[Federal Register Volume 70, Number 64 (Tuesday, April 5, 2005)]
[Proposed Rules]
[Pages 17219-17223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6690]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 45

[Docket No. RM05-6-000]


Commission Authorization To Hold Interlocking Directorates

March 25, 2005.
AGENCY: Federal Energy Regulatory Commission, Energy.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission is proposing to amend 
its regulations to clarify the time frame within which individuals must 
file applications for authorization to hold interlocking positions, and 
the information provided in certain informational reports required for 
automatic authorization of certain interlocking positions.

DATES: Comments are due June 6, 2005.

ADDRESSES: Comments may be filed electronically via the eFiling link on 
the Commission's Web site at http://www.ferc.gov. Commentors unable to 
file comments electronically must send original and 14 copies of their 
comments to: Federal Energy Regulatory Commission, Office of the 
Secretary, 888 First Street NE., Washington, DC 20426. Refer to the 
Comment Procedures section of the preamble for additional information 
on how to file comments.

FOR FURTHER INFORMATION CONTACT:
James Akers (Technical Information), Office of Markets, Tariffs and 
Rates, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8101.
Melissa Mitchell (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6038.

SUPPLEMENTARY INFORMATION:
    1. Section 305(b) of the Federal Power Act (FPA) \1\ prohibits 
individuals from concurrently holding positions as officer or director 
of more than one public utility; or to hold the positions of officer or 
director of a public utility and of an entity authorized by law to 
underwrite or participate in the marketing of public utility 
securities; or to hold the positions of officer or director of a public 
utility and a company supplying electrical equipment to that particular 
public utility, unless the holding of

[[Page 17220]]

such positions has been authorized by the Commission upon a showing 
that neither public nor private interests will be adversely affected 
thereby.\2\
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    \1\ 16 U.S.C. 825d(b)(2000).
    \2\ Id.
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    2. The Commission implemented Congress' mandate in part 45 of the 
Commission's regulations.\3\ Section 45.3 of the regulations currently 
states that ``the holding of positions within the purview of [section 
305(b)] shall be unlawful unless the holding shall have been authorized 
by order of the Commission. Nothing in this part shall be construed as 
authorizing the holding of positions prior to the order of the 
Commission on application therefor. Applications shall be filed within 
30 days after election or appointment to any positions within the 
purview of section 305(b) of the Act.'' \4\
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    \3\ 18 CFR part 45 (2004).
    \4\ 18 CFR 45.3 (2004).
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    3. In this Notice of Proposed Rulemaking (NOPR), the Commission is 
proposing to clarify the time at which a person must apply for 
authorization to hold interlocking positions under section 305(b) of 
the FPA and part 45 of the Commission's regulations. Specifically, and 
as described more fully below, we propose to clarify in revised section 
45.3 that persons are prohibited from holding interlocking positions 
prior to receiving authorization from the Commission, and that 
``holding'' shall mean acting as, serving as, voting as, or otherwise 
performing or assuming the duties and responsibilities of the 
interlocking positions for which the authorization is requested. 
Similarly, we propose to clarify in revised section 45.9 when filings 
need to be made. Finally, we solicit comments on the continued waiver 
of the full requirements of part 45 for officers and directors of 
certain public utilities with market-based rate authority.

