. 2344) amended Section 15C of the Act (15 
U.S.C. 78o-5) by adding a new subsection (f), authorizing the Secretary 
of the Treasury to adopt rules to require specified persons holding, 
maintaining or controlling a large position in to-be-issued or recently-
issued Treasury securities to report such a position and make and keep 
records related to such a position. Part 420 of this subchapter contains 
the rules governing large position reporting.

[52 FR 27926, July 24, 1987, as amended at 61 FR 48348, Sept. 12, 1996; 
71 FR 54410, Sept. 15, 2006]



Sec.  400.2  Office responsible for regulations; filing of requests for
exemptions, for interpretations and of other materials.

    (a) Office responsible. The regulations in this chapter are 
promulgated by the Assistant Secretary (Domestic Finance) pursuant to a 
delegation of authority from the Secretary of the

[[Page 646]]

Treasury. The office responsible for implementing the regulations, 
including interpretations and action on requests for exemption, 
classification, or modification, is the Office of the Commissioner, 
Bureau of the Fiscal Service.
    (b)(1) Exemptions and classifications. Section 15C(a)(4) of the Act 
(15 U.S.C. 78o-5(a)(4)) authorizes the Secretary to exempt any 
government securities broker or dealer or class thereof, conditionally 
or unconditionally, from the requirements of registration or regulations 
promulgated under section 15C. In addition, section 15C(b)(3) of the Act 
(15 U.S.C. 78o-5(b)(3)) provides for classification, by the Secretary, 
of government securities brokers or dealers and authorizes the whole or 
partial exemption of classes from rules under section 15C or the 
application of different standards to different classes.
    (2) Interpretations. Although the appropriate regulatory agencies, 
as defined in Sec.  400.3, and the self-regulatory organizations, as 
defined in section 3(a)(26) of the Act (15 U.S.C. 78c(a)(26)), have 
enforcement responsibility under section 15C of the Act, Treasury is 
responsible for interpretation of section 15C(b) of the Act (15 U.S.C. 
78o-5(b)) and related sections and for interpretation and amendment of 
the regulations under this chapter (with the exception of Forms G-FIN 
and G-FINW, Sec. Sec.  449.1 and 449.2 of this chapter, which are the 
responsibility of the Board of Governors of the Federal Reserve System 
[``Board'']).
    (c) Requests for interpretations, exemptions, classifications. (1) 
Interpretations under this chapter may be provided, at the discretion of 
the Department, to firms or individuals actually or potentially affected 
by the Act or regulations, or to their representatives.
    (2) Exemptions and classifications under sections 15C (a), (b) and 
(d) of the Act (15 U.S.C. 78o-5 (a), (b), and (d)) and related sections 
and Treasury regulations thereunder may be provided at the discretion of 
the Department and after consultation with the SEC and the Board, to 
firms or individuals actually or potentially affected by the Act or 
regulations, or to their representatives.
    (3) All requests for exemptions and classifications, and all 
requests for binding interpretations, shall be in writing, and shall 
conform to the following procedures.
    (i) The names of the company or companies and all other persons 
involved shall be stated. Letters pertaining to unnamed companies or 
persons or hypothetical situations will not be answered.
    (ii) The letter must contain a concise but complete statement of all 
material facts, a complete and accurate description of the entire 
transaction if the request is transactional (even though a request may 
apply to only a portion of a transaction), and a concise and unambiguous 
statement of the request, including precise statutory and regulatory 
citations.
    (iii) The letter shall indicate why the writer believes a problem 
exists or interpretation is needed, the writer's opinion on the matter, 
and the basis for such opinion.
    (iv) In addition to requests for confidential treatment under 
paragraph (c)(7)(ii) of this section, a person may request confidential 
treatment of information that is submitted as part of, or in support of, 
a request for interpretation, exemption, or classification. A separate 
request for confidential treatment and the basis for such request shall 
be submitted at the time the information for which confidential 
treatment is requested is submitted. The request for confidential 
treatment must specifically identify the information for which such 
confidential treatment is requested. To the extent practicable, the 
information should be segregated from information for which confidential 
treatment is not requested and should be clearly marked as confidential.
    (v) Information designated as confidential in accordance with 
paragraph (c)(3)(iv) of this section shall not be disclosed to a person 
requesting such information other than in accordance with the procedures 
outlined in the Department's regulations published at 31 CFR 1.6.
    (vi) An original and two copies of each request letter shall be 
submitted to the Office of the Commissioner, Government Securities 
Regulations Staff, Bureau of the Fiscal Service, 5th Floor, 401 14th 
Street SW., Washington, DC

[[Page 647]]

20227. The envelope shall be marked ``Government Securities Act 
Request.'' The letter shall indicate in the upper right hand corner of 
the first page the particular sections of the Act and of the regulations 
at issue.
    (4) A written response by the Department to a request filed as 
stated in paragraph (c)(3) of this section shall be binding, with 
respect to the requester, on the Department, but shall cease to be 
binding if the facts are not as stated in the request or, prospectively, 
if the Department issues a superseding interpretation. In responding to 
such a request, the Department will, where appropriate, consult with and 
may obtain the formal concurrence of the appropriate regulatory agencies 
or their staffs. The Department understands that even if formal 
concurrence is not received the appropriate regulatory agencies and 
self-regulatory organizations will give appropriate deference to binding 
interpretations of the Department. The Department also expects the SEC 
staff to reflect such interpretations in responding, pursuant to the 
established procedures of the Commission, to no-action requests 
concerning rules the SEC enforces.
    (5) The Department may decline to issue an interpretation for any 
reason and, in particular, may require that a requester make inquiry of 
its appropriate regulatory agency, the Commission or designated 
examining authority before the Department responds to a request.
    (6) The Department will also provide informal oral and written 
advice, but such advice is not binding on the Department or on any other 
agency or organization.
    (7)(i) Except as provided in paragraphs (c)(3)(iv) and (c)(7)(ii) of 
this section, every letter or other written communication requesting the 
Department to provide interpretive legal advice under the Act or to 
grant, deny or modify an exemption, classification or modification of 
the regulations, together with any written response thereto, shall be 
made available for inspection and copying as soon as practicable after 
the response has been sent or given to the person requesting it. These 
documents will be made available at the following location: Treasury 
Department Library, 1500 Pennsylvania Avenue NW., Annex, Room 1020, 
Washington, DC 20220.
    (ii) Any person submitting a letter or communication may also 
simultaneously submit a request that the letter or communication and the 
Department's response be accorded confidential treatment for a specified 
period of time not to exceed 120 days from the date the response has 
been made or given to such person. The request shall state the basis 
upon which the request for confidential treatment has been made. If the 
Department determines that the request for confidential treatment should 
be denied, the requester will be given 30 days to withdraw either the 
request for confidential treatment or the letter or communication 
requesting an interpretation, classification, or exemption.
    (d) Effect of Commission interpretations. Interpretations of the 
Commission and its staff (including no-action positions) and of the 
designated examining authorities, of any Commission regulation expressly 
adopted by reference in these regulations shall be of the same effect as 
if the regulation being interpreted were solely the Commission's 
regulation. However, in the event the Treasury has issued a formal 
interpretation on the subject, the Treasury understands that the 
Commission will give that interpretation appropriate deference, 
particularly with respect to both subsequent no-action positions and the 
continued validity of prior no-action positions.

[52 FR 27926, July 24, 1987, as amended at 53 FR 28984, Aug. 1, 1988; 72 
FR 54410, Sept. 15, 2006; 79 FR 38454, July 8, 2014]



Sec.  400.3  Definitions.

    Unless otherwise explicitly provided, in this subchapter and for the 
purposes of these regulations:
    Act means the Securities Exchange Act of 1934 (48 Stat. 881, 15 
U.S.C. chapter 2B, as amended);
    Appropriate regulatory agency has the meaning set out in section 
3(a)(34)(G) of the Act (15 U.S.C. 78c(a)(34)(G)), and, with respect to a 
financial institution for which an appropriate regulatory agency is not 
explicitly designated, the appropriate regulatory agency is the SEC;

[[Page 648]]

    Associated person means a person other than a person whose functions 
are solely clerical or ministerial:
    (1) Directly engaged in any of the following activities in either a 
supervisory or non-supervisory capacity:
    (i) Underwriting, trading or sales of government securities;
    (ii) Financial advisory or consultant services for issuers in 
connection with the issuance of government securities;
    (iii) Research or investment advice, other than general economic 
information or advice, with respect to government securities in 
connection with the activities described in paragraphs (c)(1)(i) and 
(c)(1)(ii) of this section;
    (iv) Activities other than those specifically mentioned which 
involve communication, directly or indirectly, with public investors in 
government securities in connection with the activities described in 
paragraphs (c)(1)(i) and (c)(1)(ii) of this section; or
    (2) Directly engaged in the following activities in a supervisory 
capacity:
    (i) Processing and clearance activities with respect to government 
securities;
    (ii) Maintenance of records involving any of the activities 
described in paragraph (c)(1) of this section;

                           Provided, however,

    (3) That in the case of a financial institution,
    (i) Persons whose government securities functions: (A) Consist 
solely of carrying out the financial institution's activities in a 
fiduciary capacity and (B) are subject to examination by the appropriate 
regulatory agency for compliance with requirements applicable to 
activities by the financial institution in a fiduciary capacity, shall 
not be considered ``associated persons'';
    (ii) Persons whose sole government securities activities are, 
without exercising any investment discretion and solely at the direction 
of customers, to receive and/or transmit customer orders to purchase or 
sell government securities, but who do not give investment advice or 
receive transaction-based compensation shall not be considered 
``associated persons''; and
    (iii) Directors and senior officers of the financial institution who 
may from time to time set broad policy guidelines affecting the 
financial institution as a whole that are not directly related to the 
conduct of the financial institution's government securities business 
are not considered to be ``directly engaged'' in the activities 
described in this paragraph (c);
    Board means the Board of Governors of the Federal Reserve System;
    Branch or agency of a foreign bank means a Federal branch or Federal 
agency of a foreign bank or a State branch or State agency of a foreign 
bank as such terms are used in the International Banking Act of 1978, 
Pub. L. 95-369, 92 Stat. 607;
    CFTC means the Commodity Futures Trading Commission;
    Commission or SEC means the Securities and Exchange Commission;
    Designated examining authority and Examining Authority mean (1) in 
the case of a registered government securities broker or dealer that 
belongs to only one self-regulatory organization, such self-regulatory 
organization, and (2) in the case of a registered government securities 
broker or dealer that belongs to more than one self-regulatory 
organization, the self-regulatory organization designated by the 
Commission pursuant to section 17(d) of the Act (15 U.S.C. 78q(d)) as 
the entity with responsibility for examining such registered government 
securities broker or dealer;
    Fiduciary capacity includes trustee, executor, administrator, 
registrar, transfer agent, guardian, assignee, receiver, managing agent, 
and any other similar capacity involving the sole or shared exercise of 
discretion by a financial institution having fiduciary powers that is 
supervised by a Federal or state financial institution regulatory 
agency;
    Financial institution has the meaning set out in section 3(a)(46) of 
the Act (15 U.S.C. 78c(a)(46)), and such term explicitly does not 
include a subsidiary or affiliate of an institution described in such 
section unless such subsidiary or affiliate is itself described in such 
section;
    Government securities broker has the meaning set out in section 
3(a)(43) of the Act (15 U.S.C. 78c(a)(43)), and explicitly includes not 
only registered government securities brokers, but

[[Page 649]]

also registered brokers and financial institutions;
    Government securities dealer has the meaning set out in section 
3(a)(44) of the Act (15 U.S.C. 78c(a)(44)), and explicitly includes not 
only registered government securities dealers, but also registered 
dealers and financial institutions;
    Government securities has the meaning set out in section 3(a)(42) of 
the Act (15 U.S.C. 78c(a)(42));
    OTC derivatives dealer has the same meaning set out in 17 CFR 
240.3b-12.
    Registered broker or dealer means a broker or dealer registered 
pursuant to section 15 or section 15B of the Act (15 U.S.C. 78o, 78o-4)) 
but does not include a municipal securities dealer that is a bank or a 
separately identifiable department or division of a bank;
    Registered government securities broker or dealer means a government 
securities broker or dealer registered pursuant to section 15C(a)(1)(A) 
of the Act (15 U.S.C. 78o-5(a)(1)(A));
    Secretary means the Secretary of the Treasury; and
    Treasury or Department means the Department of the Treasury, 
including in particular the Bureau of the Fiscal Service.

[52 FR 27926, July 24, 1987, as amended at 55 FR 6604, Feb. 26, 1990; 71 
FR 54410, Sept. 15, 2006; 79 FR 38455, July 8, 2014]



Sec.  400.4  Information concerning associated persons of financial 
institutions that are government securities brokers or dealers.

    (a) Every associated person of a financial institution that is a 
government securities broker or dealer that is not exempt pursuant to 
Part 401 of this chapter shall file with such financial institution a 
completed Form G-FIN-4 (Sec.  449.4 of this chapter) unless such person 
has on file with such financial institution a completed and current Form 
U-4 (promulgated by a self-regulatory organization) or Form MSD-4 (as 
required for associated persons of bank municipal securities dealers).
    (b) To the extent any information furnished by an associated person 
pursuant to paragraph (a) of this section (including information on a 
Form U-4 or Form MSD-4) is or becomes materially inaccurate or 
incomplete, such associated person shall promptly furnish in writing to 
such financial institution, in a form acceptable to the appropriate 
regulatory agency for such financial institution, a statement correcting 
such information.
    (c) For the purpose of verifying the information furnished by an 
associated person pursuant to paragraph (a) of this rule, every 
government securities broker or dealer that is a financial institution 
shall make inquiry of all other employers of such associated person 
during the immediately preceding three years concerning the accuracy and 
completeness of such information.
    (d) Every government securities broker or dealer that is a financial 
institution not exempt from this section pursuant to Part 401 of this 
chapter shall:
    (1) Promptly obtain and, within 10 days thereafter, file with the 
appropriate regulatory agency, in a form acceptable to such appropriate 
regulatory agency, the information required by paragraph (a) of this 
section (which shall consist of all Forms G-FIN-4 filed and a list of 
all associated persons who have filed Forms MSD-4 or U-4 with the 
financial institution since the last such filing, designating whether 
the associated person is serving in a supervisory or non-supervisory 
capacity) and by paragraph (b) of this section; and
    (2) File with the appropriate regulatory agency within 30 days after 
the termination of the status of an individual as an associated person a 
Form G-FIN-5 (Sec.  449.4 of this chapter), unless--
    (i) The financial institution is required to and has filed a Form U-
5 or Form MSD-5 with respect to such person; or
    (ii) The financial institution notifies the appropriate regulatory 
agency that the individual will remain in the financial institution's 
employment and the financial institution will continue to update the 
information about such individual as provided in paragraph (b) of this 
section and will file a Form G-FIN-5 within 30 days after the 
termination of such individual's employment with the financial 
institution.
    (e) Every notice and form filed pursuant to this section shall 
constitute a

[[Page 650]]

``report'' within the meaning of sections 15, 15C and 32(a) of the Act 
(15 U.S.C. 78o, 78o-5, 78ff(a)).

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27926, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995]



Sec.  400.5  Amendments to application for registration and to notice
of status as a government securities broker or dealer.

    (a)(1) If the information contained in any application for 
registration as a government securities broker or dealer (other than the 
statements required by Sec.  240.15Ca2-2 of this title) or in any 
amendment thereto, becomes inaccurate for any reason, the registered 
government securities broker or dealer shall file within 30 days 
thereafter an amendment on Form BD (Sec.  249.501 of this title) 
correcting such information, in accordance with the instructions 
provided therein.
    (2) If the information contained in any notice of status as a 
government securities broker or dealer filed by a registered broker or 
dealer, or in any amendment thereto, becomes inaccurate for any reason, 
the registered broker or dealer shall file within 30 days an amendment 
on Form BD (Sec.  249.501 of this title) correcting such information, in 
accordance with the instructions provided therein.
    (b) If the information contained in any notice of status as a 
government securities broker or dealer filed by a financial institution, 
or any amendment thereto, becomes inaccurate for any reason, the 
financial institution shall file within 30 days an amendment on Form G-
FIN (Sec.  449.1 of this chapter) correcting such information, in 
accordance with the instructions provided therein.
    (c) Every amendment filed pursuant to this section shall constitute 
a ``report'' within the meaning of sections 15, 15C and 32(a) of the Act 
(15 U.S.C. 78o, 78o-5, 78ff(a)).

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27926, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995]



Sec.  400.6  Notice of withdrawal from business as a government securities
broker or dealer by a financial institution.

    (a) Whenever a financial institution that is a government securities 
broker or dealer that is not exempt from the notice requirements of 
section 15C(a)(1)(B)(i) of the Act (15 U.S.C. 78o-5(a)(1)(B)(i)) and of 
Sec.  400.5 pursuant to part 401 of this chapter, ceases to act as a 
government securities broker or dealer, it shall file with the 
appropriate regulatory agency notice of such cessation on Form G-FINW 
(Sec.  449.2 of this chapter) in accordance with the instructions 
contained therein.
    (b) Except as provided in paragraph (c) of this section, a notice 
that a financial institution has ceased to act as a government 
securities broker or dealer shall become effective for all purposes on 
the 60th day after the filing thereof with the appropriate regulatory 
agency or within such shorter period of time as the appropriate 
regulatory agency determines.
    (c) If the notice described in paragraph (a) of this section is 
filed with the appropriate regulatory agency any time after the date of 
the issuance of a notice or order by the appropriate regulatory agency 
instituting proceedings pursuant to section 15C(c)(2)(A) of the Act (15 
U.S.C. 78o-5(c)(2)(A)) to censure, suspend, limit, or bar from acting as 
a government securities broker or government securities dealer the 
entity filing such notice, or if the appropriate regulatory agency has 
instituted any action against the entity filing such notice pursuant to 
section 15C(2)(B) of the Act (15 U.S.C. Sec.  78o-5(c)(2)(B)), the 
notice shall become effective pursuant to paragraph (b) of this section 
at such time and upon such terms and conditions as the appropriate 
regulatory agency deems necessary or appropriate in the public interest 
for the protection of investors.
    (d) Every notice filed pursuant to this section shall constitute a 
``report'' within the meaning of sections 15, 15C and 32(a) of the Act 
(15 U.S.C. 78o, 78o-5, 78ff(a)).

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27926, July 24, 1987, as amended at 60 FR 18734, Apr. 13, 1995]

[[Page 651]]



PART 401_EXEMPTIONS--Table of Contents



Sec.
401.1 Exemption for organizations handling transactions in United States 
          Savings Bonds.
401.2 Exemtion for depository institutions that submit tenders for the 
          account of customers for purchase on original issue of United 
          States Treasury securities.
401.3 Exemption for financial institutions that are engaged in limited 
          government securities brokerage activities.
401.4 Exemption for financial institutions engaged in limited government 
          securities dealer activities.
401.5 Exemption for corporate credit unions transacting limited 
          government securities business with other credit unions.
401.6 Exemption for branches and agencies of foreign banks that deal 
          solely with non-United States citizens resident offshore.
401.7 Exemption for certain foreign government securities brokers or 
          dealers.

    Authority: Sec. 101, Pub. L. 99-571, 100 Stat. 3209 (15 U.S.C. 78o-
5(a)(4)).

    Source: 52 FR 27930, July 24, 1987, unless otherwise noted.



Sec.  401.1  Exemption for organizations handling transactions in
United States Savings Bonds.

    An organization that handles United States Savings Bond 
transactions, including a qualified issuing or paying agent or an 
organization that accommodates customers or employees by forwarding 
requested transactions to qualified issuing or paying agents or the 
Treasury and whose transactions in government securities are limited to 
these transactions and such other activities that are exempted by the 
regulations under this subchapter, shall be exempt from the provisions 
of section 15C (a), (b) and (d) of the Act (15 U.S.C. 78o-5 (a), (b), 
(d)) and the regulations of this subchapter. For the purposes of this 
section, the term ``United States Savings Bond'' means any savings-type 
security offered by the Treasury, including all series of United States 
Savings Bonds, United States Savings Notes and United States Savings 
Stamps.



Sec.  401.2  Exemption for depository institutions that submit tenders
for the account of customers for purchase on original issue of
United States Treasury securities.

    (a) Subject to the requirements of paragraph (b) of this section, a 
depository institution that submits tenders or subscriptions for 
purchase on original issue of United States Treasury securities for the 
account of customers on a fully disclosed basis, whose transactions in 
government securities are limited to such transactions and such other 
activities as have been exempted by regulation under this subchapter 
shall be exempt from the provisions of section 15C (a), (b) and (d) of 
the Act (15 U.S.C. 78o-5 (a), (b), (d)) and the regulations of this 
subchapter.
    (b) A depository institution that relies on the exemption contained 
in paragraph (a) of this section is required to comply with the 
regulations of part 450 of this chapter concerning custodial holdings of 
government securities.
    (c) For the purposes of this section, ``depository institution'' has 
the meaning stated in clauses (i) through (vi) of section 19(b)(1)(A) of 
the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)-(vi)) and also 
includes a foreign bank, an agency or branch of a foreign bank and a 
commercial lending company owned or controlled by a foreign bank (as 
such terms are used in the International Banking Act of 1978, Pub. L. 
95-369, 92 Stat. 607).



Sec.  401.3  Exemption for financial institutions that are engaged in
limited government securities brokerage activities.

    (a)(1) Subject to the requirements of paragraph (b) of this section, 
a financial institution shall be exempt from the provisions of sections 
15C (a), (b), and (d) of the Act (15 U.S.C. 78o-5 (a), (b), (d)) and the 
regulations of this subchapter, unless it acts as a government 
securities broker by:
    (i) Holding itself out as a government securities broker or 
interdealer broker; or
    (ii) Actively soliciting purchases or sales of government securities 
on an agency basis;

[[Page 652]]

    (2) Notwithstanding the provisions of paragraph (a)(1) of this 
section, a financial institution shall not be regarded as acting as a 
government securities broker within the meaning of this section if it:
    (i) Effects fewer than 500 government securities brokerage 
transactions (other than transactions described in Sec. Sec.  401.1 or 
401.2) per year; or
    (ii) Effects all such transactions (other than transactions 
described in Sec. Sec.  401.1 or 401.2) pursuant to a contractual or 
other arrangement with one or more government securities brokers or 
dealers each of which has registered or filed notice pursuant to section 
15C(a)(1) of the Act (15 U.S.C. 78o-5(a)(1)) (each referred to as the 
``transacting government securities broker or dealer'') under which the 
transacting government securities broker or dealer will offer securities 
services on or off the premises of the financial institution, provided 
that:
    (A) The transacting government securities broker or dealer is 
clearly identified to customers as the person performing the securities 
services;
    (B) Financial institution employees perform only clerical and 
ministerial or order-taking functions in connection with government 
securities transactions unless such employees are associated persons (as 
defined in Sec.  400.3 of this chapter) or registered representatives of 
the transacting government securities broker or dealer;
    (C) Financial institution employees do not receive compensation for 
government securities activities other than clerical or ministerial 
functions unless such employees are associated persons (as defined in 
Sec.  400.3 of this chapter) or registered representatives of the 
transacting government securities broker or dealer; and
    (D) Such services are provided on a fully disclosed basis by the 
transacting government securities broker or dealer, i.e., the 
transacting government securities broker or dealer receives and 
maintains all required information concerning each customer, its trading 
and account.
    (b)(1) A financial institution that relies on the exemption 
contained in paragraph (a) of this section is required to comply with 
the regulations of part 450 of this chapter concerning custodial 
holdings of government securities for customers.
    (2) A branch or agency of a foreign bank that relies on the 
exemption contained in paragraph (a) of this section is in addition 
required to comply with Sec.  403.5(e) of this chapter.
    (c) For the purposes of this section ``financial institution'' 
includes an insured credit union, as defined in 12 U.S.C. 1752(7).

[52 FR 27930, July 24, 1987, as amended at 71 FR 54411, Sept. 15, 2006]



Sec.  401.4  Exemption for financial institutions engaged in limited 
government securities dealer activities.

    (a) Subject to the requirements of paragraph (b) of this section, a 
financial institution shall be exempt from the provisions of sections 
15C (a), (b), and (d) of the Act (15 U.S.C. 78o-5 (a), (b), (d)) and the 
regulations of this subchapter if its government securities dealer 
activities are limited to one or more of the following activities:
    (1) Sales or purchases in a fiduciary capacity;
    (2) The sale and subsequent repurchase and the purchase and 
subsequent resale of government securities pursuant to a repurchase or 
reverse repurchase agreement; and
    (3) Such other activities as have been exempted by regulation under 
this subchapter.
    (b)(1) A financial institution that relies on the exemption 
contained in paragraph (a) of this section is required to comply with:
    (i) The regulations of part 450 of this chapter concerning custodial 
holdings of government securities for customers; and
    (ii) Section 403.5(d) of this chapter concerning certain repurchase 
transactions with customers.
    (2) A branch or agency of a foreign bank that relies on the 
exemption contained in paragraph (a) of this section is in addition 
required to comply with Sec.  403.5(e) of this chapter.
    (c) For the purposes of this section ``financial institution'' 
includes an insured credit union, as defined in 12 U.S.C. 1752(7).

[[Page 653]]



Sec.  401.5  Exemption for corporate credit unions transacting limited 
government securities business with other credit unions.

    (a)(1) Subject to the requirements of paragraph (b) of this section, 
a corporate credit union shall be exempt from the provisions of section 
15C (a), (b) and (d) of the Act (15 U.S.C. 78o-5 (a), (b), (d)) and the 
regulations thereunder if its government securities dealer activities 
are limited to the sale and subsequent repurchase and the purchase and 
subsequent resale, each pursuant to a repurchase or reverse repurchase 
agreement, of government securities to other credit unions and such 
other activities as have been exempted by regulation under this part.
    (2) For the purposes of this section, ``corporate credit union'' 
means a credit union whose membership consists primarily of other credit 
unions and that is (i) a Federal credit union as defined in 12 U.S.C. 
1752(1), (ii) an insured credit union as defined in 12 U.S.C. 1752(7), 
or (iii) a member of the National Credit Union Administration Central 
Liquidity Facility.
    (b) A credit union that relies on the exemption contained in 
paragraph (a) of this section is required to comply with:
    (1) The regulations of part 450 of this chapter concerning custodial 
holdings of government securities; and
    (2) Section 403.5(d) concerning certain repurchase transactions with 
customers.



Sec.  401.6  Exemption for branches and agencies of foreign banks that
deal solely with non-United States citizens resident offshore.

    (a) Subject to the requirements of paragraph (b) of this section, a 
branch or agency of a foreign bank shall be exempt from the provisions 
of section 15C (a), (b), and (d) of the Act (15 U.S.C. 78o-5 (a), (b), 
(d)) and the regulations of this subchapter, if all the customers with 
or on behalf of whom it engages in government securities transactions 
are limited to foreign governments, agencies of foreign governments and 
other persons and entities who are not citizens of the United States and 
who reside or, in the case of a corporation, partnership or other 
entity, have their principal place of business, outside of the United 
States.
    (b) A branch or agency that relies on the exemption contained in 
paragraph (a) of this section is required to comply with the regulations 
of part 450 of this chapter concerning custodial holdings of government 
securities.



Sec.  401.7  Exemption for certain foreign government securities brokers 
or dealers.

    A government securities broker or dealer (excluding a branch or 
agency of a foreign bank) that is a non-U.S. resident shall be exempt 
from the provisions of sections 15C(a), (b), and (d) of the Act (15 
U.S.C. 78o-5(a), (b) and (d)) and the regulations of this subchapter 
provided it complies with the provisions of 17 CFR 240.15a-6 (SEC Rule 
15a-6) as modified in this section.
    (a) For purposes of this section, non-U.S. resident means any person 
(including any U.S. person) engaged in business as a government 
securities broker or dealer entirely outside the U.S. that is not an 
office or branch of, or a natural person associated with, a registered 
broker or dealer, a registered government securities broker or dealer or 
a financial institution that has provided notice pursuant to Sec.  
400.1(d) of this chapter.
    (b) Within Sec.  240.15a-6 of this title, references to ``security'' 
and ``securities'' shall mean ``government securities'' as defined in 
Sec.  400.3 of this chapter.
    (c) Section 240.15a-6(a) of this title is modified to read as 
follows:
    ``(a) A foreign broker or dealer shall be exempt from the 
registration or notice requirements of section 15C(a)(1) of the Act to 
the extent that the foreign broker or dealer:''
    (d) Paragraph 240.15a-6(a)(2)(iii) of this title is modified to read 
as follows:
    ``(iii) If the foreign broker or dealer has established a 
relationship with a registered broker or dealer for the purpose of 
compliance with paragraph (a)(3) of this rule, this relationship is 
disclosed in all research reports and all transactions with the foreign 
broker or dealer in securities discussed in the research reports are 
effected only through that registered broker or dealer, pursuant to the 
provisions of paragraph (a)(3); and''

[[Page 654]]

    (e) Paragraph 240.15a-6(a)(3)(i)(B) of this title is modified to 
read as follows:
    ``(B) Provides its appropriate regulatory agency (upon request or 
pursuant to agreements reached between any foreign securities authority, 
including any foreign government as specified in section 3(a)(50) of the 
Act, and the Commission or the U.S. Government) with any information, 
documents, or records within the possession, custody, or control of the 
foreign broker or dealer, any testimony of foreign associated persons, 
and any assistance in taking the evidence of other persons, wherever 
located, that the appropriate regulatory agency requests and that 
relates to transactions under paragraph (a)(3) of this rule, except that 
if, after the foreign broker or dealer has exercised its best efforts to 
provide this information, including requesting the appropriate 
governmental body and, if legally necessary, its customers (with respect 
to customer information) to permit the foreign broker or dealer to 
provide this information to its appropriate regulatory agency, the 
foreign broker or dealer is prohibited from providing this information 
by applicable foreign law or regulations, then this paragraph 
(a)(3)(i)(B) shall not apply and the foreign broker or dealer will be 
subject to paragraph (c) of this rule;''
    (f) Paragraphs 240.15a-6(a)(3)(iii)(A) (4), (5) and (6) of this 
title are modified to read as follows:
    ``(4) Maintaining required books and records relating to the 
transactions, including those required by Sec.  404.1 of this title for 
registered brokers and dealers (excluding registered government 
securities brokers and dealers and noticed financial institutions), 
Sec. Sec.  404.2 and 404.3 of this title for registered government 
securities brokers or dealers, and Sec.  404.4 of this title for noticed 
financial institutions;
    ``(5) Complying with part 402 of this title with respect to the 
transactions; and
    ``(6) Receiving, delivering, and safeguarding funds and securities 
in connection with the transactions on behalf of the U.S. institutional 
investor or the major U.S. institutional investor in compliance with 
Sec.  403.1 of this title for registered brokers and dealers (excluding 
registered government securities brokers and dealers and noticed 
financial institutions); Sec. Sec.  403.2, 403.3, 403.4 and 403.6 of 
this title for registered government securities brokers and dealers, and 
Sec.  403.5 of this title for noticed financial institutions.''
    (g) Paragraph 240.15a-6(a)(3)(iii)(C) of this title is modified to 
read as follows:
    ``(C) Has obtained from the foreign broker or dealer, with respect 
to each foreign associated person, the types of information specified in 
Rule 17a-3(a)(12) under the Act (17 CFR 240.17a-3(a)(12)), provided that 
the information required by paragraph (a)(12)(d) of that Rule shall 
include sanctions imposed by foreign securities authorities, exchanges, 
or associations, including, without limitation, those described in 
paragraph (a)(3)(ii)(B) of this rule. Notwithstanding the above, a 
registered broker or dealer that is a noticed financial institution 
shall comply with the provisions of paragraphs 404.4(a)(3)(i) (B) and 
(C) of this title, in lieu of Rule 17a-3(a)(12), provided that the 
information required by paragraphs 404.4(a)(3)(i) (B) and (C) of this 
title shall include sanctions imposed by foreign securities authorities, 
exchanges, or associations, including, without limitation, those 
described in (a)(3)(ii)(B) of this rule;''
    (h) Paragraph 240.15a-6(a)(3)(iii)(D) of this title is modified to 
read as follows:
    ``(D) Has obtained from the foreign broker or dealer and each 
foreign associated person written consent to service of process for any 
civil action brought by or proceeding before its appropriate regulatory 
agency or a self-regulatory organization (as defined in section 3(a)(26) 
of the Act), providing that process may be served on them by service on 
the registered broker or dealer in the manner set forth on the 
registered broker's or dealer's current Form BD or other appropriate 
procedure as specified by the appropriate regulatory agency; and''
    (i) Paragraph 240.15a-6(a)(3)(iii)(E) of this title is modified to 
read as follows:
    ``(E) Maintains a written record of the information and consents 
required by paragraphs (a)(3)(iii) (C) and (D) of this rule, and all 
records in connection with trading activities of the U.S. institutional 
investor or the major U.S. institutional investor involving the

[[Page 655]]

foreign broker or dealer conducted under paragraph (a)(3) of this rule, 
in an office of the registered broker or dealer located in the United 
States (with respect to nonresident registered brokers or dealers, 
pursuant to Rule 17a-7(a) under the Act (17 CFR 240.17a-7(a)), provided 
that in Rule 17a-7(a) references to broker or dealer shall include 
government securities brokers or dealers, as those terms are defined in 
Sec. Sec.  400.3 of this title), and makes these records available to 
the appropriate regulatory agency upon request; or''
    (j) Paragraph 240.15a-6(a)(4)(i) of this title is modified to read 
as follows:
    ``(i) A registered broker or dealer, whether the registered broker 
or dealer is acting as principal for its own account or as agent for 
others, or a financial institution acting pursuant to Sec. Sec.  
401.3(a)(2)(ii) or 401.4(a)(1) of this title;''
    (k) Paragraph 240.15a-6(b)(2) of this title is modified to read as 
follows:
    ``(2) The term foreign associated person shall mean any natural 
person domiciled outside the United States who is an associated person 
(a person associated with a government securities broker or a government 
securities dealer as defined in section 3(a)(45) of the Act) of the 
foreign broker or dealer and who participates in the solicitation of a 
U.S. institutional investor or a major U.S. institutional investor under 
paragraph (a)(3) of this rule.''
    (l) Paragraph 240.15a-6(b)(3) of this title is modified to read as 
follows:
    ``(3) The term ``foreign broker or dealer'' shall mean any non-U.S. 
resident person (including any U.S. person engaged in business as a 
broker or dealer entirely outside the United States, except as otherwise 
permitted by this rule) that is not an office or branch of, or a natural 
person associated with, a registered broker or dealer, whose securities 
activities, if conducted in the United States, would be described by the 
definition of ``government securities broker'' or ``government 
securities dealer'' in sections 3(a)(43) and 3(a)(44) of the Act.''
    (m) Paragraph 240.15a-6(b)(5) of this title is modified to read as 
follows:
    ``(5) Only for the purposes of this rule, the term ``registered 
broker or dealer'' shall mean a person that is registered with the 
Commission under section 15C(a)(2) of the Act or a broker or dealer or a 
financial institution who has provided notice to its appropriate 
regulatory agency under section 15C(a)(1)(B)(ii) of the Act.''
    (n) For the purposes of this section, Sec.  240.15a-6(b) of this 
title shall include a new paragraph (8) to read as follows:
    ``(8) The term registered government securities broker or dealer has 
the meaning set out in Sec.  400.3 of this title.''
    (o) For the purposes of this section, 240.15a-6(b) of this title 
shall include a new paragraph (9) to read as follows:
    ``(9) The term noticed financial institution means a financial 
institution as defined at Sec.  400.3 of this title that has provided 
notice to its appropriate regulatory agency pursuant to Sec.  400.1(d) 
of this title.''
    (p) For the purposes of this section, Sec.  240.15a-6(b) of this 
title shall include a new paragraph (10) to read as follows:
    ``(10) The term appropriate regulatory agency has the meaning set 
out in Sec.  400.3 of this title.''
    (q) Section 240.15a-6(c) of this title is modified to read as 
follows:
    ``(c) The Secretary of the Treasury, upon receiving notification 
from an appropriate regulatory agency that the laws or regulations of a 
foreign country have prohibited a foreign broker or dealer, or a class 
of foreign brokers or dealers, engaging in activities exempted by 
paragraph (a)(3) of this rule, from providing, in response to a request 
from an appropriate regulatory agency, information, documents, or 
records within its possession, custody, or control, testimony of foreign 
associated persons, or assistance in taking the evidence of other 
persons, wherever located, related to activities exempted by paragraph 
(a)(3) of this rule, may consider to be no longer applicable the 
exemption provided in paragraph (a)(3) of this rule with respect to the 
subsequent activities of the foreign broker or dealer or class of 
foreign brokers or dealers if the Secretary finds that continuation of 
the exemption is inconsistent with the public interest, the

[[Page 656]]

protection of investors and the purposes of the Government Securities 
Act.''

