[Federal Register Volume 81, Number 231 (Thursday, December 1, 2016)]
[Rules and Regulations]
[Pages 86586-86613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28198]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 25, 73 and 74

[GN Docket No. 15-236; FCC 16-128]


Review of Foreign Ownership Policies for Broadcast, Common 
Carrier and Aeronautical Radio Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Report and Order, the Federal Communications 
Commission (Commission) extends its streamlined foreign ownership rules 
and procedures that apply to common carrier and certain aeronautical 
licensees under Section 310(b)(4) of the Communications Act of 1934, as 
amended (the ``Act'') to broadcast licensees, with certain 
modifications to tailor them to the broadcast context. The Commission 
also reforms the methodology used by both common carrier and broadcast 
licensees that are, or are controlled by, U.S. public companies to 
assess compliance with the 20 percent foreign ownership limit in 
Section 310(b)(3), and the 25 percent foreign ownership benchmark in 
Section 310(b)(4) of the Act, in order to reduce regulatory burdens on 
applicants and licensees. Finally, the Commission makes certain 
technical corrections and clarifications to its foreign ownership 
rules.

DATES: Effective January 30, 2017, except for the amendments to 47 CFR 
1.5000 through 1.5004, 25.105, 73.1010 and 74.5 which will be effective 
upon approval of information collection requirements by the Office of 
Management and Budget (OMB). The Commission will publish a separate 
document in the Federal Register announcing the effective date of these 
rule changes.

ADDRESSES: Federal Communications Commission, 445 12th Street SW., 
Washington, DC 20554. The Commission will seek comments from the Office 
of Management and Budget (OMB), other Federal agencies and the general 
public on the Paperwork Reduction Act (PRA) information collection 
requirements contained herein in a separate notice to be published in 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Kimberly Cook or Francis Gutierrez, 
Telecommunications and Analysis Division, International Bureau, FCC, 
(202) 418-1480 or via email to [email protected], 
[email protected]. On PRA matters, contact Cathy Williams, 
Office of the Managing Director, FCC, (202) 418-2918 or via email to 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order in GN Docket No. 15-236, FCC 16-128, adopted September 29, 
2016 and released on September 30, 2016. The full text of the Report 
and Order is available for inspection and copying during normal 
business hours in the FCC Reference Center, 445 12th Street SW., 
Washington, DC 20554. The document also is available for download over 
the Internet at http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db0930/FCC-16-128A1.pdf.

Synopsis of Report and Order

    1. The Report and Order modifies the foreign ownership filing and 
review process for broadcast licensees by extending the streamlined 
rules and procedures developed for foreign ownership reviews for common 
carrier and certain aeronautical licensees under Section 310(b)(4) of 
the Communications Act of 1934, as amended (the ``Act''), to the 
broadcast context with certain limited exceptions.\1\ Recognizing the 
difficulty U.S. public companies face in ascertaining their foreign 
ownership, this Report and Order also reforms the methodology used by 
both common carrier and broadcast licensees that are, or are controlled 
by, U.S. public companies to assess compliance with the foreign 
ownership limits in Sections 310(b)(3) and 310(b)(4) of the Act, 
respectively. In particular, the reformed methodology provides a 
framework for a publicly traded licensee or controlling U.S. parent to 
ascertain its foreign ownership using information that is ``known or 
reasonably should be known'' to the company in the ordinary

[[Page 86587]]

course of business, thereby eliminating the need for shareholder 
surveys.\2\
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    \1\ For ease of reference, this Report and Order refers to 
broadcast, common carrier, aeronautical en route and aeronautical 
fixed radio station applicants and licensees (including broadcast 
permittees) and to common carrier spectrum lessees collectively as 
``licensees'' unless the context warrants otherwise. This Report and 
Order also uses the term ``common carrier'' or ``common carrier 
licensees'' to encompass common carrier, aeronautical en route and 
aeronautical fixed radio station applicants and licensees unless the 
context applies only to common carrier licensees. ``Spectrum 
lessees'' are defined in Section 1.9003 of Part 1, Subpart X 
(``Spectrum Leasing''). 47 CFR 1.9003. This Report and Order also 
refers to aeronautical en route and aeronautical fixed licensees 
collectively as ``aeronautical'' licensees. In using this shorthand, 
this Report and Order does not include other types of aeronautical 
radio station licenses issued by the Commission.
    \2\ For ease of reference, this Report and Order refers to 
``shareholders'' and ``interest holders'' interchangeably. A 
``shareholder'' (or ``stockholder'') refers generally to an 
individual or entity that owns one or more of a company's shares and 
in whose name the share certificate is issued. Most shares of U.S. 
publicly traded companies today are held in the name of an 
intermediary bank or broker on behalf of a client account. The 
voting rights (if any) associated with a particular share of a 
company may be held by one or more persons/entities. This Report and 
Order refers to any person or entity that holds the right to vote or 
to direct the voting of a share of a company's stock as a 
``beneficial owner.'' The beneficial owner(s) of a share may or may 
not hold the equity (i.e., the pecuniary) interest in the share. 
This Report and Order refers to any person or entity that has the 
right to receive or the power to direct the receipt of dividends 
from, or the proceeds from the sale of, a share as the ``equity 
interest holder.''
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    2. The Commission believes these changes will facilitate investment 
from new sources of capital at a time of growing need for investment in 
this important sector of the nation's economy, while continuing to 
satisfy the requirements of Section 310 and the policies reflected in 
this Report and Order. The Commission also finds that adopting a 
standardized filing and review process for broadcast licensees' 
requests to exceed the 25 percent foreign ownership benchmark in 
Section 310(b)(4), as the Commission has done for common carrier 
licensees, will provide the broadcast sector with greater transparency 
and more predictability, and reduce regulatory burdens and costs. As is 
the case with common carrier licensees, this standardized filing and 
review process will provide a clearer path for foreign investment in 
broadcast licensees that is more consistent with the U.S. domestic 
investment process, while continuing to protect important interests 
related to national security, law enforcement, foreign policy, trade 
policy, and other public policy goals.\3\
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    \3\ The new rules adopted in this Report and Order will be 
codified in Part 1, Subpart T, Sections 1.5000 through 1.5004 of the 
Commission's rules and are appended to the Report and Order.
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    3. Section 310 of the Act requires the Commission to review foreign 
investment in radio station licensees.\4\ This section imposes specific 
restrictions on who may hold certain types of radio licenses. The 
provisions of Section 310 apply to applications for initial radio 
licenses, applications for assignments and transfers of control of 
radio licenses, and spectrum leasing arrangements under the 
Commission's secondary market rules.\5\ Section 310(b)(3) prohibits 
foreign individuals, governments, and corporations from owning more 
than 20 percent of the capital stock of a broadcast, common carrier, or 
aeronautical radio station licensee.\6\ Section 310(b)(4) establishes a 
25 percent benchmark for investment by foreign individuals, 
governments, and corporations in U.S.-organized entities that directly 
or indirectly control a U.S. broadcast, common carrier, or aeronautical 
radio licensee. A foreign individual, government, or entity may own, 
directly or indirectly, more than 25 percent (and up to 100 percent) of 
the stock of a U.S.-organized entity that holds a controlling interest 
in a broadcast, common carrier, or aeronautical radio licensee, unless 
the Commission finds that the public interest will be served by 
refusing to permit such foreign ownership.
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    \4\ A ``station license'' is defined in the Act as ``that 
instrument of authorization required by [the] Act or the rules and 
regulations of the Commission made pursuant to [the] Act, for the 
use or operation of apparatus for transmission of energy, or 
communications, or signals by radio by whatever name the instrument 
may be designated by the Commission.'' 47 U.S.C. 153(49). For 
example, the Commission issues radio station licenses for the 
provision of broadcast, wireless personal communications services, 
cellular, microwave, aeronautical en route, and mobile satellite 
services. See also 47 U.S.C. 319 (construction permits). For ease of 
reference, this Report and Order refers to ``radio station 
licenses'' as ``licenses'' unless the context warrants otherwise.
    \5\ Under the Commission's secondary market rules, spectrum 
lessees (and spectrum sublessees) providing common carrier service 
are subject to the same foreign ownership requirements that apply to 
common carrier licensees under Sections 310(a) and (b) of the Act. 
Spectrum leasing is not currently permitted under the broadcast 
service rules.
    \6\ In the 2012 Foreign Ownership First Report and Order, the 
Commission determined to forbear from applying the foreign ownership 
limits in Section 310(b)(3) to the class of common carrier licensees 
in which the foreign investment is held in the licensee through 
U.S.-organized entities that do not control the licensee, to the 
extent the Commission determines such foreign ownership is 
consistent with the public interest under the policies and 
procedures that apply to the Commission's public interest review of 
foreign ownership subject to Section 310(b)(4) of the Act. The 
Commission codified the forbearance approach in the 2013 Foreign 
Ownership Second Report and Order. The Commission's forbearance 
authority does not extend to broadcast or aeronautical radio station 
licensees covered by Section 310(b)(3). See 47 U.S.C. 160.
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    4. Licensees may request Commission approval of their controlling 
U.S. parents' foreign ownership under Section 310(b)(4) by filing a 
petition for declaratory ruling.\7\ Licensees must obtain Commission 
approval before direct or indirect foreign ownership of their U.S. 
parent companies exceeds 25 percent. When presented with a petition for 
declaratory ruling, the Commission assesses, in each particular case, 
whether the foreign interests presented for approval by the licensee 
are in the public interest, consistent with the Commission's Section 
310(b)(4) policy framework. The Commission's public interest analysis 
also considers national security, law enforcement, foreign policy, or 
trade policy issues that may be raised by the foreign ownership. The 
Commission coordinates as necessary and appropriate with the relevant 
Executive Branch agencies and accords deference to their expertise in 
identifying and interpreting issues of concern related to these 
matters. The Commission evaluates concerns raised by the Executive 
Branch agencies in light of all the issues raised by a particular 
Section 310(b)(4) petition, and the Commission makes an independent 
decision on whether the foreign interests presented for approval by the 
licensee are in the public interest.
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    \7\ Under the Commission's Section 310(b)(3) forbearance 
approach applicable to common carrier licensees, common carrier 
licensees have the option to file a petition for declaratory ruling 
requesting prior Commission approval to exceed the 20 percent 
foreign ownership limits in Section 310(b)(3) where the foreign 
ownership interests would be held in the licensee through 
intervening U.S.-organized entities that do not control the 
licensee. For ease of reference, and because the Commission's 
forbearance authority does not extend to broadcast or aeronautical 
licensees covered by Section 310(b)(3), this Report and Order 
generally refers to petitions for declaratory ruling filed under 
Section 310(b)(4) of the Act, unless the context warrants otherwise.
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    5. This Report and Order modifies the foreign ownership filing and 
review process for broadcast licensees and the revised methodology 
broadcast and common carrier licensees that are, or are controlled by, 
U.S. public companies will use to determine and certify their 
compliance with the statutory foreign ownership limits. The Commission 
replaces the ad hoc case-by-case procedures for requesting approval of 
foreign ownership of broadcast licensees with specific rules that 
incorporate the same streamlined procedures used for common carrier 
licensees--with limited broadcast-specific provisions--except those 
procedures associated with Section 310(b)(3) forbearance. Second, the 
Commission adopts a new methodology for broadcast and common carrier 
licensees that are, or are controlled by, U.S. public companies to use 
in determining and certifying compliance with Sections 310(b)(3) and 
310(b)(4), respectively. The methodology relies on information that is 
known or reasonably should be known to the publicly traded licensee or 
U.S. parent company in the ordinary course of business. This Report and 
Order discusses issues related to how frequently the public company 
must review its foreign ownership, as well as compliance requirements 
for publicly traded licensees and U.S. parent companies to remedy a 
breach of the foreign ownership limits in Sections 310(b)(3) and 
310(b)(4) or of conditions in a licensee's Section 310(b)(4) ruling.

[[Page 86588]]

These compliance requirements take into account that certain breaches 
may be due to circumstances beyond the licensee's control that were not 
reasonably foreseeable to or known by the licensee with the exercise of 
the required due diligence. The Report and Order addresses the 
compliance obligations of privately held entities. Finally, the 
Commission adopts certain corrections and clarifications to its 
existing foreign ownership rules, and discusses transition issues.