Background

    4. Section 305(b) of the FPA prohibits persons from concurrently 
holding positions as an officer or director of more than one public 
utility; or to hold the positions of officer or director of a public 
utility and of an entity authorized by law to underwrite or participate 
in the marketing of public utility securities; \5\ or to hold the 
positions of an officer or director of a public utility and of a 
company supplying electrical equipment to that particular public 
utility, unless the holding of such positions ``shall have been 
authorized by order of the Commission'' upon a finding that neither 
public nor private interests will be adversely affected thereby. The 
Commission's regulations, 18 CFR part 45 (2004), currently require that 
an application for approval be filed within 30 days of election or 
appointment to a qualifying position. If an application is filed after 
30 days, it is considered late. The Commission has stated in previous 
orders that it does not look favorably on late-filed applications for 
authorization to hold interlocking positions.\6\
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    \5\ However, section 305(b)(2) of the FPA, 16 U.S.C. 825d(b)(2) 
(2000), exempts from this prohibition certain interlocks between 
public utilities and securities underwriters and marketers.
    \6\ William T. Coleman, 21 FERC ] 61,242 at 61,535 n.3 (1982).
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    5. In examining Congress' intent in enacting section 305(b) of the 
FPA, the Commission has explained that ``among the evils sought to be 
eliminated by the enactment of section 305(b)'' was ``the lack of arm's 
length dealings between public utilities and organizations furnishing 
financial services or electrical equipment.'' \7\ In this regard, the 
legislative history indicates that with respect to section 305(b) of 
the FPA ``Congress exhibited a relentless interest in, bordering on an 
obsession with, the evils of concentration of economic power in the 
hands of a few individuals. It recognized that the conflicts of 
interest stemming from the presence of the same few persons on boards 
of companies with intersecting interests generated subtle and 
difficult-to-prove failures in the arm's length bargaining process.'' 
\8\
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    \7\ Paul H. Henson, 51 FERC ] 61,104 at 61,231 (1990), citing 
John Edward Aldred, 2 FPC 247,261 (1940).
    \8\ Hatch v. FERC, 654 f.2d 825, 831 (DC Cir. 1981) (Hatch), 
citing, e.g., 79 Cong. Rec. 10379 (1935) (remarks of Representative 
Lea), 79 Cong. Rec. 8524 (1935) (remarks of Sen. Norris), and 15 
U.S.C. 79a(b)(2)(2000); see also Paul H. Henson, 51 FERC ] 61,104 at 
61,230 n.5 (1990) (discussing this quotation).
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Applications for Authorization to Hold Interlocking Positions

    6. While the statute requires prior authorization to hold otherwise 
proscribed interlocking positions, the regulations allow for 
applications to be filed up to 30 days after the fact and also do not 
expressly address how applications filed more than 30 days late should 
be treated.
    7. Consistent with the statute's express direction as well as its 
underlying intent, the Commission proposes to clarify Sec.  45.3 to 
provide that an application must be filed, and authorization granted, 
before a person may hold otherwise proscribed interlocking positions, 
and that late-filed applications will be denied.

Automatic Authorization of Certain Interlocking Positions

    8. In addition to clarifying Sec.  45.3, the Commission also 
proposes to clarify Sec.  45.9, which governs automatic authorization 
for certain interlocking positions. Section 45.9 of the Commission's 
regulations provides that a person seeking to hold the positions of (1) 
an officer or director of a public utility and officer or director of 
another public utility (or utilities), where the same holding company 
owns, directly or indirectly, wholly or in part, the other public 
utility, (2) an officer or director of two public utilities, if one 
utility is owned, wholly or in part, by the other and (3) an officer or 
director of more than one public utility, if such person is already 
authorized under part 45 to hold different positions where the 
interlock involves affiliated public utilities, may apply for 
``automatic authorization'' to hold the interlocking positions.\9\ The 
regulations require that, as a condition of such authorization, persons 
seeking automatic authorization under Sec.  45.9 must file with the 
Commission an informational report containing the full name and 
business address of the person requesting authorization, the names of 
all public utilities that the person holds or seeks to hold positions 
with, the names of any other entity that the person serves as an 
officer or director of and a brief description of those positions, and 
an explanation of the corporate relationship between or among the 
public utilities involved. This informational report is required to be 
filed ``not later than 30 days after assuming the duties of the 
position.'' \10\ The Commission proposes to change the current 
regulation to require that informational reports for automatic 
authorization must be filed with the Commission prior to an officer or 
director assuming the duties of the requested interlocking position.
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    \9\ Automatic authorization is only for interlocking positions 
between two or more public utilities; it does not authorize a person 
to hold an interlocking position with, for example, an electrical 
equipment supplier. For those interlocking positions, an application 
under section 45.3 is required.
    \10\ 18 CFR 45.9(b) (2004)
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    9. The Commission proposes to address the issue of the timeliness 
of the informational filings for automatic authorization. Increasingly, 
the Commission is receiving informational reports under Sec.  45.9 that 
are filed after the 30-day deadline specified for submitting the 
informational reports. While the Commission believes that the current 
regulation regarding automatic authorization is clear with regard to

[[Page 17221]]

when a person must file an informational report, the Commission 
proposes to include an additional requirement in the informational 
report. Currently, the informational report outlined in Sec.  45.9(c) 
does not require persons to state when they assumed the positions for 
which they seek automatic authorization. Therefore, in order to assist 
the Commission in determining the timeliness of the informational 
report, the Commission proposes to add a requirement that persons state 
the dates that they assumed the positions for which they seek automatic 
authorization under Sec.  45.9; a person will not be entitled to 
automatic authorization if that person's informational report is 
untimely, as the person will not have satisfied the condition of timely 
submission of an informational report.