(Approved by the Office of Management and Budget under control number 
1535-0089)

[55 FR 27462, July 3, 1990; 55 FR 29293, July 18, 1990, as amended at 60 
FR 11026, Mar. 1, 1995; 71 FR 54411, Sept. 15, 2006. Redesignated at 79 
FR 38455, July 8, 2014]



PART 402_FINANCIAL RESPONSIBILITY--Table of Contents



Sec.
402.1 Application of part to registered brokers and dealers and 
          financial institutions; special rules for futures commission 
          merchants and government securities interdealer brokers; 
          effective date.
402.2 Capital requirements for registered government securities brokers 
          and dealers.
402.2a Appendix A--Calculation of market risk haircut for purposes of 
          Sec.  402.2(g)(2).
402.2b [Reserved]
402.2c Appendix C--Consolidated computations of liquid capital and total 
          haircuts for certain subsidiaries and affiliates.
402.2d Appendix D--Modification of Sec.  240.15c3-1d of this title, 
          relating to satisfactory subordination agreements, for 
          purposes of Sec.  402.2.

    Authority: 15 U.S.C. 78o-5(b)(1)(A), (b)(4), Pub. L. 111-203, 124 
Stat. 1376.

    Source: 52 FR 27931, July 24, 1987, unless otherwise noted.



Sec.  402.1  Application of part to registered brokers and dealers and
financial institutions; special rules for futures commission merchants
and government securities interdealer brokers; effective date.

    (a) Application of part. This part applies to all government 
securities brokers and dealers, except as otherwise provided herein.
    (b) Registered brokers or dealers. This part does not apply to a 
registered broker or dealer (including an OTC derivatives dealer) that 
is subject to Sec.  240.15c3-1 of this title (SEC Rule 15c3-1).
    (c) Financial institutions. This part does not apply to a government 
securities broker or dealer that is a financial institution and that is:
    (1) Subject to the rules and regulations of its appropriate 
regulatory agency concerning capital requirements, or
    (2) A branch or agency of a foreign bank subject to regulation, 
supervision, and examination by state or Federal authorities having 
regulatory or supervisory authority over commercial bank and trust 
companies.
    (d) Futures commission merchants. A futures commission merchant 
subject to Sec.  1.17 of this title that is a government securities 
broker or dealer but is not a registered broker or dealer shall not be 
subject to the limitations of Sec.  402.2 but rather to the capital 
requirement of Sec.  1.17 or Sec.  240.15c3-1, except paragraph (e)(3) 
thereof, of this title, whichever is greater.
    (e) Government securities interdealer broker. (1) A government 
securities interdealer broker, as defined in paragraph (e)(2) of this 
section, may, with the prior written consent of the Secretary, elect not 
to be subject to the limitations of Sec.  402.2 but rather to be subject 
to the requirements of Sec.  240.15c3-1 of this title (SEC Rule 15c3-1), 
except paragraphs (c)(2)(ix) and (e)(3) thereof, and paragraphs (e)(3) 
through (8) of this section by filing such election in writing with its 
designated examining authority. A government securities interdealer 
broker may not revoke such election without the written consent of its 
designated examining authority.
    (2)(i) Government securities interdealer broker means an entity 
engaged exclusively in business as a broker that effects, on an 
initially fully disclosed or identified group basis, transactions in 
government securities for counterparties that are government securities 
brokers or dealers who have registered or given notice pursuant to 
section 15C(a)(1) of the Act (15 U.S.C. 78o-5(a)(1)), and that promptly 
transmits all funds and delivers all securities received in connection 
with its activities as a government securities interdealer broker and 
does not otherwise hold funds or securities for or owe money or 
securities to its counterparties and, except as provided in paragraph 
(e)(2)(ii) of this section, does not have or maintain any government 
securities in its proprietary or other accounts. For the purpose of this 
paragraph (e)(2)(i), ``identified group basis'' means that a 
counterparty has consented to the

[[Page 657]]

identity of the specific group of entities from which the other 
counterparty is chosen.
    (ii) A government securities interdealer broker may have or maintain 
government securities in its proprietary or other accounts only as a 
result of:
    (A) Engaging in overnight reverse repurchase or securities borrowed 
transactions solely for the purpose of facilitating the process of 
clearing government securities transactions;
    (B) Engaging in overnight repurchase or securities loaned 
transactions solely for the purpose of reducing its financing expense in 
connection with the clearance of government securities transactions;
    (C) Subordinated loans subject to satisfactory subordination 
agreements pursuant to Sec.  240.l5c3-1(d) of this title;
    (D) Collateral or depository requirements of a clearing corporation 
or association with which it participates in the clearance of government 
securities transactions; or
    (E) The investment of its excess cash.

The maturities of any government securities held or maintained under 
paragraph (e)(2)(ii) (C), (D), or (E) of this section may not exceed one 
year.
    (3) In order to qualify to operate under this paragraph (e), a 
government securities interdealer broker shall at all times have and 
maintain net capital, as defined in Sec.  240.15c3-1(c)(2) of this title 
with the modifications of this paragraph (e), of not less than 
$1,000,000.
    (4) For purposes of this paragraph (e), a government securities 
interdealer broker need not deduct loans to commercial banks for one 
business day of immediately available funds (commonly referred to as 
``sales of federal funds'') held by the government securities 
interdealer broker in connection with the clearance of securities on the 
day the loan is made.
    (5) For purposes of this paragraph (e), a government securities 
interdealer broker need not deduct net pair-off receivables and money 
differences until the close of business of the third business day 
following the day the funds are due and give-up receivables outstanding 
no more than 30 days from the billing date, which shall be no later than 
the last day of the month in which they arise, as otherwise would be 
required under Sec.  240.15c3-1(c)(2)(iv)(B) of this title.
    (6) For purposes of this paragraph (e), a government securities 
interdealer broker shall deduct from net worth \1/4\ of 1 percent of the 
contract value of each government securities failed-to-deliver contract 
which is outstanding 5 business days or longer. Such deduction shall be 
increased by any excess of the contract price of the failed-to-deliver 
contract over the market value of the underlying security.
    (7) For purposes of this paragraph (e), a government securities 
interdealer broker may exclude from its aggregate indebtedness 
computation indebtedness adequately collateralized by government 
securities outstanding for not more than one business day and offset by 
government securities failed to deliver of the same issue and quantity. 
In no event may a government securities interdealer broker exclude any 
overnight bank loan attributable to the same government securities 
failed-to-deliver contract for more than one business day. A government 
securities interdealer broker need not deduct from net worth the amount 
by which the market value of securities failed to receive outstanding 
longer than thirty (30) calendar days exceeds the contract value of 
those failed to receive as required by Sec.  240.15c3-1(c)(2)(iv)(E) of 
this title.
    (8)(i) For purposes of this paragraph (e), a government securities 
interdealer broker shall deduct from net worth 5 percent of its net 
exposure to each counterparty.
    (ii) Net exposure. For purposes of this paragraph (e), net exposure 
shall equal:
    (A) The sum of the dollar amount of funds, debt instruments, other 
securities, and other inventory at risk, in the first instance, to the 
government securities interdealer broker in the event of the 
counterparty's default,
    (B) Reduced, but not to less than zero, by the sum of:
    (1) The dollar amount of funds, debt instruments, other securities, 
and other inventory at risk, in the first instance, to the counterparty 
in the event of the government securities interdealer broker's default;

[[Page 658]]

    (2) The deductions taken from net worth for unsecured receivables, 
repurchase and reverse repurchase deficits, aged fails to deliver, and 
aged fails to receive arising from transactions with the counterparty;
    (3) Demand deposits in the case where the counterparty is a 
commercial bank;
    (4) Loans for one business day of immediately available funds 
(commonly referred to as ``sales of federal funds'') held by the 
government securities interdealer broker in connection with the 
clearance of securities on the day the loan is made in the case where 
the counterparty is a commercial bank;
    (5) Custodial holdings of securities in the case where the 
counterparty is a clearing bank or clearing broker of the government 
securities interdealer broker; and
    (6) Exposure to a counterparty due to holding marketable instruments 
subject to market risk haircuts under appendix A to this section (Sec.  
402.2a) for which the counterparty is the obligor.
    (9) On the application of the government securities interdealer 
broker, the designated examining authority may extend the periods of 
time in this paragraph (e) if it determines that the extension is 
warranted because of exceptional circumstances and that the government 
securities interdealer broker is acting in good faith.
    (f) This part shall be effective July 25, 1987.

[52 FR 27931, July 24, 1987, as amended at 60 FR 11024, Mar. 1, 1995; 71 
FR 54411, Sept. 15, 2006; 79 FR 38455, July 8, 2014]



Sec.  402.2  Capital requirements for registered government securities 
brokers and dealers.

    (a) General rule. No government securities broker or dealer shall 
permit its liquid capital to be below an amount equal to 120 percent of 
total haircuts as defined in paragraph (g) of this section.
    (b)(1) Minimum liquid capital for brokers or dealers that carry 
customer accounts. Notwithstanding the provisions of paragraph (a) of 
this section, a government securities broker or dealer that carries 
customer or broker or dealer accounts and receives or holds funds or 
securities for those persons within the meaning of Sec.  240.15c3-
1(a)(2)(i) of this title, shall have and maintain liquid capital in an 
amount not less than $250,000, after deducting total haircuts as defined 
in paragraph (g) of this section.
    (2) Minimum liquid capital for brokers or dealers that carry 
customer accounts, but do not generally hold customer funds or 
securities. Notwithstanding the provisions of paragraphs (a) and (b)(1) 
of this section, a government securities broker or dealer that carries 
customer or broker or dealer accounts and is exempt from the provisions 
of Sec.  240.15c3-3 of this title, as made applicable to government 
securities brokers and dealers by Sec.  403.4 of this part, pursuant to 
paragraph (k)(2)(i) thereof (17 CFR 240.15c3-3(k)(2)(i)), shall have and 
maintain liquid capital in an amount not less than $100,000, after 
deducting total haircuts as defined in paragraph (g) of this section.
    (c)(1) Minimum liquid capital for introducing brokers that receive 
securities. Notwithstanding the provisions of paragraphs (a) and (b) of 
this section, a government securities broker or dealer that introduces 
on a fully disclosed basis transactions and accounts of customers to 
another registered or noticed government securities broker or dealer but 
does not receive, directly or indirectly, funds from or for, or owe 
funds to, customers, and does not carry the accounts of, or for, 
customers shall have and maintain liquid capital in an amount not less 
than $50,000, after deducting total haircuts as defined in paragraph (g) 
of this section. A government securities broker or dealer operating 
pursuant to this paragraph (c)(1) may receive, but shall not hold 
customer or other broker or dealer securities.
    (2) Minimum liquid capital for introducing brokers that do not 
receive or handle customer funds or securities. Notwithstanding the 
provisions of paragraphs (a), (b), and (c)(1) of this section, a 
government securities broker or dealer that does not receive, directly 
or indirectly, or hold funds or securities for, or owe funds or 
securities to, customers, and does not carry accounts of, or for, 
customers and that effects ten or fewer transactions in securities in

[[Page 659]]

any one calendar year for its own investment account shall have and 
maintain liquid capital in an amount not less than $25,000, after 
deducting total haircuts as defined in paragraph (g) of this section.
    (d) Liquid capital. ``Liquid capital'' means net capital as defined 
in Sec.  240.15c3-1(c)(2) of this title with the following 
modifications:
    (1) The percentages used to calculate the deductions for failed to 
deliver contracts required by Sec.  240.15c3-1(c)(2)(ix) of this title 
when the underlying instrument is a Treasury market risk instrument as 
defined in paragraph (e) of this section are the appropriate net 
position haircut factors specified in paragraph (f)(2) of this section;
    (2) The percentages used to calculate deductions required by Sec.  
240.15c3-1(c)(2)(iv)(B) of this title for securities that are Treasury 
market risk instruments are the appropriate net position haircut factors 
specified in paragraph (f)(2) of this section;
    (3) The deduction required by Sec.  240.15c3-1(c)(2)(iv)(F)(3)(i) of 
this title relating to repurchase agreement deficits shall be determined 
without reference to Sec.  240.15c3-1(c)(2)(iv)(F)(3)(i)(B) or Sec.  
240.15c3-1(c)(2)(iv)(F)(3)(i)(C);
    (4) The deductions from net worth required by Sec. Sec.  240.15c3-1 
(c)(2)(vi) and (c)(2)(viii) of this title and the adjustments to net 
worth set forth in Sec.  240.15c3-1a and Sec.  240.15c3-1b of this title 
(Appendices A and B to SEC Rule 15c3-1) are omitted;
    (5) Net pair-off receivables and money differences need not be 
deducted as otherwise would be required under Sec.  240.15c3-
1(c)(2)(iv)(B) of this title until the close of business of the third 
business day following the day the funds are due;
    (6) Give-up receivables outstanding no more than 30 days from the 
billing date, which shall be no later than the last day of the month in 
which they arise, need not be deducted as otherwise would be required 
under Sec.  240.15c3-1(c)(2)(iv)(B) of this title;
    (7) Loans to commercial banks for one business day of immediately 
available funds (commonly referred to as ``sales of federal funds'') 
held by the government securities broker or dealer in connection with 
the clearance of securities on the day the loan is made need not be 
deducted; and
    (8) In determining net worth, all long and short positions in 
unlisted options that are Treasury market risk instruments shall be 
evaluated in the manner set forth in Sec.  240.15c3-1(c)(2)(i)(B)(1) and 
not in the manner set forth in Sec.  240.15c3-1(c)(2)(i)(B)(2) of this 
title.
    (e) Treasury market risk instruments. (1) For purposes of this part, 
the term ``Treasury market risk instrument'' means the following dollar-
denominated securities, debt instruments, and derivative instruments:
    (i) Government securities, except equity securities and those 
mortgage-backed securities described in paragraph (e)(2) of this 
section;
    (ii) Zero-coupon receipts or certificates based on marketable 
Treasury notes or bonds;
    (iii) Marketable certificates of deposit of no more than one year to 
maturity;
    (iv) Bankers acceptances;
    (v) Commercial paper of no more than one year to maturity and which 
has only a minimal amount of credit risk as determined by the government 
securities broker or dealer pursuant to reasonably designed written 
policies and procedures the government securities broker or dealer 
establishes, maintains, and enforces to assess and monitor 
creditworthiness. These policies and procedures should result in 
creditworthiness assessments that typically are consistent with market 
data;
    (vi) Securities, other than equity securities, issued by 
international organizations that have a statutory exemption from the 
registration requirements of the Securities Act of 1933 and the 
Securities Exchange Act of 1934 provided their changes in yield are 
closely correlated to the changes in yield of similar Treasury 
securities, including STRIPS;
    (vii) Futures, forwards, and listed options on Treasury market risk 
instruments described in paragraphs (e)(1)(i)-(vi) of this section or on 
time deposits whose changes in yield are closely correlated with the 
Treasury market risk instruments described in paragraph (e)(1)(iii) of 
this section, settled on a cash or delivery basis;

[[Page 660]]

    (viii) Options on those futures contracts described in paragraph 
(e)(1)(vii) of this section, settled on a cash or delivery basis; and
    (ix) Unlisted options on marketable Treasury bills, notes or bonds.
    (2) ``Treasury market risk instrument'' does not include mortgage-
backed securities that do not pass through to each security holder on a 
pro rata basis a distribution based on the monthly payments and 
prepayments of principal and interest on the underlying pool of mortgage 
collateral less fees and expenses.
    (f)(1) Haircut categories. For purposes of this part, the applicable 
categories within which non-zero-coupon and zero-coupon Treasury market 
risk instruments are classified are:

----------------------------------------------------------------------------------------------------------------
                         Term or type for non-zero-
       Category              coupon instruments                    Term for zero-coupon instruments
----------------------------------------------------------------------------------------------------------------
A.....................  Less than 45 days...........  Less than 45 days.
B.....................  At least 45 days but less     At least 45 days but less than 135 days.
                         than 135 days.
C.....................  At least 135 days but less    At least 135 days but less than 9 months.
                         than 9 months.
D.....................  At least 9 months but less    At least 9 months but less than 1 year, 6 months.
                         than 1 year, 6 months.
E.....................  At least 1 year, 6 months     At least 1 year, 6 months but less than 3 years.
                         but less than 3 years, 6
                         months.
F.....................  At least 3 years, 6 months    At least 3 years but less than 5 years, 6 months.
                         but less than 7 years, 6
                         months.
G.....................  At least 7 years, 6 months    At least 5 years, 6 months but less than 9 years.
                         but less than 15 years.
H.....................  15 years and over...........  At least 9 years but less than 12 years.
I.....................  ............................  At least 12 years but less than 21 years
J.....................  ............................  21 years and over.
MB....................  All fixed rate mortgage-
                         backed securities that are
                         Treasury market risk
                         instruments..
AR....................  All adjustable rate mortgage-
                         backed securities that are
                         Treasury market risk
                         instruments.
----------------------------------------------------------------------------------------------------------------

    (2) Haircut factors. For purposes of this part, the applicable net 
position and offset haircut factors to be used in the calculation of the 
Treasury market risk haircut are as follows:

------------------------------------------------------------------------
                                                      Haircut factors
                                                 -----------------------
                                                      Net
                    Category                       position     Offsets
                                                   haircuts    (percent)
                                                   (percent)
------------------------------------------------------------------------
A...............................................        None        None
B...............................................        0.12        0.02
C...............................................        0.20        0.03
D...............................................        0.45        0.07
E...............................................        1.10        0.22
F...............................................        2.20        0.44
G...............................................        3.30        0.50
H...............................................        4.50        0.90
I...............................................        7.75        1.55
J...............................................       11.25        3.38
MB..............................................        3.30        0.66
AR..............................................        1.10        0.22
------------------------------------------------------------------------

    (3) Category pair hedging disallowance haircut factors. For purposes 
of this part, the applicable category pair hedging disallowance haircut 
factors to be used in the calculation of the Treasury market risk 
haircut are as follows:

------------------------------------------------------------------------
                                              Percent disallowed
              Category               -----------------------------------
                                       C   D   E   F   G   H   I   J  MB
------------------------------------------------------------------------
B...................................  30  40
C...................................  ..  20  30
D...................................  ..  ..  20  30  40
E...................................  ..  ..  ..  20  30  40
F...................................  ..  ..  ..  ..  20  30  40  ..  30
G...................................  ..  ..  ..  ..  ..  20  30  ..  30
H...................................  ..  ..  ..  ..  ..  ..  20  40  40
I...................................  ..  ..  ..  ..  ..  ..  ..  40
------------------------------------------------------------------------

    (g) Total haircuts. ``Total haircuts'' equals the sum of the credit 
risk haircut and the market risk haircut.
    (1) Credit risk haircut. The ``credit risk haircut'' equals the sum 
of the total counterparty exposure haircut, the total concentration of 
credit haircut and the credit volatility haircut.
    (i) Net credit exposure. For purposes of this part, net credit 
exposure shall equal:
    (A) The sum of the dollar amount of funds, debt instruments, other 
securities, and other inventory at risk to the government securities 
broker or dealer in the event of the counterparty's default and the 
market value of purchased unlisted options written by the counterparty 
that are Treasury market risk instruments,
    (B) Reduced, but not to less than zero, by the sum of:

[[Page 661]]

    (1) The dollar amount of funds, debt instruments, other securities, 
and other inventory at risk to the counterparty in the event of the 
government securities broker's or dealer's default and the market value 
of unlisted options written by the government securities broker or 
dealer and held by the counterparty that are Treasury market risk 
instruments;
    (2) The deductions taken from net worth for unsecured receivables, 
repurchase and reverse repurchase agreement deficits, aged fails to 
deliver, and aged fails to receive arising from transactions with the 
counterparty;
    (3) Demand deposits in the case where the counterparty is a 
commercial bank;
    (4) Loans for one business day of immediately available funds 
(commonly referred to as ``sales of federal funds'') held by the 
government securities broker or dealer in connection with the clearance 
of securities on the day the loan is made in the case where the 
counterparty is a commercial bank;
    (5) Custodial holdings of securities in the case where the 
counterparty is a clearing bank or clearing broker of the government 
securities broker or dealer; and
    (6) Exposure to a counterparty due to holding marketable instruments 
subject to market risk haircuts under appendix A to this section (Sec.  
402.2a) for which the counterparty is the obligor.
    (ii) Total counterparty exposure haircut. The ``total counterparty 
exposure haircut'' equals the sum of the counterparty exposure haircuts 
taken for all counterparties except a Federal Reserve Bank, of the 
government securities broker or dealer. The ``counterparty exposure 
haircut'' equals the product of a counterparty exposure haircut factor 
of 5 percent and the net credit exposure to a single counterparty not in 
excess of 15 percent of the government securities broker's or dealer's 
liquid capital.
    (iii) Total concentration of credit haircut. The ``total 
concentration of credit haircut'' equals the sum of the concentration of 
credit haircuts taken for all counterparties of the government 
securities broker or dealer. The ``concentration of credit haircut'' 
equals the product of a concentration of credit haircut factor of 25 
percent and the amount by which the net credit exposure to a single 
counterparty is in excess of 15 percent of the government securities 
broker's or dealer's liquid capital.
    (iv) Credit volatility haircut. The ``credit volatility haircut'' 
equals the product of a credit volatility haircut factor of 0.15 percent 
and the dollar amount of the larger of the gross long position or gross 
short position in those Treasury market risk instruments described in 
paragraphs (e)(1)(iii), (iv) and (v) of this section that have a term to 
maturity greater than 44 days, including futures and forwards thereon, 
settled on a cash or delivery basis, and futures and forwards on time 
deposits described in paragraph (e)(1)(vii) of this section, that have a 
term to maturity greater than 44 days, settled on a cash or delivery 
basis.
    (2) Market risk haircut. The ``market risk haircut'' equals the sum 
of the Treasury market risk haircut and the other securities haircut, 
calculated in accordance with the provisions of appendix A of this 
section, Sec.  402.2a.
    (h) Debt-equity requirements. No government securities broker or 
dealer shall permit the total of outstanding principal amounts of its 
satisfactory subordination agreements as defined in Sec.  240.15c3-1d of 
this title (appendix D to SEC Rule 15c3-1) modified as provided in 
appendix D to this section, Sec.  402.2d, to exceed the allowable levels 
set forth in Sec.  240.15c3-1(d) of this title.
    (i) Provisions relating to the withdrawal of equity capital--(1) 
Notice provisions. No equity capital of the government securities broker 
or dealer or a subsidiary or affiliate consolidated pursuant to appendix 
C to this section, Sec.  402.2c, may be withdrawn by action of a 
stockholder or partner, or by redemption or repurchase of shares of 
stock by any of the consolidated entities or through the payment of 
dividends or any similar distribution, nor may any unsecured advance or 
loan be made to a stockholder, partner, sole proprietor, employee or 
affiliate without providing written notice, given in accordance with 
paragraph (i)(1)(iv) of this section, when specified in paragraphs 
(i)(1) (i) and (ii) of this section:

[[Page 662]]

    (i) Two business days prior to any withdrawals, advances or loans if 
those withdrawals, advances or loans on a net basis exceed in the 
aggregate in any 30 calendar day period, 30 percent of the government 
securities broker's or dealer's excess liquid capital. A government 
securities broker or dealer, in an emergency situation, may make 
withdrawals, advances or loans that on a net basis exceed 30 percent of 
the government securities broker's or dealer's excess liquid capital in 
any 30 calendar day period without giving the advance notice required by 
this paragraph, with the prior approval of its designated examining 
authority. When a government securities broker or dealer makes a 
withdrawal with the consent of its designated examining authority, it 
shall in any event comply with paragraph (i)(1)(ii) of this section; and
    (ii) Two business days after any withdrawals, advances or loans if 
those withdrawals, advances or loans on a net basis exceed in the 
aggregate in any 30 calendar day period, 20 percent of the government 
securities broker's or dealer's excess liquid capital.
    (iii) This paragraph (i)(1) of this section does not apply to:
    (A) Securities or commodities transactions in the ordinary course of 
business between a government securities broker or dealer and an 
affiliate where the government securities broker or dealer makes payment 
to or on behalf of such affiliate for such transaction and then receives 
payment from such affiliate for the securities or commodities 
transaction within two business days from the date of the transaction; 
or
    (B) Withdrawals, advances or loans which in the aggregate in any 
such 30 calendar day period, on a net basis, equal $500,000 or less.
    (iv) Each required notice shall be effective when received by the 
Commission in Washington, DC, the regional or district office of the 
Commission for the area in which the government securities broker or 
dealer has its principal place of business, and the government 
securities broker's or dealer's designated examining authority.
    (2) Withdrawal limitations. No equity capital of the government 
securities broker or dealer or a subsidiary or affiliate consolidated 
pursuant to appendix C to this section, Sec.  402.2c, may be withdrawn 
by action of a stockholder or a partner, or by redemption or repurchase 
of shares of stock by any of the consolidated entities or through the 
payment of dividends or any similar distribution, nor may any unsecured 
advance or loan be made to a stockholder, partner, sole proprietor, 
employee or affiliate if, after giving effect thereto and to any other 
such withdrawals, advances or loans and any Payments of Payment 
Obligations (as defined in Sec.  240.15c3-1d of this title, appendix D 
to SEC Rule 15c3-1, modified as provided in appendix D to this section, 
Sec.  402.2d) under satisfactory subordination agreements which are 
scheduled to occur within 180 calendar days following such withdrawal, 
advance or loan, either:
    (i) The ratio of liquid capital to total haircuts, determined as 
provided in Sec.  402.2, would be less than 150 percent; or
    (ii) Liquid capital minus total haircuts would be less than 120 
percent of the minimum capital required by Sec.  402.2(b) or Sec.  
402.2(c) as applicable; or
    (iii) In the case of any government securities broker or dealer 
included in such consolidation, the total outstanding principal amounts 
of satisfactory subordination agreements of the government securities 
broker or dealer (other than such agreements which qualify as equity 
under Sec.  240.15c3-1(d) of this title) would exceed 70% of the debt-
equity total as defined in Sec.  240.15c3-1(d).
    (3) Miscellaneous provisions. (i) Excess liquid capital is that 
amount in excess of the amount required by the greater of Sec.  402.2(a) 
or, Sec. Sec.  402.2 (b) or (c), as applicable. For the purposes of 
paragraphs (i)(1) and (i)(2) of this section, a government securities 
broker or dealer may use the amount of excess liquid capital, liquid 
capital and total haircuts reported in its most recently required filed 
Form G-405 for the purposes of calculating the effect of a projected 
withdrawal, advance or loan relative to excess liquid capital or total 
haircuts. The government securities broker or dealer must assure itself 
that the excess liquid capital, liquid capital

[[Page 663]]

or the total haircuts reported on the most recently required filed Form 
G-405 have not materially changed since the time such report was filed.
    (ii) The term equity capital includes capital contributions by 
partners, par or stated value of capital stock, paid-in capital in 
excess of par, retained earnings or other capital accounts. The term 
equity capital does not include securities in the securities accounts of 
partners and balances in limited partners' capital accounts in excess of 
their stated capital contributions.
    (iii) Paragraphs (i)(1) and (i)(2) of this section shall not 
preclude a government securities broker or dealer from making required 
tax payments or preclude the payment to partners of reasonable 
compensation, and such payments shall not be included in the calculation 
of withdrawals, advances or loans for purposes of paragraphs (i)(1) and 
(i)(2) of this section.
    (iv) For the purposes of this subsection (i), any transaction 
between a government securities broker or dealer and a stockholder, 
partner, sole proprietor, employee or affiliate that results in a 
diminution of the government securities broker's or dealer's liquid 
capital shall be deemed to be an advance or loan of liquid capital.
    (j) Modification of appendices to Sec.  240.15c3-1 of this title. 
For purposes of this section, appendix C to this section (Sec.  402.2c) 
is substituted for appendix C to Rule 15c3-1 (Sec.  240.15c3-1c of this 
title), and appendix D to Rule 15c3-1 (Sec.  240.15c3-1d of this title), 
relating to Satisfactory Subordination Agreements, is modified as 
provided in appendix D to this section (Sec.  402.2d).

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27931, July 24, 1987, as amended at 53 FR 28984, Aug. 1, 1988; 60 
FR 11024, Mar. 1, 1995; 79 FR 38455, July 8, 2014]



Sec.  402.2a  Appendix A--Calculation of market risk haircut for 
purposes of Sec.  402.2(g)(2).

    The market risk haircut is the sum of the Treasury market risk 
haircut and the other securities haircut, calculated as follows.
    (a) Treasury market risk haircut. The ``Treasury market risk 
haircut'' equals the sum of the total governments offset portion 
haircut, the total futures and options offset haircut, the total hedging 
disallowance haircut, and the residual net position haircut, calculated 
with respect to financings and positions in Treasury market risk 
instruments, except to the extent that a permissible election is made 
pursuant to paragraph (b)(1) of this section to include qualified 
positions in the calculation of the other securities haircut.
    (1) Total governments offset portion haircut. The ``total 
governments offset portion haircut'' equals the sum of the governments 
offset portion haircuts calculated for each category in Sec.  
402.2(f)(1). The ``governments offset portion haircuts'' equal, for each 
category in Sec.  402.2(f)(1), the product of the offset haircut factor 
for that category set out in Sec.  402.2(f)(2) and the smaller of the 
absolute values of the gross long immediate position or gross short 
immediate position for that category. Schedules B and C in paragraph (c) 
of this section can be used to make this calculation.
    (i)(A) The ``gross long immediate position'' for purposes of this 
part equals, for each category except categories MB and AR in Sec.  
402.2(f)(1), the sum of the market values of each long immediate 
position in Treasury market risk instruments with a term to maturity 
(or, in the case of a floating rate note, the time to the next scheduled 
interest rate adjustment or the term to maturity, whichever is less) 
corresponding to such category, the contract values of each reverse 
repurchase agreement with a term to maturity or time to the next 
scheduled interest rate adjustment, whichever is less, corresponding to 
that category, and the values of the cash collateral of each security 
borrowing with a term to maturity or time to next scheduled interest 
rate adjustment, whichever is less, corresponding to such category.
    (B) In the case of category MB, the ``gross long immediate 
position'' equals the sum of the market values of all long immediate 
positions in fixed rate mortgage-backed securities which are Treasury 
market risk instruments.
    (C) In the case of category AR, the ``gross long immediate 
position'' equals the sum of the market values of all long immediate 
positions in adjustable

[[Page 664]]

rate mortgage-backed securities which are Treasury market risk 
instruments.
    (ii)(A) The ``gross short immediate position'' for purposes of this 
section equals, for each category except categories MB and AR in Sec.  
402.2(f)(1), the sum of the market values of each short immediate 
position in Treasury market risk instruments with a term to maturity 
(or, in the case of a floating rate note, the time to the next scheduled 
interest rate adjustment or the term to maturity, whichever is less) 
corresponding to such category, and the values of funds received from 
each financing transaction (including repurchase agreements, securities 
lending secured by cash collateral, and term financings, but excluding 
subordinated debt which meets the requirements of Sec.  240.15c3-1d of 
this title modified as provided in Sec.  402.2d) with a term to maturity 
or time to the next scheduled interest rate adjustment, whichever is 
less, corresponding to that category.
    (B) In the case of category MB, the ``gross short immediate 
position'' equals the sum of the market values of all short immediate 
positions in fixed rate mortgage-backed securities which are Treasury 
market risk instruments.
    (C) In the case of category AR, the ``gross short immediate 
position'' equals the sum of the market values of all short immediate 
positions in adjustable rate mortgage-backed securities which are 
Treasury market risk instruments.
    (iii) The term long immediate position in a Treasury market risk 
instrument means, for purposes of this part:
    (A) The net long position in a Treasury market risk instrument as of 
the trade date, except when the settlement date, in the case of a 
Treasury market risk instrument except a mortgage-backed security, is 
scheduled more than five business days in the future, and, in the case 
of a mortgage-backed security, more than thirty calendar days in the 
future;
    (B) The net long when-issued position in a marketable U.S. Treasury 
security between announcement and issue date;
    (C) The net long when-issued position in a government agency or a 
government-sponsored agency debt security between release date and issue 
date; and
    (D) The net long when-issued position in a security described in 
Sec.  402.2(e)(1)(vi) between announcement date and issue date.
    (iv) The term short immediate position on a Treasury market risk 
instrument means, for purposes of this part:
    (A) The net short position in a Treasury market risk instrument as 
of the trade date, except when the settlement date, in the case of a 
Treasury market risk instrument except a mortgage-backed security, is 
scheduled more than five business days in the future, and, in the case 
of a mortgage-backed security, more than thirty calendar days in the 
future;
    (B) The net short when-issued position in a marketable U.S. Treasury 
security between announcement and issue date;
    (C) The net short when-issued position in a government agency or a 
government-sponsored agency debt security between release date and issue 
date; and
    (D) The net short when-issued position in a security described in 
Sec.  402.2(e)(1)(vi) between announcement date and issue date.
    (2) Net immediate position interim haircut. The ``net immediate 
position interim haircut'' equals, for each category in Sec.  
402.2(f)(1), the product of the net position haircut factor for that 
category and the sum of the gross long immediate position and the gross 
short immediate position for that category. For purposes of this part, a 
gross long immediate position shall be a positive number and a gross 
short immediate position shall be a negative number. Schedules B and C 
in paragraph (c) of this section can be used to make this calculation.
    (3) Total futures and options offset haircut. The ``total futures 
and options offset haircut'' equals the sum of the futures and options 
offset haircuts calculated for each category in Sec.  402.2(f)(1). The 
``futures and options offset haircut'' equals, for each category in 
Sec.  402.2(f)(1), the product of a futures and options offset factor of 
20 percent and the smaller of the absolute values of the positive and 
negative aggregate interim haircuts for that category.