Extending Streamlined Common Carrier Foreign Ownership Procedures to 
Broadcast Licensees

    6. The Commission adopts the 2015 Foreign Ownership NPRM proposal 
to apply the foreign ownership rules and procedures applicable to 
common carrier licensees to broadcast licensees, with certain 
exceptions and modifications further discussed below. It is clear from 
the Commission's experience that the common carrier rules for reviewing 
foreign ownership petitions create an efficient process that benefits 
filers without harm to the public. The process also helps ensure that 
the Commission is able to fulfill its obligations under Section 310(b) 
with respect to foreign ownership, while coordinating applications and 
petitions with the relevant Executive Branch agencies, as needed. 
Notably, among other changes, broadcast petitioners will now be able to 
request: (1) Approval of up to and including 100 percent aggregate 
foreign ownership (voting and/or equity) by unnamed and future foreign 
investors in the controlling U.S. parent of a broadcast licensee, 
subject to certain conditions; (2) approval for any named foreign 
investor that proposes to acquire a less than 100 percent controlling 
interest to increase the interest to 100 percent at some future time; 
and (3) approval for any non-controlling named foreign investor to 
increase its voting and/or equity interest up to and including a non-
controlling interest of 49.99 percent at some future time.\8\ Other 
routine common carrier terms and conditions will also apply to 
broadcast rulings, such as those involving subsidiaries and affiliates 
and the insertion of new foreign-organized companies into the 
controlling U.S. parent's vertical ownership chain. There is 
significant support for these proposals in the record, and the 
Commission finds that the public interest will be served by applying 
these rules to broadcast petitions for declaratory ruling filed 
pursuant to Section 310(b)(4).
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    \8\ For example, under the common carrier foreign ownership 
rules that the Commission is extending to broadcasters, a licensee 
filing a Section 310(b)(4) petition to allow foreign ownership of 
its controlling U.S. parent to exceed 25 percent may include in its 
petition a request that the Commission specifically approve a named 
foreign investor's acquisition of up to and including a non-
controlling 49.99 percent interest in the U.S. parent at some future 
time. If, after grant of the initial petition, the foreign investor 
seeks to acquire any additional equity or voting interests in the 
U.S. parent above 49.99 percent interests, i.e., the thresholds 
approved in the initial ruling, the licensee must file a new Section 
310(b)(4) petition to obtain Commission approval before the foreign 
investor acquires any additional interests. Commission grant of the 
licensee's new petition would constitute a modification of the 
licensee's initial ruling.
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    7. In addition, the Commission adopts its proposal that broadcast 
petitioners need to obtain specific approval only for foreign investors 
(i.e., foreign individuals, entities, or a ``group'' of foreign 
individuals or entities) that hold or would hold, directly or 
indirectly, more than 5 percent, and in certain circumstances, more 
than 10 percent of the U.S. parent's voting and/or equity interests, or 
a controlling interest in the U.S. parent. The 2013 Foreign Ownership 
Second Report and Order details the policy objectives under Section 
310(b) that informed the selection of these specific approval criteria. 
The Commission, in that item, sought to balance a number of factors in 
identifying the types of foreign investments that warrant specific 
approval. Ultimately, the Commission determined that the specific 
approval thresholds it adopted struck an important balance between the 
agency's twin objectives of reducing the regulatory costs and burdens 
associated with foreign investment in common carriers and protecting 
important interests related to national security, law enforcement, and 
public safety. The Commission further held that the specific approval 
thresholds it adopted were tailored to those foreign investors that the 
company should reasonably be able to identify and whose interests rise 
to the level that may be relevant to the actual concerns applicable to 
the Section 310(b) review of foreign ownership in the common carrier 
context. The Commission finds this reasoning equally applicable to 
broadcast petitioners, and conclude that the public interest is best 
served by harmonizing the specific approval requirements, thereby 
providing consistency in the application of Section 310(b) to all 
subject licensees, regardless of service.
    8. As indicated in the 2015 Foreign Ownership NPRM, the Commission 
finds that there are instances in which it is appropriate to 
distinguish between broadcast licensees and common carrier licensees to 
minimize disruption to broadcasters. Based on the Commission's review 
of the record, the Commission adopts its proposal to modify particular 
rules as they would apply to broadcast petitioners to reflect the 
distinct nature and precedent of the broadcast service, as discussed 
below.

Specific Modifications for Broadcast Licensees

    9. Disclosable Interest Holders. Under the existing rules, common 
carrier licensees filing petitions for declaratory ruling regarding 
proposed foreign investments under Section 310(b) must include the 
name, address, citizenship, and principal business(es) of any 
individual or entity, regardless of citizenship, that directly or 
indirectly holds or would hold, after effectuation of any planned 
ownership changes described in the petition, at least 10 percent of the 
equity or voting interests in the controlling U.S. parent of the 
petitioning common carrier licensee or a controlling interest.\9\ The 
10 percent threshold was adopted to ensure consistency with the 
ownership disclosure requirements that apply to most common carrier 
applicants under the existing licensing rules, while preserving a 
meaningful opportunity for the Executive Branch agencies to review 
petitions for national security, law enforcement, foreign policy, and 
trade policy concerns.
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    \9\ Similarly, when a foreign individual or foreign-organized 
entity requires specific approval under Section 1.991(i) of the 
rules, the petition must include the information specified in 
Section 1.991(j), including the name and citizenship of any 
individual or entity that holds, or would hold, directly and/or 
indirectly, through one or more intervening entities, 10 percent or 
more of the equity interests and/or voting interests, or a 
controlling interest, in the foreign entity for which the petitioner 
requests specific approval.
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    10. Consistent with the record, the Commission adopts its proposal 
to utilize the attribution rules and policies applicable to 
broadcasters to determine those U.S. and foreign interests that must be 
disclosed in Section 310(b)(4) petitions involving broadcast 
stations.\10\ The disclosure requirement is designed to ensure that the 
Commission has sufficient information to understand the licensee's 
ownership structure and to

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verify the identity and ultimate control of the foreign investor for 
which the petitioner seeks specific approval. Accordingly, in the 
common carrier context, the Commission relies on the ownership 
disclosure requirements applicable to most common carriers. The 
Commission finds that it is similarly appropriate to rely on the 
attribution rules and policies applicable to broadcast licensees in 
adopting the broadcast ownership disclosure requirements.
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    \10\ The Commission finds that excluding certain attributable 
interest holders would hinder the Commission's ability to determine 
the locus of control of a petitioner's U.S. parent company and the 
potential impact of proposed foreign investment of the management 
and operations of the broadcast licensee; therefore, the Commission 
declines to pursue NAB's recommendations. NAB also recommends re-
evaluating the broadcast attribution standards. The Commission 
determines that any consideration of modification of our attribution 
rules and policies is beyond the scope of the instant proceeding.
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    11. This approach provides regulatory certainty and ease of 
compliance while minimizing disruption to broadcasters. The attribution 
rules represent longstanding broadcast policy, and broadcasters are 
familiar with these rules, as they are used in the application and 
disclosure of multiple ownership, among other requirements. 
Broadcasters have also structured their organizations in reliance on 
the attribution standards. Applying the common carrier disclosure 
requirements to broadcasters would result in undue hardship without 
producing any discernable public interest benefits. Thus, the 
Commission does not believe that the public interest would be served by 
requiring broadcasters to conform to the foreign ownership rules 
regarding disclosable interests applicable to common carriers.\11\
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    \11\ The Commission reminds broadcasters that the term 
``disclosable interest holder'' in the foreign ownership context is 
not coterminous with the use of that term in the auction context. 
See, e.g., 47 CFR 1.2112(a)(6).
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    12. Specific Approval of Named Foreign Investors. The Commission 
extends to broadcast licensees the specific approval rules in Section 
1.991(i)-(j), applicable to common carrier licensees, with certain 
modifications as proposed in the 2015 Foreign Ownership NPRM. First, 
broadcast licensees will use the insulation criteria set forth in the 
broadcast attribution rules for purposes of determining whether a 
licensee's petition for declaratory ruling must include a request for 
specific approval of one or more foreign investors because the investor 
holds, or would hold, directly and/or indirectly, more than 5 percent 
(or, in certain situations, more than 10 percent) of the controlling 
U.S. parent's equity or voting interests.\12\
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    \12\ The Commission will issue foreign ownership rulings to 
broadcast licensees--as the Commission does now in the common 
carrier context--subject to routine terms and conditions, including 
the requirement that licensees file a new petition before any 
previously unapproved foreign investor acquires an interest that 
requires specific approval.
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    13. Second, to the extent a broadcast licensee identifies a foreign 
entity that requires specific approval under Section 1.5001(i) of the 
new rules, the petition must include the information specified in 
Section 1.5001(j), including the name and citizenship of any individual 
or entity that holds, or would hold, directly and/or indirectly, 
through one or more intervening entities, an attributable interest in 
the foreign entity for which the petitioner requests specific approval. 
The Commission does not believe it would be appropriate to require 
broadcast petitioners to use the 10 percent standard that applies (and 
will continue to apply under the new rules) to petitions filed by 
common carrier licensees. No commenter disagreed with this proposed 
approach.
    14. Several commenters, at times, appeared to conflate the 
broadcast attribution criteria that the Commission proposed broadcast 
petitioners use for purposes of identifying their ``disclosable U.S. 
and foreign interest holders'' with the specific approval criteria that 
were proposed to extend to broadcast licensees. The broadcast 
attribution criteria, however, are not co-extensive with the specific 
approval requirements that apply to common carrier licensees. These 
specific approval requirements, as proposed, will apply to broadcast 
licensees under the new rules--with the limited exception allowing 
broadcast licensees to calculate whether a foreign investor requires 
specific approval using the insulation criteria that such licensees use 
in calculating their attributable interests under Section 73.3555. As 
noted above, the specific approval rules for Section 310(b)(4) 
petitions require petitioners to request specific approval for any 
foreign investor that holds, or would hold, directly or indirectly, 
more than 5 percent, and in certain circumstances, more than 10 percent 
of the controlling U.S. parent's total outstanding capital stock 
(equity) and/or voting stock (or a controlling interest). In contrast, 
the broadcast attribution rules, with limited exception, do not apply 
to non-voting equity interests. In this respect, the specific approval 
requirements are broader in scope than the broadcast attribution rules, 
consistent with Commission precedent that reads Section 310(b) to 
evince Congress' separate concern with the scope of foreign equity 
interests in a licensee and any controlling U.S. parent company. The 
Commission also notes that, because it may be a source of confusion, 
the general specific approval requirement applies to interests of more 
than 5 percent, not interests of 5 percent or more as under the 
broadcast attribution rules. The Commission set the specific approval 
thresholds in the 2013 Foreign Ownership Second Report and Order so 
they are aligned with the SEC's beneficial ownership reporting 
requirements.
    15. Insulation Criteria. The Commission's current rules specify the 
methodology for calculating the foreign equity and voting interests in 
the controlling U.S. parent of a common carrier licensee that require 
specific approval under Section 1.991(i) of the rules. This methodology 
will now be applicable to broadcast licensees. The 2015 Foreign 
Ownership NPRM, however, sought comment on the appropriate insulation 
criteria for broadcasters for purposes of calculating the percentage of 
foreign voting interests held indirectly in the controlling U.S. parent 
through one or more intervening partnerships or limited liability 
companies (LLCs).
    16. The Commission will rely on the insulation criteria applicable 
to broadcast licensees rather than those applicable to common carriers. 
Broadcast entities are familiar with these criteria, and many broadcast 
interests have relied upon and have executed their organizational 
documents based on these insulation criteria. The Commission agrees 
with commenters that modifying these agreements would be difficult and 
costly, and is unable to identify any corresponding public interest 
benefits in requiring such modification. Therefore, the Commission 
finds that imposing common carrier insulation criteria on broadcasters 
for purposes of calculating foreign voting interests for Section 310(b) 
purposes would create an undue hardship. Ultimately, the Commission 
finds that consistency with its broadcast insulation rules and policies 
is appropriate in these circumstances.
    17. Service- and Geographic-Specific Rulings. Consistent with the 
common carrier rules, the Commission will not issue broadcast rulings 
on a service-specific or geographic-specific basis.\13\ Licensees will 
not be required to file new petitions for each broadcast station 
acquisition. Except as noted below, licensees, including any covered 
affiliates or subsidiaries, that have rulings for foreign investment in 
the broadcast service may apply those rulings to after-acquired 
broadcast licenses, regardless of the broadcast service or the 
geographic area in which the stations are located. The Commission 
believes this approach will provide the greatest amount of