Waiver of Part 45 in Commission Orders Granting Market-Based Rate 
Authority

    10. The Commission provides certain persons with a waiver of the 
full requirements of part 45. An ``abbreviated'' filing requirement, 
with essentially ``automatic authorization'', has developed in 
Commission orders granting market-based rates for certain public 
utilities. While the Commission has explained that it cannot waive the 
statutory requirements regarding authorization of interlocking 
positions, the Commission did lessen the filing requirements and permit 
the filing of an ``abbreviated statement identifying any jurisdictional 
interlock.'' \11\ The authority to make these abbreviated filings is 
granted in orders that permit companies to charge market-based rates. 
Typical language in these market-based rates orders, regarding 
abbreviated filings, states:
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    \11\ E.g. Citizens Energy Corporation, 35 FERC ] 61,198 at 
61,455 (1986); Howell Gas Management Company, 40 FERC ] 61,336 at 
62,025 (1987); Torco Energy Marketing, Inc., 48 FERC ] 61,294 at 
61,948 (1989); National Electric Associates. Limited Partnership, 50 
FERC ] 61,378 at 62,157 (1990).

[U]ntil further order of this Commission, the full requirements of 
Part 45 of the Commission's regulations, except as noted below, are 
hereby waived with respect to any person now holding or who may hold 
an otherwise proscribed interlocking directorate involving the 
applicants. Any such person instead shall file a sworn application 
providing the following information:
    (a) Full name and business address; and
    (b) All jurisdictional interlocks, identifying the affected 
companies and the positions held by that person.\12\
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    \12\ CLECO Energy, LLC, 82 FERC ] 61,152 at 61,557 (1998).

    11. Since the abbreviated filings only require the identification 
of affected companies and positions held by the applicant, there is no 
description in the abbreviated filing of what business the affected 
company is engaged in. This lack of information makes it difficult for 
the Commission to determine the nature of the interlock and how, if at 
all, it might adversely affect public or private interests. In 
addition, this abbreviated filing is not required before the person 
begins holding the interlocking position. Since the provisions of 
section 305(b) of the FPA are intended to be prophylactic in nature and 
prevent any harm from a person holding otherwise prohibited 
interlocking positions, the lack of timely information from these 
abbreviated filings can make it very difficult to determine if the 
interlock might adversely affect public or private interests.
    12. Therefore, the Commission is examining the possibility of no 
longer granting a waiver of the full requirements of part 45 in its 
orders granting market-based rate authority. Rather, the Commission 
would require that for public utilities that receive authority to 
charge market-based rates, their officers and directors would still 
need to comply with the full requirements of part 45 and timely file 
any applications for Commission authorization to hold any interlocking 
positions that meet the requirements set forth in Sec.  305(b) of the 
FPA. The Commission seeks comments.
    13. It is important to note, however, that this proposal 
essentially to cease granting waivers of part 45 in orders granting 
market-based rate authority would not apply to those persons who may 
qualify for automatic authorization of their interlocking positions 
under Sec.  45.9 of the Commission's regulations. Automatic 
authorization would remain unchanged should we cease to grant waivers 
of the full requirements of part 45 in orders granting market-based 
rate authority.

Information Collection Statement

    14. The following collection of information contained in this 
proposed rule has been submitted to the Office of Management and Budget 
(OMB) for review under Sec.  3507(d) of the Paperwork Reduction Act of 
1995.\13\ OMB's regulations require OMB to approve certain information 
collection requirements imposed by agency rule.\14\
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    \13\ 44 U.S.C. 3507(d).
    \14\ 5 CFR 1320.11.
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    Comments are solicited on the need for this information, whether 
the information will have practical utility, the accuracy of the 
provided burden estimates, ways to enhance the quality, utility, and 
clarity of the information to be collected, and any suggested methods 
for minimizing respondent's burden, including the use of automated 
information techniques. The additional information the Commission 
proposes to require should have a minimal impact on the current 
reporting burden which is as follows:

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                                                 Number of        Number of        Hours per       Total annual
               Data collection                  respondents       responses         response          hours
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FERC-520....................................              28                1             51.8            1,450
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    Total Annual Hours for Collection (reporting + recordkeeping, if 
appropriate) = 1,450.
    Information Collection Costs: The Commission seeks comments on the 
costs to comply with these requirements. It has projected the average 
annualized cost of all respondents to be: 1,450 hours / 2,080 hours x 
$108,558 = $75,677. Cost per respondent is $2,703. The estimate of 
costs for respondents is based upon salaries for professional and 
clerical support, as well as direct and indirect costs. Direct costs 
include all costs directly attributable to providing this information, 
such as administrative costs and the cost of information technology. 
Indirect or overhead costs are costs incurred by an organization in 
support of its mission. These costs apply to activities which benefit 
the whole organization rather than any one particular function or 
activity.
    Title: FERC-520, ``Application for Authority to Hold Interlocking 
Positions''.
    Action: Proposed Data Collection.
    OMB Control Nos. 1902-0083.
    The applicant will not be penalized for failure to respond to this 
information collection unless the information collection displays a 
valid OMB control

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number or the Commission has provided justification as to why the 
control number should not be displayed.
    Respondents: Businesses or other for profit.
    Necessity of the Information: The information collected under the 
requirements of FERC-520 is used by the Commission to implement the 
statutory provisions of Section 305(b) of the Federal Power Act and 
implemented by the Commission in the Code of Federal Regulations under 
18 CFR part 45. Under part 45, each person that desires to hold an 
interlocking position(s) must submit an application to the Commission, 
or if qualified, comply with the requirements for automatic 
authorization. Section 305(b) of the FPA makes the holding of certain 
defined interlocking positions unlawful unless the Commission has 
authorized the interlocks to be held, and requires the applicant to 
show in a form or manner as prescribed by the Commission, that neither 
public nor private interests will be adversely affected by the holding 
of the position. The proposed rule will clarify (1) the time at which a 
person must apply for authorization to hold interlocking positions 
under section 305(b) of the Federal Power Act and part 45 of the 
Commission's regulations, (2) clarify automatic authorizations for 
certain interlocking positions authorization is requested and (3) add a 
requirement that persons state the dates that they assumed the 
positions for which they seek automatic authorization under section 
45.9. It is necessary to make these clarifications and require the 
additional information to ensure the Commission receives timely 
submissions and also to have sufficient information to make a 
determination as the appropriateness of the position.
    Internal Review: The Commission has reviewed these requirements 
pertaining to holding of interlocking positions and has determined the 
proposed revision is necessary because the Commission needs to have 
adequate information filed in a timely manner. These requirements 
conform to the Commission's plan for efficient information collection, 
communication, and management within the electric industries. The 
Commission has assured itself, by means of internal review, that there 
is specific, objective support for the burden estimates associated with 
the information requirements.
    15. Interested persons may obtain information on the information 
collection by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, Attention: 
Michael Miller, Office of the Executive Director, Phone: (202) 502-
8415, fax: (202) 273-0873, e-mail: [email protected].
    16. For submitting comments concerning the collection of 
information and the associated burden estimate, please send your 
comments to the contact listed above and to the Office of Management 
and Budget, Office of Information and Regulatory Affairs, Washington, 
DC 20503, Attention: Desk Officer for the Federal Energy Regulatory 
Commission, phone: (202) 395-4650, fax: (202) 395-7285.

Environmental Analysis

    17. The Commission is required to prepare an environmental 
assessment or an environmental impact statement for any action that may 
have a significant adverse effect on the human environment.\15\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. Included in the exclusion are rules that are procedural, 
ministerial, or internal management programs or decisions,\16\ as well 
as actions under section 305(b) of the FPA.\17\ The rules proposed in 
this NOPR address the need to make a timely filing of an application 
for authorization to hold otherwise prohibited interlocking positions. 
Therefore, this NOPR falls within the categorical exemptions provided 
in the Commission's regulations, and, as a result neither an 
environmental impact statement nor an environmental assessment is 
required.
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    \15\ Regulations Implementing National Environmental Policy Act, 
52 FR 47897 (Order No. 486, 1987), FERC Stats. & Regulations 
Preambles 1986-1990 ] 30,783 (Dec. 10, 1987).
    \16\ 18 CFR 380.4(a)(1) (2004).
    \17\ 18 CFR 380.4(a)(16) (2004).
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Regulatory Flexibility Act [Analysis or Certification]