[[Page 665]]

Schedule D in paragraph (c) of this section can be used to make this 
calculation.
    (i) Positive aggregate interim haircut. The ``positive aggregate 
interim haircut'' equals, for each category in Sec.  402.2(f)(1), the 
sum of the positive net immediate position interim haircut (see 
paragraph (a)(2) of this section), the gross long futures and forward 
interim haircut, and the positive gross options interim haircut for that 
category. Schedule D in paragraph (c) of this section can be used to 
make this calculation.
    (A) Gross long futures and forward interim haircut. The ``gross long 
futures and forward interim haircut'' equals, for each category in Sec.  
402.2(f)(1), the sum of the interim haircuts on each long futures 
position and long forward position placed, in the case of a futures or 
forward contract which is a Treasury market risk instrument except those 
on mortgage-backed securities, in the category corresponding to the sum 
of the term to maturity of the contract and the term to maturity of the 
underlying instrument at the time of the maturity of the contract or, in 
the case of a futures or forward contract on Treasury market risk 
mortgage-backed securities, in the category corresponding to the type of 
Treasury market risk mortgage-backed security.
    (1) For purposes of this part, the interim haircut on each long 
futures position and each long forward position is the product of the 
net position haircut factor for the category corresponding to, in the 
case of a futures or forward contract which is a Treasury market risk 
instrument except those on mortgage-backed securities, the maturity of 
the underlying instrument at the time of the maturity of the contract 
or, in the case of a futures or forward contract on Treasury market risk 
mortgage-backed securities, the type of Treasury market risk mortgage-
backed security and the value of the long futures position or long 
forward position evaluated at the current market price for such 
contract.
    (2) For purposes of this part, the gross long futures and forward 
interim haircut shall be a positive number.
    (B) Positive gross options interim haircut. The ``positive gross 
options interim haircut'' equals, for each category in Sec.  
402.2(f)(1), the sum of the interim haircuts on each purchased call and 
sold put placed in the category in which the underlying instrument would 
be placed.
    (1) For purposes of this part, the ``interim haircut on each 
purchased call and sold put'' equals the lesser of the market value of 
the option or, (i) in the case of an option on a cash instrument, the 
product of the net position haircut factor for the category to which the 
underlying cash instrument corresponds and the market value of the 
underlying cash instrument or, (ii) in the case of an option on a 
futures contract, the interim haircut on the underlying futures 
contract.
    (2) For purposes of this part, the positive gross options interim 
haircut is a positive number.
    (ii) Negative aggregate interim haircut. The ``negative aggregate 
interim haircut'' equals, for each category in Sec.  402.2(f)(1), the 
sum of the negative net immediate position interim haircut (see 
paragraph (a)(2) of this section), the gross short futures and forward 
interim haircut, and the negative gross options interim haircut for that 
category. Schedule D in paragraph (c) of this section can be used to 
make this calculation.
    (A) Gross short futures and forward interim haircut. The ``gross 
short futures and forward interim haircut'' equals, for each category in 
Sec.  402.2(f)(1), the sum of the interim haircuts on each short futures 
position and short forward position placed, in the case of a futures or 
forward contract which is a Treasury market risk instrument except those 
on mortgage-backed securities, in the category corresponding to the sum 
of the term to maturity of the contract and the term to maturity of the 
underlying instrument at the time of the maturity of the contract or, in 
the case of a futures or forward contract on Treasury market risk 
mortgage-backed securities, in the category corresponding to the type of 
Treasury market risk mortgage-backed security.
    (1) For purposes of this part, the ``interim haircut on each short 
futures position and each short forward position''

[[Page 666]]

is the product of the net position haircut factor for the category 
corresponding to, in the case of a futures or forward contract which is 
a Treasury market risk instrument except those on mortgage-backed 
securities, the maturity of the underlying instrument at the time of the 
maturity of the contract or, in the case of a futures or forward 
contract on Treasury market risk mortgage-backed securities, the type of 
Treasury market risk mortgage-backed security and the value of the short 
futures position or short forward position evaluated at the current 
market price for such contract.
    (2) For purposes of this part, the gross short futures and forward 
interim haircut is a negative number.
    (B) Negative gross options interim haircut. The ``negative gross 
options interim haircut'' equals, for each category in Sec.  
402.2(f)(1), the sum of the interim haircuts on each sold call and 
purchased put placed in the category in which the underlying instrument 
would be placed.
    (1) For purposes of this part, the ``interim haircut on each sold 
call and purchased put'' equals the lesser of the market value of the 
option or, (i) in the case of an option on a cash instrument, the 
product of the net position haircut factor for the category to which the 
underlying cash instrument corresponds and the market value of the 
underlying cash instrument or, (ii) in the case of an option on a 
futures contract, the interim haircut on the underlying futures 
contract.
    (2) For purposes of this part, the negative gross options interim 
haircut is a negative number.
    (4) Total hedging disallowance haircut. The ``total hedging 
disallowance haircut'' equals the sum of the hedging disallowance 
haircuts calculated pursuant to each netting of qualified netting 
interim haircuts. The ``hedging disallowance haircut'' equals the 
absolute value of the product of the applicable category pair hedging 
disallowance haircut factor specified in Sec.  402.2(f)(3) and the 
smaller in absolute value of any two qualified netting interim haircuts, 
netted in accordance with the provisions of this paragraph. Schedule E 
in paragraph (c) of this section can be used to make this calculation.
    (i) Qualified netting interim haircut. The term ``qualified netting 
interim haircut'' means a residual position interim haircut or a net 
residual position interim haircut.
    (A) Residual position interim haircut. The ``residual position 
interim haircut'' equals, for each category in Sec.  402.2(f)(1), the 
sum of the positive aggregate interim haircut and the negative aggregate 
interim haircut corresponding to the category, calculated in accordance 
with the provisions of paragraph (a)(3) of this section.
    (B)(1) Net residual position interim haircut. The ``net residual 
position interim haircut'' equals, for any two categories between which 
netting is permitted, the sum of (i) the residual position interim 
haircuts calculated for those categories, in the case of the category of 
the larger in absolute value of the two residual position interim 
haircuts being netted, and (ii) zero, in the case of the category of the 
smaller in absolute value of the two residual position interim haircuts 
being netted.
    (2) For the purposes of this paragraph (a)(4), netting is permitted 
only between categories for which a category pair hedging disallowance 
haircut factor has been specified in paragraph Sec.  402.2(f)(3).
    (ii) Net residual position interim haircuts shall be substituted for 
the residual position interim haircuts in the respective categories in 
which they have been placed and shall be considered as if they were 
residual position interim haircuts. New net residual position interim 
haircuts may continue to be calculated until for each category pair for 
which netting is permitted at least one of the two qualified netting 
interim haircuts is zero or both qualified netting interim haircuts are 
of the same sign.
    (5) Residual net position haircut. The ``residual net position 
haircut'' equals the sum of the absolute values of all qualified netting 
interim haircuts remaining in each category after the completion of the 
calculation of permissible nettings described in paragraph (a)(4) of 
this section. Schedule E in paragraph (c) of this section can be used to 
make this calculation.
    (b) Other securities haircut. The ``other securities haircut'' 
equals the sum of

[[Page 667]]

all deductions specified in Sec.  240.15c3-1 (c)(2)(vi) and (c)(2)(viii) 
of this title and Sec. Sec.  240.15c3-1a and 240.l5c3-1b of this title 
for long and short positions in securities, futures contracts, forward 
contracts, options, and other inventory which are not Treasury market 
risk instruments as defined in Sec.  402.2(e).
    (1) A registered government securities broker or dealer may elect to 
exclude from its calculation of the Treasury market risk haircut and 
include in its calculation of the other securities haircut long and 
short positions in Treasury market risk instruments if such positions 
form part of a hedge against long and short positions in securities, 
futures contracts, forward contracts, or options which are not Treasury 
market risk instruments. Only the portion of the total position in a 
Treasury market risk instrument that forms part of such hedge may be 
excluded from the calculation of the Treasury market risk haircut and 
included in the calculation of the other securities haircut.
    (2) For purposes of this paragraph (b), a gross long or short 
position in Treasury market risk instruments shall be considered part of 
a hedge if the inclusion of such position in the calculation of the 
other securities haircut would serve to reduce said haircut.
    (3) For purposes of this paragraph (b) as it relates to Sec.  
240.15c3-1(c)(2)(vi)(M) (``undue concentration''), references to ``10 
percent of the ``net capital''' shall be understood to refer to 10 
percent of the liquid capital and references to ``Appendix (D) (17 CFR 
240.15c3-1d)'' shall be understood to refer to such section as modified 
by Sec.  402.2d.
    (c) Schedules. This paragraph sets forth schedules which may be used 
by government securities brokers or dealers in the calculation of total 
haircuts as required by this part 402. The appropriate regulatory agency 
or designated examining authority may specify other substantially 
similar forms required to be used by government securities brokers or 
dealers in the calculation of such haircuts.

       Schedule A--Liquid Capital Requirement, Summary Computation
                        [In thousands of dollars]
1. Liquid capital \1\..........................................   ______
2. Haircuts on security and financing positions including
 contractual commitments:
    a. Total governments offset portion haircut (Schedule C)...   ______
    b. Total futures and options offset haircut (Schedule D)...   ______
    c. Total hedging disallowance haircut (Schedule E).........   ______
    d. Residual net position haircut (Schedule E)..............   ______
    e. Other securities haircut (use SEC factors)..............   ______
3. Haircuts on credit exposure:
    a. Total counterparty exposure haircut.....................   ______
    b. Total concentration of credit haircut...................   ______
    c. Credit volatility haircut...............................   ______
4. Total haircuts (sum of lines 2 a through e, 3 a, b, and c)..   ______
5. Capital-to-risk ratio (line 1 divided by line 4)............  ______
 
\1\ Identical to the amount reported on line 3640 of the Report on
  Finances and Operations of Government Securities Brokers and Dealers,
  Form G-405.


[[Page 668]]

[GRAPHIC] [TIFF OMITTED] TC11OC91.008


[[Page 669]]

[GRAPHIC] [TIFF OMITTED] TC11OC91.009


[[Page 670]]

[GRAPHIC] [TIFF OMITTED] TC11OC91.010


[[Page 671]]

[GRAPHIC] [TIFF OMITTED] TC11OC91.011

                  Instructions to Schedules A through E

    Schedules A through E may be used by government securities brokers 
or dealers subject to 17 CFR 402 to determine the firm's capital-to-risk 
ratio. Section 402.2 provides that a government securities broker or 
dealer must meet the applicable minimum dollar liquid capital 
requirement and that the firm's ratio of liquid capital to risk (total 
haircuts) must be at least 1.2:1; liquid capital must exceed risk by at 
least 20 percent. Total haircuts is the risk measure used in the ratio; 
it is made up of measures of market risk and measures of credit risk. 
The market risk of a government securities broker's or dealer's 
positions is accounted for

[[Page 672]]

through the Treasury market risk haircut and the other securities 
haircut. Credit risk is accounted for in the counterparty exposure, 
concentration of credit, and credit volatility haircuts and in the 
computation of liquid capital through the various deductions and 
charges.
    Only positions in Treasury market risk instruments and financings 
may be used in the calculation of the Treasury market risk haircut. 
Treasury market risk instruments and financings are described in 17 CFR 
402.2 and in the instructions to the schedule where they are to be first 
entered. All other types of financial instruments are to be included in 
the calculation of the other securities haircut. Calculation of the 
other securities haircut is based on the SEC's Rule 15c3-1 (17 CFR 
240.15c3-1).
    Treasury market risk instruments may be excluded from the 
calculation of the Treasury market risk haircut if they are included in 
the calculation of the other securities haircut as part of a hedge 
against long and short positions in securities, futures contracts, 
forward contracts, or options that are not Treasury market risk 
instruments. Only the portion of the total position in a Treasury market 
risk instrument that forms part of such a hedge may be excluded, and the 
result of this transfer of the Treasury market risk instruments must be 
a reduction in the other securities haircut.
    The categories for classifying Treasury market risk instruments are 
designated in 17 CFR 402.2(f)(1). The categories, which are designated 
by a maturity range, contain all securities with remaining terms to 
maturity greater than or equal to the lower end of the range but less 
than the higher. A half year is always considered to be 6 months. In 
categories A through D, zero-coupon instruments are to be treated in the 
same manner as all other instruments. In categories E through J, the 
maturity designations in parentheses give the maturities of the zero-
coupon instruments to be placed in that category. All mortgage-backed 
securities that are Treasury market risk instruments are to be placed in 
category MB or category AR, depending on whether they are backed by 
conventional or adjustable-rate mortgages.
    All haircuts may be calculated to the nearest hundred dollars, 
unless such rounding would materially affect the liquid capital 
calculation.
    Appendix A to the Preamble published with the temporary regulations 
for 17 CFR part 402 (52 FR 19669, May 26, 1987) contains an example of 
the capital calculation. It may also be used as an aid in completing 
these schedules.

       Schedule A--Liquid Capital Requirement Summary Computation

    Schedule A is used to determine the capital-to-risk ratio by 
comparing liquid capital to total haircuts. Schedule A will be the last 
schedule completed as many of the haircuts entered on Schedule A are 
calculated on Schedules B through E.
    Line 1--Enter liquid capital, which is identical to the amount 
reported on line 3640 of the Report on Finances and Operations of 
Government Securities Brokers and Dealers, Form G-405.
    Line 2--Haircuts on ``Security and Financing Positions'' including 
contractual commitments:
    a. Enter the Total Governments Offset Portion Haircut from column 10 
of Schedule C.
    b. Enter the Total Futures and Options Offset Haircut from column 19 
of Schedule D.
    c. Enter the Total Hedging Disallowance Haircut as calculated in 
Schedule E, column 27.
    d. Enter the Residual Net Position Haircut as given in column 28 of 
Schedule E.
    e. Enter the other securities haircut as determined by applying the 
SEC haircut factors to securities, futures contracts, forward contracts, 
options and other inventory that are not Treasury market risk 
instruments as defined in 17 CFR 402.2(e). The other securities haircut 
is the sum of all applicable deductions as specified in 17 CFR 240.15c3-
1 (c)(2)(vi) and (c)(2)(viii) and in 17 CFR 240.15c3-1a and 240.15c3-1b. 
Any position(s) in Treasury market risk instruments that have been 
excluded from the calculation of the Treasury market risk haircut 
because they are part of a hedge with these other instruments are to be 
included in the calculation of this haircut.
    Line 3--Haircuts on credit exposure:
    a. Enter the total counterparty exposure haircut which is the sum of 
the counterparty exposure haircut with each counterparty, except a 
Federal Reserve Bank. A counterparty exposure haircut is equal to 5 
percent of the net credit exposure to a single counterparty which is not 
in excess of 15 percent of the government securities broker's or 
dealer's liquid capital. If the net credit exposure to a counterparty 
does exceed 15 percent of liquid capital, the excess will be used in 
calculating the total concentration of credit haircut on line 3b.
    Net credit exposure equals the difference between the government 
securities broker's or dealer's credit exposure to a single counterparty 
and that counterparty's credit exposure to the government securities 
broker or dealer. The government securities broker's or dealer's credit 
exposure to a counterparty is equal to the sum of the dollar amount of 
funds, debt instruments, other securities, and other inventory at risk 
to the government securities broker or dealer in the event of the 
counterparty's default and the market value of purchased unlisted 
options that are Treasury market risk instruments and were written by 
the counterparty.

[[Page 673]]

It does not include, however, (1) the deduction taken from net worth for 
unsecured receivables, repurchase and reverse repurchase agreement 
deficits, aged fails to deliver, and aged fails to receive arising from 
transactions with the counterparty; (2) demand deposits in the case 
where the counterparty is a commercial bank; (3) loans of immediately 
available funds (commonly referred to as ``sales of federal funds'') 
held by the government securities broker or dealer in connection with 
the clearance of securities on the day the loan is made in the case 
where the counterparty is a commercial bank; (4) custodial holdings of 
securities in the case where the counterparty is a clearing bank or 
clearing broker of the government securities broker or dealer; or (5) 
credit exposure to the counterparty due to holding marketable 
instruments for which the counterparty is the obligor.
    The counterparty's credit exposure to the government securities 
broker or dealer equals the dollar amount of funds, debt instruments, 
other securities, and other inventory at risk to the counterparty in the 
event of the government security broker's or dealer's default and any 
unlisted options written by the government securities broker or dealer 
and held by the counterparty.
    b. Enter the total concentration of credit haircut which is the sum 
of all concentration of credit haircuts applied in cases where the net 
credit exposure (as defined above) to a single counterparty is in excess 
of 15 percent of the government securities broker's or dealer's liquid 
capital. The concentration of credit haircut is 25 percent of the amount 
of net credit exposure in excess of 15 percent of the government 
securities broker's or dealer's liquid capital.
    c. Enter the credit volatility haircut which equals a factor of 0.15 
percent applied to the larger of the gross long or gross short position 
in money market instruments qualifying as Treasury market risk 
instruments which mature in 45 days or more, in futures and forwards on 
these instruments that are settled on a cash or delivery basis, and in 
futures and forwards on time deposits described in Sec.  
402.2(e)(1)(vii), that mature in 45 days or more, settled on a cash or 
delivery basis. Money market instruments qualifying as Treasury market 
risk instruments are (1) marketable certificates of deposit with no more 
than one year to maturity, (2) bankers acceptances, and (3) commercial 
paper of no more than one year to maturity and which has only a minimal 
amount of credit risk as determined by the government securities broker 
or dealer pursuant to reasonably designed written policies and 
procedures the government securities broker or government securities 
dealer establishes, maintains, and enforces to assess and monitor 
creditworthiness. These policies and procedures should result in 
creditworthiness assessments that typically are consistent with market 
data.
    Line 4--Enter total haircuts which is the sum of lines 2 a through 
e, and 3 a, b, and c.
    Line 5--Enter the capital-to-risk ratio which is found by dividing 
line 1, ``Liquid capital,'' by line 4, ``Total haircuts.'' The capital-
to-risk ratio must be at least equal to 1.2:1.

  Schedule B--Calculation of Net Immediate Position in Securities and 
                               Financings

    Schedule B is used to calculate the net immediate position in and 
offset portion of securities and financings. The results are then 
carried over to Schedule C for initial haircut calculations. Futures, 
forwards, and options which are Treasury market risk instruments are to 
be entered on Schedule D.
    Positions in and financings on debt instruments other than mortgage-
backed or adjustable rate mortgage-backed securities should be placed in 
the category corresponding to their remaining term to maturity. In the 
case of a floating rate note, however, the note should be placed in the 
category corresponding to the time to the next scheduled interest rate 
adjustment or remaining term to maturity, whichever is less.
    Column 1--Under ``Financings-Long'' report in the appropriate 
category the contract value of reverse repurchase agreements and the 
value(s) of cash collateral on security borrowings. Financings so 
reported should be placed in the category corresponding to the remaining 
term to maturity or time to the next scheduled interest rate adjustment, 
whichever is less.
    Column 2--Under ``Financings-Short'' report in the appropriate 
category as a negative number the values of funds received from 
financing transactions. Include repurchase agreements, securities 
lending secured by cash collateral, and term financings, but exclude 
subordinated debt which meets the requirements of 17 CFR 240.15c3-1d as 
modified by 17 CFR 402.2d. Financings so reported should be placed in 
the category corresponding to the remaining term to maturity or time to 
the next scheduled interest rate adjustment, whichever is less.
    Columns 3 and 4--Report in the appropriate column by maturity or 
type of mortgage-backed security under ``Securities Positions'' the sum 
of the market values of immediate positions in Treasury market risk 
instruments. The net position in each individual Treasury market risk 
instrument is to be appropriately reported as a long (+) or short (-) 
position in summation with all other positions of the same category 
(long/short). Short positions are assigned a negative value. Treasury 
market risk instruments are defined in 17 CFR 402.2(e). Those to be 
reported in Schedule B are:

[[Page 674]]

    (1) Government securities as defined in 17 CFR 400.3 except equity 
securities and mortgage-backed securities which do not pass through to 
the security holder on a pro rata basis a distribution based on the 
monthly payments and prepayments of principal and interest on the 
underlying pool of mortgage collateral less fees and expenses;
    (2) Zero-coupon receipts or certificates based on marketable 
Treasury notes or bonds;
    (3) Marketable certificates of deposit of no more than one year to 
maturity;
    (4) Bankers acceptances;
    (5) Commercial paper of no more than one year to maturity and which 
has only a minimal amount of credit risk as determined by the government 
securities broker or dealer pursuant to reasonably designed written 
policies and procedures the government securities broker or dealer 
establishes, maintains, and enforces to assess and monitor 
creditworthiness. These policies and procedures should result in 
creditworthiness assessments that typically are consistent with market 
data; and
    (6) Securities described in Sec.  402.2(e)(1)(vi).
    Report all positions as of the trade date. If the settlement date is 
scheduled for more than five business days in the future (or, in the 
case of a mortgage-backed security, more than thirty calendar days in 
the future), then report the position as a forward contract on Schedule 
D. Also, under ``Securities Positions'' in the appropriate column and 
category, report any when-issued position in a marketable Treasury 
security between announcement and issue date, any when-issued position 
in a government agency or a government-sponsored agency debt security 
between release date and issue date, and any when-issued position in a 
security described in Sec.  402.2(e)(1)(vi) between announcement date 
and issue date.
    Exclude positions in Treasury market risk instruments which form 
part of a hedge against long and short positions in securities, futures 
contracts, forward contracts, or options that are not Treasury market 
risk instruments and are to be included in the calculation of the other 
securities haircut. Only that portion of the total position in a 
Treasury market risk instrument that forms part of such a hedge may be 
excluded, and the inclusion of the Treasury market risk instruments must 
reduce the other securities haircut.
    Column 5--Under ``Total Securities and Financing Positions (+)'' 
report in the appropriate category the sum of the long financings 
(column 1) and long securities positions (column 3).
    Column 6--Under ``Total Securities and Financing Positions (-)'' 
report in the appropriate category the sum of the short financings 
(column 2) and short securities positions (column 4).
    Column 7--Under ``Offset Portions'' report in the appropriate 
category the lesser of the absolute values of the positive (column 5) or 
negative (column 6) total securities and financing positions.
    Column 8--Under ``Net Immediate Positions'' report in the 
appropriate category the sum, or net value, of the positive (column 5) 
and negative (column 6) total securities and financing positions.
    Columns 7, ``Offset Portions,'' and 8, ``Net Immediate Positions,'' 
are to be carried to Schedule C.

   Schedule C--Governments Offset Portion and Net Immediate Position 
                      Interim Haircuts Calculation

    Schedule C is used to calculate the total governments offset portion 
haircut and net immediate position interim haircuts by applying offset 
and net position haircut factors to the offset portions and net 
immediate positions in Treasury market risk instruments and financings. 
The total governments offset portion haircut is then carried to Schedule 
A, and the net immediate position interim haircuts are carried to 
Schedule D or E.
    Column 7--Transfer to column 7, ``Governments Offset Portion--$ 
Amounts,'' column seven from Schedule B, ``Offset Portions.''
    Column 9--These are the governments offset portion haircut factors 
given at 17 CFR 402.2(f)(2). They may be updated from time to time.
    Column 10--Under ``Governments Offset Portion--Haircuts'' report in 
the appropriate category the product of the corresponding values in 
column 7, ``$ Amounts,'' and in column 9, ``Factors.''
    To determine the total governments offset portion haircut, sum the 
values under ``Governments Offset Portion--Haircuts'' in column 10, and 
enter this number in the appropriate space. Carry this value to Schedule 
A, line 2a, converting, if necessary, to thousands of dollars.
    Column 8--Transfer to column 8, ``Net Immediate Positions--$ 
Amounts,'' column eight from Schedule B, ``Net Immediate Positions.''
    Column 11--These are the net immediate position haircut factors 
given at 17 CFR 402.2(f)(2). They may be updated from time to time.
    Column 12--Under ``Net Immediate Positions--Interim Haircuts'' place 
in the appropriate category the product of the corresponding values in 
column 8, ``$ Amounts,'' and in column 11, ``Factors.'' A haircut on a 
short position remains negative.
    Carry column 12 to Schedule D, or, if there are no futures, 
forwards, or options positions, to Schedule E.

[[Page 675]]

  Schedule D--Consolidation of Net Immediate Position Interim Haircuts 
             with Gross Futures and Options Interim Haircuts

    Schedule D is used to enter haircuts on futures, forwards and 
options positions and to calculate the total futures and options offset 
haircut and the residual position interim haircuts as needed for 
Schedules A and E respectively. If there are no futures and options 
positions, it is not necessary to fill out Schedule D.
    Report on Schedule D futures, forwards, and options which are 
Treasury market risk instruments as defined in Sec.  402.2(e). These 
futures, forwards, and listed option contracts may be based on any of 
the Treasury market risk instruments described in the instructions to 
columns 3 and 4 on Schedule B or on time deposits whose changes in yield 
are closely correlated with marketable certificates of deposit which are 
Treasury market risk instruments, as described in Sec.  
402.2(e)(1)(vii). Options on Treasury market risk futures contracts and 
unlisted options on marketable Treasury bills, notes, and bonds are also 
to be included. Futures contracts may settle on a cash or delivery 
basis. Any of these contracts which are being included as part of a 
hedge in the calculation of the other securities haircut must be 
excluded from Schedule D.
    Report as a forward contract any position for which the time between 
trade date and settlement date is more than five business days (30 
calendar days for a mortgage-backed security). Any when-issued position 
in a marketable Treasury security established between announcement and 
issue date, any when-issued position in a government agency or a 
government-sponsored agency debt security established between release 
date and issue date, and any when-issued position in a security 
described in Sec.  402.2(e)(1)(vi) between announcement date and issue 
date is reported in the appropriate category on Schedule B under 
``Securities Positions.''
    Column 12--Transfer to column 12, ``Net Immediate Position Interim 
Haircuts,'' column 12 from Schedule C, ``Net Immediate Positions--
Interim Haircuts,'' converting, if necessary, to thousands of dollars.
    Columns 13 and 14--Under ``Gross Interim Haircuts--Futures and 
Forward'' enter in the appropriate category the sum of the interim 
haircuts on the futures or forward positions belonging to that category. 
The interim haircut on a futures or forward position equals the product 
of the value of the position evaluated at the current market price for 
such contract and the net position haircut factor that corresponds to 
either the term to maturity of the underlying instrument or, for 
mortgage-backed securities, the type of security. The term to maturity 
of the underlying instrument is the term to maturity of the deliverable 
security at the time of the maturity of the futures or forward contract. 
The haircut on a futures or forward position on a non-mortgaged-backed 
instrument is to be entered in the category corresponding to the sum of 
the remaining time to maturity of the futures or forward contract and 
the maturity of the underlying instrument. Haircuts on futures and 
forwards on mortgage-backed securities are to be entered in the 
appropriate mortgage-backed securities category. The interim haircuts on 
long futures and forwards are positive (column 13), and on short futures 
and forwards, negative (column 14).
    Columns 15 and 16--Under ``Gross Interim Haircuts--Options'' enter, 
in the category in which the instrument directly underlying the contract 
would be entered, the lesser of (1) the market value of the option or 
(2) the net immediate position interim haircut on the underlying cash 
instrument or gross futures interim haircut on the underlying futures 
contract. Note that in the case of an option on a futures contract the 
category in which the option contract is to be entered is the sum of the 
remaining time to maturity of the futures or forward contract and the 
maturity of the instrument underlying the futures or forward contract. 
The haircut factor used to determine the gross futures interim haircut 
is that factor corresponding to the term to maturity of the deliverable 
security at the time of the maturity of the futures or forward contract. 
Gross option haircuts on purchased calls and sold puts are positive, 
those on sold calls and purchased puts are negative.
    Column 17--Under ``Aggregate Interim Haircuts (+)'' enter in the 
appropriate category, the sum of any positive net immediate position 
interim haircut (column 12) and the positive gross option (column 15) 
and gross futures and forward (column 13) interim haircuts for that 
category.
    Column 18--Under ``Aggregate Interim Haircuts (-)'' enter in the 
appropriate category, the sum of any negative net immediate position 
interim haircut (column 12) and the negative gross option (column 16) 
and gross futures and forward (column 14) interim haircuts for that 
category.
    Column 19--Under ``Futures and Options Offset Portions'' enter, in 
the appropriate category, the lesser of the absolute values of the 
positive and negative aggregate interim haircuts (columns 17 and 18) for 
that category.
    The total futures and options offset portion is the sum of the 
values in column 19 under ``Futures and Options Offset Portions.''
    The total futures and options offset haircut is the total futures 
and options offset portion multiplied by a factor of 20 percent and is 
carried to line 2b, Schedule A.
    Column 20--Enter in the appropriate category under ``Residual 
Position Interim

[[Page 676]]

Haircuts'' the sum, or net value, of the positive and negative aggregate 
interim haircuts. Carry this to column 20 on Schedule E.