[[Page 86590]]

regulatory flexibility possible, is consistent with the existing common 
carrier practice, and will encourage investment in the domestic 
transactional market, infusing capital into the industry.\14\ The 
transfer and assignment of individual broadcast station licenses, 
however, will continue to be subject to petitions to deny and informal 
objections, where interested parties may comment on whether the 
particular transaction, including its foreign ownership, is consistent 
with the public interest.\15\
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    \13\ While this will apply as a routine term and condition under 
the rules, the Commission retains the discretion to limit the scope 
of any petition grant based on the facts and circumstances presented 
in a particular case.
    \14\ The Commission emphasizes that rulings are granted to 
petitioning licensees (and their subsidiaries and affiliates as 
defined in the rules) pursuant to Final Rules (Sec.  1.5004(b)), and 
not to the foreign individuals/entities that are specifically 
approved in the ruling to hold specified levels of equity and voting 
interests in the licensee's U.S. parent. Thus, the specifically 
approved foreign investor cannot rely on the licensee's ruling for 
purposes of acquiring a controlling or non-controlling interest in 
an unaffiliated company.
    \15\ This also affords the relevant Executive Branch agencies 
opportunity to raise applicable national security, law enforcement, 
foreign policy, or trade policy concerns.
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    18. The Commission will, however, limit its foreign ownership 
rulings to common carrier and broadcast services, as applicable. 
Entities that have obtained a broadcast ruling may not use that ruling 
to cover an after-acquired common carrier--and vice versa. As observed 
in the 2015 Foreign Ownership NPRM, the Commission has noted previously 
the important distinctions between common carrier services and 
broadcast media in the context of the public interest analysis under 
Section 310(b)(4). Given these considerations, the Commission believes 
it is appropriate to adopt the tentative conclusion in the 2015 Foreign 
Ownership NPRM and require licensees to separately file common carrier 
petitions from broadcast petitions. However, if the licensee 
specifically requests approval as both a common carrier and 
broadcaster, the Commission will entertain such petitions, provided 
that the petitioner includes all the relevant common carrier and 
broadcast petition information. If approved, such a ruling would apply 
to subsequent acquisitions of common carrier and broadcast licenses, 
subject to any limitations adopted in the particular ruling.\16\
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    \16\ The transfer and assignment of individual licenses will 
continue to be subject to the appropriate Commission approval 
processes.
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    19. Filing and Processing of Broadcast Petitions. The 2015 Foreign 
Ownership NPRM proposed that broadcast petitions for declaratory ruling 
be filed electronically as an attachment to the underlying applications 
for a construction permit, assignment, or transfer of control that are 
electronically filed through the Commission's Consolidated Database 
System (CDBS) or any successor database. Additionally, for those 
broadcast petitions filed without an underlying broadcast construction 
permit, assignment, or transfer of control application, the 2015 
Foreign Ownership NPRM proposed that the broadcast petitioner would 
file its petition for declaratory ruling electronically with the 
Commission's Office of the Secretary via the Commission's Electronic 
Comment Filing System (ECFS) as a non-docketed filing.
    20. The Commission will adopt the processes described in the 2015 
Foreign Ownership NPRM for the filing and processing of broadcast 
petitions.\17\ Thus, broadcast petitions for declaratory ruling must be 
filed electronically as an attachment to the underlying applications 
for a construction permit, assignment, or transfer of control that are 
electronically filed with the Commission. As proposed in the 2015 
Foreign Ownership NPRM, such applications, if otherwise acceptable for 
filing, will be placed on public notice denoting that the application 
is ``accepted for filing.'' This public notice initiates the formal 
processing of the application, triggers the legal timeframe for the 
filing of petitions to deny, and provides notice to interested members 
of the public who may wish to comment on the application. A foreign 
ownership petition, filed as part of an underlying application, will 
separately receive a docket number, and the Commission will issue a 
separate public notice to solicit comment on the petition. A broadcast 
petition filed in the absence of an underlying broadcast construction 
permit, assignment, or transfer of control application shall be 
initially submitted electronically with the Commission's Office of the 
Secretary via ECFS as a non-docketed filing. The petition will 
subsequently receive a docket number and a public notice seeking 
comment will be released. Broadcasters are familiar with filing 
applications/petitions in the relevant filing systems, and the 
Commission finds that that these procedures will promote regulatory 
consistency.\18\ The Commission will continue to coordinate 
applications and petitions with the relevant Executive Branch agencies, 
as necessary and appropriate.
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    \17\ An applicant shall inform the Commission that it is covered 
by an existing ruling and that it is in compliance with that ruling 
if the applicant seeks approval for a subsequent assignment/transfer 
of control pursuant to the terms and conditions of that ruling.
    \18\ In circumstances in which a petition involves common 
carrier and broadcast licenses, filers should comply with all 
applicable filing requirements for those services. The Commission 
will tailor the public notice and comment process, as appropriate.
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Methodology for Assessing Compliance With Section 310(b)

    21. The Commission adopts a methodology for U.S. public companies 
to assess compliance with the foreign ownership limits in Sections 
310(b)(3) and 310(b)(4) of the Act. The Commission adopts the approach 
proposed in the 2015 Foreign Ownership NPRM to permit a broadcast or 
common carrier licensee that is controlled by a U.S. public company to 
rely on ownership information that is known or reasonably should be 
known to the public company to determine its aggregate levels of 
foreign ownership. The Commission adopts the same approach for 
licensees' determinations of compliance with Section 310(b)(3) to the 
extent the licensee is a public company. The Commission finds that 
adopting such a rule for ``eligible'' publicly traded licensees and 
U.S. parent companies \19\ is supported by the record developed in this 
proceeding and will provide licensees with greater certainty and 
reduced burdens in determining their aggregate levels of foreign 
ownership given the difficulties of ascertaining the identity and 
citizenship of widely dispersed public company shareholders.
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    \19\ An ``eligible'' U.S. public company is defined in the new 
rules as a U.S.-organized company that has issued a class of equity 
securities for which beneficial ownership reporting is required by 
security holders and other beneficial owners under sections 13(d) or 
13(g) of the Exchange Act and corresponding Exchange Act Rule 13d-1, 
17 CFR 240.13d-1. See Final Rules (Sec.  1.5000(d)). This definition 
tracks the definition of ``public company'' in Section 1.990(g)(9) 
(to be renumbered as Section 1.5000(g)(9)) except that it is limited 
to U.S.-organized public companies. The Securities and Exchange 
Commission (SEC) rules and forms referenced in this Report and Order 
may be eliminated, redesignated, or otherwise modified in the future 
by the SEC. To ensure that the Commission's rules continue to refer 
to the correct SEC rules and forms, the Commission delegates to the 
International Bureau the authority to make technical and ministerial 
edits to the rules adopted in this Report and Order for this 
purpose.
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    22. The methodology will eliminate the need for publicly traded 
licensees and U.S. parent companies to attempt to conduct surveys or 
random samplings of their shares and apply presumptions about the 
citizenship of their unknown shareholders, based on the informal staff 
guidance routinely provided to applicants and licensees since the early 
1970s. At the same time, the Commission finds that this methodology 
will allow publicly traded licensees and U.S. parent companies to 
identify those foreign interest holders likely to have

[[Page 86591]]

the ability to influence company policies and operations. The 
methodology recognizes the realities of today's marketplace for the 
equity securities of public companies by allowing companies to focus 
their compliance efforts and resources on identifying and determining 
the citizenship of those shareholders that may present a realistic 
potential to influence or control the company, rather than on those 
interests that are not influential.
    23. The difficulties associated with ascertaining the foreign 
ownership of U.S. public companies arise, in large part, out of the 
changing nature of stock ownership in the United States. As commenters 
note, most shares of publicly traded companies are now held in ``street 
name'' (i.e., in the name of an intermediary bank or broker holding 
legal title to a share on behalf of a third party). In 1934, when 
Congress adopted the provisions of Section 310(b)(4), only about 10 
percent of shares in U.S. markets were held by an individual or 
institution on behalf of someone else; it has been estimated that at 
least 85 percent of shares are now held this way. Moreover, as noted 
below, it has proven increasingly difficult to ascertain the identity, 
much less the citizenship, of a public company's shareholders.

Identification of Interest Holders

    24. Known or Reasonably Should Be Known Standard. Based on the 
record, the Commission concludes that a U.S. public company knows, or 
reasonably should know, in the exercise of due diligence, the identity 
and citizenship of certain individuals and entities that hold, directly 
and/or indirectly, equity and/or voting interests in the U.S. public 
company as described in further detail below. Accordingly, the rules 
will permit a licensee that is, or is controlled by, a U.S. public 
company to rely on such information to ascertain the company's foreign 
equity and voting interests under Sections 310(b)(3) and 310(b)(4).
    25. The Commission finds record support for its conclusion that 
U.S. public companies should know the identity of shareholders that 
report their beneficial ownership, or other persons who may be 
identified in such report as holding a pecuniary interest, in the 
equity securities of the company pursuant to Section 13(d) of the 
Securities Exchange Act of 1934, as amended (the ``Exchange Act''), and 
Exchange Act Rule 13d-1. In general, Exchange Act Rule 13d-1 requires a 
person or ``group'' that becomes, directly or indirectly, the 
``beneficial owner'' of more than 5 percent of a class of equity 
securities registered under Section 12 of the Exchange Act to report 
the acquisition to the SEC.\20\ The absence of a reporting requirement 
under Exchange Act Rule 13d-1 for beneficial owners of 5 percent or 
less of a class of equity securities also means that the identity and 
citizenship of such smaller shareholders may not be readily available 
to the issuing company.\21\
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    \20\ For purposes of Exchange Act Rule 13d-1, Exchange Act Rule 
13d-3(a) defines a beneficial owner of a security to include any 
person who, directly or indirectly, through any contract, 
arrangement, understanding, relationship, or otherwise has or shares 
voting power, which includes the power to vote, or to direct the 
voting of, such security; and/or investment power, which includes 
the power to dispose, or to direct the disposition of, such 
security. 17 CFR 240.13d-3(a). Exchange Act Rule 13d-1(i) defines 
the term ``equity security'' as any equity security of a class which 
is registered pursuant to Section 12 of that Act as well as certain 
equity securities of insurance companies and equity securities 
issued by closed-end investment companies registered under the 
Investment Company Act of 1940. The term ``equity security,'' 
however, does not include securities of a class of non-voting 
securities. Id. Sec.  240.13d-1(i).
    \21\ The Commission agrees with commenters that small, unknown 
interest holders that hold 5 percent or less of a U.S. public 
company's outstanding shares or qualified institutional investors 
that hold interests of 10 percent or less, as a general rule, do not 
have the ability or pose a realistic potential to exert influence or 
control over that U.S. public company.
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    26. The rules adopted today will require that licensees or their 
controlling U.S. parents that are eligible U.S. public companies within 
the meaning of the rules review the beneficial ownership reports, 
Schedules 13D and 13G, filed with the SEC, and monitor other widely 
available sources of information about institutional ownership of U.S. 
publicly traded equity securities, specifically, information derived 
from SEC Form 13F reports, as the Commission expects they do now in the 
ordinary course of business.\22\ Generally, Schedule 13D is required to 
be filed by any person who acquires, directly or indirectly, beneficial 
ownership exceeding 5 percent of a class of an issuer's equity 
securities (as defined by Exchange Act Rule 13d-1(i)). Schedule 13D 
must be filed with the SEC within 10 days after the acquisition that 
triggered the reporting requirement and must include, among other 
things, the identity and citizenship of the direct and indirect 
beneficial owners of the equity securities and the purpose of the 
transaction--including whether it is to acquire control.
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    \22\ For example, various SEC forms filed by issuers, including 
their annual reports (or proxy statements) and quarterly reports, 
require the issuer to include a beneficial ownership table that 
contains, inter alia, the name and address of any individual or 
entity, or ``group'' (as that term is used in Section 13(d)(3) of 
the Exchange Act), who is known to the issuer to be the beneficial 
owner of more than 5 percent of any class of the issuer's voting 
securities (not limited to securities registered pursuant to Section 
12 of the Exchange Act) and the percentage of the class held. Thus, 
Item 403 requires that issuers include beneficial ownership of any 
class of their voting securities regardless of whether the 
securities are registered under Section 12 of the Exchange Act (in 
contrast to the requirements of Exchange Act Rule 13d-1, which 
requires reporting of beneficial ownership of an issuer's equity 
securities (defined in Section 13d-1(i) as generally including only 
registered, voting securities). Pursuant to Item 403 of Regulation 
S-K, issuers must determine their beneficial ownership in accordance 
with Exchange Act Rule 13d-3 (applicable as well to Schedules 13D 
and 13G). For purposes of Item 403, the issuer ``shall be deemed to 
know the contents of any statements filed with [the SEC] pursuant to 
Section 13(d) or 13(g) of the Exchange Act.'' When applicable, the 
issuer may rely upon information set forth in such statements unless 
it ``knows or has reason to believe that such information is not 
complete or accurate or that a statement or amendment should have 
been filed and was not.''
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    27. Qualified institutional investors may use an abbreviated 
``short-form'' disclosure statement, known as Schedule 13G, pursuant to 
Exchange Act Rule 13d-1(b), to report their beneficial ownership in 
excess of 5 percent of a class of equity securities, including amounts 
in excess of 10 percent, to the SEC, when the institutional investor 
acquires its shares ``in the ordinary course of [its] business and not 
with the purpose nor with the effect of changing or influencing the 
control of the issuer. . . .'' Where an institutional investor's 
beneficial ownership exceeds 5 percent, but not 10 percent, of a class 
of equity securities in a given calendar year, the Schedule 13G need 
not be filed until 45 days after the end of the calendar year (and only 
then if the investor or ``group'' continues to own more than 5 percent 
at year end). Exchange Act Rule 13d-1(b) covers a broad range of 
institutional investors, such as registered brokers and dealers, banks, 
insurance companies, investment companies, investment advisers, 
employee benefit plans, and savings associations.
    28. Both the Schedule 13D and 13G include citizenship information 
for the beneficial owner. In the case of a Schedule 13D that is filed 
by a general or limited partnership, syndicate or other group, which 
group could include a limited liability company, the schedule also 
requires, inter alia, the identity and citizenship of each partner of a 
general partnership, each partner who is denominated as a general 
partner or who functions as a general partner of such limited 
partnership, each member of such syndicate or group, and each person 
controlling such partner or member. When the Schedule 13D is filed by a 
corporation, the schedule similarly requires, inter alia, the