    18. The Regulatory Flexibility Act of 1980 (RFA) \18\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small 
entities.\19\The Commission is not required to make such analyses if a 
rule would not have such an effect.
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    \18\ 5 U.S.C. 601-12 (2000).
    \19\ The RFA definition of ``small entity'' refers to the 
definition provided in the Small Business Act, which defines a 
``small business concern'' as a business that is independently owned 
and operated and that is not dominant in its field of operation. 15 
U.S.C. 632 (2000). The Small Business Size Standards component of 
the North American Industry Classification System defines a small 
electric utility as on that, including its affiliates, is primarily 
engaged in the generation, transmission, and/or distribution of 
electric energy for sale and whose total electric output for the 
preceding fiscal years did not exceed 4 million MWh. 13 CFR 121.201 
(2004) (Section 22, Utilities, North American Industry 
Classification System, NAICS).
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    19. The Commission does not believe that this proposed rule would 
have such an impact on small entities. Most persons affected by this 
proposed rule are officers or directors of companies that do not fall 
within the RFA's definition of a small entity. Further, the proposed 
rule does not substantially change the current requirements and 
regulations that persons who are officers and directors must comply 
with. Therefore, the Commission certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities.

Comment Procedures

    20. The Commission invites comments on the matters and proposals in 
this notice, including any related matters or alternative proposals 
that commentors may wish to discuss. Comments are due June 6, 2005. 
Reply comments will be due 30 days thereafter. Comments must refer to 
Docket No. RM05-6-000, and must include the commentor's name, the 
organization they represent, if applicable, and their address in their 
comments. Comments may be filed either in electronic or paper format.
    21. Comments may be filed electronically via the eFiling link on 
the Commission's Web site at http://www.ferc.gov. The Commission 
accepts most standard word processing formats and commentors may attach 
additional files with supporting information in certain other file 
formats. Commentors filing electronically do not need to make a paper 
filing. Commentors that are not able to file comments electronically 
must send original and 14 copies of their comments to: Federal Energy 
Regulatory Commission, Office of the Secretary, 888 First Street NE., 
Washington, DC 20426.
    22. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commentors on this proposal are 
not required to serve copies of their comments on other commentors.

Document Availability

    23. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
eastern time) at 888 First

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Street, NE., Room 2A, Washington DC 20426.
    24. From FERC's Home Page on the Internet, this information is 
available in the Federal Energy Regulatory Records Information System 
(FERRIS). The full text of this document is available on FERRIS in PDF 
and Microsoft Word format for viewing, printing, and/or downloading. To 
access this document in FERRIS, type the docket number excluding the 
last three digits of this document in the docket number field.
    25. User assistance is available for FERRIS and the FERC's Web site 
during normal business hours from our Help line at (202) 502-8222 or 
the Public Reference Room at (202) 502-8371 Press 0, TTY (202) 502-
8659. E-Mail the Public Reference Room at 
[email protected].

List of Subjects in 18 CFR part 45

    Electric utilities; Reporting and recordkeeping requirements.

    By direction of the Commission.
Linda Mitry,
Deputy Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
part 45, Chapter I, Title 18, Code of Federal Regulations, as follows:

PART 45--APPLICATION FOR AUTHORITY TO HOLD INTERLOCKING POSITIONS

    1. The authority citation for part 45 is revised to read as 
follows:

    Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352; 3 CFR 142.

    2. Section 45.3 is revised to read as follows:


Sec.  45.3  Timing of filing application.

    The holding of positions within the purview of section 305(b) of 
the Act shall be unlawful unless the holding shall have been authorized 
by order of the Commission. Nothing in this part shall be construed as 
authorizing the holding of positions within the purview of section 
305(b) of the Act prior to order of the Commission on application 
therefor. Applications must be filed and authorization must be granted 
prior to holding any interlocking positions within the purview of 
section 305(b) of the Act; late-filed applications will be denied. The 
term ``holding'', as used in this section, shall mean acting as, 
serving as, voting as, or otherwise performing or assuming the duties 
and responsibilities of officer or director within the purview of 
section 305(b) of the Act.
    3. In Sec.  45.9, paragraph (b) is revised and paragraph (c)(5) is 
added to read as follows:


Sec.  45.9  Automatic authorization of certain interlocking positions.

* * * * *
    (b) Conditions of authorization. As a condition of authorization, 
any person authorized to hold interlocking positions under this section 
must submit, prior to assuming the duties of the position, an 
informational report in accordance with paragraph (c) of this section, 
unless that person is already authorized to hold interlocking positions 
of the type governed by this section. Failure to timely file the 
informational report will constitute a failure to satisfy this 
condition, and will constitute automatic denial.
    (c) Informational report. * * *
    (5) The dates that the person assumed the duties and 
responsibilities of each position listed in paragraphs (c)(2) and 
(c)(3) of this section.

[FR Doc. 05-6690 Filed 4-4-05; 8:45 am]
BILLING CODE 6717-01-P