 Schedule E--Calculation of Hedging Disallowance Haircuts When Netting 
                       Haircuts Across Categories

    Schedule E is used to calculate the hedging disallowance and 
residual net position haircuts which are then carried to Schedule A. The 
purpose of Schedule E is to hedge positions in different categories in 
order to reduce total haircuts. Netting the residual position interim 
haircuts reflects the risk reduction inherent in hedges between 
positions in different categories where the price volatility is 
reasonably well correlated.
    Section 402.2(f)(3) of the rule specifies the hedging disallowance 
haircut factors for the category pairs. Netting of residual position 
interim haircuts is permitted only between any two categories for which 
a hedging disallowance haircut factor is specified. Hedging disallowance 
haircuts are similar to offset haircuts in that they are applied to the 
smaller of the two residual position interim haircuts and represent the 
portion of the hedge being ``disallowed.'' A hedging disallowance 
haircut is determined each time two residual position interim haircuts 
are netted.
    There are three levels of permissible netting corresponding to the 
three hedging disallowance haircut factors: The 20 percent, 30 percent, 
and 40 percent levels. It is not necessary to net all possible pairs at 
any one level. A greater reduction in total haircuts can sometimes be 
obtained by choosing not to net a pair at one level (e.g., the 20 
percent level) so that one element of the pair can be netted against a 
third category at another level (e.g., the 30 percent level).
    Column 20--Transfer column 20, ``Residual Position Interim 
Haircuts,'' from Schedule D. If there are no futures or options 
positions, transfer instead column 12, ``Net Immediate Positions--
Interim Haircuts,'' from Schedule C.
    Column 21--Use the matrix at 17 CFR 402.2(f)(3) to determine the 
categories from which the residual position interim haircuts may be 
paired at the 20 percent level. For each pair multiply the smaller of 
the absolute values of the two residual position interim haircuts by the 
hedging disallowance haircut factor of 20 percent, and, in the category 
of the smaller, enter the resulting hedging disallowance haircut.
    Column 22--For each pair being netted at this level, enter under 
``Net Residual Position Interim Haircuts'' (1) the sum, or net value, of 
the two residual position interim haircuts (and/or net residual position 
interim haircuts) in the category of the larger (in absolute value) of 
the two interim haircuts that were netted, and (2) a zero in the 
category of the smaller.
    These net residual position interim haircuts replace the residual 
position interim haircuts (or net residual position interim haircuts) 
from which they were derived. Net residual position interim haircuts can 
in turn be used in any other allowable netting exactly as residual 
position interim haircuts would be. If further netting of that category 
at the same level is permissible and possible, it will be necessary to 
replace the net residual position interim haircut involved with a new 
(and smaller) net residual position interim haircut in column 22.
    Since the net residual position interim haircut in any category 
containing a hedging disallowance haircut is zero, further netting with 
any such category is impossible.
    After all netting has been completed for category pairs with a 20 
percent hedging disallowance haircut factor, move on to column 23.
    Column 23--Use the matrix at 17 CFR 402.2(f)(3) to determine the 
categories from which the residual position interim haircuts and/or net 
residual position interim haircuts may be paired at the 30 percent 
level. In each category, the newest (and smallest) net residual position 
interim haircut determined by netting at the 20 percent level replaces 
the old value and must be used in hedging in that category at higher 
levels. For each pair being netted, multiply the smaller of the absolute 
values of the two (net) residual position interim haircuts by the 
hedging disallowance haircut factor of 30 percent, and in the category 
of the smaller, enter the resulting hedging disallowance haircut.
    Column 24--For each pair being netted at this level, enter under 
``Net Residual Position Interim Haircuts'' (1) the sum, or net value, of 
the two residual position interim haircuts and/or net residual position 
interim haircuts in the category of the larger (in absolute value) of 
the two interim haircuts that were netted, and (2) a zero in the 
category of the smaller.
    These net residual position interim haircuts replace the residual 
position interim haircuts (or net residual position interim haircuts) 
from which they were derived. Net residual position interim haircuts can 
in turn be used in any other allowable netting exactly as residual 
position interim haircuts would be. If further netting of that category 
at the same level is permissible and possible, it will be necessary to 
replace the net residual position interim haircut involved with a new 
(and smaller) net residual position interim haircut.
    After all netting has been completed for category pairs with a 30 
percent hedging disallowance haircut factor, continue to column 25.
    Column 25--Use the matrix at 17 CFR 402.2(f)(3) to determine the 
categories from which the residual position interim haircuts and/or net 
residual position interim haircuts

[[Page 677]]

may be paired at the 40 percent level. In each category, any new net 
residual position interim haircut determined by netting at the 20 or 30 
percent level replaces the old value and must be used in hedging with 
that category at the 40 percent level. For each pair being netted, 
multiply the smaller of the absolute values of the two (net) residual 
position interim haircuts by the hedging disallowance haircut factor of 
40 percent and, in the category of the smaller, enter the resulting 
hedging disallowance haircut.
    Column 26--For each pair being netted at this level, enter under 
``Net Residual Position Interim Haircuts'' (1) the sum, or net value, of 
the two (net) residual position interim haircuts in the category of the 
larger (in absolute value) of the two interim haircuts that were netted, 
and (2) a zero in the category of the smaller. If further netting of 
that category at the same level is permissible and possible, it will be 
necessary to replace the net residual position interim haircut involved 
with a new (and smaller) net residua1 position interim haircut.
    Column 27--When all possible (net) residual position interim 
haircuts have been netted, enter under ``Hedging Disallowance Haircuts'' 
all hedging disallowance haircuts calculated in the netting procedures, 
each in its appropriate category.
    Enter under ``Total Hedging Disallowance Haircut'' the sum of all 
the hedging disallowance haircuts entered in column 27. Carry to 
Schedule A, line 2c.
    Column 28--Under ``Qualified Netting Interim Haircuts'' enter in the 
appropriate category the absolute value of the haircut given under ``Net 
Residual Position Interim Haircut'' at the highest hedging disallowance 
factor used for that category (columns 26, 24, or 22). This value will 
also be the smallest of the net residual position interim haircuts in 
that category. If the position in a given category was not used in 
hedging then enter the absolute value of the residual position interim 
haircut from column 20.
    Sum the qualified netting interim haircuts, enter this value under 
``Residual Net Position Haircut,'' and carry to Schedule A, line 2d.

[52 FR 27931, July 24, 1987, as amended at 53 FR 28985, Aug. 1, 1988; 71 
FR 54411, Sept. 15, 2006; 79 FR 38455, July 8, 2014]



Sec.  402.2b  [Reserved]



Sec.  402.2c  Appendix C--Consolidated computations of liquid capital
and total haircuts for certain subsidiaries and affiliates.

    (a) Consolidation. (1) A government securities broker or dealer (the 
``parent broker or dealer''), in computing its liquid capital and total 
haircuts pursuant to Sec.  402.2:
    (i) Shall consolidate in a single computation of liquid capital the 
assets and liabilities of any subsidiary or affiliate for which the 
parent broker or dealer guarantees, endorses, or assumes directly or 
indirectly the obligations or liabilities if the parent broker or dealer 
has obtained the opinion of counsel described in paragraph (b) of this 
section with respect to such subsidiary or affiliate;
    (ii) May not consolidate in a single computation of liquid capital 
the assets and liabilities of any subsidiary or affiliate for which the 
parent broker or dealer guarantees, endorses, or assumes directly or 
indirectly the obligations or liabilities if the parent broker or dealer 
has not obtained the opinion of counsel described in paragraph (b) of 
this section with respect to such subsidiary or affiliate, but in that 
event, the parent broker or dealer shall compute its total haircuts by 
adding the total haircuts of each such subsidiary or affiliate computed 
in accordance with the provisions of Sec.  402.2 to the haircuts of the 
parent broker or dealer computed separately in accordance with the 
provisions of Sec.  402.2; and
    (iii) May consolidate in its computation of liquid capital the 
assets and liabilities of any majority owned and controlled subsidiary 
or affiliate for which the parent broker or dealer does not guarantee, 
endorse or assume directly or indirectly the obligations or liabilities 
if the parent broker or dealer has obtained the opinion of counsel 
described in paragraph (b) of this section with respect to such 
subsidiary or affiliate.
    (2) With respect to any subsidiary or affiliate whose assets and 
liabilities are consolidated in the parent broker's or dealer's 
computation of liquid capital according to the provisions of paragraph 
(a)(1)(i) or (a)(1)(iii) of this section, the parent broker or dealer 
shall compute its haircuts in accordance with the provisions of Sec.  
402.2 as if the consolidated entity were one firm, or, in the 
alternative, shall add the total haircuts of each consolidated 
subsidiary or affiliate computed in accordance with the provisions of 
Sec.  402.2 to the haircuts of the parent broker or

[[Page 678]]

dealer computed separately in accordance with the provisions of Sec.  
402.2.
    (b) Required counsel opinion. The opinion of counsel referred to in 
paragraph (a) of this section shall demonstrate to the satisfaction of 
the Commission, through the Designated Examining Authority, that net 
asset values, or the portion thereof related to the parent broker's or 
dealer's ownership interest in a majority owned and controlled 
subsidiary or affiliate, may be caused by the parent broker or dealer or 
an appointed trustee to be distributed to the parent broker or dealer 
within 30 calendar days. Such opinion shall also set forth the actions 
necessary to cause such a distribution to be made, identify the parties 
having the authority to take such actions, identify and describe the 
rights of other parties or classes of parties, including but not limited 
to customers, general creditors, subordinated lenders, minority 
shareholder employees, litigants and governmental or regulatory 
authorities, who may delay or prevent such a distribution and such other 
assurances as the Commission or the Designated Examining Authority by 
rule or interpretation may require. Such opinion shall be current and 
periodically renewed in connection with the parent broker's or dealer's 
annual audit pursuant to Sec.  240.17a-5 of this title, as made 
applicable to government securities brokers or dealers by Sec.  405.2 of 
this chapter, or upon any material change in circumstances.
    (c) Principles of consolidation. The following minimum and non-
exclusive requirements shall govern the consolidation of a subsidiary or 
affiliate in the computation of total liquid capital and total haircuts 
of a government securities broker or dealer pursuant to this section:
    (1) The total liquid capital of the government securities broker or 
dealer shall be reduced by the estimated amount of any taxes reasonably 
anticipated to be incurred upon distribution of the assets of the 
subsidiary or affiliate.
    (2) Liabilities of a consolidated subsidiary or affiliate that are 
subordinated to the claims of present and future creditors pursuant to a 
satisfactory subordination agreement shall not be added to consolidated 
net worth unless such subordination extends also to the claims of 
present or future creditors of the parent broker or dealer and all 
consolidated subsidiaries.
    (3) Subordinated liabilities of a consolidated subsidiary or 
affiliate that are consolidated in accordance with paragraph (c)(2) of 
this section may not be prepaid, repaid or accelerated if any of the 
entities included in such consolidation would otherwise be unable to 
comply with the provision of Sec.  240.15c3-1d of this title, as 
modified by Sec.  402.2d.
    (4) Each government securities broker or dealer included within the 
consolidation shall at all times be in compliance with the liquid 
capital or net capital requirement to which it is subject.
    (d) Certain Precluded Acts. Even if consolidation is not required or 
allowed under paragraph (a) of this section, no parent broker or dealer 
shall guarantee, endorse or assume directly or indirectly any obligation 
or liability of a subsidiary or affiliate unless the obligation or 
liability is reflected in the parent broker's or dealer's computation of 
liquid capital.



Sec.  402.2d  Appendix D--Modification of Sec.  240.15c3-1d of this title,
relating to satisfactory subordination agreements, for purposes of 
Sec.  402.2.

    Section 240.15c3-1d of this title shall apply to government 
securities brokers and dealers subject to the requirements of Sec.  
402.2 with the following modifications.
    (a) References to ``broker or dealer'' include government securities 
brokers and dealers.
    (b) References to ``17 CFR 240.15c3-1'' mean Sec.  402.2.
    (c) Section 240.15c3-1d(a)(2)(iii) is modified to read as follows:
    ``(iii) The term ``Collateral Value'' of any securities pledged to 
secure a secured demand note shall mean the market value of such 
securities after giving effect to the haircuts specified in Sec.  402.2a 
of this title.''
    (d) References to ``17 CFR 240.15c3-1d'' mean that section as 
modified by this section.
    (e) Section 240.15c3-1d(b)(6)(iii) is modified to read as follows:
    ``(iii) The secured demand note agreement may also provide that, in 
lieu of

[[Page 679]]

the procedures specified in the provisions required by paragraph 
(b)(6)(ii) of this section, the lender, with the prior written consent 
of the government securities broker or dealer and the Examining 
Authority for such broker or dealer, may reduce the unpaid principal 
amount of the secured demand note. After giving effect to such 
reduction, the liquid capital, as defined in Sec.  402.2(d) of this 
title, of the government securities broker or dealer may not be less 
than 150% of the government securities broker's or dealer's total 
haircuts, as defined in Sec.  402.2(g) of this title. No single secured 
demand note shall be permitted to be reduced by more than 15% of its 
original principal amount and after such reduction no excess collateral 
may be withdrawn. No Examining Authority shall consent to a reduction of 
the principal amount of a secured demand note if, after giving effect to 
such reduction, liquid capital after deducting total haircuts would be 
less than 120% of the minimum dollar amount required by Sec.  402.2(b) 
or Sec.  402.2(c) of this title as applicable.''
    (f) Section 240.15c3-1d(b)(7) is modified to read as follows:
    ``(7) A government securities broker or dealer at its option but not 
at the option of the lender may, if the subordination agreement so 
provides, make a Payment of all or any portion of the Payment Obligation 
thereunder prior to the scheduled maturity date of such Payment 
Obligation (hereinafter referred to as a ``Prepayment''), but in no 
event may any Prepayment be made before the expiration of one year from 
the date such subordination agreement became effective. This restriction 
shall not apply to temporary subordination agreements which comply with 
the provisions of paragraph (c)(5) of this section. No Prepayment shall 
be made if, after giving effect thereto (and to all Payments of Payment 
Obligations under any other subordinated agreements then outstanding the 
maturities or accelerated maturities of which are scheduled to fall due 
within six months after the date such Prepayment is to occur pursuant to 
this provision or on or prior to the date on which the Payment 
Obligation in respect of such Prepayment is scheduled to mature 
disregarding this provision, whichever date is earlier) without 
reference to any projected profit or loss of the government securities 
broker or dealer, the liquid capital, as defined in Sec.  402.2(d) of 
this title, of the government securities broker or dealer would be less 
than 150% of the government securities broker's or dealer's total 
haircuts, as defined in Sec.  402.2(g) of this title. Notwithstanding 
the above, no Prepayment shall occur without the prior written approval 
of the Examining Authority for such government securities broker or 
dealer.''.
    (g) Section 240.15c3-1d(b)(8) is modified to read as follows:
    ``(i) The Payment Obligation of the government securities broker or 
dealer in respect of any subordination agreement shall be suspended and 
shall not mature if, after giving effect to Payment of such Payment 
Obligation (and to all Payments of Payment Obligations of such broker or 
dealer under any other subordination agreement(s) then outstanding which 
are scheduled to mature on or before such Payment Obligation), either 
the liquid capital, as defined in Sec.  402.2(d) of this title, of the 
government securities broker or dealer would be less than 150% of the 
government securities broker's or dealer's total haircuts, as defined in 
Sec.  402.2(g) of this title, or the government securities broker's or 
dealer's liquid capital after deducting total haircuts would be less 
than 120% of the minimum dollar amount required by Sec.  402.2(b) or 
Sec.  402.2(c) of this title, as applicable. The subordination agreement 
may provide that if the Payment Obligation of the government securities 
broker or dealer thereunder does not mature and is suspended as a result 
of the requirement of this paragraph (b)(8) for a period of not less 
than six months, the government securities broker or dealer shall 
thereupon commence the rapid and orderly liquidation of its business but 
the right of the lender to receive Payment, together with accrued 
interest or compensation, shall remain subordinate as required by the 
provisions of 17 CFR 240.15c3-1 and 240.15c3-1d.''.
    (h) Section 240.15c3-1d(b)(10)(ii)(B) is modified to read as 
follows:

[[Page 680]]

    ``(B) The liquid capital, as defined in Sec.  402.2(d) of this 
title, of the government securities broker or dealer being less than 
120% of total haircuts, as defined in Sec.  402.2(g) of this title, 
throughout a period of 15 consecutive business days, commencing on the 
day the broker or dealer first determines and notifies the Examining 
Authority for the government securities broker or dealer, or the 
Examining Authority or the Commission first determines and notifies the 
government securities broker or dealer of such fact;''.
    (i) Section 240.15c3-1d(c)(2) is modified to read as follows:
    ``(2) Notice of Maturity or Accelerated Maturity. Every government 
securities broker or dealer shall immediately notify the Examining 
Authority for such broker or dealer if, after giving effect to all 
Payments of Payment Obligations subordination agreements then 
outstanding which are then due or mature within the following six months 
without reference to any projected profit or loss of the broker or 
dealer, the liquid capital, as defined in Sec.  402.2(d) of this title, 
of such government securities broker or dealer, would be less than 150% 
of total haircuts, as defined in Sec.  402.2(g) of this title.''.
    (j) Section 240.15c3-1d(c)(5)(i) is modified to read as follows:
    ``(i) For the purpose of enabling a government securities broker or 
dealer to participate as an underwriter of securities or other 
extraordinary activities in compliance with the capital requirements of 
Sec.  402.2 of this title, a government securities broker or dealer 
shall be permitted, on no more than three occasions in any 12 month 
period, to enter into a subordination agreement on a temporary basis 
which has a stated term of no more than 45 days from the date such 
subordination agreement became effective. This temporary relief shall 
not apply to a government securities broker or dealer if, within the 
preceding thirty calendar days, it has given notice pursuant to Sec.  
405.3, or if immediately prior to entering into such subordination 
agreement, the liquid capital, as defined in Sec.  402.2(d) of this 
title, of such broker or dealer would be less than 150% of total 
haircuts, as defined in Sec.  402.2(g) of this title, or the amount of 
its then outstanding subordination agreements exceeds the limits 
specified in Sec.  240.15c3-1(d). Such temporary subordination agreement 
shall be subject to all other provisions of this appendix D.''.
    (k) Section 240.15c3-1d(c)(5)(ii)(A) is modified to read as follows:
    ``(A) After giving effect thereto (and to all Payments of Payment 
Obligations under any other subordinated agreements then outstanding the 
maturity or accelerated maturities of which are scheduled to fall due 
within six months after the date such prepayment is to occur pursuant to 
this provision or on or prior to the date on which the Payment 
Obligation in respect of such prepayment is schedu1ed to mature 
disregarding this provision, whichever date is earlier) without 
reference to any projected profit or loss of the government securities 
broker or dealer, the liquid capital, as defined in Sec.  402.2(d) of 
this title, of such broker or dealer, would be less than 180% of total 
haircuts, as defined in Sec.  402.2(g) of this title.''.

[52 FR 27931, July 24, 1987, as amended at 59 FR 53731, Oct. 26, 1994]



PART 403_PROTECTION OF CUSTOMER SECURITIES AND BALANCES-
-Table of Contents



Sec.
403.1 Application of part to registered brokers and dealers.
403.2 Hypothecation of customer securities.
403.3 Use of customers' free credit balances.
403.4 Customer protection--reserves and custody of securities.
403.5 Custody of securities held by financial institutions that are 
          government securities brokers or dealers.
403.6 Compliance with part by futures commission merchants.
403.7 Effective dates.

    Authority: Sec. 101, Pub. L. 99-571, 100 Stat. 3209; sec. 4(b), Pub. 
L. 101-432, 104 Stat. 963; sec. 102, sec. 106, Pub. L. 103-202, 107 
Stat. 2344 (15 U.S.C. 78o-5(a)(5), (b)(1)(A), (b)(4)).

    Source: 52 FR 27947, July 24, 1987, unless otherwise noted.



Sec.  403.1  Application of part to registered brokers and dealers.

    With respect to their activities in government securities, 
compliance by registered brokers or dealers with Sec.  240.8c-1 of this 
title (SEC Rule 8c-1),

[[Page 681]]

as modified by Sec.  403.2 (a), (b) and (c), with Sec.  240.15c2-1 of 
this title (SEC Rule 15c2-1), with Sec.  240.15c3-2 of this title (SEC 
Rule 15c3-2), as modified by Sec.  403.3, and with Sec.  240.15c3-3 of 
this title (SEC Rule 15c3-3), as modified by Sec.  403.4 (a) through 
(d), (f)(2) through (3), (g) through (j), and (m), including provisions 
in those rules relating to OTC derivatives dealers, constitutes 
compliance with this part.

[71 FR 54411, Sept. 15, 2006]



Sec.  403.2  Hypothecation of customer securities.

    Every registered government securities broker or dealer shall comply 
with the requirements of Sec.  240.8c-1 of this title concerning 
hypothecation of customer securities with the following modifications:
    (a) In Sec.  240.8c-1(a), the words ``no government securities 
broker or dealer'' shall be substituted for the words ``no member of a 
national securities exchange, and no broker or dealer who transacts a 
business in securities through the medium of such member.''
    (b) Section 240.8c-1(d) is modified to read as follows:

    ``(d) Exemption for clearing liens. The provisions of paragraphs 
(a)(2), (a)(3) and (f) of this section shall not apply to any lien or 
claim of a clearing bank, or the clearing corporation (or similar 
department or association) of a national securities exchange or a 
registered national securities association, for a loan made to acquire 
any securities subject to said lien and to be repaid on the same 
calendar day, which loan is incidental to the clearing of transactions 
in securities or loans through such bank, corporation, department or 
association; provided, however, that for the purpose of paragraph (a)(3) 
of this section, `aggregate indebtedness of all customers in respect of 
securities carried for their accounts' shall not include indebtedness in 
respect of any securities subject to any lien or claim exempted by this 
paragraph.''

    (c) References to ``member, broker or dealer'' mean ``government 
securities broker or dealer.''



Sec.  403.3  Use of customers' free credit balances.

    Every registered government securities broker or dealer shall comply 
with the requirement of Sec.  240.15c3-2 of this title concerning the 
use of customer free credit balances. For purposes of this section, all 
references to ``broker or dealer'' in Sec.  240.15c3-2 shall include 
government securities brokers and dealers.



Sec.  403.4  Customer protection--reserves and custody of securities.

    Every registered government securities broker or dealer shall comply 
with the requirements of Sec. Sec.  240.15c3-3 and 240.15c3-3a of this 
title (SEC Rule 15c3-3 and Exhibit A thereto), with the following 
modifications:
    (a) References to ``broker or dealer'' include government securities 
brokers and dealers.
    (b) ``Fully paid securities,'' as defined in Sec.  240.15c3-3(a)(3) 
of this title, includes all securities held by a government securities 
broker or a government securities dealer for the account of a customer 
who has made full payment for such securities.
    (c) ``Margin securities,'' as defined in Sec.  240.15c3-3(a)(4) of 
this title, includes any securities for which a customer has not made 
full payment and for which the customer has received an extension of 
credit by a government securities broker or government securities dealer 
for a portion of the purchase price.
    (d) ``Excess margin securities,'' as defined in Sec.  240.15c3-
3(a)(5) of this title, includes margin securities carried for the 
account of a customer having a market value in excess of 140 percent of 
the total of the debit balances in the customer's account or accounts 
with the broker or dealer.
    (e) For purposes of this section, Sec.  240.15c3-3(b)(3)(iii)(A) of 
this title is modified to read as follows:
    (A) Must provide to the lender upon the execution of the agreement, 
or by the close of the business day of the loan if the loan occurs 
subsequent to the execution of the agreement, collateral that fully 
secures the loan of securities, consisting exclusively of cash or United 
States Treasury bills or Treasury notes or an irrevocable letter of

[[Page 682]]

credit issued by a bank as defined in Sec.  3(a)(6)(A)-(C) of the Act 
(15 U.S.C. 78c(a)(6)(A)-(C)) or such other collateral as the Secretary 
designates as permissible by order as consistent with the public 
interest, the protection of investors, and the purposes of the Act, 
after giving consideration to the collateral's liquidity,
    (f)(1) For purposes of this section, Sec.  240.15c3-3(b)(4)(i)(C) is 
modified to read as follows:
    ``(C) Advise the counterparty in the repurchase agreement that the 
Securities Investor Protection Act of 1970 will not provide protection 
to the counterparty with respect to the repurchase agreement.''
    (2) For purposes of this section, Sec.  240.15c3-3(b)(4)(ii) is 
modified to read as follows:
    ``(ii) For purposes of this paragraph (4), securities are in the 
broker's or dealer's control only if they are in the control of the 
broker or dealer within the meaning of Sec.  240.15c3-3(c)(1), (c)(3), 
(c)(5), (c)(6), or Sec.  403.4(f) of this title.''
    (3) For purposes of this section, Sec.  240.15c3-3(b)(4)(iv) is 
redesignated Sec.  240.15c3-3(b)(4)(iv)(A) and paragraph (b)(4)(iv)(B) 
is added to read as follows:
    ``(B) A person that is a non-U.S. citizen residing outside of the 
United States or a foreign corporation, partnership, or trust may waive, 
but only in writing, the right to receive the confirmation required by 
paragraph (b)(4)(i)(B) of this section.''
    (g)(1) Securities under the control of a broker or dealer, as 
described in Sec.  240.15c3-3(c) of this title, shall include securities 
maintained by a broker or dealer in an account at a depository 
institution, as defined in section 19(b)(A)(i)-(vi) of the Federal 
Reserve Act (12 U.S.C. 461(b)(1)(A)(i)-(vi)), which depository 
institution has a book-entry securities account at a Federal Reserve 
Bank through which it provides clearing services (``clearing bank''), 
provided the securities are maintained in a Segregated Account of the 
government securities broker or dealer. For purposes of this paragraph 
(f)(1) and paragraph (h) of this section, a Segregated Account is an 
account (other than a clearing account) of the government securities 
broker or dealer maintained on the books of a clearing bank pursuant to 
a written clearing agreement with such clearing bank which provides 
that:
    (i) Such account is established for the purpose of segregating 
securities of counterparties or customers of such broker or dealer from 
proprietary securities of the broker or dealer;
    (ii) The broker or dealer is entitled to direct the disposition of 
the securities; and
    (iii) The clearing bank does not have, and will not assert, any 
claim or lien against such securities nor will the clearing bank grant 
any third party, including any Federal Reserve Bank, any interest in 
such securities so long as they are maintained in the segregated 
account.
    (2) For purposes of this section, Sec.  240.15c3-3(c)(2) of this 
title is redesignated as paragraph (c)(2)(i) and new paragraph 
(c)(2)(ii) is added to read as follows:
    ``(ii) Are carried for the account of any customer by a government 
securities broker or dealer in an account designated exclusively for 
customers of the government securities broker or dealer with a 
registered broker or dealer or another registered government securities 
broker or dealer (the ``carrying broker or dealer'') in compliance with 
instructions of the registered government securities broker or dealer to 
the carrying broker or dealer that the securities are to be maintained 
free of any charge, lien or claim of any kind in favor of the carrying 
broker or dealer or any persons claiming through such carrying broker or 
dealer; or''.

    (h) For the purposes of this section, Sec.  240.15c3-3(d)(2) of this 
title is modified to read as follows:

    ``(2) Securities included on its books or records as failed to 
receive more than 30 calendar days, or in the case of mortgage-backed 
securities, more than 60 calendar days, then the government securities 
broker or government securities dealer shall, not later than the 
business day following the day on which such determination is made, take 
prompt steps to obtain possession or control of securities so failed to 
receive through a buy-in procedure or otherwise; or''


[[Page 683]]


    (i) In addition to the notification required by Sec.  240.15c3-3(i) 
of this title, whenever any government securities broker or dealer 
instructs its clearing bank to place securities in a Segregated Account 
(as defined in paragraph (f)(1) of this section), and the clearing bank 
refuses to do so as of the close of business on that day, the broker or 
dealer shall, in accordance with Sec.  240.17a-11(f) of this title, give 
telegraphic notice of the notification by the clearing bank within 24 
hours and within 48 hours of the telegraphic notice, file a report 
stating what steps are being taken to correct the situation.
    (j) For purposes of this section, Sec.  240.15c3-3(l) of this title 
is modified to read as follows:

    ``(l) Delivery or disposition of securities. Nothing stated in this 
section shall be construed as affecting the absolute right of a customer 
of a government securities broker or dealer, unless otherwise agreed in 
writing, in the normal course of business operations following demand 
made on the broker or dealer, to receive the physical delivery of 
certificates if the securities are issued in certificated form, or to 
direct a transfer of or otherwise to exercise control over any 
securities if they are:
    ``(1) Fully-paid securities to which the customer is entitled;
    ``(2) Margin securities upon full payment by such customer to the 
broker or dealer of the customer's indebtedness to the broker or dealer; 
or
    ``(3) Excess margin securities not reasonably required to 
collateralize such customer's indebtedness to the broker or dealer.''.

    (k) Except with respect to a government securities interdealer 
broker subject to the financial responsibility requirements of Sec.  
402.1(e) and a registered government securities broker or dealer that is 
a futures commission merchant registered with the CFTC, Sec.  240.15c3-
3(e)(3) is modified for purposes of this section to read as follows:

    ``(3) Computations necessary to determine the amount required to be 
deposited as specified in paragraph (e)(1) of this section shall be made 
weekly, as of the close of the last business day of the week, and the 
deposit so computed shall be made no later than 1 hour after the opening 
of banking business on the second following business day; provided, 
however, a government securities broker or dealer registered pursuant to 
section 15C(a)(1)(A) of the Act (15 U.S.C. 78o-5 (a)(1)(A)) which has a 
ratio of liquid capital to total haircuts (calculated in accordance with 
part 402 of this chapter) of 1.8 or greater and which carries aggregate 
customer funds (as defined in paragraph (a)(10) of this section), as 
computed at the last required computation pursuant to this section, not 
exceeding $1 million, may in the alternative make the computation 
monthly, as of the close of the last business day of the month, and, in 
such event, shall deposit not less than 105 percent of the amount so 
computed no later than 1 hour after the opening of banking business on 
the second following business day. If a registered government securities 
broker or dealer, computing on a monthly basis, has, at the time of any 
required computation, a ratio of liquid capital to total haircuts of 
less than 1.8, such broker or dealer shall thereafter compute weekly as 
aforesaid until four successive weekly computations are made, none of 
which were made at a time when its ratio of liquid capital to total 
haircuts was less than 1.8. Computations in addition to the computation 
required in this paragraph (3), may be made as of the close of any other 
business day, and the deposits so computed shall be made no later than 1 
hour after the opening of banking business on the second following 
business day. The registered government securities broker or dealer 
shall make and maintain a record of each such computation made pursuant 
to this paragraph (3) or otherwise and preserve such record in 
accordance with Sec.  240.17a-4.''.

    (l) Except with respect to a government securities interdealer 
broker subject to the financial responsibility requirements of Sec.  
402.1(e) and a registered government securities broker or dealer that is 
a futures commission merchant registered with the CFTC, Note E(5) of 
Sec.  240.15c3-3a of this title is modified for purposes of this section 
to read as follows:


[[Page 684]]


    ``(5) Debit balances in margin accounts (other than omnibus 
accounts) shall be reduced by the amount by which any single customer's 
debit balance exceeds 25% (to the extent such amount is greater than 
$50,000) of the government securities broker's or dealer's liquid 
capital unless such broker or dealer can demonstrate that the debit 
balance is directly related to credit items in the Reserve Formula. 
Related accounts (e.g., the separate accounts of an individual, accounts 
under common control or subject to cross guarantees) shall be deemed to 
be a single customer's accounts for purposes of this provision.''.

    (m) For purposes of this section, the suspension of Sec.  240.15c3-
3(m) of this title (38 FR 12103, May 9, 1973) is no longer effective and 
the paragraph is modified to read as follows: ``(m) If a government 
securities broker or government securities dealer executes a sell order 
of a customer (other than an order to execute a sale of securities which 
the seller does not own, which for the purposes of this paragraph shall 
mean that the customer placing the sell order has identified the sale as 
a short sale to the government securities broker or dealer) and if for 
any reason whatever the government securities broker or government 
securities dealer has not obtained possession of the government 
securities, other than mortgage-backed securities, from the customer 
within 30 calendar days, or in the case of mortgage-backed securities 
within 60 calendar days, after the settlement date, the government 
securities broker or government securities dealer shall immediately 
thereafter close the transaction with the customer by purchasing, or 
otherwise obtaining, securities of like kind and quantity. For purposes 
of this paragraph (m), the term ``customer'' shall not include a broker 
or dealer who maintains a special omnibus account with another broker or 
dealer in compliance with section 4(b) of Regulation T (12 CFR 
220.4(b)).

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27947, July 24, 1987, as amended at 53 FR 28986, Aug. 1, 1988; 59 
FR 9406, Feb. 28, 1994; 60 FR 18734, Apr. 13, 1995; 69 FR 33259, June 
14, 2004]



Sec.  403.5  Custody of securities held by financial institutions that
are government securities brokers or dealers.

    (a) A government securities broker or dealer that is a financial 
institution shall:
    (1) Comply with part 450 with respect to all government securities 
held for the account of customers of the financial institution in its 
capacity as a fiduciary or custodian (unless otherwise exempt pursuant 
to Sec.  450.3); and
    (2) Comply with part 450 and with paragraphs (b), (c) and (d) of 
this section with respect to all fully paid and excess margin government 
securities held for customers of the financial institution in its 
capacity as government securities broker or dealer, and government 
securities that are the subject of a repurchase agreement between the 
financial institution and certain counterparties as described in 
paragraph (d) of this section.
    (b) A financial institution shall not be in violation of the 
possession or control requirements of paragraphs (c) and (d) of this 
section if, solely as the result of normal business operations, 
temporary lags occur between the time when a security is first required 
to be in the financial institution's possession or control and the time 
when it is actually placed in possession or control, provided that the 
financial institution takes timely steps in good faith to establish 
prompt possession or control. In the event that a financial institution 
has accepted funds from a customer for the purchase of securities and 
the financial institution does not initiate the purchase of the 
specified securities by the close of the next business day after receipt 
of such customer's funds, the financial institution shall immediately 
deposit or redeposit the funds in an account belonging to such customer 
and send the customer notice of such deposit or redeposit.