[[Page 86592]]

identity and citizenship of each executive officer and director, each 
person controlling the corporation, and each executive officer and 
director of any corporation or other person ultimately in control of 
such corporation. Thus, U.S. public companies should review Schedules 
13D and 13G to identify their interest holders (and to determine their 
citizenship).
    29. In addition, licensees and controlling U.S. parents should 
assess the ownership of their publicly traded equity securities more 
broadly through additional sources of information; specifically, 
institutional equity ownership information about U.S. publicly traded 
companies which is available from a variety of entities, including, for 
example: (i) Internet-based news and other sources; and (ii) data 
gatherers that compile and distribute information and analysis about 
ownership of publicly traded equity securities for a fee. A 
considerable amount of such equity ownership information is based on 
the quarterly Form 13F reports that are required under Section 13(f) of 
the Exchange Act and the rules thereunder. Form 13F is required to be 
filed with the SEC within 45 days of the end of each calendar quarter 
by an institutional investment manager, including a foreign-organized 
manager, with investment discretion over an aggregate value of $100 
million or more in U.S. exchange-traded equity securities. Such 
securities, referred to as ``Section 13(f) securities,'' generally are 
the common stock of issuers that are listed and traded on the primary 
U.S. stock exchanges.\23\ Each Form 13F report discloses, as of the end 
of the calendar quarter, the number of shares in each reportable 
Section 13(f) security over which the Form 13F reporting manager 
exercised investment discretion. While a Form 13F report does not 
necessarily reveal the ultimate beneficial owner of a company's U.S. 
exchange-traded stock, it provides material insight into the holders of 
such stock, and can be an important element in determining ultimate 
voting control.\24\ The Commission finds that information available in 
the Form 13F about the institutional ownership of its shares reasonably 
should be known to the company in the ordinary course of business.
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    \23\ Form 13F identifies, among other things, the total number 
of a public company's Section 13(f) securities for which the filer 
(and sometimes its related parties) exercises investment discretion. 
The Form 13F also identifies voting authority for such positions, 
although its specialized reporting instruction captures voting 
authority only over ``non-routine'' matters (e.g., a contested 
election of directors; a merger or sale of substantially all of the 
issuer's assets).
    \24\ A Form 13F report also can assist in identifying the 
citizenship of an equity owner because, as a starting point for 
determining citizenship, the cover page of Form 13F requires that 
the filing manager's name and address be provided. Form 13F reports 
are filed on the SEC's EDGAR database, and list holdings to 
facilitate the utility to end users of the reported U.S. equity 
holdings data. Because a material number of institutional investment 
managers that file Form 13F are registered under the Investment 
Advisers Act of 1940, the investment adviser registration form, Form 
ADV, may be useful in this context. For example, Form ADV may have 
information relevant to determining the citizenship of a registered 
investment adviser that may be identified in a Schedule 13D/G or 
Form 13F as holding investment discretion and voting authority for 
such positions in a public company.
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    30. A U.S. public company also can avail itself of certain other 
sources of reliable information about the ownership of its publicly 
traded stock, available in the ordinary course of business. First, U.S. 
public companies should know the ownership of the shares registered 
with the company and the shares held by officers and directors. Second, 
U.S. public companies should know the citizenship of at least some of 
the shareholders of the company's securities that are not publicly 
traded (e.g., non-registered securities (whether voting or non-voting) 
held by pre-IPO founders of the company and non-registered voting 
shares held by beneficial owners required to be identified in a 
company's annual reports (or proxy statements) and quarterly reports). 
Third, other shareholders and their citizenship may be known to the 
public company, including those identified as a result of shareholder 
litigation, financing transactions, and proxies voted at annual or 
other meetings. Fourth, shareholders whose interests and citizenship 
are actually known to the company by whatever source, whether the 
interests exceed 5 percent or not, will be considered ``known'' under 
the new rules, and companies will be required to include such equity 
and/or voting interests in calculating the percentages of their foreign 
voting interests and their foreign equity interests under Section 
310(b). For example, information gleaned from Schedules 13D and 13G may 
indicate that the company has foreign beneficial owners holding 
interests in excess of 5 percent of a particular class of voting stock 
that does not equate to an interest exceeding 5 percent of the 
company's total outstanding shares of voting stock. Nevertheless, the 
rules will treat these interests as ``known.'' The Commission requires 
U.S. public companies to include all of the above-mentioned information 
in their foreign ownership calculations.\25\
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    \25\ As more information regarding the citizenship of beneficial 
owners becomes available as a result of improved, revised or 
increased disclosure requirements, registries or databases, the 
Commission expects U.S. public companies to include such information 
for purposes of determining their foreign ownership levels.
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    31. The methodology adopted in this Report and Order generally will 
not require U.S. public companies to identify de minimis interest 
holders. NOBO shareholders that are not otherwise identifiable (as 
through SEC filings) are such de minimis interest holders. Nonetheless, 
Comcast and NAB recommend that the Commission deem any information 
that, upon reasonable inquiry, a company receives from NOBOs to be 
reasonably identifiable. The Commission declines to require U.S. public 
companies, as a matter of course, to send out NOBO letters to obtain 
citizenship information, as was required in the Pandora Declaratory 
Ruling. Based on the Commission's experience and the comments received, 
the Commission does not believe such letters consistently generate 
responses from addressees. Therefore, any information gleaned directly 
through NOBO letters may be incomplete or redundant, and thus 
potentially difficult to reconcile with the citizenship information 
obtained using the methodology adopted in this Report and Order.\26\
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    \26\ However, to the extent a U.S. public company has identified 
an interest holder under our methodology, direct inquiries--
including by letter--are encouraged as noted below.
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    32. The Commission recognizes that SEC Schedules 13D and 13G 
provide limited information as to those persons or entities that hold 
the pecuniary interests associated with a public company's voting 
shares that are subject to reporting under Exchange Act Rule 13d-1.\27\ 
Notwithstanding the limited information that may be publicly available 
as to a company's equity interest holders, the Commission does not 
believe that Section 310(b) allows the Commission to limit its foreign 
ownership review to include only those investors that possess voting 
rights in a

[[Page 86593]]

company. The Commission therefore declines to adopt a methodology that 
focuses only on voting power.\28\
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    \27\ Information as to those persons holding the pecuniary 
interest in the company's voting, equity securities is limited: A 
beneficial owner required to report under Section 13d-1 by filing 
the requisite Schedule 13D or Schedule 13G is required to state 
whether any other person is known to have the right to receive or 
the power to direct the receipt of dividends from, or the proceeds 
from the sale of, such securities. If such interests relate to more 
than 5 percent of the class being reported, however, the Schedule 
13D or Schedule 13G requires that such person be identified. 
However, a listing of the shareholders of an investment company 
registered under the Investment Company Act of 1940 or the 
beneficiaries of an employee benefit plan, pension fund, or 
endowment fund is not required.
    \28\ The methodology the Commission is adopting takes into 
account that it may not be possible for a publicly traded licensee 
or U.S. parent, even with the exercise of the required diligence, to 
identify the individuals or entities that ultimately have the 
pecuniary interest in voting shares of the company that are subject 
to reporting by the beneficial owner under Exchange Act Rule 13d-1 
(and that therefore should reasonably be known to the company).
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    33. Surveys. Publicly traded companies have, in the past, attempted 
to undertake surveys or random sampling of their shareholders' equity 
and voting interests to determine whether they are in compliance with 
Section 310(b). As noted above, the methodology adopted in this Report 
and Order will eliminate the need for a publicly held licensee or 
controlling U.S. parent to attempt to use surveys or random sampling 
techniques for purposes of ensuring that the licensee is able to 
certify compliance with Section 310(b) or obtain the Commission's 
approval, under Section 310(b)(4), before the U.S. public company's 
foreign equity and/or voting interests exceed 25 percent.
    34. SEG-100. The 2015 Foreign Ownership NPRM sought comment on 
whether a public company's participation in the Depository Trust 
Company's (DTC) SEG-100 program, or an equivalent program, would 
provide the Commission with sufficient information to discharge its 
public interest obligations pertaining to foreign ownership in 
broadcast licensees. Several parents of broadcast licensees participate 
in SEG-100 or similar programs which allow for the deposit of foreign-
owned shares into a segregated account for monitoring foreign owned 
shares.
    35. When an issuer requests to be included in the SEG-100 program, 
DTC notifies its participating banks/brokers that they must apply SEG-
100 procedures to future trades of stock. The issuer may provide 
specific instructions to DTC to forward to participating banks/brokers 
regarding how to determine citizenship of potential purchasers of the 
issuer's stock. DTC participants are obligated to make inquiries of 
their client account holders and to place the shares of such holders 
who are non-citizens in the DTC participant's segregated account. Such 
a process allows issuers, through their transfer agents, to monitor 
changes in foreign ownership levels and, if the threshold is exceeded, 
to notify DTC of the number of shares that must be transferred out of 
SEG-100 accounts.
    36. While the Commission finds that participation in SEG-100 serves 
as a useful check on monitoring foreign ownership levels and may be 
used as a tool to prevent transactions that would render a licensee 
noncompliant with foreign ownership thresholds, the Commission is not 
persuaded that the SEG-100 program can be used as a standalone method 
for demonstrating compliance with Section 310(b). The Commission 
declines, in part, because there are many variables that might impact 
the effectiveness of the program in any given circumstance. For 
example, the instructions issuers provide DTC to guide DTC participants 
in making inquiries could have varying degrees of accuracy and detail. 
Furthermore, the effectiveness of the program would be impacted by the 
extent to which participants apply the guidelines in the instructions 
when making client inquiries to determine their citizenship. The 
Commission also hesitates to require U.S. public companies that are not 
currently participating in SEG-100 to enroll in the program. The 
Commission believes that relying on the methodology outlined above is a 
more uniform approach that can be implemented consistently. 
Nonetheless, the Commission recognizes that many companies, 
broadcasters in particular, participate in SEG-100 and have found its 
services useful for a range of purposes, including monitoring of 
compliance with foreign ownership restrictions. Thus, while the 
Commission will not permit participation in SEG-100 to serve as a 
standalone compliance methodology, it is not the Commission's intention 
to discourage the use of this program to the extent that companies find 
it valuable.

Determining Citizenship

    37. Based on the record and the Commission's experience with 
foreign ownership, the Commission provides the following guidance as to 
the criteria Section 310(b) licensees can use to determine the 
citizenship of their identifiable interest holders.\29\ As discussed 
above with respect to identifying an eligible U.S. public company's 
interest holders, the Commission expects licensees will exercise due 
diligence in determining the citizenship of their identifiable interest 
holders.
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    \29\ The Commission uses the term ``identifiable'' interest 
holders to refer to those individuals and entities identified by the 
licensee using the methodology described in the Report and Order as 
holding equity and/or voting interests in the publicly traded 
licensee or controlling U.S. parent.
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    38. Under the new framework, Section 310(b) licensees must make a 
determination in the first instance as to whether an identifiable 
interest holder should be deemed ``foreign.'' The Commission finds 
that, for purposes of determining the citizenship of their directors, 
officers, and employees, U.S. public companies should obtain 
citizenship information through direct inquiry. If the company has 
other registered shareholders (other than directors, officers, 
employees), it should rely on publicly available information (if any), 
and/or attempt to query these interest holders directly to the extent 
citizenship is not included in the share registry.
    39. The Commission also finds that companies are entitled to rely 
on publicly available information with respect to non-registered 
identifiable interest holders, including information gleaned from SEC 
filings that were used to identify the shareholder, other SEC filings 
made by the interest holder (e.g., a Form ADV where the interest holder 
is a registered investment adviser), information specifically known to 
the company, and/or information received by the company through direct 
inquiries. The Commission finds direct inquiries by the U.S. public 
company of its identifiable interest holders constitutes a reasonable 
measure,\30\ particularly in circumstances where: (1) The U.S. public 
company knows or has reason to believe that information reported to the 
SEC is not complete or accurate or that a statement or amendment should 
have been, but was not, filed; or (2) the U.S. public company's 
otherwise known or should be known aggregate foreign equity or voting 
interests are approaching the statutory limits.
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    \30\ A reporting person filing a Schedule 13G as a ``parent 
holding company/control person'' pursuant to Sections 13d-
1(b)(ii)(G), 13d-1(c), or 13d-1(d), is required to identify the 
subsidiary(ies) that acquired the shares being reported by the 
parent/control person. Unless the subsidiary is itself deemed to 
hold a reportable interest in some or all of same shares (in which 
case the subsidiary would be required to report, inter alia, its 
identity, citizenship, and number/percentage of shares over which it 
has sole or shared voting power), the Schedule 13G filed by the 
parent/control person will not necessarily specify the number/
percentage of shares held by the subsidiary or its citizenship. The 
Commission finds it reasonable to expect that, in these 
circumstances, the public company will inquire directly with the 
parent/control person as to the number/percentage of shares over 
which the subsidiary has voting power (if any). If the subsidiary 
has the right to vote or direct the voting of the shares, the 
company should inquire as to subsidiary's place of organization. If 
the subsidiary is foreign-organized, the company should treat the 
voting interests in the shares as identifiable foreign voting 
interests, regardless of the number/percentage of shares held.
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    40. If the identifiable interest holder is itself a U.S. public 
company, some ownership information as to that