[[Page 685]]

    (c)(1) On each business day a financial institution shall determine 
the quantity and issue of such securities, if any, that are required to 
be but are not in the financial institution's possession or control. As 
appropriate to bring such securities into possession or control, the 
financial institution shall:
    (i) Promptly obtain the release of any lien, charge, or other 
encumbrance against such securities;
    (ii) Promptly obtain the return of any securities loaned;
    (iii) Take prompt steps to obtain possession or control of 
securities failed to receive for more than 30 calendar days, or in the 
case of mortgage-backed securities, for more than 60 calendar days; or
    (iv) Take prompt steps to buy in securities as necessary to the 
extent any shortage of securities in possession or control cannot be 
resolved as required by any of the above procedures.
    (2) The financial institution shall prepare and maintain a current 
and detailed description of the procedures and internal controls that it 
utilizes to comply with the possession or control requirements of this 
paragraph (c), which shall be made available upon request to its 
appropriate regulatory agency.
    (3) Nothing stated in this section shall be construed as affecting 
the absolute right of a customer of a government securities broker or 
dealer, unless otherwise agreed in writing, in the normal course of 
business operations following demand made on the broker or dealer, to 
receive the physical delivery of certificates if the securities are 
issued in certificated form, or to direct a transfer of or otherwise to 
exercise control over any securities if they are:
    (i) Fully-paid securities to which the customer is entitled;
    (ii) Margin securities upon full payment by such customer to the 
broker or dealer of the customer's indebtedness to the broker or dealer; 
or
    (iii) Excess margin securities not reasonably required to 
collateralize such customer's indebtedness to the broker or dealer.
    (d)(1) A financial institution that retains custody of securities 
that are the subject of a repurchase agreement between the financial 
institution and a counterparty shall:
    (i) Obtain the repurchase agreement in writing;
    (ii) Confirm in writing the specific securities that are the subject 
of a repurchase transaction pursuant to such agreement at the end of the 
day of initiation of the transaction and at the end of any other day 
during which other securities are substituted if the substitution 
results in a change to issuer, maturity date, par amount or coupon rate 
specified in the previous confirmation;
    (iii) Advise the counterparty in the repurchase agreement that the 
funds held by the financial institution pursuant to a repurchase 
transaction are not a deposit and therefore are not insured by the 
Federal Deposit Insurance Corporation, or the National Credit Union 
Share Insurance Fund, as applicable;
    (iv) If the counterparty agrees to grant the financial institution 
the right to substitute securities, include in the written repurchase 
agreement the provision by which the financial institution retains the 
right to substitute securities;
    (v) If the counterparty agrees to grant the financial institution 
the right to substitute securities, include in the written repurchase 
agreement the following disclosure statement, which must be prominently 
displayed in the written repurchase agreement immediately preceding the 
provision governing the right to substitution:

                          ``Required Disclosure

    The [seller] is not permitted to substitute other securities for 
those subject to this agreement and therefore must keep the [buyer's] 
securities segregated at all times, unless in this agreement the [buyer] 
grants the [seller] the right to substitute other securities. If the 
[buyer] grants the right to substitute, this means that the [buyer's] 
securities will likely be commingled with the [seller's] own securities 
during the trading day. The [buyer] is advised that, during any trading 
day that the [buyer's] securities are commingled with the [seller's] 
securities, they may be subject to liens granted by the [seller] to 
third parties and may be used by the [seller] for deliveries on other 
securities transactions. Whenever the securities are commingled, the 
[seller's] ability to resegregate substitute securities for the [buyer]

[[Page 686]]

will be subject to the [seller's] ability to satisfy any lien or to 
obtain substitute securities.''; and

    (vi) Maintain possession or control of securities that are the 
subject of the agreement in accordance with Sec.  450.4(a) of this 
chapter, except when exercising its right of substitution in accordance 
with the provisions of the agreement and paragraph (d)(1)(iv) of this 
section.
    (2)(i) A confirmation issued in accordance with paragraph (d)(1)(ii) 
of this section shall specify the issuer, maturity date, coupon rate, 
par amount and market value of the security and shall further identify a 
CUSIP or mortgage-backed security pool number, as appropriate, except 
that a CUSIP or a pool number is not required on the confirmation if it 
is identified in internal records of the broker or dealer that designate 
the specific security of the counterparty. For purposes of this 
paragraph (d)(2), the market value of any security that is the subject 
of the repurchase transaction shall be the most recently available bid 
price plus accrued interest, obtained by any reasonable and consistent 
methodology.
    (ii) A person that is a non-U.S. citizen residing outside of the 
United States or a foreign corporation, partnership, or trust may waive, 
but only in writing, the right to receive the confirmation required by 
paragraph (d)(1)(ii) of this section.
    (3) This paragraph (d) shall not apply to a repurchase agreement 
between the financial institution and a broker or dealer (including a 
government securities broker or dealer), a registered municipal 
securities dealer, or a director or principal officer of the financial 
institution or any person to the extent that his claim is explicitly 
subordinated to the claims of creditors of the financial institution.
    (e)(1) A government securities broker or dealer that is a branch or 
agency of a foreign bank shall keep on deposit with an insured bank (as 
that term is defined in 12 U.S.C. 1813(h)) an amount equal to the amount 
that would be required to be set aside pursuant to Sec.  240.15c3-
3(e)(1) of this title with respect to government securities of customers 
of such branch or agency that are citizens or residents of the United 
States. The amount required to be deposited pursuant to this Sec.  
403.5(e)(1) may be reduced by the amount of assets pledged or deposited 
by the branch or agency pursuant to regulations promulgated by a Federal 
or State banking regulatory agency that are attributable to liabilities 
to customers which are included both in the calculation of the required 
pledge or deposit of assets and in the calculation of the amount to be 
set aside pursuant to Sec.  240.15c3-3(e)(1) of this title.
    (2) The amount deposited in accordance with this section shall be 
pledged to the appropriate regulatory agency of the branch or agency 
making the deposit for the exclusive benefit of the customers to whom 
the credit balances are owed.
    (3) For purposes of making the calculation pursuant to Sec.  
240.15c3-3(e)(1) of this title, the terms ``free credit balances,'' 
``other credit balances'' and ``credit balances'' shall not include any 
funds placed in deposits or accounts enumerated at 12 CFR 204.2.
    (4) For purposes of making the calculation pursuant to Sec.  
240.15c3-3(e)(1) of this title, the formula set forth at Sec.  240.15c3-
3a of this title shall be modified as follows:
    (i) For purposes of this section, references to ``securities 
account,'' ``cash account,'' ``margin account'', or other customer 
accounts for purposes of this section shall not include any deposits or 
accounts enumerated at 12 CFR 204.2;
    (ii) References to ``security or ``securities shall mean U.S. 
government securities;
    (iii) References to net capital shall be inapplicable;
    (iv) Item 2 is modified to read as follows:

    ``2. Monies borrowed by the branch or agency collateralized by 
securities carried for the account of customers. (See Note B.)'';

    (v) Item 4 is modified to read as follows:

    ``4. Customers' securities failed to receive only with respect to 
transactions for which payment has been received by and is under the 
control of the branch or agency. (See Note D.)'';


[[Page 687]]


    (vi) Note B is modified to read as follows:

    ``Note B. Item 2 shall include the principal amount of Restricted 
Letters of Credit obtained by members of Options Clearing Corporation 
which are collateralized by customers' securities. Item 2 shall not 
include bank loans to customers in the ordinary course collateralized by 
the customers' U.S. government securities.''; and

    (vii) Note C is modified to read as follows:

    ``Note C. Item 3 shall include in addition to monies payable against 
customers' securities loaned the amount by which the market value of 
securities loaned exceeds the collateral value received from the lending 
of such securities. Item 3 shall exclude cash collateral received 
pursuant to a written securities lending agreement that complies fully 
with the supervisory guidelines of its appropriate regulatory agency 
that expressly govern securities lending practices.''.

    (5) Computations necessary to determine the amount required to be 
deposited as specified in paragraph (e)(1) of this section shall be made 
weekly, as of the close of the last business day of this week, and the 
deposit so computed shall be made no later than one hour after the 
opening of banking business on the second following business day.
    (6) A government securities broker or dealer that is a branch or 
agency of a foreign bank shall make and maintain a record of each 
computation made pursuant to paragraph (e)(5) of this section and 
preserve each such record for a period of not less than three years, the 
first two years in an easily accessible place.
    (f)(1) For purposes of this section, the terms ``fully paid 
securities,'' ``margin securities,'' and ``excess margin securities'' 
shall have the meanings described in Sec.  403.4 (b), (c) and (d).
    (2) For purposes of this section, the term ``customer'' shall 
include any person from whom or on whose behalf a financial institution 
that is a government securities broker or dealer has received or 
acquired or holds securities for the account of that person or funds 
resulting from transactions in securities for or with such person or 
that represent principal, interest, or other proceeds of such 
securities. The term shall not include a broker or dealer that is 
registered pursuant to section 15, 15B or 15C (a)(1)(A) of the Act (15 
U.S.C. 78o, 78o-4, 78o-5(a)(1)(A)) or that has filed notice of its 
status as a government securities broker or dealer pursuant to section 
15C(a)(1)(B) of the Act (15 U.S.C. 78o-5(a)(1)(B)) except with respect 
to securities maintained by such broker or dealer in a Segregated 
Account as defined in Sec.  403.4(f)(1) and with respect to securities 
otherwise identified by such broker or dealer as customer securities for 
purposes of maintaining possession or control of such securities as 
required by this part. The term ``customer'' shall not include a 
director or principal officer of the financial institution or any other 
person to the extent that that person has a claim for property or funds, 
which by contract, agreement or understanding, or by operation of law, 
is part of the capital of the financial institution or is subordinated 
to the claims of creditors of the financial institution.
    (g) If a financial institution executes a sell order of a customer 
(other than an order to execute a sale of securities which the seller 
does not own, which for the purposes of this paragraph shall mean that 
the customer placing the sell order has identified the sale as a short 
sale to the financial institution) and if for any reason whatever the 
financial institution has not obtained possession of the government 
securities, except mortgage-backed securities, from the customer within 
30 calendar days, or in the case of mortgage-backed securities within 60 
calendar days, after the settlement date, the financial institution 
shall immediately thereafter close the transaction with the customer by 
purchasing, or otherwise obtaining, securities of like kind and 
quantity.
    (h) The appropriate regulatory agency of a financial institution 
that is a government securities broker or dealer may extend the period 
specified in paragraphs (c)(1)(iii) and (g) of this section on 
application of the financial institution for one or more limited periods 
commensurate with the circumstances, provided the appropriate regulatory 
agency is satisfied that the financial institution is acting in good 
faith in making the application and

[[Page 688]]

that exceptional circumstances warrant such action. Each appropriate 
regulatory agency should make and preserve for a period of not less than 
three years a record of each extension granted pursuant to this 
paragraph, which contains a summary of the justification for the 
granting of the extension.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27947, July 24, 1987, as amended at 53 FR 28986, Aug. 1, 1988; 55 
FR 6604, Feb. 26, 1990; 59 FR 9406, Feb. 28, 1994; 60 FR 11026, Mar. 1, 
1995]



Sec.  403.6  Compliance with part by futures commission merchants.

    A registered government securities broker or dealer that is also a 
futures commission merchant registered with the CFTC shall comply with 
the provisions of this part with respect to all customer funds and 
securities except those that are incidental to the broker's or dealer's 
futures-related business, as defined in Sec.  240.3a43-1(b) of this 
title. For purposes of the preceding sentence, the term ``customer'' 
shall have the meaning set forth in Sec.  240.15c3-3(a)(1) of this 
title.



Sec.  403.7  Effective dates.

    (a) General. Except as provided in paragraphs (b) through (e) of 
this section, this part shall be effective on the last business day in 
October 1987.
    (b) Confirmations. The requirements of Sec. Sec.  403.4 and 403.5(d) 
to describe the specific securities that are the subject of a repurchase 
transaction, including the market value of such securities, on a 
confirmation at the initiation of a repurchase transaction or on 
substitution of other securities shall be effective January 31, 1988.
    (c) Written repurchase agreements. The requirement to obtain a 
repurchase agreement in writing with the provisions described in 
Sec. Sec.  403.4 and 403.5(d) shall be effective October 31, 1987, in 
the case of new customers of a government securities broker or dealer 
and shall be effective January 31, 1988, in the case of existing 
customers of a government securities broker or dealer. For purposes of 
this paragraph, an ``existing customer'' of a government securities 
broker or dealer is any counterparty with whom the government securities 
broker or dealer has entered into a repurchase transaction on or after 
January 1, 1986, but before July 25, 1987. For purposes of this 
paragraph, a ``new customer'' of a government securities broker or 
dealer is any counterparty other than an existing customer.

[52 FR 27947, July 24, 1987, as amended at 53 FR 28986, Aug. 1, 1988; 79 
FR 38456, July 8, 2014]



PART 404_RECORDKEEPING AND PRESERVATION OF RECORDS--Table of Contents



Sec.
404.1 Application of part to registered brokers and dealers.
404.2 Records to be made and kept current by registered government 
          securities brokers and dealers; records of non-resident 
          registered government securities brokers and dealers.
404.3 Records to be preserved by registered government securities 
          brokers and dealers.
404.4 Records to be made and preserved by government securities brokers 
          and dealers that are financial institutions.
404.5 Securities counts by registered government securities brokers and 
          dealers.

    Authority: 15 U.S.C. 78o-5 (b)(1)(B), (b)(1)(C), (b)(2), (b)(4).

    Source: 52 FR 27952, July 24, 1987, unless otherwise noted.



Sec.  404.1  Application of part to registered brokers and dealers.

    Compliance by a registered broker or dealer with Sec.  240.17a-3 of 
this title (pertaining to records to be made), Sec.  240.17a-4 of this 
title (pertaining to preservation of records), Sec.  240.17a-13 of this 
title (pertaining to quarterly securities counts) and Sec.  240.17a-7 of 
this title (pertaining to records of non-resident brokers or dealers), 
including provisions in those rules relating to OTC derivatives dealers, 
constitutes compliance with this part.

[71 FR 54411, Sept. 15, 2006]



Sec.  404.2  Records to be made and kept current by registered government
securities brokers and dealers; records of non-resident registered government 
          securities brokers and dealers.

    (a) Every registered government securities broker or dealer shall 
comply

[[Page 689]]

with the requirements of Sec.  240.17a-3 of this title (SEC Rule 17a-3), 
with the following modifications:
    (1) References to ``broker or dealer'' and ``broker or dealer 
registered pursuant to Section 15 of the Act'' include registered 
government securities brokers or dealers.
    (2) References to Sec. Sec.  240.17a-3, 240.17a-4, 240.17a-5, and 
240.17a-13 mean such sections as modified by this part and part 405 of 
this chapter.
    (3) (i) Except in the case of a government securities interdealer 
broker who is subject to the financial responsibility rules of Sec.  
402.1(e) of this chapter and a registered government securities broker 
or dealer that is a futures commission merchant registered with the 
CFTC, paragraph 240.17a-3(a)(1l) is modified to read as follows:

    ``(11) A record of the proof of money balances of all ledger 
accounts in the form of trial balances, and a record of the computation 
of liquid capital and total haircuts, as of the trial date, determined 
as provided in Sec.  402.2 of this title; provided however, that such 
computation need not be made by any registered government securities 
broker or dealer unconditionally exempt from part 402 of this title. 
Such trial balances and computations shall be prepared current1y at 
least once a month.''.

    (ii) For a government securities interdealer broker who is subject 
to the financial responsibility rules of Sec.  402.1(e) of this chapter, 
references to Sec.  240.15c3-1 include modifications contained in Sec.  
402.1(e) of this chapter.
    (4) Paragraph 240.17a-3(b)(1) is modified to read as follows:

    ``(1) This section shall not be deemed to require a government 
securities broker or dealer registered pursuant to section 15C(a)(1)(A) 
of the Act (15 U.S.C. 78o-5(a)(1)(A)) to make or keep such records of 
transactions cleared for such government securities broker or dealer as 
are customarily made and kept by a clearing broker or dealer pursuant to 
the requirements of Sec. Sec.  240.17a-3 and 240.17a-4: Provided, that 
the clearing broker or dealer has and maintains net capital of not less 
than $250,000 (or, in the case of a clearing broker or dealer that is a 
registered government securities broker or dealer, liquid capital less 
total haircuts, determined as provided in Sec.  402.2 of this title, of 
not less than $250,000) and is otherwise in compliance with Sec.  
240.15c3-1, Sec.  402.2 of this title, or the capital rules of the 
exchange of which such clearing broker or dealer is a member if the 
members of such exchange are exempt from Sec.  240.15c3-1 by paragraph 
(b)(2) thereof.''

    (5) The undertaking in Sec.  240.17a-3(b)(2) is modified to read as 
follows:

    ``The undersigned hereby undertakes to maintain and preserve on 
behalf of [registered government securities broker or dealer] the books 
and records required to be maintained by [registered government 
securities broker or dealer] pursuant to 17 CFR 404.2 and 404.3 and 
Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and to 
permit examination of such books and records at any time or from time to 
time during business hours by examiners or other representatives of the 
Securities and Exchange Commission, and to furnish to said Commission at 
its principal office in Washington, DC, or at any regional office of 
said Commission specified in a demand made by or on behalf of said 
Commission for copies of books and records, true, correct, complete, and 
current copies of any or all, or any part, of such books and records. 
This undertaking shall be binding upon the undersigned, and the 
successors and assigns of the undersigned.''.

    (6) Section 240.17a-3(c) is modified to read as follows:

    ``(c) This section shall not be deemed to require a government 
securities broker or dealer to make or keep such records as are required 
by paragraph (a) reflecting the sale and redemption of United States 
Savings Bonds, United States Savings Notes and United States Savings 
Stamps.''.

    (b) Every registered government securities broker or dealer shall 
comply with the requirements of Sec.  240.17h-1T of this title (SEC Rule 
17h-1T), with the following modifications:
    (1) For the purposes of this section, references to ``broker or 
dealer'' and ``broker or dealer registered with the Commission pursuant 
to Section 15 of the Act'' mean registered government securities brokers 
or dealers.
    (2) For the purposes of this section, references to Sec. Sec.  
240.17h-1T and 240.17h-2T of this title mean those sections as modified 
by Sec. Sec.  404.2(b) and 405.5, respectively.
    (3) For the purposes of this section, ``associated person'' has the 
meaning set out in Section 3(a)(18) of the Act (15 U.S.C. 78c(a)(18)), 
except that natural persons are excluded.

[[Page 690]]

    (4) Paragraphs 240.17h-1T(a)(1)(iii) through (vi) of this title are 
modified to read as follows:

    ``(iii) A description of all material pending legal or arbitration 
proceedings involving a Material Associated Person or the registered 
government securities broker or dealer that are required to be 
disclosed, under generally accepted accounting principles on a 
consolidated basis, by the highest level holding company that is a 
Material Associated Person.
    ``(iv) Consolidated and consolidating balance sheets, prepared in 
accordance with generally accepted accounting principles, which may be 
unaudited and which shall include the notes to the financial statements, 
as of quarter-end for the registered government securities broker or 
dealer and its highest level holding company that is a Material 
Associated Person;
    ``(v) Quarterly consolidated and consolidating income statements and 
consolidated cash flow statements, prepared in accordance with generally 
accepted accounting principles, which may be unaudited and which shall 
include the notes to the financial statements, for the registered 
government securities broker or dealer and its highest level holding 
company that is a Material Associated Person;

    Note 1 to paragraph 240.17h-1T(a)(1)(v).
    Statements of comprehensive income (as defined in 17 CFR 210.1-02) 
must be included in place of income statements, if required by the 
applicable generally accepted accounting principles.

    ``(vi) The amount as of quarter-end, and at month-end if greater 
than quarter-end, of the aggregate long and short securities and 
commodities positions held by each Material Associated Person, including 
a separate listing of each single unhedged securities or commodities 
position, other than U.S. Treasury securities, that exceeds the 
Materiality Threshold at any month-end;''

    (5) Paragraphs 240.17h-1T(a)(3) and (a)(4) of this title are 
modified to read as follows:

    ``(3) The information, reports and records required by the 
provisions of this section shall be maintained and preserved in 
accordance with the provisions of Sec.  404.3 of this title and shall be 
kept for a period of not less than three years in an easily accessible 
place.
    ``(4) For the purposes of this section and Sec.  405.5 of this 
title, the term ``Materiality Threshold'' shall mean the greater of:
    ``(i) $100 million; or
    ``(ii) 10 percent of the registered government securities broker's 
or dealer's liquid capital based on the most recently filed Form G-405 
(or, in the case of futures commission merchants and interdealer brokers 
subject to the capital rules in Sec. Sec.  402.1(d) and 402.1(e), 
respectively, tentative net capital based on the most recently filed 
Form X-17A-5) or 10 percent of the Material Associated Person's tangible 
net worth, whichever is greater.''

    (6) Paragraph 240.17h-1T(b) of this title is modified to read as 
follows:

    ``(b) Special provisions with respect to Material Associated Persons 
subject to the supervision of certain domestic regulators. A registered 
government securities broker or dealer shall be deemed to be in 
compliance with the recordkeeping requirements of paragraph (a)(1)(iii) 
through (x) of this section with respect to a Material Associated Person 
if: * * * ''

    (7) Paragraph 240.17h-1T(c) of this title is modified to read as 
follows:

    ``(c) Special provisions with respect to Material Associated Persons 
subject to the supervision of a foreign financial regulatory authority. 
A registered government securities broker or dealer shall be deemed to 
be in compliance with the recordkeeping requirements of paragraph 
(a)(1)(iii) through (x) of this section with respect to a Material 
Associated Person if such registered government securities broker or 
dealer maintains in accordance with the provisions of this section 
copies of the reports filed by such Material Associated Person with a 
Foreign Financial Regulatory Authority. The registered government 
securities broker or dealer shall maintain a copy of the original report 
and a copy translated into the English language. For the purposes of 
this section, the term Foreign Financial Regulatory Authority shall have 
the meaning set forth in section 3(a)(52) of the Act.''

    (8) Paragraph 240.17h-1T(d) of this title is modified to read as 
follows:

    ``(d) Exemptions. (1) The provisions of this section shall not apply 
to any registered government securities broker or dealer:
    ``(i) Which is exempt from the provisions of Sec.  240.15c3-3 of 
this title, as made applicable by Sec.  403.4, pursuant to paragraph 
(k)(2) of Sec.  240.15c3-3 of this title; or
    ``(ii) If the registered government securities broker or dealer does 
not qualify for an exemption from the provisions of Sec.  240.15c3-3 of 
this title, as made applicable by Sec.  403.4, and such registered 
government securities broker or dealer does not hold funds or securities 
for, or owe money or securities to, customers and does not carry the 
accounts of, or for, customers; unless
    ``(iii) In the case of paragraphs (d)(1)(i) or (ii) of this section, 
the registered government securities broker or dealer maintains capital 
of at least $20,000,000, including debt

[[Page 691]]

subordinated in accordance with Appendix D of Sec.  240.15c3-1 of this 
title, as modified by Appendix D of Sec.  402.2.
    ``(2) The provisions of this section shall not apply to any 
registered government securities broker or dealer which maintains 
capital of less than $250,000, including debt subordinated in accordance 
with Appendix D of Sec.  240.15c3-1 of this title, as modified by 
Appendix D of Sec.  402.2, even if the registered government securities 
broker or dealer holds funds or securities for, or owes money or 
securities to, customers or carries the accounts of, or for, customers.
    ``(3) The provisions of this section shall not apply to any 
registered government securities broker or dealer which has an 
associated person that is a registered broker or dealer, provided that:
    ``(i) The registered broker or dealer is subject to, and in 
compliance with, the provisions of Sec.  240.17h-1T and Sec.  240.17h-2T 
of this title, and
    ``(ii) All of the Material Associated Persons of the registered 
government securities broker or dealer are Material Associated Persons 
of the registered broker or dealer subject to Sec.  240.17h-1T and Sec.  
240.17h-2T of this title.
    ``(4) In calculating capital for the purposes of this paragraph, a 
registered government securities broker or dealer shall include with its 
equity capital and subordinated debt the equity capital and subordinated 
debt of any other registered government securities brokers or dealers or 
registered brokers or dealers that are associated persons of such 
registered government securities broker or dealer, except that the 
equity capital and subordinated debt of registered brokers and dealers 
that are exempt from the provisions of Sec.  240.15c3-3 of this title, 
pursuant to paragraph (k)(1) of Sec.  240.15c3-3, shall not be included 
in the capital computation.
    ``(5) The Secretary may, upon written application by a Reporting 
Registered Government Securities Broker or Dealer, exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any registered government securities brokers or dealers 
that are associated persons of such Reporting Registered Government 
Securities Broker or Dealer. The term ``Reporting Registered Government 
Securities Broker or Dealer'' shall mean any registered government 
securities broker or dealer that submits such application to the 
Secretary on behalf of its associated registered government securities 
brokers or dealers.''

    (9) Paragraph 240.17h-1T(g) of this title is modified to read as 
follows:

    ``(g) Implementation schedule. Every registered government 
securities broker or dealer subject to the requirements of this section 
shall maintain and preserve the information required by paragraphs 
(a)(1)(i), (ii), and (iii) of this section commencing June 30, 1995. 
Commencing September 30, 1995, the provisions of this section shall 
apply in their entirety.''

    (c)(1) Every non-resident government securities broker or dealer 
registered or applying for registration pursuant to Section 15C of the 
Act shall comply with Sec.  240.17a-7 of this title, provided that:
    (i) For the purposes of this section, references to ``broker or 
dealer'' and ``broker or dealer registered or applying for registration 
pursuant to Section 15 of the Act'' mean registered government 
securities brokers or dealers; and
    (ii) For the purposes of this section, references to ``any rule or 
regulation of the Commission'' and ``any rule or regulation of the 
Securities and Exchange Commission'' mean any rule or regulation of the 
Secretary.
    (2) For the purposes of this section, the term ``non-resident 
government securities broker or dealer'' means:
    (i) In the case of an individual, one who resides in or has his 
principal place of business in any place not subject to the jurisdiction 
of the United States;
    (ii) In the case of a corporation, one incorporated in or having its 
principal place of business in any place not subject to the jurisdiction 
of the United States; and
    (iii) In the case of a partnership or other unincorporated 
organization or association, one having its principal place of business 
in any place not subject to the jurisdiction of the United States.

    (d) Effective date. Paragraph (a) of this section shall be effective 
on October 31, 1987, except that registered government securities 
brokers and dealers are required to maintain the records specified in 
Sec.  240.17a-3(a) (12), (13), (14) and (15) beginning July 25, 1987.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27952, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995; 60 
FR 20399, Apr. 26, 1995; 83 FR 66616, Dec. 27, 2018]

[[Page 692]]



Sec.  404.3  Records to be preserved by registered government securities
brokers and dealers.

    (a) Every registered government securities broker or dealer, except 
a government securities interdealer broker subject to the financial 
responsibility rules of Sec.  402.1(e) and a registered government 
securities broker or dealer that is also a futures commission merchant 
registered with the CFTC, shall comply with the requirements of Sec.  
240.17a-4 of this title (SEC Rule 17a-4), with the following 
modifications:
    (1) References to ``broker or dealer'' and ``broker and dealer 
registered pursuant to Section 15 of the Act'' include registered 
government securities brokers or dealers.
    (2) References to Sec. Sec.  240.17a-3, .17a-4, and .17a-5 mean such 
sections as modified by this part and part 405 of this chapter.
    (3) References to Sec.  240.15c3-1, relating to net capital, and 
``Computation for Net Capital'' thereunder mean Sec.  402.2 of this 
chapter and the computation of the ratio of liquid capital to total 
haircuts required thereunder.
    (4) References to Sec.  240.15c3-3, relating to possession or 
control of customer securities and balances, mean Sec.  403.4 of this 
chapter.
    (5) References to Form X-17A-5 mean Form G-405 (Sec.  449.5 of this 
chapter).
    (6) The computation described in Sec.  240.17a-4(b)(8)(x) is not 
required.
    (b) A government securities interdealer broker subject to the 
financial responsibility rules of Sec.  402.1(e) and a registered 
government securities broker or dealer that is also a futures commission 
merchant registered with the CFTC, shall comply with the requirements of 
Sec.  240.17a-4 of this title (SEC Rule 17a-4), with the following 
modifications:
    (1) References to ``broker or dealer'' and ``broker and dealer'' 
include registered government securities brokers or dealers.
    (2) References to Sec. Sec.  240.17a-3, 240.17a-4, and 240.17a-5 
mean such sections as modified by this part and part 405 of this 
chapter.
    (3) With respect to a government securities interdealer broker 
subject to the financial responsibility rules of Sec.  402.1(e) of this 
chapter, references to Sec.  240.15c3-1, relating to net capital, and 
``Computation for Net Capital'' thereunder include the modifications 
contained in Sec.  402.1(e) of this chapter.
    (4) References to Sec.  240.15c3-3, relating to possession or 
control of customer securities and balances, mean Sec.  403.4 of this 
chapter.
    (c) This section shall be effective on July 25, 1987.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27952, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995]



Sec.  404.4  Records to be made and preserved by government securities
brokers and dealers that are financial institutions.

    (a) Records to be made and kept. Every financial institution that is 
a government securities broker or dealer and that is not exempt from 
this part pursuant to part 401 of this chapter shall comply with the 
requirements of Sec. Sec.  404.2 and 404.3 unless such financial 
institution:
    (1) Is subject to 12 CFR part 12 (relating to national banks), 12 
CFR part 208 (relating to state member banks of the Federal Reserve 
System) or 12 CFR part 344 (relating to state banks that are not members 
of the Federal Reserve System), or is a United States branch or agency 
of a foreign bank and complies with 12 CFR part 12 (for federally 
licensed branches and agencies of foreign banks) or 12 CFR part 208 (for 
uninsured state-licensed branches and agencies of foreign banks) or 12 
CFR part 344 (for insured state licensed branches and agencies of 
foreign banks);
    (2) Complies with the recordkeeping requirements of Sec.  450.4(c), 
(d) and (f) of this chapter; and
    (3) Makes and keeps current:
    (i)(A) A securities record or ledger reflecting separately for each 
government security as of the settlement dates all ``long'' or ``short'' 
positions (including government securities that are the subjects of 
repurchase or reverse repurchase agreements) carried by such financial 
institution for its own account or for the account of its customers or 
others (except securities

[[Page 693]]

held in a fiduciary capacity) and showing the location of all government 
securities long and the offsetting position to all government securities 
short, including long security count differences and short security 
count differences classified by the date of the count and verification 
in which they were discovered, and in all cases the name or designation 
of the account in which each position is carried;
    (B) A complete and current Form G-FIN-4 (Sec.  449.3 of this 
chapter) or Form U-4 (promulgated by a self-regulatory organization) or 
Form MSD-4 (as required for associated persons of bank municipal 
securities dealers) for each associated person as defined in Sec.  400.3 
of this chapter;
    (C) A Form G-FIN-5 (Sec.  449.4 of this chapter) or Form U-5 
(promulgated by a self-regulatory organization) or Form MSD-5 (as 
required for associated persons of bank municipal securities dealers) 
for each associated person whose association has been terminated as 
provided in Sec.  400.4(d)(2) of this chapter; and
    (D) A complete and current Form G-FIN (Sec.  449.1 of this chapter) 
and, if applicable, a Form G-FINW (Sec.  449.2 of this chapter).
    (ii) For purposes of paragraph (a)(3)(i)(A) of this section, 
``safekeeping'' may be shown as a location of any securities long as 
long as the financial institution complies with the requirements of part 
450 of this chapter with respect to such securities.
    (b) Preservation of records. (1) The records required by paragraph 
(a)(3)(i)(A) of this section shall be preserved for not less than six 
years, the first two years in an easily accessible place.
    (2) The records required by paragraphs (a)(3)(i) (B) and (C) of this 
section shall be preserved for at least three years after the person who 
is the subject of the record has terminated his employment and any other 
association with the government securities broker or dealer function of 
the financial institution.
    (3) The records required by paragraph (a)(3)(i)(D) of this section 
shall be preserved for at least three years after the financial 
institution has notified the appropriate regulatory agency that it has 
ceased to function as a government securities broker or dealer.
    (c) Effective date. This section shall be effective on July 25, 
1987, except that until October 31, 1987, a financial institution 
government securities broker or dealer is not required to make and keep 
current the securities position record required by paragraph 
(a)(3)(i)(A) of this section.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27952, July 24, 1987, as amended at 53 FR 28987, Aug. 1, 1988; 60 
FR 11026, Mar. 1, 1995; 62 FR 7155, Feb. 18, 1997; 72 FR 54411, Sept. 
15, 2006]



Sec.  404.5  Securities counts by registered government securities brokers
and dealers.

    (a) Securities counts. Every registered government securities broker 
or dealer shall comply with the requirements of Sec.  240.17a-13 of this 
title (Commission Rule 17a-13), with the modification that references to 
``broker or dealer'' and ``broker and dealer registered pursuant to 
Section 15 of the Act'' include registered government securities brokers 
or dealers.
    (b) Effective date. This section shall be effective on October 31, 
1987.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27952, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995]



PART 405_REPORTS AND AUDIT--Table of Contents



Sec.
405.1 Application of part to registered brokers and dealers and to 
          financial institutions; transition rule.
405.2 Reports to be made by registered government securities brokers and 
          dealers.
405.3 Notification provisions for certain registered government 
          securities brokers and dealers.
405.4 Financial recordkeeping and reporting of currency and foreign 
          transactions by registered government securities brokers and 
          dealers.
405.5 Risk assessment reporting requirements for registered government 
          securities brokers and dealers.

    Authority: 15 U.S.C. 78o-5 (b)(1)(B), (b)(1)(C), (b)(2), (b)(4).

    Source: 52 FR 27954, July 24, 1987, unless otherwise noted.

[[Page 694]]



Sec.  405.1  Application of part to registered brokers and dealers and
to financial institutions; transition rule.

    (a) Compliance by registered brokers or dealers with Sec. Sec.  
240.17a-5, 240.17a-8, and 240.17a-11 of this title (Commission Rules 
17a-5, 17a-8 and 17a-11), including provisions of those rules relating 
to OTC derivatives dealers, constitutes compliance with this part.
    (b) A government securities broker or dealer that is a financial 
institution and is subject to financial reporting rules of its 
appropriate regulatory agency is exempt from the provisions of 
Sec. Sec.  405.2 and 405.3.
    (c) This part shall be effective July 25, 1987, Provided however,
    (1) That registered government securities brokers or dealers shall 
first be required to file the reports required by Sec.  240.17a-5(a), by 
virtue of Sec.  405.2, for the month and the quarter during which they 
were first required to comply with part 402 of this chapter other than 
the interim liquid capital requirements of Sec.  402.1(f); but that
    (2) For any quarter ending prior to the quarter during which they 
were first required to comply with part 402 of this chapter other than 
the interim liquid capital requirements of Sec.  402.1(f), registered 
government securities brokers or dealers shall file with the designated 
examining authority for such registered broker or dealer, within 17 
business days after the close of the quarter, an unaudited balance sheet 
(with appropriate notes) for such quarter, prepared in accordance with 
generally accepted accounting principles.

[52 FR 27954, July 24, 1987, as amended at 71 FR 54411, Sept. 15, 2006]



Sec.  405.2  Reports to be made by registered government securities
brokers and dealers.

    (a) Every registered government securities broker or dealer, except 
a government securities interdealer broker subject to the financial 
responsibility requirements of Sec.  402.1(e) of this chapter and a 
government securities broker or dealer that is also a futures commission 
merchant registered with the CFTC, shall comply with the requirements of 
Sec.  240.17a-5 of this title (SEC Rule 17a-5), with the following 
modifications:
    (1) References to ``broker or dealer'' include registered government 
securities brokers and dealers.
    (2) References to ``rules of the Commission'' or words of similar 
import include, where appropriate, the regulations contained in this 
subchapter.
    (3) References to Form X-17A-5 mean Form G-405 (Sec.  449.5 of this 
chapter).
    (4) For the purposes of Sec.  240.17a-5(a)(4) of this title, the 
Commission may, on the terms and conditions stated in that subparagraph, 
declare effective a plan with respect to Form G-405, in which case, that 
plan shall be treated the same as a plan approved with respect to Form 
X-17A-5.
    (5) References to ``net capital'' mean ``liquid capital'' as defined 
in Sec.  402.2(d) of this chapter.
    (6) References to Sec.  240.15c3-1, relating to net capital, mean 
Sec.  402.2 of this chapter.
    (7) Paragraph 240.17a-5(c)(2)(ii) is modified to read as follows:

    ``(ii) A footnote containing a statement of the registered 
government securities broker's or dealer's liquid capital, total 
haircuts, and ratio of liquid capital to total haircuts, determined in 
accordance with Sec.  402.2 of this title. Such statement shall include 
summary financial statements of subsidiaries consolidated pursuant to 
Sec.  402.2c of this title, where material, and the effect thereof on 
the liquid capital, total haircuts and ratio of liquid capital to total 
haircuts of the registered government securities broker or dealer.''.