[[Page 86594]]

company should be publicly available, such as in the company's annual 
reports (or proxy statements) and quarterly reports that it files with 
the SEC. The Commission finds it reasonable to expect the licensee to 
make direct inquiries of the U.S. public company where the licensee 
determines that direct inquiries are necessary to assess the effect 
that the investing company's foreign ownership may have on the publicly 
traded licensee's or U.S. parent's aggregate levels of foreign 
ownership. Depending on the publicly traded licensee's or U.S. parent's 
individual circumstances, the Commission would expect it to consider 
whether additional measures are necessary to ensure compliance with the 
applicable statutory limit, e.g., obtaining the agreement of the U.S. 
public company investor to assess its own known or reasonably should be 
known aggregate foreign equity and/or voting interests and to advise 
the licensee or U.S. parent when such interests reach a level--to be 
determined by the licensee or U.S. parent--that could render the 
licensee or U.S. parent non-compliant with Section 310(b). To address 
instances where the investor may not agree, a licensee (or U.S. parent, 
as relevant) may choose, but is not required, to have the ability, 
under its governance documents, to redeem the investor's shares or take 
other action if necessary to enable the licensee or U.S. parent to 
remain in compliance with the statutory limits.
    41. For purposes of classifying a U.S. public company's 
identifiable beneficial ownership (voting) interests and equity 
interests as ``U.S.'' or ``foreign,'' licensees should apply the 
following guidelines:
    42. A licensee may classify beneficial ownership (voting) interests 
as ``U.S.'' where the licensee has established a reasonable basis for 
concluding that the beneficial owner and all individuals and entities 
in the beneficial owner's vertical chain of control are U.S. citizens 
and/or U.S.-organized entities that are ultimately controlled by U.S. 
citizens.
    43. By contrast, where the beneficial owner is itself a foreign-
organized entity, or where there is a foreign-organized entity in the 
beneficial owner's vertical chain of control, the licensee should 
classify the voting interest in the shares held by the beneficial owner 
as ``foreign'' even where the beneficial owner is ultimately controlled 
by U.S. citizens.\31\
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    \31\ For example, assume that a Schedule 13D is filed with the 
SEC with respect to shares of a licensee's publicly traded U.S. 
parent. The Schedule 13D is filed on behalf of two reporting persons 
(the beneficial owners), each of which reports holding sole voting 
power with respect to 7 percent of the U.S. parent's single class of 
common stock: A foreign-organized limited partnership (described as 
an investment fund) and a U.S. citizen who is the general partner of 
the foreign limited partnership. In this example, the block of 
shares must be counted as foreign voting interests even though a 
U.S. citizen may have the power to independently vote the foreign-
organized investment fund's shares.
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    44. Where the licensee has identified more than one person as 
beneficially owning the same shares (e.g., where a SEC Schedule 13G is 
filed on behalf of more than one reporting person with sole or shared 
power to vote the same shares), and at least one of such persons is 
foreign, the licensee should classify the voting interests in those 
shares as foreign even if the other beneficial owner's interests would 
otherwise warrant treatment as ``U.S.''
    45. With respect to a U.S. public company's identifiable equity 
interests, the licensee may classify such equity interests as ``U.S.'' 
where the licensee has established a reasonable basis for concluding 
that the ultimate beneficiary or beneficiaries of the shares are U.S. 
citizens or U.S.-organized entities that are controlled by U.S. 
citizens.\32\
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    \32\ As an example, assume that a Schedule 13G is filed with the 
SEC by a U.S. university's endowment fund to report its beneficial 
ownership of 7 percent of a publicly traded U.S. parent's single 
class of common stock. The Schedule 13G states that the endowment 
fund also holds the pecuniary interest in the reported shares, which 
constitute 7 percent of the U.S. parent's total outstanding shares. 
The Schedule 13G and the endowment fund's annual report (which 
confirms that U.S. citizens control the endowment fund) provide a 
reasonable basis for treating the equity interests associated with 
the common stock as ``U.S.'' By contrast, assume that a Schedule 13G 
is filed by two reporting persons: A qualified institutional 
investor that is organized in a foreign country in a form equivalent 
to a Delaware limited liability company; and, the sole member of the 
limited liability company, who is a U.S. citizen that is also a 
qualified institutional investor (e.g., an investment adviser). The 
Schedule 13G states that the reported interests are held on behalf 
of numerous client accounts and that no person is known to have the 
right to receive or the power to direct the receipt of dividends 
from, or the proceeds from the sale of, such securities. In this 
example, the U.S. parent would treat the voting interests (which 
constitute 8 percent of the U.S. parent's total outstanding shares 
of stock) as ``foreign;'' however, the U.S. parent would not include 
the 8 percent equity interest associated with the reported shares in 
its calculation of foreign equity interests. The Commission finds it 
reasonable for the U.S. parent to conclude in these circumstances 
that no person holds the equity interest in the reported shares in 
an amount exceeding 5 percent of the company's total capital stock.
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    46. There should be very few instances where a widely held, 
publicly traded licensee or U.S. parent will need to conduct an up-the-
chain analysis under the revised methodology for identifying interests 
that will be subject to a citizenship determination. The relevant 
interests will be limited to those that are known or reasonably should 
be known to the public company in the ordinary course of business. 
Similarly, where a licensee has received a Section 310(b)(4) ruling and 
is monitoring its foreign ownership to ensure compliance with the 
specific approval requirements in Rule 1.5004(a)(1), the licensee will 
not need to engage in an up-the-chain analysis of an identifiable 
interest holder's direct or indirect interest holders, except to the 
extent any such interest holder could be calculated as holding an 
equity or voting interest in the U.S. parent in an amount requiring 
specific approval.\33\ The Commission also finds that these guidelines 
prescribe a reasonable means for licensees to look up the chain of 
ownership to capture indirect foreign interests. These new guidelines 
enable companies to use information that reasonably should be known (or 
that can be, or is, in fact, known) to the companies.
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    \33\ For example, assume that a broadcast licensee with a 
publicly traded controlling U.S. parent has received a Section 
310(b)(4) ruling. As part of its on-going monitoring, the licensee's 
U.S. parent determines from an SEC Schedule 13D that a private 
equity fund (``Delaware Fund I,'' which is organized as a Delaware 
limited liability company) is the beneficial owner of 6 percent of a 
class of the U.S. parent's equity securities. The parent is able to 
determine from the Schedule 13D that a U.S. citizen, who is also 
deemed a reporting person as to the same shares, controls the fund 
indirectly through another Delaware limited liability company 
(``Delaware Fund II'') that is the sole managing member of Delaware 
Fund I and is deemed a reporting person as to the same shares. 
Through direct inquiry with the controlling fund principal, the U.S. 
parent determines that, with the exception of the sole managing 
member, Delaware Fund II, all of Delaware Fund I's members are 
insulated consistent with the broadcast insulation requirements and 
none holds an equity interest in the fund in an amount that, when 
multiplied by the fund's 6 percent interest in the U.S. parent, 
exceeds 5 percent. The U.S. parent need not make any inquiries with 
respect to the citizenship of the fund's insulated members.
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    47. The Commission declines, however, to allow the use of 
shareholder addresses to establish the citizenship of identifiable 
interest holders. The 2015 Foreign Ownership NPRM asked if the 
Commission should accept shareholder addresses, alone, as a proxy for 
citizenship.
    48. The Commission finds that use of a shareholder's address of 
record is not, by itself, a reasonable measure to determine citizenship 
and is unnecessary where, as here, the number of citizenship inquiries 
will be limited and other sources of information, including direct 
inquiries, should be available to the public company.\34\ It is

[[Page 86595]]

quite possible that a citizen of a foreign country may have or use a 
U.S. address for mailing purposes. A foreign-organized company may have 
a U.S. address if the company has a subsidiary or some of its 
operations in the United States. A foreign company may also have a U.S. 
address for purposes of its dealings, sales or investments in the 
United States. In any event, having a U.S. address of record does not 
provide reasonable assurance that an individual is a U.S. citizen or 
that an entity with a U.S. address should be treated as a U.S.-
organized and U.S.-controlled entity for compliance purposes under 
Section 310(b). However, if a public company's share registry or other 
information available to the company identifies a beneficial owner or 
equity interest holder only with reference to a foreign address, the 
interests held should be counted as foreign unless the public company 
conducts a further inquiry to determine that the individual is a U.S. 
citizen or the entity is a U.S.-organized entity controlled by U.S. 
citizens.
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    \34\ Under the methodology adopted here for determining the 
citizenship of a public company's identifiable interest holders, a 
publicly traded licensee's or U.S. parent's citizenship inquiry will 
be limited to those individuals or entities that are known or 
reasonably should be known to the public company in the ordinary 
course of business and thus will exclude interests of 5 percent or 
less (or 10 percent or less in the case of a qualified institutional 
investor) unless such interests are in fact known to the company. In 
such cases, the company is likely to know the citizenship of the 
interest holder, which may be an officer, director, employee, or 
former employee of the company.
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    49. The new rules provide U.S. public companies the flexibility to 
use relevant and publicly available information for purposes of 
determining the citizenship of their identifiable interest holders. To 
the extent the public company cannot obtain some of the information, 
the company should make direct inquiries with its identifiable interest 
holders to inform the company's citizenship analysis. The Commission 
encourages licensees and their controlling U.S. parents to keep the 
Commission apprised of the extent to which direct inquiries of 
beneficial owners are, or are not, productive. This will allow the 
Commission to gauge the effectiveness of the new rules and to adjust 
this approach as licensees implement the rules in practice.
    50. Finally, the 2015 Foreign Ownership NPRM requested comment on 
whether the Commission should limit the percentage of a U.S. public 
company's foreign officers and directors in connection with the 
Commission's proposed methodology for U.S. public companies. Comcast 
argues that there should be no requirement that a certain percentage of 
officers and directors are U.S. citizens. The Commission agrees and 
declines to establish a specific limit on the percentage of a U.S. 
public company's foreign officers or directors.\35\
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    \35\ The Commission's proposed methodology rule for U.S. public 
companies also included an eligibility requirement that the company 
be headquartered in the United States. The Commission declines to 
adopt this proposed restriction in the absence of comment on it, and 
because the restriction may conflict with other federal rules and 
policies.
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Calculating Foreign Ownership Levels