    (8) References to Sec.  240.15c3-3 and the exhibits thereto, 
relating to possession or control of customer securities and reserve 
requirements, mean Sec.  403.4 of this chapter.
    (9) The reference to Sec.  240.15b1-2 of this title, relating to 
financial statements to be filed upon registration, means Sec.  
240.15Ca2-2.
    (10) The supplemental report described in Sec.  240.17a-5(e)(4) of 
this title, concerning the Securities Investor Protection Act, is not 
required.
    (11) The statement described in Sec.  240.17a-5(f)(2) of this title 
shall be headed ``Notice Pursuant to Section 405.2,'' and shall be filed 
within 30 days

[[Page 695]]

following the effective date of registration as a government securities 
broker or dealer.
    (12) References in Sec.  240.17a-5(h)(2) of this title to Sec.  
240.17a-11 mean Sec.  405.3(a) of this chapter.
    (b) A government securities interdealer broker subject to the 
financial responsibility requirements of Sec.  402.1(e) of this chapter 
shall comply with the requirements of Sec.  240.17a-5 of this title (SEC 
Rule 17a-5), with the following modifications:
    (1) References to ``broker or dealer'' include government securities 
interdealer brokers;
    (2) References to ``rules of the Commission'' or words of similar 
import include, where appropriate, the regulations contained in this 
subchapter.
    (3) References to ``net capital'' mean net capital calculated as 
provided in Sec.  402.1(e) of this chapter.
    (4) References to Sec.  240.15c3-1, relating to net capital, include 
the modifications contained in Sec.  402.1(e) of this chapter.
    (5) References to Sec.  240.15c3-3 and the exhibits thereto, 
relating to possession or control of customer securities and reserve 
requirements, mean Sec.  403.4 of this chapter.
    (6) The reference to Sec.  240.15b1-2 of this title, relating to 
financial statements to be filed upon registration, means Sec.  
240.15Ca2-2.
    (7) The supplemental report described in Sec.  240.17a-5(e)(4) of 
this title, concerning the Securities Investor Protection Act, is not 
required.
    (8) The statement described in Sec.  240.17a-5(f)(2) of this title 
shall be headed ``Notice Pursuant to Section 405.2'' and shall be filed 
within 30 days following the effective date of registration as a 
government securities broker.
    (9) References in Sec.  240.17a-5(h)(2) of this title to Sec.  
240.17a-11 mean Sec.  405.3(b) of this chapter.
    (c) A registered government securities broker or dealer that is also 
a futures commission merchant registered with the CFTC shall comply with 
the requirements of Sec.  240.17a-5 of this title (SEC Rule 17a-5), with 
the following modifications:
    (1) References to ``broker or dealer'' include registered government 
securities brokers and dealers.
    (2) References to ``rules of the Commission'' or words of similar 
import include, where appropriate, the regulations contained in this 
subchapter.
    (3) References to Sec.  240.15c3-3 and the exhibits thereto, 
relating to possession or control of customer securities and reserve 
requirements, mean Sec.  403.4 of this chapter.
    (4) The reference to Sec.  240.15b1-2 of this title, relating to 
financial statements to be filed upon registration, means Sec.  
240.15Ca2-2.
    (5) The supplemental report described in Sec.  240.17a-5(e)(4) of 
this title, concerning the Securities Investor Protection Act, is not 
required.
    (6) The statement described in Sec.  240.17a-5(f)(2) of this title 
shall be headed ``Notice Pursuant to Sec.  405.2,'' and shall be filed 
within 30 days following the effective date of registration as a 
government securities broker or dealer.
    (7) References in Sec.  240.17a-5(h)(2) of this title to Sec.  
240.17a-11 mean Sec.  405.3(c) of this chapter.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27954, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995; 64 
FR 1737, Jan. 12, 1999; 79 FR 38456, July 8, 2014]



Sec.  405.3  Notification provisions for certain registered government
securities brokers and dealers.

    (a) Every registered government securities broker or dealer, other 
than a government securities interdealer broker that is subject to the 
financial responsibility requirements of Sec.  402.1(e) and a government 
securities broker or dealer that is also a futures commission merchant 
registered with the CFTC, shall comply with the requirements of Sec.  
240.17a-11 of this title (SEC Rule 17a-11), with the following 
modifications:
    (1) References to ``broker or dealer'' include registered government 
securities brokers and dealers.
    (2) References to Sec.  240.15c3-1, relating to net capital, mean 
Sec.  402.2 of this chapter.
    (3) References to ``net capital'' mean ``liquid capital'' as defined 
in Sec.  402.2 of this chapter.

[[Page 696]]

    (4) References to Sec.  240.17a-5, relating to reports and audit, 
mean Sec.  405.2(a) of this chapter.
    (5) Section 240.17a-11(c), for the purposes of this section, is 
modified to read as follows:
    ``(c) Every registered government securities broker or dealer shall 
send notice promptly (but within 24 hours) in accordance with paragraph 
(g) of this section if a computation made pursuant to the requirements 
of Sec.  402.2 of this title shows, at any time during the month, that 
its liquid capital is less than 150 percent of total haircuts, 
determined in accordance with Sec.  402.2 of this title, or that its 
capital after deducting total haircuts from liquid capital is less than 
120 percent of the registered government securities broker or dealer's 
minimum capital requirement specified in Sec.  402.2 (b) or (c) of this 
title as applicable.''
    (6) References to Sec.  240.17a-3, relating to records, mean Sec.  
404.2 of this chapter.
    (b) A government securities interdealer broker that is subject to 
the financial responsibility requirements of Sec.  402.1(e) of this 
chapter shall comply with the requirements of Sec.  240.17a-11 of this 
title (SEC Rule 17a-11), with the following modifications:
    (1) References to ``broker or dealer'' include government securities 
interdealer brokers;
    (2) References to Sec.  240.15c3-1, relating to net capital, include 
the modifications contained in Sec.  402.1(e) of this chapter.
    (3) References to ``net capital'' mean net capital calculated as 
provided in Sec.  402.1(e) of this chapter.
    (4) References to Sec.  240.17a-5, relating to reports and audit, 
mean Sec.  405.2(b) of this chapter.
    (5) References to Sec.  240.17a-3, relating to records, mean Sec.  
404.2 of this chapter.
    (c) A registered government securities broker or dealer that is also 
a futures commission merchant registered with the CFTC shall comply with 
the requirements of Sec.  240.17a-11 of this title (SEC Rule 17a-11), 
with the following modifications:
    (1) References to ``broker or dealer'' include government securities 
brokers and dealers.
    (2) References to Sec.  240.15c3-1, relating to net capital, mean 
either Sec.  240.15c3-1 or Sec.  1.17 of this title, depending on which 
computation results in the higher net capital requirement.
    (3) References to ``net capital'' mean the higher of net capital 
calculated under Sec.  240.15c3-1 or Sec.  1.17 of this title.
    (4) References to Sec.  240.17a-5, relating to reports and audit, 
mean Sec.  405.2(c) of this chapter.
    (5) Section 240.17a-11(c) for the purposes of this section is 
modified to read as follows:
    ``(c) Every broker or dealer shall send notice promptly (but within 
24 hours) after the occurrence of the events specified in paragraphs 
(c)(1), (c)(2), (c)(3), or (c)(4) of this section in accordance with 
paragraph (g) of this section:''
    (6) A new paragraph 240.17a-11(c)(4) is added to read as follows:
    ``(4) If a computation made by a government securities broker or 
dealer that is not a registered broker or dealer but that is also a 
futures commission merchant registered with the Commodity Futures 
Trading Commission shows that:
    ``(i) The adjusted net capital of such entity is less than the 
greater of:
    ``(A) 150 percent of the appropriate minimum dollar amount required 
by Sec.  1.17(a)(1)(i), or
    ``(B) 6 percent of the following amount: The customer funds required 
to be segregated pursuant to Sec.  4d(2) of the Commodity Exchange Act 
and Sec.  1.17 of this title, less the market value of commodity options 
purchased by option customers on or subject to the rules of a contract 
market, provided, however, the deduction for each option customer shall 
be limited to the amount of customer funds in such option customer's 
account; or
    ``(ii) At any point during the month, aggregate indebtedness is in 
excess of 1200 percent of net capital or total net capital is less than 
120 percent of the minimum net capital required.''
    (7) References to Sec.  240.17a-3, relating to records, mean Sec.  
404.2 of this chapter.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27954, July 24, 1987, as amended at 59 FR 53731, Oct. 26, 1994; 
59 FR 55910, Nov. 9, 1994; 60 FR 18734, Apr. 13, 1995]

[[Page 697]]



Sec.  405.4  Financial recordkeeping and reporting of currency and foreign
transactions by registered government securities brokers and dealers.

    Every registered government securities broker or dealer who is 
subject to the requirements of the Currency and Foreign Transactions 
Reporting Act of 1970 shall comply with the reporting, recordkeeping and 
record retention requirements of 31 CFR part 103. Where 31 CFR part 103 
and Sec.  404.3 of this chapter require the same records to be preserved 
for different periods of time, such records or reports shall be 
preserved for the longer period of time.



Sec.  405.5  Risk assessment reporting requirements for registered 
government securities brokers and dealers.

    (a) Every registered government securities broker or dealer shall 
comply with the requirements of Sec.  240.17h-2T of this title (SEC Rule 
17h-2T), with the following modifications:
    (1) For the purposes of this section, references to ``broker or 
dealer'' and ``broker or dealer registered with the Commission pursuant 
to Section 15 of the Act'' mean registered government securities brokers 
or dealers.
    (2) For the purposes of this section, references to Sec. Sec.  
240.17h-1T and 240.17h-2T of this title mean those sections as modified 
by Sec. Sec.  404.2(b) and 405.5, respectively.
    (3) For the purposes of this section, ``associated person'' has the 
meaning set out in Section 3(a)(18) of the Act (15 U.S.C. 78c(a)(18)), 
except that natural persons are excluded.
    (4) Paragraph 240.17h-2T(b) of this title is modified to read as 
follows:
    ``(b) Exemptions. (1) The provisions of this section shall not apply 
to any registered government securities broker or dealer:
    ``(i) Which is exempt from the provisions of Sec.  240.15c3-3 of 
this title, as made applicable by Sec.  403.4, pursuant to paragraph 
(k)(2) of Sec.  240.15c3-3 of this title; or
    ``(ii) If the registered government securities broker or dealer does 
not qualify for exemption from the provisions of Sec.  240.15c3-3 of 
this title, as made applicable by Sec.  403.4, and such registered 
government securities broker or dealer does not hold funds or securities 
for, or owe money or securities to, customers and does not carry the 
accounts of, or for, customers; unless
    ``(iii) In the case of paragraphs (b)(1) (i) or (ii) of this 
section, the registered government securities broker or dealer maintains 
capital of at least $20,000,000, including debt subordinated in 
accordance with appendix D of Sec.  240.15c3-1 of this title, as 
modified by appendix D of Sec.  402.2.
    ``(2) The provisions of this section shall not apply to any 
registered government securities broker or dealer which maintains 
capital of less than $250,000, including debt subordinated in accordance 
with appendix D of Sec.  240.15c3-1 of this title, as modified by 
appendix D of Sec.  402.2, even if the registered government securities 
broker or dealer holds funds or securities for, or owes money or 
securities to, customers or carries the accounts of, or for, customers.
    ``(3) The provisions of this section shall not apply to any 
registered government securities broker or dealer which has an 
associated person that is a registered broker or dealer, provided that:
    ``(i) The registered broker or dealer is subject to, and in 
compliance with, the provisions of Sec.  240.17h-1T and Sec.  240.17h-2T 
of this title, and
    ``(ii) All of the Material Associated Persons of the registered 
government securities broker or dealer are Material Associated Persons 
of the registered broker or dealer subject to Sec.  240.17h-1T and Sec.  
240.17h-2T of this title.
    ``(4) In calculating capital for the purposes of this paragraph, a 
registered government securities broker or dealer shall include with its 
equity capital and subordinated debt the equity capital and subordinated 
debt of any other registered government securities brokers or dealers or 
registered brokers or dealers that are associated persons of such 
registered government securities broker or dealer, except that the 
equity capital and subordinated debt of registered brokers and dealers 
that are exempt from the provisions of Sec.  240.15c3-3 of this title, 
pursuant to paragraph (k)(1) of Sec.  240.15c3-3, shall

[[Page 698]]

not be included in the capital computation.
    ``(5) The Secretary may, upon written application by a Reporting 
Registered Government Securities Broker or Dealer, exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any registered government securities brokers or dealers 
that are associated persons of such Reporting Registered Government 
Securities Broker or Dealer. The term ``Reporting Registered Government 
Securities Broker or Dealer'' shall mean any registered government 
securities broker or dealer that submits such application to the 
Secretary on behalf of its associated registered government securities 
brokers or dealers.''
    (5) Paragraph 240.17h-2T(c) of this title is modified to read as 
follows:
    ``(c) Special provisions with respect to Material Associated Persons 
subject to the supervision of certain domestic regulators. A registered 
government securities broker or dealer shall be deemed to be in 
compliance with the reporting requirements of paragraph (a) of this 
section with respect to a Material Associated Person if such registered 
government securities broker or dealer files Items 1, 2, and 3 (in Part 
I) of Form 17-H in accordance with paragraph (a) of this section, 
provided that:
    ``(1) Such Material Associated Person is subject to examination by 
or the reporting requirements of a Federal banking agency and the 
registered government securities broker or dealer or such Material 
Associated Person furnishes in accordance with paragraph (a) of this 
section copies of reports filed by the Material Associated Person with 
the Federal banking agency pursuant to section 5211 of the Revised 
Statutes, section 9 of the Federal Reserve Act, section 7(a) of the 
Federal Deposit Insurance Act, section 10(b) of the Home Owners' Loan 
Act, or section 5 of the Bank Holding Company Act of 1956; or * * * ''
    (6) Paragraph 240.17h-2T(d) of this title is modified to read as 
follows:
    ``(d) Special provisions with respect to Material Associated Persons 
subject to the supervision of a foreign financial regulatory authority. 
A registered government securities broker or dealer shall be deemed to 
be in compliance with the reporting requirements of paragraph (a) of 
this section with respect to a Material Associated Person if such 
registered government securities broker or dealer furnishes, in 
accordance with the provisions of paragraph (a) of this section, Items 
1, 2, and 3 (in Part I) of Form 17-H and copies of the reports filed by 
such Material Associated Person with a Foreign Financial Regulatory 
Authority. The registered government securities broker or dealer shall 
file a copy of the original Foreign Financial Regulatory report and a 
copy translated into the English language. For the purposes of this 
section, the term Foreign Financial Regulatory Authority shall have the 
meaning set forth in section 3(a)(52) of the Act.''

(Approved by the Office of Management and Budget under control number 
1535-0089)

[60 FR 20401, Apr. 26, 1995, as amended at 79 FR 38456, July 8, 2014]



PART 420_LARGE POSITION REPORTING--Table of Contents



Sec.
420.1 Applicability.
420.2 Definitions.
420.3 Reporting.
420.4 Recordkeeping.
420.5 Applicability date.

Appendix A to Part 420--Separate Reporting Entity
Appendix B to Part 420--Sample Large Position Report

    Authority: 15 U.S.C. 78o-5(f).

    Source: 79 FR 73414, Dec. 10, 2014, unless otherwise noted.



Sec.  420.1  Applicability.

    (a) This part is applicable to all persons that participate in the 
government securities market, including, but not limited to: Government 
securities brokers and dealers, depository institutions that exercise 
investment discretion, registered investment companies, registered 
investment advisers, pension funds, hedge funds, and insurance companies 
that may control a position in a recently-issued marketable Treasury 
bill, note, or bond as those terms are defined in Sec.  420.2.
    (b) Notwithstanding paragraph (a) of this section, Treasury requests 
that central banks (including U.S. Federal

[[Page 699]]

Reserve Banks for their own account), foreign governments, and 
international monetary authorities voluntarily submit large position 
reports when they meet or exceed a reporting threshold.



Sec.  420.2  Definitions.

    For the purposes of this part:
    Aggregating entity means a single entity (e.g., a parent company, 
affiliate, or organizational component) that is combined with other 
entities, as specified in the definition of ``reporting entity'' of this 
section, to form a reporting entity. In those cases where an entity has 
no affiliates, the aggregating entity is the same as the reporting 
entity.
    Control means having the authority to exercise investment discretion 
over the purchase, sale, retention, or financing of specific Treasury 
securities.
    Large position threshold means the minimum dollar par amount of the 
specified Treasury security that a reporting entity must control in 
order for the entity to be required to submit a large position report. 
It also means the minimum number of futures, options on futures, and 
exchange-traded options contracts for which the specified Treasury 
security is deliverable that the reporting entity must control in order 
for the entity to be required to submit a large position report. 
Treasury will announce the large position thresholds, which may vary 
with each notice of request to report large position information and 
with each specified Treasury security. Treasury may announce different 
thresholds for certain reporting criteria. Under no circumstances will a 
large position threshold be less than 10 percent of the amount 
outstanding of the specified Treasury security.
    Recently-issued means:
    (1) With respect to Treasury securities that are issued quarterly or 
more frequently, the three most recent issues of the security.
    (2) With respect to Treasury securities that are issued less 
frequently than quarterly, the two most recent issues of the security.
    (3) With respect to a reopened security, the entire issue of a 
reopened security (older and newer portions) based on the date the new 
portion of the reopened security is issued by Treasury (or for when-
issued securities, the scheduled issue date).
    (4) For all Treasury securities, a security announced to be issued 
or auctioned but unissued (when-issued), starting from the date of the 
issuance announcement. The most recent issue of the security is the one 
most recently announced.
    (5) Treasury security issues other than those specified in 
paragraphs (1) and (2) of this definition, provided that such large 
position information is necessary and appropriate for monitoring the 
impact of concentrations of positions in Treasury securities.
    Reporting entity means any corporation, partnership, person, or 
other entity and its affiliates, as further provided herein. For the 
purposes of this definition, an affiliate is any: Entity that is more 
than 50% owned, directly or indirectly, by the aggregating entity or by 
any other affiliate of the aggregating entity; person or entity that 
owns, directly or indirectly, more than 50% of the aggregating entity; 
person or entity that owns, directly or indirectly, more than 50% of any 
other affiliate of the aggregating entity; or entity, a majority of 
whose board of directors or a majority of whose general partners are 
directors or officers of the aggregating entity or any affiliate of the 
aggregating entity.
    (1) Subject to the conditions prescribed in appendix A to this part, 
one aggregating entity, or a combination of aggregating entities, may be 
recognized as a separate reporting entity.
    (2) Notwithstanding this definition, any persons or entities that 
intentionally act together with respect to the investing in, retention 
of, or financing of Treasury securities are considered, collectively, to 
be one reporting entity.
    Reporting requirement means that an entity must file a large 
position report when it meets any one of eight criteria contained in 
appendix B to this part.



Sec.  420.3  Reporting.

    (a) A reporting entity must file a large position report if it meets 
the reporting requirement as defined in Sec.  420.2. Treasury will 
provide notice of the large position thresholds by issuing

[[Page 700]]

a public announcement and subsequently publishing the notice in the 
Federal Register. Such notice will identify the Treasury security 
issue(s) to be reported (including, where applicable, identifying the 
related STRIPS principal component); the date or dates for which the 
large position information must be reported; and the large position 
thresholds for that issue. A reporting entity is responsible for taking 
reasonable actions to be aware of such a notice.
    (b) A reporting entity shall select one entity from among its 
aggregating entities (i.e., the designated filing entity) as the entity 
designated to compile and file a report on behalf of the reporting 
entity. The designated filing entity shall be responsible for filing any 
large position reports in response to a notice issued by Treasury and 
for maintaining the additional records prescribed in Sec.  420.4.
    (c)(1) In response to a notice issued under paragraph (a) of this 
section requesting large position information, a reporting entity that 
controls an amount of the specified Treasury security that equals or 
exceeds one of the specified large position thresholds stated in the 
notice shall compile and report the amounts of the reporting entity's 
positions in the order specified, as follows:
    (i) Part I. Positions in the Security Being Reported as of the 
Opening of Business on the Report Date, including positions:
    (A) In book-entry accounts of the reporting entity;
    (B) As collateral against borrowings of funds on general collateral 
finance repurchase agreements;
    (C) As collateral against borrowings of funds on tri-party 
repurchase agreements;
    (D) As collateral or margin to secure other contractual obligations 
of the reporting entity; and
    (E) Otherwise available to the reporting entity.
    (ii) Part II. Settlement Obligations Attributable to Outright 
Purchase and Sale Contracts Negotiated Prior to or on the Report Date 
(excluding settlement fails), including:
    (A) Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts for cash settlement (T 
+ 0);
    (B) Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts for regular settlement 
(T + 1);
    (C) Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts, including when-issued 
contracts, for forward settlement (T + n, n1);
    (D) Obligations to receive, on the report date, the security being 
reported attributable to Treasury auction awards; and
    (E) Obligations to receive or deliver, on the report date, principal 
STRIPS derived from the security being reported attributable to 
contracts for cash settlement, regular settlement, when-issued 
settlement, and forward settlement.
    (iii) Part III. Settlement Obligations Attributable to Delivery-
versus-Payment Financing Contracts (including repurchase agreements and 
securities lending agreements) Negotiated Prior to or on the Report Date 
(excluding settlement fails), including:
    (A) Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to overnight agreements;
    (B) Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to term agreements due to open on, or due 
to close on, the report date; and
    (C) Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to open agreements due to open on, or due 
to close on, the report date.
    (iv) Part IV. Settlement Fails from Days Prior to the Report Date 
(Legacy Obligations), including obligations to receive or deliver, on 
the report date, the security being reported, and principal STRIPS 
derived from the security being reported, arising out of settlement 
fails on days prior to the report date.
    (v) Part V. Settlement Fails as of the Close of Business on the 
Report Date,

[[Page 701]]

including obligations to receive or deliver, on the business day 
following the report date, the security being reported, and principal 
STRIPS derived from the security being reported, arising out of 
settlement fails on the report date.
    (vi) Part VI. Positions in the Security Being Reported as of the 
Close of Business on the Report Date, including positions:
    (A) In book-entry accounts of the reporting entity;
    (B) As collateral against borrowings of funds on general collateral 
finance repurchase agreements;
    (C) As collateral against borrowings of funds on tri-party 
repurchase agreements;
    (D) As collateral or margin to secure other contractual obligations 
of the reporting entity; and
    (E) Otherwise available to the reporting entity.
    (vii) Part VII. Quantity of Continuing Delivery-versus-Payment 
Financing Contracts for the Security Being Reported, including the gross 
amount of security being reported borrowed or lent out on term delivery-
versus-payment repurchase agreements opened before the report date and 
not due to close until after the report date, and on open delivery-
versus-payment repurchase agreements opened before the report date and 
not closed on the report date.
    (viii) Part VIII. Futures and Options Contracts, including:
    (A)(1) Net position, as of the close of market on the business day 
prior to the report date, in futures, options on futures, and exchange-
traded options contracts on which the security being reported is 
deliverable (report number of contracts); and
    (2) Net position, as of the close of market on the report date, in 
futures, options on futures, and exchange-traded options contracts on 
which the security being reported is deliverable (report number of 
contracts).
    (B)(1) Net position, as of the close of market on the business day 
prior to the report date, in over-the-counter options contracts on which 
the security being reported is deliverable (report notional amount of 
contracts regardless of option delta); and
    (2) Net position, as of the close of market on the report date, in 
over-the-counter options contracts on which the security being reported 
is deliverable (report notional amount of contracts regardless of option 
delta).
    (d) An illustration of a sample report is contained in appendix B of 
this part.
    (e) Each of the components of Part I-Part VIII of paragraph (c)(1) 
of this section shall be reported as a positive number or zero. All 
reportable amounts should be reported in the order specified above and 
at par in millions of dollars, except futures, options on futures, and 
exchange-traded options contracts, which should be reported as the 
number of contracts. Over-the-counter options contracts should be 
reported as the notional dollar amount of contracts regardless of option 
delta.
    (f) Each submitted large position report must include the following 
administrative information: Name of the reporting entity; address of the 
principal place of business; name and address of the designated filing 
entity; the Treasury security that is being reported; the CUSIP number 
for the security being reported; the report date or dates for which 
information is being reported; the date the report was submitted; name 
and telephone number of the person to contact regarding information 
reported; and name and position of the authorized individual submitting 
this report.
    (1) Reporting entities have the option to identify the type(s) of 
business engaged in by the reporting entity and its aggregating entities 
with positions in the specified Treasury security by checking the 
appropriate box. The types of businesses include: Broker or dealer, 
government securities broker or dealer, municipal securities broker or 
dealer, futures commission merchant, bank holding company, non-bank 
holding company, bank, investment adviser, commodity pool operator, 
pension trustee, non-pension trustee, and insurance company. Reporting 
entities may select as many business types as applicable. If the 
reporting entity is engaged in a business that is not listed, it could 
select ``other'' and provide a description of its business with respect 
to positions in the specified Treasury security.

[[Page 702]]

    (2) Reporting entities also have the option to identify their 
overall investment strategy with respect to positions in the specified 
Treasury security by checking the appropriate box. Active investment 
strategies include those that involve purchasing, selling, borrowing, 
lending, and financing positions in the security prior to maturity. 
Passive investment strategies include those that involve holding the 
security until maturity. A combination of active and passive strategies 
would involve applying the aforementioned active and passive strategies 
to all or a portion of a reporting entity's positions in the specified 
Treasury security. Reporting entities may select the most applicable 
investment strategy.
    (g) The large position report must be signed by one of the 
following: The chief compliance officer; chief legal officer; chief 
financial officer; chief operating officer; chief executive officer; or 
managing partner or equivalent of the designated filing entity. The 
designated filing entity must also include in the report, immediately 
preceding the signature, a statement of certification as follows:

    By signing below, I certify that the information contained in this 
report with regard to the designated filing entity is accurate and 
complete. Further, after reasonable inquiry and to the best of my 
knowledge and belief, I certify that: (i) The information contained in 
this report with regard to any other aggregating entities is accurate 
and complete; and (ii) the reporting entity, including all aggregating 
entities, is in compliance with the requirements of 17 CFR part 420.

    (h) The report must be filed before noon Eastern Time on the fourth 
business day following issuance of a public announcement.
    (i) A report to be filed pursuant to paragraph (c) of this section 
will be considered filed when received by Treasury or the Federal 
Reserve Bank of New York according to the instructions provided in the 
public announcement.
    (j) A reporting entity that has filed a report pursuant to paragraph 
(c) of this section shall, at the request of Treasury, or the Federal 
Reserve Bank of New York at the direction of Treasury, timely provide 
any supplemental information pertaining to such report.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[79 FR 73414, Dec. 10, 2014, as amended at 83 FR 52768, Oct. 18, 2018]



Sec.  420.4  Recordkeeping.

    (a) Recordkeeping responsibility of aggregating entities. 
Notwithstanding the provisions of paragraphs (b) and (c) of this 
section, an aggregating entity that controls a portion of its reporting 
entity's position in a recently-issued Treasury security, when such 
position of the reporting entity equals or exceeds $2 billion, shall be 
responsible for making and maintaining the records prescribed in this 
section.
    (b) Records to be made and preserved by entities that are subject to 
the recordkeeping provisions of the SEC, Treasury, or the appropriate 
regulatory agencies for financial institutions. As an aggregating 
entity, compliance by a registered broker or dealer, registered 
government securities broker or dealer, noticed financial institution, 
depository institution that exercises investment discretion, registered 
investment adviser, or registered investment company with the applicable 
recordkeeping provisions of the SEC, Treasury, or the appropriate 
regulatory agencies for financial institutions shall constitute 
compliance with this section, provided that, if such entity is also the 
designated filing entity, it:
    (1) Makes and keeps copies of all large position reports filed 
pursuant to this part;
    (2) Makes and keeps supporting documents or schedules used to 
compute data for the large position reports filed pursuant to this part, 
including any certifications or schedules it receives from aggregating 
entities pertaining to their holdings of the reporting entity's 
position;
    (3) Makes and keeps a chart showing the organizational entities that 
are aggregated (if applicable) in determining the reporting entity's 
position; and
    (4) With respect to recordkeeping preservation requirements that 
contain more than one retention period, preserves records required by 
paragraphs (b)(1) through (3) of this section for the

[[Page 703]]

longest record retention period of applicable recordkeeping provisions.
    (c) Records to be made and preserved by other entities. (1) An 
aggregating entity that is not subject to the provisions of paragraph 
(b) of this section shall make and preserve a journal, blotter, or other 
record of original entry containing an itemized record of all 
transactions that contribute to a reporting entity's position, including 
information showing the account for which such transactions were 
effected and the following information pertaining to the identification 
of each instrument: The type of security, the par amount, the CUSIP 
number, the trade date, the maturity date, the type of transaction 
(e.g., a reverse repurchase agreement), and the name or other 
designation of the person from whom sold or purchased.
    (2) If such aggregating entity is also the designated filing entity, 
then in addition it shall make and preserve the following records:
    (i) Copies of all large position reports filed pursuant to this 
part;
    (ii) Supporting documents or schedules used to compute data for the 
large position reports filed pursuant to this part, including any 
certifications or schedules it receives from aggregating entities 
pertaining to their holdings of the reporting entity's position; and
    (iii) A chart showing the organizational entities that are 
aggregated (if applicable) in determining the reporting entity's 
position.
    (3) With respect to the records required by paragraphs (c)(1) and 
(2) of this section, each such aggregating entity shall preserve such 
records for a period of not less than six years, the first two years in 
an easily accessible place. If an aggregating entity maintains its 
records at a location other than its principal place of business, the 
aggregating entity must maintain an index that states the location of 
the records, and such index must be easily accessible at all times.

(Approved by the Office of Management and Budget under control number 
1535-0089)



Sec.  420.5  Applicability date.

    The provisions of this part shall be first applicable beginning 
March 31, 1997.



         Sec. Appendix A to Part 420--Separate Reporting Entity

    Subject to the following conditions, one or more aggregating 
entity(ies) (e.g., parent, subsidiary, or organizational component) in a 
reporting entity, either separately or together with one or more other 
aggregating entity(ies), may be recognized as a separate reporting 
entity. All of the following conditions must be met for such entity(ies) 
to qualify for recognition as a separate reporting entity:
    (1) Such entity(ies) must be prohibited by law or regulation from 
exchanging, or must have established written internal procedures 
designed to prevent the exchange of information related to transactions 
in Treasury securities with any other aggregating entity;
    (2) Such entity(ies) must not be created for the purpose of 
circumventing these large position reporting rules;
    (3) Decisions related to the purchase, sale or retention of Treasury 
securities must be made by employees of such entity(ies). Employees of 
such entity(ies) who make decisions to purchase or dispose of Treasury 
securities must not perform the same function for other aggregating 
entities; and
    (4) The records of such entity(ies) related to the ownership, 
financing, purchase and sale of Treasury securities must be maintained 
by such entity(ies). Those records must be identifiable--separate and 
apart from similar records for other aggregating entities.
    To obtain recognition as a separate reporting entity, each 
aggregating entity or group of aggregating entities must request such 
recognition from Treasury pursuant to the procedures outlined in Sec.  
400.2(c) of this chapter. Such request must provide a description of the 
entity or group and its position within the reporting entity, and 
provide the following certification:
    [Name of the entity(ies)] hereby certifies that to the best of its 
knowledge and belief it meets the conditions for a separate reporting 
entity as described in appendix A to 17 CFR part 420. The above named 
entity also certifies that it has established written policies or 
procedures, including ongoing compliance monitoring processes, that are 
designed to prevent the entity or group of entities from:
    (1) Exchanging any of the following information with any other 
aggregating entity (a) positions that it holds or plans to trade in a 
Treasury security; (b) investment strategies that it plans to follow 
regarding Treasury securities; and (c) financing strategies that it 
plans to follow regarding Treasury securities, or
    (2) In any way intentionally acting together with any other 
aggregating entity with respect to the purchase, sale, retention or 
financing of Treasury securities.

[[Page 704]]

    The above-named entity agrees that it will promptly notify Treasury 
in writing when any of the information provided to obtain separate 
reporting entity status changes or when this certification is no longer 
valid.
    Any entity, including any organizational component thereof, that 
previously has received recognition as a separate bidder in Treasury 
auctions from Treasury pursuant to 31 CFR part 356 is also recognized as 
a separate reporting entity without the need to request such status, 
provided such entity continues to be in compliance with the conditions 
set forth in appendix A to 31 CFR part 356.



        Sec. Appendix B to Part 420--Sample Large Position Report

    Formula for Determining Whether To Submit a Large Position Report

(Report all components as a positive number or zero in millions of 
dollars at par value)

[[Page 705]]

[GRAPHIC] [TIFF OMITTED] TR10DE14.003


[[Page 706]]


[GRAPHIC] [TIFF OMITTED] TR10DE14.004


[[Page 707]]


[GRAPHIC] [TIFF OMITTED] TR10DE14.005


[[Page 708]]


[GRAPHIC] [TIFF OMITTED] TR10DE14.006


[[Page 709]]


[GRAPHIC] [TIFF OMITTED] TR10DE14.007


[[Page 710]]


[GRAPHIC] [TIFF OMITTED] TR10DE14.008


[[Page 711]]





PART 449_FORMS, SECTION 15C OF THE SECURITIES EXCHANGE ACT OF 1934-
-Table of Contents



Sec.
449.1 Form G-FIN, notification by financial institutions of status as 
          government securities broker or dealer pursuant to section 
          15C(a)(1)(B)(i) of the Securities Exchange Act of 1934.
449.2 Form G-FINW, notification by financial institutions of cessation 
          of status as government securities broker or dealer pursuant 
          to section 15C(a)(1)(B)(i) of the Securities Exchange Act of 
          1934 and Sec.  400.6 of this chapter.
449.3 Form G-FIN-4, notification by persons associated with financial 
          institutions that are government securities brokers and 
          dealers pursuant to section 15C(a)(1)(B)(i) of the Securities 
          Exchange Act of 1934 and Sec.  400.4 of this chapter.
449.4 Form G-FIN-5, notification of termination of association with a 
          financial institution that is a government securities broker 
          or dealer pursuant to section 15C(a)(1)(B)(i) of the 
          Securities Exchange Act of 1934 and Sec.  400.4 of this 
          chapter.
449.5 Form G-405, information required of registered government 
          securities brokers and dealers pursuant to section 15C of the 
          Securities Exchange Act of 1934 and Sec. Sec.  405.2 and 405.3 
          of this chapter.