    51. As discussed above, the Commission finds that only those 
interests that are known or reasonably should be known to a U.S. public 
company in the ordinary course of business need to be included for 
purposes of calculating the company's aggregate levels of foreign 
ownership under Section 310(b). Thus, for purposes of calculating 
aggregate levels of foreign ownership under Section 310(b), a licensee 
that is, or is controlled by, an eligible U.S. public company will base 
its foreign ownership calculations on the public company's known or 
reasonably should be known foreign equity and voting interests as 
specified above. The licensee will then aggregate the public company's 
known or reasonably should be known foreign voting interests and 
separately aggregate its known or reasonably should be known foreign 
equity interests. If the public company's known or reasonably should be 
known foreign voting interests and its known or reasonably should be 
known foreign equity interests do not exceed 25 percent (20 percent in 
the case of a publicly traded licensee subject to Section 310(b)(3)) of 
the company's total outstanding voting shares or 25 percent (20 percent 
in the case of a publicly traded licensee subject to Section 310(b)(3)) 
of the company's total outstanding shares (whether voting or non-
voting), respectively, then the company shall be deemed compliant under 
the Commission's rules with the applicable statutory limit.
    52. As an example of how the methodology would work, assume that a 
licensee's controlling U.S. parent is an eligible U.S. public company. 
The publicly traded U.S. parent has one class of stock consisting of 
100 total outstanding shares of common voting stock. The licensee (and/
or the U.S. parent on its behalf) has exercised the required due 
diligence in following the above-described methodology for identifying 
and determining the citizenship of the U.S. parent's known or 
reasonably should be known interest holders. The U.S. public company 
has identified one foreign shareholder that owns 6 shares (i.e., 6 
percent of the total outstanding shares) and another foreign 
shareholder that owns 4 shares (i.e., 4 percent of the total 
outstanding shares). The licensee would add the U.S. parent's known 
foreign shares and divide the sum by the number of the U.S. parent's 
total outstanding shares. In this example, the licensee's U.S. parent 
would be calculated as having an aggregate 10 percent foreign equity 
interests and 10 percent foreign voting interests (6 + 4 foreign shares 
= 10 foreign shares; 10 foreign shares divided by 100 total outstanding 
shares = 10 percent). Thus, in this example, the licensee would be 
deemed compliant with Section 310(b)(4).
    53. The extrapolation approach supported by several commenters 
would assume that the percentage of unknown equity and voting interests 
that are foreign is the same as the percentage of known equity and 
voting interests that are foreign. The Commission finds it unnecessary 
to apply any presumed percentage of foreign ownership to the 
unidentifiable shareholders of a U.S. public company in light of the 
Commission's finding that small, unknown interest holders, as a general 
rule, do not have the ability or pose a realistic potential to exert 
influence of control over such company.\36\
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    \36\ Likewise, the Commission declines to adopt an approach that 
would apply another multiple to the remaining unknown equity and 
voting interests.
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    54. The Commission also asked whether the public interest would be 
served by permitting a U.S. public company to have up to an aggregate 
less than 50 percent (or some higher level) non-controlling foreign 
investment, even with individual investments that may be required to be 
reported under the Exchange Act Rule 13d-1, without individual review 
and approval. The Commission declines to do so in this Report and 
Order. The Commission's actions in this Report and Order provide a more 
carefully tailored approach that addresses the commenters' concerns in 
a way that is consistent with the Commission's statutory obligations. 
The Commission intends to monitor how the rules respond to the needs 
and concerns of interested parties, and may review these issues again 
at a later date once the effectiveness of the new rules is evaluated 
and assessed.
    55. Finally, the Commission declines to adopt 21st Century Fox's 
suggestion that the Commission permit broadcast licensees to determine 
compliance with the foreign voting prong of Section 310(b)(4) by 
counting shares of stock actually voted, rather than voting shares

[[Page 86596]]

merely held by non-U.S. shareholders. The Commission finds that a 
foreign beneficial owner of U.S. public company shares that is known to 
the company may have the ability, in a particular case, to exert 
influence over the company regardless of whether the beneficial owner 
decides to vote its shares on any given matter that requires 
shareholder approval. The Commission finds that the calculation 
approach adopted here will rationalize the process for licensees' 
determinations of compliance with Section 310(b)--with concomitant 
reductions in the costs and burdens associated with determinations of 
compliance--without disturbing the substantive standards for its public 
interest review of foreign ownership.

Compliance Procedures

    56. The Commission concludes that monitoring is a reasonable 
approach to ensure compliance with the statute and individual foreign 
ownership rulings. As discussed in below, the Commission formalizes the 
current equitable practice of recognizing a licensee's good faith 
efforts to comply with the Section 310(b) requirements, the terms and 
conditions of a licensee's Section 310(b)(4) ruling, and the 
Commission's rules.
    57. Monitoring Compliance. The Commission declines to adopt the 
periodic compliance and monitoring options proposed by commenters. The 
Commission finds that limiting monitoring of foreign ownership levels 
to two- or four-year intervals would not adequately ensure that 
entities are maintaining compliance with Section 310(b) and/or any 
relevant foreign ownership rulings. In light of significant steps taken 
in this Report and Order to simplify the process for U.S. public 
companies in determining their foreign ownership levels, however, the 
Commission finds that it is reasonable and appropriate to require 
companies to ensure their foreign ownership levels are in compliance 
with the statutory foreign ownership limits and/or their relevant 
foreign ownership rulings.\37\
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    \37\ The Commission finds that it is reasonable to require 
privately held entities to monitor their foreign ownership levels, 
but also continue to consider mitigating circumstances in that 
context.
---------------------------------------------------------------------------

    58. This approach is consistent with Commission practice and 
precedent. In the 2013 Foreign Ownership Second Report and Order, the 
Commission stated that licensees that receive a foreign ownership 
ruling have an obligation to monitor and stay ahead of changes in their 
foreign ownership levels to ensure that the licensee obtains Commission 
approval before a change in foreign ownership renders the licensee out 
of compliance with its ruling(s) or the Commission's rules. The 
Commission determined that, in the context of common carrier wireless 
licensees, it would not require periodic certification of compliance 
with its foreign ownership rulings, but would require certification 
whenever a licensee files an application with the Commission for a new 
license, a transfer of control, or an assignment of license that does 
not also require the filing of a petition for declaratory ruling under 
the Commission's Section 310(b)(3) forbearance approach or under 
Section 310(b)(4), as well as certification in renewal 
applications.\38\
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    \38\ Several common carrier and broadcast forms require periodic 
certification regarding compliance with the foreign ownership limits 
(e.g., FCC Forms 312, 314-316, 601, 603, 608).
---------------------------------------------------------------------------

    59. The Commission reiterates that licensees, their controlling 
parent companies, and other entities in the licensee's vertical 
ownership chain may choose, but are not required, to place restrictions 
in their bylaws or other organizational documents to enable the 
licensee to ensure continued compliance with the terms of its ruling. 
Finally, the Commission encourages broadcast and common carrier 
licensees to observe the specific monitoring \39\ and compliance tools 
identified in the 2015 Pandora Declaratory Ruling.\40\
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    \39\ However, the Commission declines to require U.S. public 
companies, as a matter of course, to send out NOBO letters to obtain 
citizenship information, as was required in the Pandora Declaratory 
Ruling.
    \40\ Although the Commission declines to impose a specific 
periodic certification requirement here, the Commission or the 
Bureaus may consider such requirements and conditions where 
appropriate based on specific facts and circumstances in a 
particular case, in order to ensure continuing compliance with the 
statute, the Commission's rules, procedures and policies.
---------------------------------------------------------------------------

    60. Remedial Procedures. Under the methodology set forth in the 
rules adopted in this Report and Order, U.S. public companies will rely 
on ownership information that is known or reasonably should be known to 
the U.S. public company in the ordinary course of business, including 
information obtained from SEC filings, to assess compliance with 
Section 310(b)(3) and Section 301(b)(4). In certain situations, a 
company relying on information gleaned from SEC filings in the ordinary 
course of business to make its foreign ownership determination may not 
become aware of new investments in the company until after a 
transaction has occurred and an investor discloses the interest in 
accordance with the SEC's reporting requirements.
    61. Discussed below are certain limited situations relevant to the 
Commission's new rules and consistent with existing Commission 
practice, where a broadcast or common carrier licensee may file a 
petition for declaratory ruling in the exercise of its required due 
diligence to remedy its inadvertent non-compliance with the foreign 
ownership benchmark in Section 310(b)(4) or the terms and conditions of 
the company's existing Section 310(b)(4) ruling with reasonable 
assurance that the Commission will not take enforcement action. In 
providing the following clarifications, the Commission formalizes in 
the limited context of U.S. public company compliance with Section 
310(b) what has been the equitable practice of the Commission in 
recognizing a licensee's good faith efforts to comply with the Section 
310(b) statutory requirements, the terms and conditions of a licensee's 
Section 310(b)(4) ruling, and the Commission's rules.\41\
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    \41\ The clarification is consistent with the Commission's long-
held view that the 25 percent foreign ownership benchmark in Section 
310(b)(4) may be exceeded only after the Commission affirmatively 
finds that the aggregate foreign ownership of a licensee's 
controlling U.S. parent company in excess of that amount is in the 
public interest.
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    62. Where a licensee's controlling U.S. parent is an eligible U.S. 
public company, the licensee may file a remedial petition for 
declaratory ruling under Section 310(b)(4) seeking approval of the U.S. 
parent's above-benchmark, aggregate foreign ownership interests or 
approval of any particular foreign equity and/or voting interests that 
require specific approval under the licensee's existing Section 
310(b)(4) ruling. Alternatively, the U.S. parent has the option to 
remedy the non-compliance by, for example, redeeming the foreign 
interest(s) that rendered the licensee non-compliant with Section 
310(b)(4) or the licensee's existing Section 310(b)(4) ruling. In 
either case, the Commission does not, as a general rule, expect to take 
enforcement action related to the non-compliance provided that: (1) The 
licensee notifies the relevant Bureau by letter no later than 10 days 
after learning of the investment(s) that rendered the licensee non-
compliant and specifies in the letter that it will file a petition for 
declaratory ruling or, alternatively, take remedial action to come into 
compliance within 30 days of the date it learned of the non-compliant 
foreign interest(s); and (2) the licensee demonstrates in its petition 
for declaratory ruling (or in a letter notifying the relevant Bureau 
that the non-compliance has been timely remedied) that the licensee's 
non-compliance with the Section 310(b)(4)

[[Page 86597]]

benchmark or the terms of the licensee's existing Section 310(b)(4) 
ruling was due solely to circumstances beyond the licensee's control 
that were not reasonably foreseeable to or known by the licensee with 
the exercise of the required due diligence.
    63. Where the licensee has opted to file a Section 310(b)(4) 
petition, the Commission will not require that the licensee's U.S. 
parent redeem the non-compliant foreign interest(s) or take other 
action to remedy the non-compliance during the pendency of its 
petition. If the Commission ultimately declines to approve the 
petition, however, the licensee must have a mechanism available to come 
into compliance with Section 310(b)(4) or the terms of its existing 
ruling, as relevant, within 30 days following the Commission's 
decision. The Commission reserves the right to require immediate 
remedial action by the licensee where the Commission finds in a 
particular case that the public interest requires such action--for 
example, where the Commission finds, after consultation with the 
relevant Executive Branch agencies, that the foreign interest presents 
national security or other significant concerns that require immediate 
mitigation.
    64. The Commission also clarifies that a publicly traded broadcast 
licensee that is, or becomes, non-compliant with the 20 percent 
statutory limit in Section 310(b)(3) must take steps to come into 
compliance immediately upon learning of the non-compliance. The 
Commission does not expect to take enforcement action related to the 
broadcast licensee's non-compliance provided that: (1) The licensee 
notifies the relevant Bureau by letter no later than 10 days after 
learning of the investment(s) that rendered the licensee non-compliant 
with Section 310(b)(3) and specifies in the letter that it will take 
remedial action to come into compliance within 30 days of the date it 
learned of the non-compliant foreign interest(s); and (2) the licensee 
sufficiently explains that its non-compliance with Section 310(b)(3) 
was due solely to circumstances beyond the licensee's control that were 
not reasonably foreseeable to or known by the licensee with the 
exercise of the required due diligence. In the case of a publicly 
traded common carrier licensee that is, or becomes, non-compliant with 
Section 310(b)(3), the common carrier licensee may be eligible to file 
a petition for declaratory ruling under the Commission's Section 
310(b)(3) forbearance approach. In such a case, the common carrier 
licensee will have the option of following the remedial procedures 
specified above with respect to publicly traded U.S. parent companies.
    65. The Commission does not expect the Commission to take 
enforcement action related to a licensee's non-compliance with the 
statutory foreign ownership limits or the terms of a licensee's 
existing foreign ownership ruling where the Commission finds that the 
broadcast or common carrier licensee has satisfied the burden of 
demonstrating that: (1) The licensee exercised due diligence in 
monitoring its foreign ownership or the foreign ownership of its 
controlling U.S. parent, as relevant, including whether there are stock 
redemption provisions in the licensee's or controlling U.S. parent's 
corporate charter and/or other provisions to promptly remedy foreign 
ownership violations; and (2) enforcement action by the Commission is 
not warranted because the licensee's non-compliance with the statutory 
foreign ownership limits or the terms of the licensee's existing 
foreign ownership ruling was due solely to circumstances beyond the 
licensee's control that were not reasonably foreseeable to or known by 
the licensee with the exercise of the requisite diligence. By avoiding 
the implications of changes in citizenship of the unidentifiable 
shareholders of a U.S. public company, the Commission's new rules will 
substantially reduce the risk that such a situation will occur.
    66. The Commission does not in this Report and Order change 
Commission policy requiring all licensees, including those who use this 
methodology, to obtain Commission approval before their aggregate 
direct or indirect foreign ownership exceeds the relevant statutory 
limits in Section 310(b)(3) or 310(b)(4). All licensees have an 
affirmative duty to monitor their foreign equity and voting interests. 
All licensees must calculate these interests in accordance with the 
Commission's foreign ownership rules and policies. Further, all 
licensees must otherwise ensure continuing compliance with the 
provisions of Section 310(b) of the Act.

Privately Held Entities

    67. The Commission affirms its tentative finding in the 2015 
Foreign Ownership NPRM that privately held entities should have 
knowledge of all of their owners, including their citizenship, and 
should be able to track their foreign ownership levels relatively 
easily. These entities do not face the same challenges in identifying 
shareholders/interest holders as publicly traded companies (e.g., 
shares held largely in the name of a bank or broker), and they have 
greater flexibility to enact controls--such as restrictions on the 
transfer of ownership interests--necessary to ensure continued 
compliance with Section 310(b). Accordingly, the Commission finds that 
it is reasonable to require privately held entities to continue to 
account for the ownership of all their voting and non-voting equity 
interests consistent with the Commission's policies and procedures.
    68. However, a privately held entity may use the methodology 
adopted in this Report and Order that is applicable to U.S. publicly 
traded companies, e.g., if, in a particular case, there are significant 
impediments that prevent a privately held entity from conducting an up-
the-chain analysis to ascertain all of its indirect ownership 
interests, including non-voting equity interests held by remote, 
insulated investors.\42\
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    \42\ Commission staff frequently works with private entities to 
address and resolve impediments to identifying ownership interests, 
and the Commission expects that this collaborative process will 
continue as private entities explore whether it is appropriate to 
rely on the revised methodology the Commission adopts today for U.S. 
publicly traded companies.
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Legal Authority Under Section 310(b)

    69. As required by Sections 310(b)(3) and 310(b)(4), the Commission 
assesses whether more than 20 percent of the capital stock of the 
licensee or whether more than 25 percent of the capital stock of the 
licensee's direct or indirect controlling U.S. parent is owned of 
record or voted by aliens or their representatives or by a foreign 
government or representative thereof or by any corporation organized 
under the laws of a foreign country. The Commission has long held that 
any equity or voting interest held by an individual other than a U.S. 
citizen or by a foreign government or an entity organized under the 
laws of a foreign government must be counted in the application of the 
statutory limits. The list of cognizable interests includes nearly all 
forms of equity and voting interests held in the licensee and its 
controlling U.S. parent. Specifically, in applying the statutory 
foreign ownership limits, the Commission has interpreted the term 
``capital stock,'' as it applies to non-corporate entities, to 
encompass the many alternative means by which equity and voting 
interests are held in these entities, including partnership interests, 
policyholders of mutual insurance companies, church members, union 
members, and beneficiaries of irrevocable trusts.
    70. The Commission has long recognized the difficulty licensees or 
their controlling U.S. parents face in

[[Page 86598]]

ascertaining their ownership for purposes of complying with Section 
310(b). In 1974, the Commission's Broadcast Bureau recognized that it 
is impossible to identify the citizenship of all of the shares issued 
by a widely held public company. Based on the current record, the 
Commission believes that the methodology adopted in this Report and 
Order with respect to U.S. public companies is a reasonable approach to 
implementing the provisions of Sections 310(b)(3) and 310(b)(4), which 
establish limits of 20 percent and 25 percent, respectively, of the 
capital stock ``owned of record'' or voted by foreign investors. The 
Commission's approach is consistent with the history and purpose of 
that phrase as adopted in the Communications Act of 1934.
    71. The provisions that became Section 310(b)(3) and 310(b)(4) in 
their current form were enacted as part of the Communications Act of 
1934. The Radio Act of 1927 had included a version of what is now 
Section 310(b)(3)--which applies to interests held in the licensee--but 
not to holding companies. During the Senate hearings, the President of 
International Telephone & Telegraph Corporation identified the 
challenges associated with ``practical compliance'' with such a 
requirement for a public company. He noted that ``no corporation is 
ever in a position to know who are the real owners of its stock.'' As 
he explained, ``All it knows is who are registered as such on its 
transfer books.'' Thus, the language of the bill then before the 
committee, which covered all shares ``owned'' or voted by foreign 
investors, was in his view ``totally impractical in its present form.''
    72. Senator Dill, the Chairman of the committee and floor manager 
of what became the Act, suggested as a solution that the words ``as of 
record'' be added to the bill. While he recognized that this would not 
directly address the problem of ``ownership of record . . . in one 
place and the beneficial and real ownership . . . in an entirely 
different place,'' he responded: ``I do not know any other way.'' He 
rejected the alternative of ``set[ting] up a secret service system to 
follow down every ownership of stock.'' Following this discussion, the 
bill was amended to change the word ``owned''--in what has become 
Section 310(b)(3) and also in what has become Section 310(b)(4)--to the 
phrase ``owned of record.''
    73. The Commission's methodology is consistent with the recognition 
by Congress, even as early as 1934, of these practical difficulties in 
ascertaining the ownership of the shares of U.S. public companies. 
While at that time only about 10 percent of shares were held on behalf 
of another person, as noted above it is estimated that at least 85 
percent of shares are held in this way today. Thus, as commenters have 
noted, the owner of record for most shares may be (or be holding on 
behalf of) an intermediary bank or broker for the ultimate beneficiary. 
The Commission's methodology requires the licensee to exercise due 
diligence, including but not limited to review and necessary follow-up 
based on SEC filings, to ascertain the ultimate ownership and 
citizenship of its shares. But Congress did not intend for public 
companies to ``set up a secret service system to follow down every 
ownership of stock,'' and the Commission does not require them to do 
so. The Commission thereby gives reasonable meaning to the terms of the 
Act, and avoid unreasonable consequences. Indeed, the Commission has 
previously recognized that in calculating compliance with the Section 
310(b) limits, licensees must ``take reasonable steps'' to ensure such 
compliance. In the past, for public companies such steps have included 
periodic surveys and random sampling of shareholders, but the 
Commission has also permitted public companies to use other methods. 
The Commission's overarching principle has been, and continues to be, 
that a public company should include foreign ownership information 
``that [it] has reason to know.'' Based on the record of this 
proceeding demonstrating the impracticabilities of using surveys and 
random sampling to identify foreign ownership when an estimated 85 
percent of shares are now held of record on behalf of other persons, 
the Commission believes that its methodology, which includes a due 
diligence standard, is a reasonable one that is consistent with its 
prior guidance.\43\
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    \43\ For the reasons stated above, the Commission agrees that it 
is inappropriate to rely on mailing addresses as a proxy for 
citizenship. But the Commission believes that its methodology, which 
includes a due diligence standard, constitutes a reasonable 
methodology for use by public companies, and the Commission agrees 
with the views of commenters that it is not necessary or appropriate 
to require any methodology for identifying foreign ownership of 
shares in public companies that hold or control broadcast licenses 
that differs from that applicable in the common carrier context.
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    74. In any event, as a separate and independent basis for adopting 
the process described in this Report and Order for demonstrating 
compliance with Section 310(b)(4), Section 310(b)(4) provides the 
Commission discretion to allow foreign ownership of a licensee's direct 
or indirect controlling U.S. parent to exceed 25 percent unless the 
Commission finds that such ownership is inconsistent with the public 
interest. The 2015 Foreign Ownership NPRM requested comment on whether 
there is a legal and policy basis for concluding that the public 
interest would be served by permitting small foreign equity and/or 
voting interests in U.S. public companies--e.g., equity or voting 
interests that are not required to be reported under Exchange Act Rule 
13d-1--without Commission review and approval, even in circumstances 
where the U.S. public company may have aggregate foreign ownership (or 
aggregate foreign and unknown ownership) exceeding 25 percent. Pursuant 
to the discretion afforded by Section 310(b)(4), the Commission 
determines, on a blanket basis, that unknown equity or voting interests 
held directly or indirectly in a licensee's publicly traded U.S. parent 
by a single foreign investor in an amount no greater than 5 percent (or 
no greater than 10 percent, in the case of such interests held by a 
qualified institutional investor) do not raise public interest concerns 
sufficient to outweigh the difficulties of identifying them. Thus, 
licensees subject to Section 310(b)(4) will no longer be required to 
seek Commission approval for proposed foreign ownership, except when 
the aggregate foreign ownership by greater than 5 percent interest 
holders (or, in the case of qualified institutional investors, greater 
than 10 percent interest holders), together with any other known or 
reasonably should be known foreign shareholders, exceeds 25 percent of 
the U.S. parent's capital stock.
    75. The disclosure requirements of Section 13(d) of the Exchange 
Act informed the Commission's decision, in the 2013 Foreign Ownership 
Second Report and Order, to require Section 310(b)(4) petitions filed 
by common carrier licensees to identify and request specific approval 
only for those foreign investors that hold or would hold, directly or 
indirectly, more than 5 percent, and in the case of a qualified 
institutional investor, more than 10 percent of the U.S. parent's 
equity and/or voting interests, or a controlling interest. The 
Commission found that it could exclude a company's 5 percent or less 
interest holders from the specific approval requirements with little 
risk of overlooking a foreign investor that possesses a realistic 
potential for influencing or controlling a licensee. The Commission 
believes this determination applies with equal force for purposes of 
the Section 310(b)(4) public interest finding made here.

[[Page 86599]]

    76. Based on the Commission's understanding of the realities of 
today's marketplace for the equity securities of public companies and 
its experience in assessing foreign ownership of common carrier 
licensees, the Commission acknowledges that smaller, unknown interest 
holders that hold 5 percent or less of a U.S. public company's 
outstanding shares or qualified institutional investors that hold 
interests of 10 percent or less are tracked somewhat less directly, 
based largely on information obtained from Form 13F reports that are 
filed quarterly with the SEC by certain institutional investment 
managers. Such institutional ownership information about U.S. publicly 
traded equities is available from various sources, and typically is 
monitored in the ordinary course of business by a company whose stock 
trades publicly on U.S. securities exchanges.
    77. The Commission also recognizes and find that interests that are 
not known to a U.S. public company (generally because they are not 
subject to reporting requirements under the U.S. federal securities 
laws and the regulations thereunder), and that the public company 
cannot reasonably be expected to know in the ordinary course of 
business, are not contrary to the public interest in the absence of 
countervailing evidence and do not need to be included for purposes of 
calculating a licensee's aggregate levels of foreign ownership under 
Section 310(b). However, the Commission remains concerned that voting 
and non-voting equity investors that are known to a public company may 
have the ability in a particular case to exert influence over the 
affairs of the company.\44\
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    \44\ In adopting the equity/debt plus (EDP) rule in the context 
of the broadcast attribution rules, the Commission observed, inter 
alia, that preferred stockholders which do not have voting rights in 
a company ``might exert significant influence through contractual 
rights or other methods of access to a licensee,'' such as 
negotiating for the right to select the persons who will run for the 
board of directors. While such opportunities may be more limited in 
the case of a public company, as compared to a privately held 
company, the Commission believes such opportunities may nonetheless 
exist, particularly where a company has one or more classes of stock 
that are not registered under Section 12 of the Exchange Act.
---------------------------------------------------------------------------

    78. The Commission believes that the public interest benefits of 
disregarding such smaller foreign interests that cannot be identified 
consistent with the methodology herein outweigh any potential costs of 
doing so and will allow companies to focus their efforts on 
ascertaining the citizenship of those foreign interests that may 
present a realistic potential to influence or control the company, 
rather than on those interests that are not influential. In addition, 
the methodology will provide certainty and consistency in 
implementation of the statute, while reducing the burdens associated 
with a public company's ascertainment of its foreign equity and voting 
interests. Commenters have stated that this will, in turn, promote 
public company financing that has access to foreign investment, and may 
encourage reciprocal trade benefits.

Corrections and Clarifications of Existing Rules

    79. The Commission adopts corrections and clarifications to the 
rules. First, in Section 1.5001 of the final rules, which lists the 
required contents of petitions for declaratory ruling, the Commission 
adopts its proposal to include a cross-reference to Section 1.5000(c), 
which imposes the requirement that each applicant, licensee, or 
spectrum lessee filing a Section 310(b) petition for declaratory ruling 
certify to the information contained in the petition in accordance with 
the provisions of Section 1.16 of the Commission's rules.\45\ As 
indicated in the 2015 Foreign Ownership NPRM, the Commission's 
experience is that it is not uncommon for petitions to be filed without 
the required certification and a cross-reference to the certification 
requirement will highlight to filers this critical aspect of our rules.
---------------------------------------------------------------------------

    \45\ The certification requirement at Section 1.990(c) of the 
Commission's rules is now recodified at Section 1.5000(c). The 
certification requires a statement that the applicant, licensee and/
or spectrum lessee has calculated the ownership interests disclosed 
in its petition based upon its review of the Commission's rules and 
that the interests disclosed satisfy each of the pertinent standards 
and criteria set forth in the rules.
---------------------------------------------------------------------------

    80. Second, the Commission adopts its proposal to include two Notes 
in Section 1.5001(i) of the rules to clarify that certain foreign 
interests of 5 percent or less may require specific approval in 
circumstances where there is direct or indirect foreign investment in 
the U.S. parent in the form of uninsulated partnership interests or 
uninsulated interests held by members of an LLC. Many limited partners 
and LLC members hold small equity interests in their respective 
companies with control of these companies residing in the general 
partner or managing member, respectively. However, for purposes of 
identifying foreign interests that require specific approval (and for 
determining a common carrier licensee's disclosable U.S. and foreign 
interest holders), uninsulated partners and uninsulated LLC members are 
deemed to hold the same voting interest as the partnership or LLC holds 
in the company situated in the next lower tier of the licensee's 
vertical ownership chain. Depending on the particular ownership 
structure presented in the petition, an uninsulated foreign limited 
partner or uninsulated LLC member may require specific approval because 
the voting interest it is deemed to hold in the U.S. parent exceeds 5 
percent and, because it is an uninsulated voting interest, it does not 
qualify as exempt from the specific approval requirements. The 
Commission finds that these two Notes will improve the clarity of the 
specific approval requirements.
    81. Third, the Commission sought comment on whether Commission 
precedent supports the inclusion of additional permissible voting or 
consent rights in the list of investor protections where the rights do 
not, in themselves, result in a limited partnership or LLC interest 
being deemed uninsulated within Section 1.5003 of the proposed rules. 
The Commission similarly requested comment on the inclusion of 
additional permissible minority shareholder protections in Section 
1.5001(i)(5) of the proposed rules. Because no comments were received, 
the Commission declines to adopt additional permissible voting or 
consent rights, or additional permissible minority shareholder 
protections in this proceeding.
    82. Finally, the Commission corrects two cross-references, and 
makes additional clarifying changes as identified in the 2015 Foreign 
Ownership NPRM.