    Authority: 15 U.S.C. 78o-5(a), (b)(1)(B), (b)(4).

    Source: 52 FR 27956, July 24, 1987, unless otherwise noted.



Sec.  449.1  Form G-FIN, notification by financial institutions of
status as government securities broker or dealer pursuant to 
section 15C(a)(1)(B)(i) of the Securities Exchange Act of 1934.

    This form is to be used by financial institutions that are 
government securities brokers or dealers not exempt under part 401 of 
this chapter to notify their appropriate regulatory agency of their 
status. The form is promulgated by the Board of Governors of the Federal 
Reserve System and is available from the Board of Governors of the 
Federal Reserve System, the Comptroller of the Currency, the Federal 
Deposit Insurance Corporation, and the SEC.

[52 FR 27956, July 24, 1987, as amended at 79 FR 38456, July 8, 2014]



Sec.  449.2  Form G-FINW, notification by financial institutions of
cessation of status as government securities broker or dealer pursuant
to section 
          15C(a)(1)(B)(i) of the Securities Exchange Act of 1934 and 
          Sec.  400.6 of this chapter.

    This form is to be used by financial institutions that are 
government securities brokers or dealers to notify their appropriate 
regulatory agency that they have ceased to function as a government 
securities broker or dealer. The form is promulgated by the Board of 
Governors of the Federal Reserve System and is available from the Board 
of Governors of the Federal Reserve System, the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, and the SEC.

[52 FR 27956, July 24, 1987, as amended at 79 FR 38456, July 8, 2014]



Sec.  449.3  Form G-FIN-4, notification by persons associated with 
financial institutions that are government securities brokers and dealers
pursuant to section 
          15C(a)(1)(B)(i) of the Securities Exchange Act of 1934 and 
          Sec.  400.4 of this chapter.

    This form is to be used by associated persons of financial 
institutions that are government securities brokers or dealers to 
provide certain information to the financial institution and the 
appropriate regulatory agency concerning employment, residence, and 
statutory disqualification. The form is promulgated by the Department of 
the Treasury and is available from the Board of Governors of the Federal 
Reserve System, the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, and the SEC.

[52 FR 27956, July 24, 1987, as amended at 79 FR 38456, July 8, 2014]

    Editorial Note: For Federal Register citations affecting Form G-FIN-
4, see the List of CFR Sections Affected, which appears in the Finding 
Aids section of the printed volume and at www.govinfo.gov.

[[Page 712]]



Sec.  449.4  Form G-FIN-5, notification of termination of association
with a financial institution that is a government securities broker or
dealer pursuant to 
          section 15C(a)(1)(B)(i) of the Securities Exchange Act of 1934 
          and Sec.  400.4 of this chapter.

    This form is to be used by financial institutions that are 
government securities brokers or dealers to notify the appropriate 
regulatory agency of the fact that an associated person is no longer 
associated with the government securities broker or dealer function of 
the financial institution. The form is promulgated by the Department of 
the Treasury and is available from the Board of Governors of the Federal 
Reserve System, the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, and the SEC.

[52 FR 27956, July 24, 1987, as amended at 79 FR 38456, July 8, 2014]



Sec.  449.5  Form G-405, information required of registered government
securities brokers and dealers pursuant to section 15C of the Securities
Exchange Act of 1934 and Sec. Sec.  405.2 and 405.3 of this chapter.

    This form is to be used by registered government securities brokers 
and dealers to make the monthly, quarterly and annual financial reports 
required by part 405 of this chapter. The form is promulgated by the 
Department of the Treasury and is available from the SEC and the 
designated examining authorities.

    Editorial Note: For Federal Register citations affecting Form G-405, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and at www.govinfo.gov.

[[Page 713]]



SUBCHAPTER B_REGULATIONS UNDER TITLE II OF THE GOVERNMENT SECURITIES ACT 
                                 OF 1986





PART 450_CUSTODIAL HOLDINGS OF GOVERNMENT SECURITIES BY DEPOSITORY 
INSTITUTIONS--Table of Contents



Sec.
450.1 Scope of regulations; office responsible.
450.2 Definitions.
450.3 Exemption for holdings subject to fiduciary standards.
450.4 Custodial holdings of government securities.
450.5 Effective date.

    Authority: Sec. 201, Pub. L. 99-571, 100 Stat. 3222-23 (31 U.S.C. 
3121, 9110); Sec. 101, Pub. L. 99-571, 100 Stat. 3208 (15 U.S.C. 78o-
5(b)(1)(A), (b)(4), (b)(5)(B)).

    Source: 52 FR 27957, July 24, 1987, unless otherwise noted.



Sec.  450.1  Scope of regulations; office responsible.

    (a) This part applies to depository institutions that hold 
government securities as fiduciary, custodian, or otherwise for the 
account of a customer, and that are not government securities brokers or 
dealers, as defined in sections 3(a)(43) and 3(a)(44) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(43)-(44)). Depository 
institutions exempt under part 401 of this chapter from the requirements 
of Subchapter A of this chapter must comply with this part. Certain 
depository institutions that are government securities brokers or 
dealers must also comply with this part, as well as with additional 
requirements set forth in Sec.  403.5.
    (b) The regulations in this subchapter are promulgated by the 
Assistant Secretary (Domestic Finance) pursuant to a delegation of 
authority from the Secretary of the Treasury. The office responsible for 
the regulations is the Office of the Commissioner, Bureau of the Fiscal 
Service. Procedures for obtaining interpretations of the regulations are 
set forth at Sec.  400.2.

[52 FR 27957, July 24, 1987, as amended at 53 FR 28987, Aug. 1, 1988; 79 
FR 38456, July 8, 2014]



Sec.  450.2  Definitions.

    For purposes of this subchapter:
    (a) Appropriate regulatory agency has the meaning set out in section 
3(a)(34)(G) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(34)(G)), except that the appropriate regulatory agency for--
    (1) A Federal credit union as defined in 12 U.S.C. 1752(1) and an 
insured credit union as defined in 12 U.S.C. 1752(7) is the National 
Credit Union Administration; and
    (2) Any depository institution for whom an appropriate regulatory 
agency is not explicitly specified by either section 3(a)(34)(G) or this 
paragraph, is the SEC;
    (b) Customer includes, but is not limited to, the counterparty to a 
transaction pursuant to a repurchase agreement for whom the depository 
institution retains possession of the security sold subject to 
repurchase, but does not include a broker or dealer that is registered 
pursuant to section 15, 15B or 15C(a)(1)(A) of the Act (15 U.S.C. 78o, 
78o-4, 78o-5(a)(l)(A)) or that has filed notice of its status as a 
government securities broker or dealer pursuant to section 15C(a)(1)(B) 
of the Act (15 U.S.C. 78o-5(a)(1)(B)) except as provided in Sec.  450.4.
    (c) Depository institution has the meaning stated in clauses (i) 
through (vi) of section 19(b)(1)(A) of the Federal Reserve Act (12 
U.S.C. 461(b)(1)(A) (i)-(vi)) and also includes a foreign bank, an 
agency or branch of a foreign bank and a commercial lending company 
owned or controlled by a foreign bank (as such terms are defined in the 
International Banking Act of 1978, Pub. L. 95-369, 92 Stat. 607);
    (d) Fiduciary capacity includes trustee, executor, administrator, 
registrar, transfer agent, guardian, assignee, receiver, managing agent, 
and any other similar capacity involving the sole or shared exercise of 
discretion by a depository institution having fiduciary powers that is 
supervised by a Federal or state financial institution regulatory 
agency; and

[[Page 714]]

    (e) Government securities means:

------------------------------------------------------------------------
                If . . .                            Then . . .
------------------------------------------------------------------------
(1)(i) A depository institution is a     ``Government securities'' means
 government securities broker or dealer   those obligations described in
 as defined in sections 3(a)(43) and      subparagraphs (A), (B), (C),
 3(a)(44) of the Securities Exchange      or (E) of section 3(a)(42) of
 Act of 1934 (15 U.S.C. 78c(a)(43)-       the Securities Exchange Act of
 (44)).                                   1934 (15 U.S.C. 78c(a)(42)(A)-
                                          (C), (E))
------------------------------------------------------------------------
(ii) A depository institution is exempt  ``Government securities'' means
 under Part 401 of this chapter from      those obligations described in
 the requirements of Subchapter A.        subparagraphs (A), (B), (C),
                                          or (E) of section 3(a)(42) of
                                          the Securities Exchange Act of
                                          1934 (15 U.S.C. 78c(a)(42)(A)-
                                          (C), (E))
------------------------------------------------------------------------
(2) A depository institution is not a    ``Government securities'' means
 government securities broker or dealer   those obligations described in
 as defined in sections 3(a)(43) and      subparagraphs (A), (B), or (C)
 3(a)(44) of the Securities Exchange      of section 3(a)(42) of the
 Act of 1934 (15 U.S.C. 78c(a)(43)-       Securities Exchange Act of
 (44)).                                   1934 (15 U.S.C. 78c(a)(42)(A)-
                                          (C))
------------------------------------------------------------------------


[52 FR 27957, July 24, 1987, as amended at 55 FR 6604, Feb. 26, 1990; 66 
FR 28655, May 24, 2001; 66 FR 29888, June 1, 2001]



Sec.  450.3  Exemption for holdings subject to fiduciary standards.

    (a) The Secretary has determined that the rules and standards of the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, and the Federal Deposit Insurance Corporation governing 
the holding of government securities in a fiduciary capacity by 
depository institutions subject thereto are adequate. Accordingly, such 
depository institutions are exempt from this part with respect to their 
holdings of government securities in a fiduciary capacity and their 
holdings of government securities in a custodial capacity provided that:
    (1) Such institution has adopted policies and procedures that would 
apply to such custodial holdings all the requirements imposed by its 
appropriate regulatory agency that are applicable to government 
securities held in a fiduciary capacity, and
    (2) Such custodial holdings are subject to examination by the 
appropriate regulatory agency for compliance with such fiduciary 
requirements.
    (b) The Secretary expects that each appropriate regulatory agency 
will notify the Department if it materially revises its rules and 
standards governing the holding of government securities in a fiduciary 
capacity.

[52 FR 27957, July 24, 1987, as amended at 70 FR 29446, May 23, 2005; 79 
FR 38456, July 8, 2014]



Sec.  450.4  Custodial holdings of government securities.

    Depository institutions that are subject to this part shall observe 
the following requirements with respect to their holdings of government 
securities for customer accounts:
    (a)(1) Except as otherwise provided in this section, a depository 
institution shall maintain possession or control of all government 
securities held for the account of customers by segregating such 
securities from the assets of the depository institution and keeping 
them free of any lien, charge or claim of any third party granted or 
created by such depository institution.
    (2)(i) Where customer securities are maintained by a depository 
institution at another depository institution, including but not limited 
to a correspondent bank or a trust company (``custodian institution''), 
the depository institution shall be in compliance with paragraph (a)(1) 
of this section if:
    (A) The depository institution notifies the custodian institution 
that such securities are customer securities;
    (B) The custodian institution maintains such securities in an 
account that is designated for customers of the depository institution 
and that does not contain proprietary securities of the depository 
institution; and
    (C) The depository institution instructs the custodian institution 
to maintain such securities free of any lien, charge, or claim of any 
kind in favor of such custodian institution or any persons claiming 
through it.

[[Page 715]]

    (ii) To the extent that a custodian institution holds securities 
that have been identified as customer securities by a depository 
institution in accordance with paragraph (a)(2)(i) of this section, the 
custodian institution shall treat such securities as customer securities 
separate from any other securities held for the account of the 
depository institution.
    (3)(i) Where securities that a depository institution is required, 
pursuant to this part 450, to keep free of all liens, charges, or other 
claims (``customer securities'') are maintained by a depository 
institution at a Federal Reserve Bank, the depository institution shall 
be in compliance with paragraph (a)(1) of this section if any lien, 
charge or other claim of such Federal Reserve Bank or any person 
claiming through it against securities of the depository institution 
expressly excludes customer securities.
    (ii) Notwithstanding paragraph (a)(3)(i) of this section, a 
depository institution described in that paragraph shall be in 
compliance with paragraph (a)(1) of this section if a Federal Reserve 
Bank retains a lien on securities received during the day that are 
subsequently determined to be customer securities, provided that,
    (A) On that day, the depository institution:
    (1) Because of extraordinary circumstances, at the end of that day 
either requests a discount window advance or is unable to eliminate an 
overdraft with its Federal Reserve Bank and the Federal Reserve Bank 
extends credit to the depository institution in order to assure the 
safety and soundness or liquidity of the depository institution; and
    (2) After reasonable efforts, is unable to provide the Federal 
Reserve Bank with an adequate security interest in other collateral that 
is clearly identifiable as pledgeable by the depository institution 
sufficient to fully collateralize such extension of credit; and
    (B) The depository institution diligently pursues with the Federal 
Reserve Bank the substitution of other collateral for securities 
determined to be customer securities; and
    (C) The Federal Reserve Bank agrees that to the extent the lien 
extends to collateral of a value greater than the outstanding balance on 
the loan, customer securities will be the first collateral released from 
the lien.
    (4)(i) To the extent that a depository institution holds securities 
that have been identified to such depository institution as customer 
securities by a government securities broker or dealer, or that the 
government securities broker or dealer has instructed the depository 
institution to place in a segregated account, in accordance with part 
403 of subchapter A of this chapter, the depository institution shall 
treat such securities as customer securities separate from any other 
securities held for the account of the government securities broker or 
dealer and shall comply with all of the provisions of this section with 
respect to such customer securities, except as provided in paragraph 
(a)(4)(ii) of this section.
    (ii) A clearing bank that provides clearing services for a 
government securities broker or dealer and that maintains a segregated 
account as described in Sec.  403.4 of this chapter shall not be 
required to transfer securities to such account upon the instruction of 
the broker or dealer for whom such account is maintained if the clearing 
bank determines that such securities continue to be required as 
collateral for an extension of clearing credit to such dealer. Whenever 
a clearing bank does not segregate securities as of the close of 
business upon the instruction of such broker or dealer, it shall send a 
notification to the appropriate regulatory agency of the broker or 
dealer for whom such account is maintained. Such securities shall 
thereafter be segregated pursuant to the instruction of the broker or 
dealer as soon as they are no longer required by the clearing bank as 
collateral for the extension of clearing credit.
    (5) A depository institution that is subject to part 403 is not 
required to maintain possession or control of margin securities as that 
term is defined in Sec.  403.5(f)(1).
    (6) Notwithstanding the requirement of paragraph (a)(1) to maintain 
possession or control of customer securities, a depository institution 
may lend such

[[Page 716]]

securities to a third party pursuant to the written agreement of the 
customer, if such loan of securities is carried out in full compliance 
with supervisory guidelines of its appropriate regulatory agency that 
expressly govern securities lending practices.
    (b)(1) Except as otherwise provided in paragraph (b)(2) of this 
section, a depository institution shall issue a confirmation or a 
safekeeping receipt for each security held for a customer in accordance 
with this section with the exception of securities that are the subject 
of repurchase transactions which are subject to the requirements of 
Sec.  403.5(d) of this chapter. The confirmation or safekeeping receipt 
shall identify the issuer, maturity date, par amount and coupon rate of 
the security being confirmed. The confirmation may be supplied to the 
customer in any manner that complies with applicable Federal banking 
regulations.
    (2) A depository institution shall not be required to send the 
confirmation or safekeeping receipt required by paragraph (b)(1) of this 
section to a customer that is a non-U.S. citizen residing outside the 
United States or a foreign corporation, partnership, or trust, if such 
customer expressly waives in writing the right to receive such 
confirmation or safekeeping receipt.
    (c) Records of government securities held for customers shall be 
maintained and shall be kept separate and distinct from other records of 
the depository institution. Such records shall:
    (1) Provide a system for identifying each customer, and each 
government security (or the amount of each issue of a government 
security issued in book-entry form) held for the customer;
    (2) Describe the customer's interest in the government security;
    (3) Indicate all receipts and deliveries of government securities 
and all receipts and disbursements of cash by the depository institution 
in connection with such securities;
    (4) Include a copy of the safekeeping receipt or a confirmation 
issued for each government security held; and
    (5) Provide an adequate basis for audit of such information.
    (d) Counts of government securities held for customers in both 
definitive and book-entry form shall be conducted at least annually and 
such counts shall be reconciled with customer account records.
    (1) Counts of book-entry securities and of definitive securities 
held outside the possession of the depository institution shall be made 
by reconciliation of the records of the depository institution with 
those of any depository, depository institution, or Federal Reserve Bank 
on whose books the depository institution has securities accounts.
    (2) The depository institution conducting the count shall also 
verify any such securities in transfer, in transit, pledged, loaned, 
borrowed, deposited, failed to receive, failed to deliver, subject to 
repurchase or reverse repurchase agreements or otherwise subject to the 
depository institution's control or direction that are not in its 
physical possession, where the securities have been in such status for 
longer than thirty days.
    (3) The dates and results of such counts and reconciliations shall 
be documented with differences noted in a security count difference 
account not later than seven business days after the date of each 
required count and verification as provided in this paragraph (d).
    (e) For purposes of this section, a depository institution shall 
treat a government securities broker or dealer as a customer with 
respect to securities maintained by such government securities broker or 
dealer in a Segregated Account as defined in Sec.  403.4(f)(1) of this 
chapter and with respect to securities otherwise identified to the 
depository institution as customer securities for purposes of 
maintaining possession or control of such securities as required by part 
403 of this chapter. The recordkeeping requirements of paragraph (c) of 
this section require the depository institution to treat such securities 
as customer securities separate from any other securities held for the 
account of the government securities broker or dealer, but do not 
require the depository institution to keep records identifying 
individual customers of the government securities broker or dealer.
    (f) The records required by paragraphs (c) and (d)(3) of this 
section

[[Page 717]]

shall be preserved for not less than six years, the first two years in 
an easily accessible place.

(Approved by the Office of Management and Budget under control number 
1535-0089)

[52 FR 27957, July 24, 1987, as amended at 60 FR 11026, Mar. 1, 1995]



Sec.  450.5  Effective date.

    This part shall be effective October 31, 1987.

                        PARTS 451	499 [RESERVED]

[[Page 719]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  Table of OMB Control Numbers
  List of CFR Sections Affected

[[Page 721]]



                    Table of CFR Titles and Chapters




                      (Revised as of April 1, 2024)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--599)
        VI  National Capital Planning Commission (Parts 600--699)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
         X  Department of the Treasury (Parts 1000--1099)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Department of Housing and Urban Development (Parts 
                2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)

[[Page 722]]

     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
      XXIX  Department of Labor (Parts 2900--2999)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
     XXXVI  Office of National Drug Control Policy, Executive 
                Office of the President (Parts 3600--3699)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)
       LIX  Gulf Coast Ecosystem Restoration Council (Parts 5900--
                5999)
        LX  Federal Communications Commission (Parts 6000--6099)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
        IV  Office of Personnel Management and Office of the 
                Director of National Intelligence (Parts 1400--
                1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)

[[Page 723]]

      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  U.S. International Development Finance Corporation 
                (Parts 4300--4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
     XXXVI  Department of Homeland Security (Parts 4600--4699)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)

[[Page 724]]

    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)
    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
    XCVIII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)
         C  National Council on Disability (Parts 10000--10049)
        CI  National Mediation Board (Parts 10100--10199)
       CII  U.S. Office of Special Counsel (Parts 10200--10299)
      CIII  Federal Mediation and Conciliation Service (Parts 
                10300--10399)
       CIV  Office of the Intellectual Property Enforcement 
                Coordinator (Part 10400--10499)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--199)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)

[[Page 725]]

      VIII  Agricultural Marketing Service (Federal Grain 
                Inspection Service, Fair Trade Practices Program), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  [Reserved]
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  [Reserved]
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]

[[Page 726]]

      XLII  Rural Business-Cooperative Service, Department of 
                Agriculture (Parts 4200--4299)
         L  Rural Business-Cooperative Service, Rural Housing 
                Service, and Rural Utilities Service, Department 
                of Agriculture (Parts 5000--5099)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Agricultural Marketing Service (Fair Trade Practices 
                Program), Department of Agriculture (Parts 200--
                299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  (Parts 500--599) [Reserved]
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)

[[Page 727]]

        IX  (Parts 900--999)[Reserved]
         X  Consumer Financial Protection Bureau (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research, Department of the 
                Treasury (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)

[[Page 728]]

       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  National Technical Information Service, Department of 
                Commerce (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
        XV  Office of the Under-Secretary for Economic Affairs, 
                Department of Commerce (Parts 1500--1599)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399) [Reserved]

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 729]]

        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599) [Reserved]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  United States Agency for Global Media (Parts 500--599)
       VII  U.S. International Development Finance Corporation 
                (Parts 700--799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)

[[Page 730]]

        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799) 
                [Reserved]

[[Page 731]]

       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--899)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900--999)
        VI  Office of the Assistant Secretary, Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--799)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)

[[Page 732]]

      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

[[Page 733]]

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of Investment Security, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Department of Defense, Defense Logistics Agency (Parts 
                1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army, Department 
                of Defense (Parts 200--399)

[[Page 734]]

        IV  Great Lakes St. Lawrence Seaway Development 
                Corporation, Department of Transportation (Parts 
                400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Career, Technical, and Adult Education, 
                Department of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599) 
                [Reserved]
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799) 
                [Reserved]
            Subtitle C--Regulations Relating to Education
        XI  [Reserved]
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

[[Page 735]]

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  National Institute of Standards and Technology, 
                Department of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)
        IX  Federal Permitting Improvement Steering Council (Part 
                1900)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)

[[Page 736]]

  103--104  [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
  129--200  [Reserved]
            Subtitle D--Federal Acquisition Supply Chain Security
       201  Federal Acquisition Security Council (Parts 201-1--
                201-99)
            Subtitle E [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
   II--III  [Reserved]
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--699)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1099)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

[[Page 737]]

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Services, Administration of 
                Families and Services, Department of Health and 
                Human Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
        IX  Denali Commission (Parts 900--999)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Administration for Children and Families, Department 
                of Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission of Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Parts 2300--2399)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

[[Page 738]]

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)
         V  The First Responder Network Authority (Parts 500--599)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Health and Human Services (Parts 300--399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)

[[Page 739]]

        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199) [Reserved]
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)

[[Page 740]]

        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

[[Page 741]]





           Alphabetical List of Agencies Appearing in the CFR




                      (Revised as of April 1, 2024)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     5, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, VIII, IX, X, XI; 9, 
                                                  II
Agricultural Research Service                     7, V
Agriculture, Department of                        2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, VIII, IX, X, XI; 9, 
                                                  II
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force, Department of                          32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 742]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI; 38, II
Army, Department of                               32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
  Federal Acquisition Regulation                  48, 19
Career, Technical, and Adult Education, Office    34, IV
     of
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazard Investigation Board    40, VI
Chief Financial Officer, Office of                7, XXX
Child Support Services, Office of                 45, III
Children and Families, Administration for         45, II, IV, X, XIII
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce, Department of                           2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Affairs, Office of the Under-          15, XV
       Secretary for
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II; 37, IV
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Technical Information Service          15, XI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Secretary of Commerce, Office of                15, Subtitle A
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I
Defense, Department of                            2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III; 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I

[[Page 743]]

  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy, Department of                             32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Denali Commission                                 45, IX
Disability, National Council on                   5, C; 34, XII
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Office of the Under-Secretary   15, XV
     for
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Career, Technical, and Adult Education, Office  34, IV
       of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Policy, National Commission for        1, IV
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99
  National Drug Control Policy, Office of         2, XXXVI; 21, III
  National Security Council                       32, XXI; 47, II
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
     States
[[Page 744]]

Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Families and Services, Administration of          45, III
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Acquisition Security Council              41, 201
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 2, LX; 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        5, CIII; 29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Permitting Improvement Steering Council   40, IX
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission of                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61

[[Page 745]]

  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Great Lakes St. Lawrence Seaway Development       33, IV
     Corporation
Gulf Coast Ecosystem Restoration Council          2, LIX; 40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Services, Office of               45, III
  Children and Families, Administration for       45, II, IV, X, XIII
  Community Services, Office of                   45, X
  Families and Services, Administration of        45, III
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 5, XXXVI; 6, I; 8, 
                                                  I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Independent Counsel, Offices of                   28, VI
Indian Affairs, Bureau of                         25, I, V

[[Page 746]]

Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Intellectual Property Enforcement Coordinator,    5, CIV
     Office of
Inter-American Foundation                         5, LXIII; 22, X
Interior, Department of                           2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Safety and Environmental Enforcement, Bureau    30, II
       of
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Development Finance Corporation,    5, XXXIII; 22, VII
     U.S.
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice, Department of                            2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Independent Counsel, Offices of                 28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor, Department of                              2, XXIX; 5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV

[[Page 747]]

  Employment and Training Administration          20, V
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I, VI
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Libraries and Information Science, National       45, XVII
     Commission on
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV, VI
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           2, XXXVI; 21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Geospatial-Intelligence Agency           32, I
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II; 37, IV
National Intelligence, Office of Director of      5, IV; 32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          5, CI; 29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI

[[Page 748]]

  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI; 47, II
National Technical Information Service            15, XI
National Telecommunications and Information       15, XXIII; 47, III, IV, V
     Administration
National Transportation Safety Board              49, VIII
Natural Resource Revenue, Office of               30, XII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy, Department of                               32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, IV, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Contracts, Department of Labor             41, 50
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Housing Service                             7, XVIII, XXXV, L
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Safety and Environmental Enforcement, Bureau of   30, II
Science and Technology Policy, Office of          32, XXIV; 47, II
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
   Office of
[[Page 749]]

State, Department of                              2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Tennessee Valley Authority                        5, LXIX; 18, XIII
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Great Lakes St. Lawrence Seaway Development     33, IV
       Corporation
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury, Department of the                       2, X; 5, XXI; 12, XV; 17, 
                                                  IV; 31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
Truman, Harry S. Scholarship Foundation           45, XVIII
United States Agency for Global Media             22, V
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
U.S. Office of Special Counsel                    5, CII
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs, Department of                   2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I, VI
World Agricultural Outlook Board                  7, XXXVIII

[[Page 751]]







                      Table of OMB Control Numbers



The OMB control numbers for chapter II of title 17 appear in Sec.  
200.800. For the convenience of the user, Sec.  200.800 is reprinted 
below.




  



  



Sec.  200.800  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    (a) Purpose: This subpart collects and displays the control numbers 
assigned to information collection requirements of the Commission by the 
Office of Management and Budget pursuant to the Paperwork Reduction Act 
of 1980, 44 U.S.C. 3500 et seq. This subpart displays current OMB 
control numbers for those information collection requirements of the 
Commission that are rules and regulations and codified in 17 CFR either 
in full text or incorporated by reference with the approval of the 
Director of the Office of the Federal Register.
    (b) Display.






------------------------------------------------------------------------
                                    17 CFR part or section
      Information collection         where identified and    Current OMB
           requirement                     described         control No.
------------------------------------------------------------------------
Regulation S-X...................  Part 210................    3235-0009
Regulation S-B...................  Part 228................    3235-0417
Regulation S-K...................  Part 229................    3235-0071
Rule 154.........................  230.154.................    3235-0495
Rule 155.........................  230.155.................    3235-0549
Rule 236.........................  230.236.................    3235-0095
Rule 237.........................  230.237.................    3235-0528
Regulation A.....................  230.251 thru 230.263....    3235-0286
Regulation C.....................  230.400 thru 230.494....    3235-0074
Rule 425.........................  230.425.................    3235-0521
Rule 477.........................  230.477.................    3235-0550
Rule 489.........................  230.489.................    3235-0411
Rule 498.........................  230.498.................    3235-0488
Rule 498A........................  230.498A................    3235-0765
Regulation D.....................  230.500 thru 230.508....    3235-0076
Regulation E.....................  230.601 thru 230.610a...    3235-0232
Rule 604.........................  230.604.................    3235-0232
Rule 605.........................  230.605.................    3235-0232
Rule 609.........................  230.609.................    3235-0233
Rule 701.........................  230.701.................    3235-0522
Regulation S.....................  230.901 thru 230.905....    3235-0357
Regulation S-T...................  Part 232................    3235-0424
Form SB-1........................  239.9...................    3235-0423
Form SB-2........................  239.10..................    3235-0418
Form S-1.........................  239.11..................    3235-0065
Form S-2.........................  239.12..................    3235-0072
Form S-3.........................  239.13..................    3235-0073
Form N-2.........................  239.14..................    3235-0026
Form N-1A........................  239.15A.................    3235-0307
Form S-6.........................  239.16..................    3235-0184
Form S-8.........................  239.16b.................    3235-0066
Form N-3.........................  239.17a.................    3235-0316
Form N-4.........................  239.17b.................    3235-0318
Form S-11........................  239.18..................    3235-0067

[[Page 752]]

 
Form N-14........................  239.23..................    3235-0336
Form N-5.........................  239.24..................    3235-0169
Form S-4.........................  239.25..................    3235-0324
Form F-1.........................  239.31..................    3235-0258
Form F-2.........................  239.32..................    3235-0257
Form F-3.........................  239.33..................    3235-0256
Form F-4.........................  239.34..................    3235-0325
Form F-6.........................  239.36..................    3235-0292
Form F-7.........................  239.37..................    3235-0383
Form F-8.........................  239.38..................    3235-0378
Form F-10........................  239.40..................    3235-0380
Form F-80........................  239.41..................    3235-0404
Form F-X.........................  239.42..................    3235-0379
Form F-N.........................  239.43..................    3235-0411
Form ID..........................  239.63..................    3235-0328
Form SE..........................  239.64..................    3235-0327
Form TH..........................  239.65..................    3235-0425
Form 1-A.........................  239.90..................    3235-0286
Form 2-A.........................  239.91..................    3235-0286
Form 144.........................  239.144.................    3235-0101
Form 1-E.........................  239.200.................    3235-0232
Form CB..........................  239.800.................    3235-0518
Rule 6a-1........................  240.6a-1................    3235-0017
Rule 6a-3........................  240.6a-3................    3235-0021
Rule 6a-4........................  240.6a-4................    3235-0554
Rule 6h-1........................  240.6h-1................    3235-0555
Rule 8c-1........................  240.8c-1................    3235-0514
Rule 9b-1........................  240.9b-1................    3235-0480
Rule 10a-1.......................  240.10a-1...............    3235-0475
Rule 10b-10......................  240.10b-10..............    3235-0444
Rule 10b-17......................  240.10b-17..............    3235-0476
Rule 10b-18......................  240.10b-18..............    3235-0474
Rule 10A-1.......................  240.10A-1...............    3235-0468
Rule 11a1-1(T)...................  240.11a1-1(T)...........    3235-0478
Rule 12a-5.......................  240.12a-5...............    3235-0079
Regulation 12B...................  240.12b-1 thru 240.12b-     3235-0062
                                    36.
Rule 12d1-3......................  240.12d1-3..............    3235-0109
Rule 12d2-1......................  240.12d2-1..............    3235-0081
Rule 12d2-2......................  240.12d2-2..............    3235-0080
Rule 12f-1.......................  240.12f-1...............    3235-0128
Rule 13a-16......................  240.13a-16..............    3235-0116
Regulation 13D/G.................  240.13d-1 thru 240.13d-7    3235-0145
Schedule 13D.....................  240.13d-101.............    3235-0145
Schedule 13G.....................  240.13d-102.............    3235-0145
Rule 13e-1.......................  240.13e-1...............    3235-0305
Rule 13e-3.......................  240.13e-3...............    3235-0007
Schedule 13E-3...................  240.13e-100.............    3235-0007
Schedule 13e-4F..................  240.13e-101.............    3235-0375
Regulation 14A...................  240.14a-1 thru 240.14a-     3235-0059
                                    12.
Schedule 14A.....................  240.14a-101.............    3235-0059
Regulation 14C...................  240.14c-1...............    3235-0057
Schedule 14C.....................  240.14c-101.............    3235-0057
Regulation 14D...................  240.14d-1 thru 240.14d-9    3235-0102
Schedule TO......................  240.14d-100.............    3235-0515
Schedule 14D-1...................  240.14d-101.............    3235-0102
Schedule 14D-9...................  240.14d-101.............    3235-0102
Schedule 14D-1F..................  240.14d-102.............    3235-0376
Schedule 14D-9F..................  240.14d-103.............    3235-0382
Regulation 14E...................  240.14e-1 thru 240.14e-2    3235-0102
Rule 14f-1.......................  240.14f-1...............    3235-0108
Rule 15a-4.......................  240.15a-4...............    3235-0010
Rule 15a-6.......................  240.15a-6...............    3235-0371
Rule 15b1-1......................  240.15b1-1..............    3235-0012
Rule 15b6-1(a)...................  240.15b6-1(a)...........    3235-0018
Rule 15c1-5......................  240.15c1-5..............    3235-0471
Rule 15c1-6......................  240.15c1-6..............    3235-0472
Rule 15c1-7......................  240.15c1-7..............    3235-0134
Rule 15c2-1......................  240.15c2-1..............    3235-0485
Rule 15c2-5......................  240.15c2-5..............    3235-0198
Rule 15c2-7......................  240.15c2-7..............    3235-0479
Rule 15c2-8......................  240.15c2-8..............    3235-0481
Rule 15c2-11.....................  240.15c2-11.............    3235-0202

[[Page 753]]

 
Rule 15c2-12.....................  240.15c2-12.............    3235-0372
Rule 15c3-1......................  240.15c3-1..............    3235-0200
Rule 15c3-1(c)(13)...............  240.15c3-1(c)(13).......    3235-0499
Appendix F to Rule 15c3-1........  240.15c3-1f.............    3235-0496
Rule 15c3-3......................  240.15c3-3..............    3235-0078
Rule 15c3-4......................  240.15c3-4..............    3235-0497
Rule 15d-16......................  240.15d-16..............    3235-0116
Rule 15g-2.......................  240.15g-2...............    3235-0434
Rule 15g-3.......................  240.15g-3...............    3235-0392
Rule 15g-4.......................  240.15g-4...............    3235-0393
Rule 15g-5.......................  240.15g-5...............    3235-0394
Rule 15g-6.......................  240.15g-6...............    3235-0395
Rule 15g-9.......................  240.15g-9...............    3235-0385
Rule 15Aj-1......................  240.15Aj-1..............    3235-0044
Rule 15Ba2-1.....................  240.15Ba2-1.............    3235-0083
Rule 15Ba2-5.....................  240.15Ba2-5.............    3235-0088
Rule 15Bc3-1.....................  240.15Bc3-1.............    3235-0087
Rule 17a-1.......................  240.17a-1...............    3235-0208
Rule 17a-2.......................  240.17a-2...............    3235-0201
Rule 17a-3.......................  240.17a-3...............    3235-0033
Rule 17a-3(a)(16)................  240.17a-3(a)(16)........    3235-0508
Rule 17a-4.......................  240.17a-4...............    3235-0279
Rule 17a-4(b)(10)................  240.17a-4(b)(10)........    3235-0506
Rule 17a-5.......................  240.17a-5...............    3235-0123
Rule 17a-5(c)....................  240.17a-5(c)............    3235-0199
Rule 17a-6.......................  240.17a-6...............    3235-0489
Rule 17a-7.......................  240.17a-7...............    3235-0131
Rule 17a-8.......................  240.17a-8...............    3235-0092
Rule 17a-9T......................  240.17a-9T..............    3235-0524
Rule 17a-10......................  240.17a-10..............    3235-0122
Rule 17a-11......................  240.17a-11..............    3235-0085
Rule 17a-12......................  240.17a-12..............    3235-0498
Rule 17a-13......................  240.17a-13..............    3235-0035
Rule 17a-19......................  240.17a-19..............    3235-0133
Rule 17a-22......................  240.17a-22..............    3235-0196
Rule 17a-25......................  240.17a-25..............    3235-0540
Rule 17f-1(b)....................  240.17f-1(b)............    3235-0032
Rule 17f-1(c)....................  240.17f-1(c)............    3235-0037
Rule 17f-1(g)....................  240.17f-1(g)............    3235-0290
Rule 17f-2(a)....................  240.17f-2(a)............    3235-0034
Rule 17f-2(c)....................  240.17f-2(c)............    3235-0029
Rule 17f-2(d)....................  240.17f-2(d)............    3235-0028
Rule 17f-2(e)....................  240.17f-2(e)............    3235-0031
Rule 17f-5.......................  240.17f-5...............    3235-0269
Rule 17h-1T......................  240.17h-1T..............    3235-0410
Rule 17h-2T......................  240.17h-2T..............    3235-0410
Rule 17Ab2-1.....................  240.17Ab2-1(a)..........    3235-0195
Rule 17Ac2-1.....................  240.17Ac2-1.............    3235-0084
Rule 17Ad-2(c), (d), and (h).....  240.17Ad-2(c), (d) and      3235-0130
                                    (h).
Rule 17Ad-3(b)...................  240.17Ad-3(b)...........    3235-0473
Rule 17Ad-4(b) and (c)...........  240.17Ad-4(b) and (c)...    3235-0341
Rule 17Ad-6......................  240.17Ad-6..............    3235-0291
Rule 17Ad-7......................  240.17Ad-7..............    3235-0291
Rule 17Ad-10.....................  240.17Ad-10.............    3235-0273
Rule 17Ad-11.....................  240.17Ad-11.............    3235-0274
Rule 17Ad-13.....................  240.17Ad-13.............    3235-0275
Rule 17Ad-15.....................  240.17Ad-15.............    3235-0409
Rule 17Ad-16.....................  240.17Ad-16.............    3235-0413
Rule 17Ad-17.....................  240.17Ad-17.............    3235-0469
Rule 19b-1.......................  240.19b-1...............    3235-0354
Rule 19b-4.......................  240.19b-4...............    3235-0045
Rule 19b-4(e)....................  240.19b-4(e)............    3235-0504
Rule 19b-5.......................  240.19b-5...............    3235-0507
Rule 19b-7.......................  240.19b-7...............    3235-0553
Rule 19d-1.......................  240.19d-1(b) thru           3235-0206
                                    240.19d-1(i).
Rule 19d-2.......................  240.19d-2...............    3235-0205
Rule 19d-3.......................  240.19d-3...............    3235-0204
Rule 19h-1.......................  240.19h-1(a), (c) thru      3235-0259
                                    (e), and (g).
Rule 24b-1.......................  240.24b-1...............    3235-0194
Rule 101.........................  242.101.................    3235-0464
Rule 102.........................  242.102.................    3235-0467
Rule 103.........................  242.103.................    3235-0466

[[Page 754]]

 
Rule 104.........................  242.104.................    3235-0465
Rule 301.........................  242.301.................    3235-0509
Rule 302.........................  242.302.................    3235-0510
Rule 303.........................  242.303.................    3235-0505
Rule 604.........................  242.604.................    3235-0462
Rule 605.........................  242.605.................    3235-0542
Rule 606.........................  242.606.................    3235-0541
Rule 607.........................  242.607.................    3235-0435
Rule 608.........................  242.608.................    3235-0500
Rule 609.........................  242.609.................    3235-0043
Rule 611.........................  242.611.................    3235-0600
Regulation S-P...................  Part 248................    3235-0537
Form 1...........................  249.1...................    3235-0017
Form 1-N.........................  249.10..................    3235-0554
Form 25..........................  249.25..................    3235-0080
Form 26..........................  249.26..................    3235-0079
Form 3...........................  249.103.................    3235-0104
Form 4...........................  249.104.................    3235-0287
Form 5...........................  249.105.................    3235-0362
Form 8-A.........................  249.208a................    3235-0056
Form 10..........................  249.210.................    3235-0064
Form 10-SB.......................  249.210b................    3235-0419
Form 18..........................  249.218.................    3235-0121
Form 20-F........................  249.220f................    3235-0288
Form 40-F........................  249.240f................    3235-0381
Form 6-K.........................  249.306.................    3235-0116
Form 8-K.........................  249.308.................    3235-0060
Form 10-Q........................  249.308a................    3235-0070
Form 10-QSB......................  249.308b................    3235-0416
Form 10-K........................  249.310.................    3235-0063
Form 10-KSB......................  249.310b................    3235-0420
Form 11-K........................  249.311.................    3235-0082
Form 18-K........................  249.318.................    3235-0120
Form 12B-25......................  249.322.................    3235-0058
Form 15..........................  249.323.................    3235-0167
Form 13F.........................  249.325.................    3235-0006
Form SE..........................  249.444.................    3235-0327
Form ID..........................  249.446.................    3235-0328
Form DF..........................  249.448.................    3235-0482
Form BD..........................  249.501.................    3235-0012
Form BDW.........................  249.501a................    3235-0018
Form BD-N........................  249.501b................    3235-0556
Form X-17A-5.....................  249.617.................    3235-0123
Form X-17A-19....................  249.635.................    3235-0133
Form ATS.........................  249.637.................    3235-0509
Form ATS-R.......................  249.638.................    3235-0509
Form CRS.........................  249.640.................    3235-0766
Form X-15AJ-1....................  249.802.................    3235-0044
Form X-15AJ-2....................  249.803.................    3235-0044
Form 19b-4.......................  249.819.................    3235-0045
Form 19b-4(e)....................  249.820.................    3235-0504
Form Pilot.......................  249.821.................    3235-0507
Form SIP.........................  249.1001................    3235-0043
Form MSD.........................  249.1100................    3235-0083
Form MSDW........................  249.1110................    3235-0087
Form X-17F-1A....................  249.1200................    3235-0037
Form TA-1........................  249b.100................    3235-0084
Form TA-W........................  249b.101................    3235-0151
Form TA-2........................  249b.102................    3235-0337
Form CA-1........................  249b.200................    3235-0195
Rule 7a-15 thru 7a-37............  260.7a-15 thru 260.7a-37    3235-0132
Form T-1.........................  269.1...................    3235-0110
Form T-2.........................  269.2...................    3235-0111
Form T-3.........................  269.3...................    3235-0105
Form T-4.........................  269.4...................    3235-0107
Form ID..........................  269.7...................    3235-0328
Form SE..........................  269.8...................    3235-0327
Form T-6.........................  269.9...................    3235-0391
Rule 0-1.........................  270.0-1.................    3235-0531
Rule 2a-7........................  270.2a-7................    3235-0268
Rule 2a19-1......................  270.2a19-1..............    3235-0332
Rule 3a-4........................  270.3a-4................    3235-0459

[[Page 755]]

 
Rule 6c-7........................  270.6c-7................    3235-0276
Rule 6e-2........................  270.6e-2................    3235-0177
Rule 7d-1........................  270.7d-1................    3235-0311
Rule 7d-2........................  270.7d-2................    3235-0527
Section 8(b) of the Investment     270.8b-1 thru 270.8b-32.    3235-0176
 Company Act of 1940.
Rule 10f-3.......................  270.10f-3...............    3235-0226
Rule 11a-2.......................  270.11a-2...............    3235-0272
Rule 11a-3.......................  270.11a-3...............    3235-0358
Rule 12b-1.......................  270.12b-1...............    3235-0212
Rule 17a-7.......................  270.17a-7...............    3235-0214
Rule 17a-8.......................  270.17a-8...............    3235-0235
Rule 17e-1.......................  270.17e-1...............    3235-0217
Rule 17f-1.......................  270.17f-1...............    3235-0222
Rule 17f-2.......................  270.17f-2...............    3235-0223
Rule 17f-4.......................  270.17f-4...............    3235-0225
Rule 17f-6.......................  270.17f-6...............    3235-0447
Rule 17f-7.......................  270.17f-7...............    3235-0529
Rule 17g-1(g)....................  270.17g-1(g)............    3235-0213
Rule 17j-1.......................  270.17j-1...............    3235-0224
Rule 18f-1.......................  270.18f-1...............    3235-0211
Rule 18f-3.......................  270.18f-3...............    3235-0441
Rule 19a-1.......................  270.19a-1...............    3235-0216
Rule 20a-1.......................  270.20a-1...............    3235-0158
Rule 22d-1.......................  270.22d-1...............    3235-0310
Rule 23c-1.......................  270.23c-1...............    3235-0260
Rule 23c-3.......................  270.23c-3...............    3235-0422
Rule 27e-1.......................  270.27e-1...............    3235-0545
Rule 30b2-1......................  270.30b2-1..............    3235-0220
Rule 30d-2.......................  270.30d-2...............    3235-0494
Rule 30e-1.......................  270.30e-1...............    3235-0025
Rule 30e-3.......................  270.30e-3...............    3235-0758
Rule 31a-1.......................  270.31a-1...............    3235-0178
Rule 31a-2.......................  270.31a-2...............    3235-0179
Rule 32a-4.......................  270.32a-4...............    3235-0530
Rule 34b-1.......................  270.34b-1...............    3235-0346
Rule 35d-1.......................  270.35d-1...............    3235-0548
Form N-5.........................  274.5...................    3235-0169
Form N-8A........................  274.10..................    3235-0175
Form N-2.........................  274.11a-1...............    3235-0026
Form N-3.........................  274.11b.................    3235-0316
Form N-4.........................  274.11c.................    3235-0318
Form N-8B-2......................  274.12..................    3235-0186
Form N-6F........................  274.15..................    3235-0238
Form 24F-2.......................  274.24..................    3235-0456
Form N-18F-1.....................  274.51..................    3235-0211
Form N-54A.......................  274.53..................    3235-0237
Form N-54C.......................  274.54..................    3235-0236
Form N-CEN.......................  274.101.................    3235-0729
Form N-27E-1.....................  274.127e-1..............    3235-0545
Form N-27F-1.....................  274.127f-1..............    3235-0546
Form N-PORT......................  274.150.................    3235-0730
Form N-17D-1.....................  274.200.................    3235-0229
Form N-23C-1.....................  274.201.................    3235-0230
Form N-8F........................  274.218.................    3235-0157
Form N-17F-1.....................  274.219.................    3235-0359
Form N-17F-2.....................  274.220.................    3235-0360
Form N-23c-3.....................  274.221.................    3235-0422
Form ID..........................  274.402.................    3235-0328
Form SE..........................  274.403.................    3235-0327
Rule 0-2.........................  275.0-2.................    3235-0240
Rule 203-3.......................  275.203-3...............    3235-0538
Rule 204-2.......................  275.204-2...............    3235-0278
Rule 204-3.......................  275.204-3...............    3235-0047
Rule 206(3)-2....................  275.206(3)-2............    3235-0243
Rule 206(4)-2....................  275.206(4)-2............    3235-0241
Rule 206(4)-3....................  275.206(4)-3............    3235-0242
Rule 206(4)-4....................  275.206(4)-4............    3235-0345
------------------------------------------------------------------------


[[Page 756]]


------------------------------------------------------------------------
                                    17 CFR part or section
      Information collection         where identified and    Current OMB
           requirement                     described         control No.
------------------------------------------------------------------------
Form ADV.........................  279.1...................    3235-0049
Schedule I to Form ADV...........  279.1...................    3235-0490
Form ADV-W.......................  279.2...................    3235-0313
Form ADV-H.......................  379.3...................    3235-0538
Form 4-R.........................  279.4...................    3235-0240
Form 5-R.........................  279.5...................    3235-0240
Form 6-R.........................  279.6...................    3235-0240
Form 7-R.........................  279.7...................    3235-0240
Form ADV-E.......................  279.8...................    3235-0361
------------------------------------------------------------------------


[67 FR 14634, Mar. 27, 2002, as amended at 70 FR 37611, June 29, 2005; 
76 FR 46616, Aug. 3, 2011; 77 FR 18684, Mar. 28, 2012; 80 FR 6902, Feb. 
9, 2015; 82 FR 82009, Nov. 18, 2016; 83 FR 29203, June 22, 2018; 84 FR 
33629, July 12, 2019; 85 FR 26092, May 1, 2020]

[[Page 757]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2019 are enumerated in the following list. Entries indicate the 
nature of the changes effected. Page numbers refer to Federal Register 
pages. The user should consult the entries for chapters, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.govinfo.gov. For changes to this volume of the 
CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 
1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. 
The ``List of CFR Sections Affected 1986-2000'' is available at 
www.govinfo.gov.

                                  2019

17 CFR
                                                                   84 FR
                                                                    Page
Chapter II
241 Authority citation added; interpretive release.................47419
242 Compliance notification........................................18136
242.610T Added; eff. 4-22-19 through 12-29-23.......................5298
249 Authority citation amended.....................................33630
249 Technical correction...........................................13796
249.103 Form 3 amended.............................................12728
249.104 Form 4 amended.............................................12728
249.105 Form 5 amended.............................................12728
249.208a Form 8-A amended..........................................12728
249.210 Form 10 amended............................................12728
249.220f Form 20-F amended.........................................12728
249.240f Form 40-F amended.........................................12730
249.308 Form 8-K amended...........................................12730
    Form 10-Q amended..............................................12731
249.310 Form 10-K amended..........................................12731
249.312 Form 10-D amended...................................12732, 39969
249.331 Form N-CSR amended.........................................12738
249.617--249.641 (Subpart G) Heading revised.......................68669
249.617 Revised....................................................68669
    Form X-17A-5 amended.............................68669, 68671, 68721
249.641 Added......................................................33630
255.1 (c) revised..................................................35022
255.2 (r) revised..................................................35022
    Revised........................................................62237
255.3 (e)(5) through (13) redesignated as (e)(6) through (14); 
        (b), (d)(3), (8), (9), new (e)(11), (12), and (14) 
        revised; (d)(10) through (13) and new (e)(5) added.........62239
255.4 Revised......................................................62241
255.5 (b) and (c)(1) introductory text revised; (c)(4) added.......62243
255.6 (e)(3) revised; (e)(4) and (6) removed; (e)(5) redesignated 
        as new (e)(4)..............................................62244
255.10 (d)(9)(iii) revised.........................................35022
    (c)(7)(ii) and (8)(i)(A) revised...............................62244
255.11 (a)(6) revised..............................................35022
    Regulation at 84 FR 35022 corrected............................38115
    (c) revised....................................................62244
255.12 Second (e)(2)(vi) redesignated as (e)(2)(vii)...............62244
255.13 (a), (b)(3), (4), and (c) revised...........................62244
255.14 (a)(2)(ii)(B) revised.......................................62245
255.20 (a), (b) introductory text, (c), (d), (e) introductory 
        text, and (f)(2) revised; (g), (h), and (i) added..........62245
255 Appendix A revised.............................................62246
255 Appendix B removed.............................................62248
255 Appendix Z added; eff. 1-1-20 through 12-31-20.................62248
270 Technical correction...........................................13796
    Authority citation amended.....................................57234

[[Page 758]]

270.0-4 Revised....................................................12732
270.6c-11 Added....................................................57234
270.8b-23 Removed..................................................12732
270.8b-24 Removed..................................................12732
270.8b-32 Removed..................................................12732
270.30b1-9 Revised; interim.........................................7987
271 Authority citation added; interpretive release.................47426
274 Technical correction...........................................13796
274.5 Form N-5 amended......................................12733, 39969
274.11A Form N-1A amended............................12733, 39969, 57236
274.11a-1 Form N-2 amended..................................12734, 39969
274.11b Form N-3 amended....................................12735, 39969
274.11c Form N-4 amended....................................12736, 39969
274.11d Form N-6 amended....................................12736, 39970
274.12 Form N-8B-2 amended...........................12737, 39970, 57237
274.101 Form N-CEN amended.........................................57237
274.128 Form N-CSR amended..................................12738, 57237
274.150 Revised; Form N-PORT amended; interim.......................7988
    Form N-PORT amended............................................57237
274.223 Form N-LIQUID amended; interim..............................7988
275 Authority citation amended.....................................33630
275 Technical correction...........................................13796
275.0-6 Revised....................................................12738
275.203-1 (a) revised..............................................33630
275.204-1 (a) and (b) revised; (e) added...........................33630
275.204-2 (a)(14)(i) revised.......................................33630
275.204-5 Added....................................................33631
276 Interpretive release....................................33681, 33689
276 Authority citation added; interpretive release.................47427
279 Authority citation revised.....................................33631
279.1 Form ADV amended.............................................33631

                                  2020

17 CFR
                                                                   85 FR
                                                                    Page
Chapter II
241 Table amended..................................................10571
242.403 (b)(1) revised.............................................75146
242.608 (a)(1), (8), and (b)(2) revised; (b)(1)(i) through (iv) 
        added; (b)(3)(i) removed...................................65497
243.103 (a) revised................................................33360
249 Technical correction...........................................19884
249.220 Form 20-F amended..........................................17242
249.220 Form 20-F amended..........................................22007
249.220f Form 20-F amended.........................................66142
249.240 Form 40-F amended..........................................17242
249.308 Form 8-K amended...........................................54072
249.310 Form 10-K amended..........................................17242
249.310 Form 10-K amended..........................................54073
249.330 Form N-CEN amended.........................................83295
249.331 Form N-CSR amended.........................................33394
249.480 Form CB amended............................................78230
249.1800--249.1801 (Subpart S) Removed.............................70948
255.6 (f) added....................................................46522
255.10 (c)(1), (3)(i), (8), (10) heading, (i), (11), and (d)(6) 
        revised; (c)(15) through (18), and (d)(11) added...........46523
255.10 Correction: amended.........................................60356
255.12 (b)(1)(ii), (4), (c)(1), (d), and (e) revised; (b)(5) added
                                                                   46527
255.13 (d) added...................................................46528
255.14 (a)(2)(i), (ii)(C), and (c) revised; (a)(2)(iii) through 
        (v), and (3) added.........................................46528
255.20 (a), (d) heading, (1), and (e) introductory text revised....46529
255.20 Correction: instruction amended.............................60356
270 Authority citation amended.....................................26101
270 Technical correction...........................................28484
270.0-1 (e) introductory text and (2) revised......................26101
270.0-5 (d) through (g) added; eff. 6-14-21........................57107
270.6c-7 Introductory text revised; authority citation removed.....26102
270.6c-8 (b) and (c) revised; authority citation removed...........26102
270.6c-11 (c)(4) revised...........................................83291
270.6e-2 Revised...................................................26102
270.6e-3 Redesignated from 270.6e-3 (T) and revised................26105
270.6e-3(T) Redesignated as 270.6e-3...............................26105
270.8b-1 Amended...................................................26109
270.8b-2 (k) revised...............................................54073
270.8b-11 (e) revised..............................................78230
270.8b-16 (b)(2) and (4) revised; (e) added........................33360
270.11a-2 (c) and (d) revised; authority citation removed..........26109
270.12d1-1 (a) revised.............................................74005
270.12d1-2 Removed.................................................74005
270.12d1-4 Added...................................................74005
270.14a-2 Revised..................................................26109
270.18f-4 Added....................................................83291

[[Page 759]]

270.22e-4 (b)(1)(ii)(C) and (iii)(B) revised.......................83295
270.23c-3 (e) added; eff. 8-1-21...................................33360
270.24f-2emsp;(a) amended; eff. 8-1-21.............................33360
270.26a-1 Revised..................................................26110
270.26a-2 Removed..................................................26110
270.27a-1 Removed..................................................26110
270.27a-2 Removed..................................................26110
270.27a-3 Removed..................................................26110
270.27c-1 Removed..................................................26110
270.27d-2 Removed..................................................26110
270.27e-1 Removed..................................................26110
270.27f-1 Removed..................................................26110
270.27g-1 Removed..................................................26110
270.27h-1 Removed..................................................26110
270.27i-1 Added....................................................26110
270.30b1-10 Revised................................................83295
274 Technical correction...........................................28484
274.11 Removed.....................................................26110
274.11a-1 Form N-2 amended...........................33361, 54074, 83295
274.11b Form N-3 revised...........................................26110
274.11b Form N-3 amended...........................................26204
274.11c Form N-4 revised...........................................26204
274.11c Correction: Form N-4 amended...............................29614
274.11d Correction: Form N-6 revisedPG29614
274.11d Form N-6 amended...........................................26309
274.24--Form 24f-2 amended.........................................33394
274.101 Form N-CEN amended..................................74007, 83295
274.127e-1 Removed.................................................26309
274.127f-1 Removed.................................................26309
274.128 Form N-CSR amended.........................................33394
274.150 Form N-PORT amended........................................83295
274.223 Revised....................................................83296
274.223 Form N-LIQUID amended......................................83297
274.302 Removed....................................................26309
274.303 Removed....................................................26309
275.203(l)-1 (a) introductory text revised.........................13741
275.203(m)-1 (d)(1) revised........................................13741
276 Table amended..................................................55157
302 Added..........................................................53668

                                  2021

17 CFR
                                                                   86 FR
                                                                    Page
241 Policy statement...............................................44604
242.105 (b)(1)(i)(C) and (ii) amended..............................18809
242.201 (a)(1) through (7), (9), (b)(1)(ii), and (3) amended.......18809
242.204 (g)(2) amended.............................................18809
242.600 (b)(2) through (87) redesignated as (b)(3), (4), (6) 
        through (15), (17), (18), (22) through (25), (27) through 
        (58), (60) through (67), (69) through (77), (79) through 
        (81), (84), and (86) through (100); new (b)(2), new (5), 
        new (16), new (19), new (20) new (21), new (26), new (59), 
        new (68), new (78), new (82), new (83), and new (85) 
        added; new (b)(50) and new (70) revised....................18809
242.600 Correction: (b)(7)(i) amended..............................29196
242.602 (a)(5)(i) and (ii) amended.................................18811
242.603 (b) revised................................................18811
242.611 (c) amended................................................18811
242.614 Added......................................................18811
242.1000 Amended...................................................18814
246 Determination..................................................71810
249 Authority citation amended.....................................17541
249.220 Form 20-F amended...........................................2131
249.220f Form 20-F amended...................................3601, 70043
249.220f Form 20-F amended; interim................................17541
249.240 Form 40-F amended...........................................2133
249.240f Form 40-F amended; interim................................17541
249.240f Form 40-F amended.........................................70044
249.308 Form 8-K amended......................................2133, 3602
249.310 Form 10 amended.............................................2134
249.310 Form 10-K amended....................................2134, 70044
249.310 Form 10-K amended; interim.................................17542
249.331 Form N-CSR amended; interim................................17542
249.331 Form N-CSR amended.........................................70044
249.446 Introductory text amended..................................25805
249.446 Form ID amended............................................25806
249.617 Correction: Form X-17A-5 amended....................31116, 31117
249.1002 Added.....................................................18814
249.1900 Form SCI amended..........................................18825
249b.400 Form SD amended............................................4715
259.602 Form ID amended............................................25806
269.7 Introductory text amended....................................25806
269.7 Form ID amended..............................................25806
270.0-8 Revised; eff. 5-31-22......................................70262
270.2a-5 Added.......................................................807
270.3a-9 Added......................................................3602

[[Page 760]]

270.31a-4 Added......................................................808
274 Authority citation revised.....................................70262
274.5 Form N-5 amended..............................................3603
274.11a-1 Form N-2 amended.............................2134, 3603, 70262
274.11A Form N-1A...................................................3603
274.11b Form N-3 amended............................................3604
274.11c Form N-4 amended............................................3604
274.11d Form N-6 amended............................................3604
274.12 Form N-8B-2 amended..........................................3605
274.24 Form 24F-2 amended..........................................70268
274.128 Form N-CSR amended; interim.........................17542, 70044
274.402 Introductory text amended..................................25806
274.402 Form ID amended............................................25806
275.204-2 (a)(7)(iv), (11), (15), and (16) revised; (a)(19) added; 
        eff. 5-4-21................................................13138
275.205-3 (d)(1)(i), (ii)(A) introductory text, and (e) 
        introductory text revised; (d)(5) added....................62475
275.206(4)-1 Revised; eff. 5-4-21..................................13139
275.206(4)-3 Removed; eff. 5-4-21..................................13142
279.1 Form ADV amended; eff. 5-4-21................................13142

                                  2022

17 CFR
                                                                   87 FR
                                                                    Page
Chapter II
249.104 Form 4 amended.............................................80431
249.105 Form 5 amended.............................................80431
249.220f Form 20-F amended...........................35413, 73140, 80431
249.240f Form 40-F amended..................................35413, 73141
249.306 Form 6-K amended...........................................35414
249.306--249.447 (Subpart D) Heading revised; eff. 7-1-24..........78808
249.308a Form 10-Q amended.........................................80432
249.310 Form 10-K amended............................35414, 73141, 80432
249.311 Form 11-K amended..........................................35414
249.325 Form 13F revised...........................................38965
249.326 Added; eff. 7-1-24.........................................78808
249.326 Form N-PX revised..........................................78811
249.331 Form N-CSR amended.........................................72857
249.444 Form SE amended............................................35412
249.480 Form CB amended............................................35414
249.617 Correction: Form X-17A-5 amended......................7934, 7935
269.8 Form SE amended..............................................35412
270.0-2 (a) and (b) amended........................................38976
270.0-2 Correction: Instruction amended............................41060
270.0-4 (a)(1) amended; (b), (d), and (i) removed; (g) removed.....38976
270.18f-4 (a) amended..............................................22446
270.20a-1 (a) amended..............................................22446
270.22c-1 (b)(1) amended...........................................22446
270.22e-3 (a)(1) amended...........................................22446
270.30a-2 (a) and (b) amended......................................72847
270.30a-2 Revised..................................................73141
270.30e-1 (d) removed; (b) and (c) redesignated as (c) and new 
        (d); new (b) added; new (c), new (d), and (f)(2)(ii)(F) 
        revised....................................................72847
270.30e-3 Revised..................................................72848
270.30b1-4 Amended; eff. 7-1-24....................................78809
270.31a-2 (a)(5) and (6) amended; (a)(7) added.....................72850
270.32a-1 Introductory text amended................................22446
270.34b-1 Introductory text and (b)(3) revised; (c) added..........72850
274 Authority citation revised..............................73142, 78809
274.5 Form N-5 amended.............................................22446
274.5 Form N-PX amended............................................22447
274.11A Form N-1A amended...................................22446, 78809
274.11a-1 Form N-2 amended.........................................78809
274.11b Form N-3 amended...........................................78810
274.11A Amended; Form N-1A amended.................................72850
274.11a-1 Form N-2 amended.........................................22446
274.11b Form N-3 amended...........................................22447
274.101 Form N-CEN amended.........................................22447
274.128 Form N-CSR amended..................................72857, 73142
274.129 Heading revised; eff. 7-1-24...............................78811
274.129 Form N-PX revised..........................................78811
274.201 Form N-MFP amended.........................................22447
274.403 Form SE amended............................................35412
275.203-1 (d) added................................................38977
275.204-2 (a)(15)(ii) amended......................................22447
275.204-3 (b) amended..............................................22447
275.204-5 (e)(1) amended...........................................22447
275.206(4)-1 (b)(2)(i) amended.....................................22447
276 Table amended..................................................43197
279.1 Form ADV amended......................................22447, 38977
279.4 Revised......................................................38978
279.4 Form ADV-NR amended..........................................38978

                                  2023

17 CFR
                                                                   88 FR
                                                                    Page
Chapter II
242 Authority citation and heading revised.........................87285
242.100 (b) amended................................................39994

[[Page 761]]

242.101 (c)(2) revised.............................................39994
242.102 (d)(2) revised.............................................39994
242.800 Added......................................................87285
242.801 Added......................................................87285
242.802 Added......................................................87285
242.803 Added......................................................87285
242.804 Added......................................................87285
242.805 Added......................................................87285
242.806 Added......................................................87285
242.807 Added......................................................87285
242.808 Added......................................................87285
242.809 Added......................................................87285
242.810 Added......................................................87285
242.811 Added......................................................87285
242.812 Added......................................................87285
242.813 Added......................................................87285
242.814 Added......................................................87285
242.815 Added......................................................87285
242.816 Added......................................................87285
242.817 Added......................................................87285
242.818 Added......................................................87285
242.819 Added......................................................87285
242.820 Added......................................................87285
242.821 Added......................................................87285
242.822 Added......................................................87285
242.823 Added......................................................87285
242.824 Added......................................................87285
242.825 Added......................................................87285
242.826 Added......................................................87285
242.827 Added......................................................87285
242.828 Added......................................................87285
242.829 Added......................................................87285
242.830 Added......................................................87285
242.831 Added......................................................87285
242.832 Added......................................................87285
242.833 Added......................................................87285
242.834 Added......................................................87285
242.835 Added......................................................87285
249.220f Form 20-F amended..................................36058, 51943
249.306 Form 6-K amended...........................................51943
249.308 Form 8-K amended...........................................51944
249.308a Form 10-Q amended.........................................36058
249.310 Form 10-K amended...................................36058, 51944
249.325 Form 13F amended...........................................37987
249.331 Form N-CSR amended..................................36059, 51523
249.332 Added......................................................75185
249.333 Form F-SR and section added................................36058
249.501 Form BD amended............................................32964
249.501a Form BDW amended..........................................32965
249.1701--249.1702 (Subpart R) Added...............................87316
249.1701 Form SBSEF added..........................................87316
249.1702 Amended...................................................87316
260.0-5 (c) revised................................................12209
270.2a-7 (c)(2), (d)(1)(ii), (iii), (4)(ii), (iii), (h)(10) 
        introductory text, (i)(B)(2), (iii) through (v), and (j) 
        revised; (g)(8)(i) introductory text and (ii)(A) amended; 
        (c)(3) and (f)(4) added....................................51521
270.12d1-1 (b)(1) amended..........................................37987
270.12d1-3 Amended.................................................37987
270.27i-1 Amended..................................................37987
270.31a-2 (a)(2) revised...........................................51523
270.35d-1 Revised..................................................70509
274.11A Form N-1A amended...................................51523, 70511
274.11a-1 Form N-2 amended..................................37988, 70511
274.12 Form N-8B-2 amended.........................................70511
274.128 Form N-CSR amended..................................36059, 51523
274.150 Form N-PORT amended........................................70511
274.201 Form N-MFP revised; eff. 6-11-24...........................51523
274.222 Form N-CR amended; eff. 6-11-24............................51523
275.204(b)-1 (f)(2)(i) and (3) revised; eff. 6-11-24...............38202
275.204-2 (a)(7)(iii) revised; eff. 5-5-23.........................13954
275.204-2 (a)(7)(iv)(B) amended; (a)(7)(v) and (20) through (24) 
        added......................................................63386
275.206(4)-7 (b) revised...........................................63386
275.206(4)-9 Added.................................................63386
275.206(4)-10 Added................................................63386
275.211(h)(1)-1 Added..............................................63387
275.211(h)(1)-2 Added..............................................63387
275.211(h)(2)-1 Added..............................................63387
275.211(h)(2)-2 Added..............................................63387
275.211(h)(2)-3 Added..............................................63387
279.9 Form PF revised..............................................38202
279.9 Form PF amended; eff. 6-11-24................................51523

                                  2024

   (Regulations published from January 1, 2024, through April 1, 2024)

17 CFR
                                                                   89 FR
                                                                    Page
249.210 Form 10 amended; eff. 5-28-24..............................21919
249.220 Form 20-F amended; eff. 5-28-24............................21919

[[Page 762]]

249.220f Form 20-F amended; eff. 7-1-24............................14324
249.308 Form 8-K amended; eff. 7-1-24..............................14324
249.308a Form 10-Q amended; eff. 5-28-24...........................21920
249.310 Form 10-K amended; eff. 5-28-24............................21920
275.204(b)-1 (f)(2)(i) amended; (f)(4) redesignated as (f)(5); new 
        (f)(4) added...............................................18060
279.9 Form PF revised..............................................18060


                                  [all]