Transition Issues

    83. Consistent with the process adopted in the 2013 Foreign 
Ownership Second Report and Order, the 2015 Foreign Ownership NPRM 
proposed to apply prospectively any changes adopted in this proceeding. 
This approach is appropriate in order to afford the Commission and the 
relevant Executive Branch agencies an opportunity to evaluate the 
potential effects of the new rules on licensees that are subject to 
existing rulings and on pending petitions. No commenter objected to the 
Commission's tentative proposal. Thus, licensees subject to an existing 
ruling as of the effective date of the rules adopted in this proceeding 
will be required to continue to comply with any general and specific 
terms and conditions of their rulings, including Commission rules and 
policies in effect

[[Page 86600]]

at the time the ruling was issued.\46\ Further, licensees may request a 
new ruling under the revised rules adopted herein; however, they are 
not required to do so. Petitions for declaratory ruling that are 
pending before the Commission as of the effective date of the rules 
adopted in this Report and Order will be decided based on the new 
rules.\47\
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    \46\ Licensees with an existing foreign ownership ruling have an 
obligation to seek a new ruling under any revised rules before 
exceeding the scope of their rulings. Failure to meet a condition of 
a foreign ownership ruling may result in monetary sanctions or other 
enforcement action by the Commission.
    \47\ If necessary, parties will be given an opportunity to amend 
any pending foreign ownership petitions to address the revised rules 
adopted herein.
---------------------------------------------------------------------------

Conclusion

    84. In this Report and Order, the Commission adopts a tailored 
application of the existing rules for review of foreign ownership of 
common carrier licensees to foreign ownership of broadcast licensees. 
The Commission also reforms the methodology used by common carrier and 
broadcast licensees that are, or are controlled by, U.S. public 
companies to assess compliance with the foreign ownership limits in 
Sections 310(b)(3) and 310(b)(4) of the Act. As discussed above, the 
Commission determines that these actions are in the public interest and 
will continue to protect important interests related to national 
security, law enforcement, foreign policy, and trade policy, while 
reducing regulatory burdens and costs, providing greater transparency 
and predictability, and facilitating investment in U.S. broadcast and 
telecommunications infrastructure.

Regulatory Flexibility Act

    85. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Certification was incorporated into the 2015 
Foreign Ownership NPRM. Pursuant to the Regulatory Flexibility Act of 
1980, as amended, the Commission's Final Regulatory Flexibility 
Certification relating to this Report and Order is included below.

Paperwork Reduction Act of 1995

    86. This Report and Order contains new or modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. The requirements will be submitted to the 
Office of Management and Budget (OMB) for review under Section 3507(d) 
of the PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the new or modified information collection 
requirements contained in this proceeding. In addition, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission previously sought specific comment on 
how it might further reduce the information collection burden for small 
business concerns with fewer than 25 employees. In the Report and 
Order, we extend the streamlined rules and procedures developed for 
foreign ownership reviews for common carrier and certain aeronautical 
licensees under Section 310(b)(4) of the Act to broadcast licensees, 
with certain modifications to tailor them to the broadcast context. We 
also reform the methodology used by common carrier and broadcast 
licensees that are, or are controlled by, U.S. public companies to 
assess compliance with the foreign ownership limits in Sections 
310(b)(3) and 310(b)(4) of the Act. We have assessed the effects of the 
new rules on small business concerns. We find that the streamlined 
rules and procedures adopted in the Report and Order will minimize the 
information collection burden on licensees subject to Section 310(b), 
including small businesses.
    87. In this Report and Order, the Commission extends the 
streamlined rules and procedures developed for foreign ownership 
reviews for common carrier and certain aeronautical licensees under 
Section 310(b)(4) of the Act to the broadcast context. The Commission 
also reforms the methodology used by common carrier and broadcast 
licensees that are, or are controlled by, U.S. public companies to 
assess compliance with the foreign ownership limits in Sections 
310(b)(3) and 310(b)(4) of the Act. The Commission has assessed the 
effects of the new rules on small business concerns. The Commission 
finds that the streamlined rules and procedures adopted here will 
minimize the information collection burden on licensees subject to 
310(b), including small businesses.

Congressional Review Act

    88. The Commission will include a copy of this Report and Order in 
a report to be sent to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act. See 5 U.S.C. 
801(a)(1)(A).

Final Regulatory Flexibility Certification

    89. In this Report and Order, the Commission modifies the foreign 
ownership filing and review process for broadcast licensees by 
extending the streamlined rules and procedures developed for foreign 
ownership reviews for common carrier and certain aeronautical licensees 
under Section 310(b)(4) of the Act to the broadcast context with 
certain limited exceptions. Recognizing the difficulty U.S. public 
companies face in ascertaining their foreign ownership, the Commission 
also reforms the methodology used by common carrier and broadcast 
licensees that are, or are controlled by U.S. public companies to 
assess compliance with the foreign ownership limits in Sections 
310(b)(3) and 310(b)(4) of the Act, respectively. In particular, the 
reformed methodology provides a framework for a publicly traded 
licensee or controlling U.S. parent to ascertain its foreign ownership 
using information that is ``known or reasonably should be known'' to 
the company in the ordinary course of business, thereby eliminating the 
need for costly shareholder surveys.
    90. The new rules are designed to provide the industry with greater 
transparency and reduce to the extent possible the regulatory costs and 
burdens that our current foreign ownership policies and procedures 
impose on broadcast, wireless common carrier and aeronautical 
applicants, licensees, and spectrum lessees. In particular, as is the 
case with common carrier licensees, the new standardized filing and 
review process will provide a clearer path for foreign investment in 
broadcast licensees that is more consistent with the U.S. domestic 
investment process, while continuing to protect important interests 
related to national security, law enforcement, foreign policy, and 
trade policy.
    91. The Commission estimates that the rule changes will facilitate 
the filing of Section 310(b)(4) petitions for declaratory ruling by 
broadcast licensees while reducing the time and expense associated with 
such filings. For example, U.S. parent companies of broadcast licensees 
that seek Commission approval to exceed the 25 percent foreign 
ownership benchmark in Section 310(b)(4) will be allowed to include in 
their petitions requests for specific approval of only those foreign 
investors that hold or would hold a direct or indirect equity and/or 
voting interest in the U.S. parent that exceeds 5 percent (or exceeds 
10 percent in certain circumstances), or a controlling interest in the 
U.S. parent. As another example, the new rules will allow the U.S. 
parent to request specific approval for any non-controlling foreign 
investors named in the Section 310(b)(4) petition to increase their 
direct or indirect equity and/or voting interests in the U.S. parent at 
any time after issuance of the Section 310(b)(4) ruling, up to and

[[Page 86601]]

including a non-controlling 49.99 percent equity and/or voting 
interest. Similarly, under the new rules the U.S. parent will be 
permitted to request specific approval for any named foreign investor 
that proposed to acquire a controlling interest of less than 100 
percent to increase the interest to 100 percent at some future time.
    92. The Commission requested comment on measures the Commission can 
take to reduce the costs and burdens associated with licensees' efforts 
to ensure that they remain in compliance with the statutory foreign 
ownership requirements. Although it did not receive comments 
specifically addressing the costs and burdens on small business 
concerns, the Commission has recognized in the past that the current 
requirements impose significant costs and burdens. Similarly, by 
extending the streamlined rules and procedures developed for foreign 
ownership reviews for common carrier to broadcast, the new rules will 
reduce the costs and burdens of broadcast licensees. Also, the 
methodology we adopt will facilitate compliance with the statutory 
foreign ownership limits and the filing of petitions for declaratory 
ruling by publicly-traded licensees while reducing the time and expense 
associated with such filings.
    93. Overall, the new rules will reduce costs and burdens currently 
imposed on licensees, including those licensees that are small 
entities, and streamline and accelerate the foreign ownership review 
process, while continuing to ensure that the Commission has the 
information it needs to carry out our statutory obligations. Moreover, 
the new rules will improve regulatory flexibility for broadcast and 
common carrier licensees for purposes of compliance with Section 
310(b)(3) and 310(b)(4) of the Act and provide an incentive for 
enhanced investment in U.S. broadcast and telecommunications 
infrastructure. Therefore, the Commission certifies that the rules 
adopted in this Report and Order will not have a significant economic 
impact on a substantial number of small entities.\48\ The Commission 
will send a copy of this Report and Order, including a copy of this 
Final Regulatory Flexibility Certification, to the Chief Counsel for 
Advocacy of the SBA. This final certification will also be published in 
the Federal Register.
---------------------------------------------------------------------------

    \48\ In the proceeding in which sections 1.990-1.994 were 
adopted, the Commission certified that the rules and procedures for 
analyzing foreign ownership of common carrier and aeronautical radio 
licensees under Section 310(b)(4), which this Report and Order 
applies with certain modifications to broadcast licensees, would not 
have a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

Ordering Clauses

    94. Accordingly, it is ordered pursuant to Sections 1, 2, 4(i), 
4(j), 303(r), 309, and 310 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 152, 154(i), 154(j), 303(r), 309, and 310 this 
Report and Order is adopted.
    95. It is further ordered that parts 1, 25, 73 and 74 of the 
Commission's rules are amended as set forth in the Final Rules.
    96. It is further ordered that, pursuant to 47 U.S.C. 155(c) and 47 
CFR 0.261, the Chief of the International Bureau is granted delegated 
authority to make technical and ministerial edits to the rules adopted 
in this Report and Order consistent with any technical and ministerial 
modifications made by the Securities and Exchange Commission to its 
rules and forms.
    97. It is further ordered that this Report and Order shall be 
effective 60 days after publication in the Federal Register, except 
those provisions that contain new or modified information collection 
requirements that require approval by the Office of Management and 
Budget under the Paperwork Reduction Act will become effective after 
the Commission publishes a notice in the Federal Register announcing 
such approval and the relevant effective date.
    98. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. 801(a)(1)(A).
    99. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order, including the Final Regulatory 
Flexibility Certification, to the Chief Counsel for Advocacy of the 
Small Business Administration.

List of Subjects in 47 CFR Parts 1, 25, 73 and 74

    Communications common carriers, Radio, Reporting and recordkeeping 
requirements, Satellites, Telecommunications.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1, 25, 73 and 74 as 
follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 is revised to read as follows:

    Authority: 15 U.S.C. 79, et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 160, 201, 225, 227, 303, 309, 310, 332, 1403, 1404, 1451, 
1452, and 1455.


Sec. Sec.  1.990 through 1.994   [Removed]

0
2. In Subpart F, remove the undesignated center heading ``Foreign 
Ownership of Common Carrier, Aeronautical en Route, and Aeronautical 
Fixed Radio Station Licensees'' and Sec. Sec.  1.990 through 1.994.


0
3. Add subpart T to part 1 to read as follows:
Subpart T--Foreign Ownership of Broadcast, Common Carrier, Aeronautical 
En Route, and Aeronautical Fixed Radio Station Licensees
Sec.
1.5000 Citizenship and filing requirements under section 310(b) of 
the Communications Act of 1934, as amended.
1.5001 Contents of petitions for declaratory ruling under section 
310(b) of the Communications Act of 1934, as amended.
1.5002 How to calculate indirect equity and voting interests.
1.5003 Insulation criteria for interests in limited partnerships, 
limited liability partnerships, and limited liability companies.
1.5004 Routine terms and conditions.

Subpart T--Foreign Ownership of Broadcast, Common Carrier, 
Aeronautical En Route, and Aeronautical Fixed Radio Station 
Licensees


Sec.  1.5000  Citizenship and filing requirements under section 310(b) 
of the Communications Act of 1934, as amended.

    The rules in this subpart establish the requirements and conditions 
for obtaining the Commission's prior approval of foreign ownership in 
broadcast, common carrier, aeronautical en route, and aeronautical 
fixed radio station licensees and common carrier spectrum lessees that 
would exceed the 25 percent benchmark in section 310(b)(4) of the Act. 
These rules also establish the requirements and conditions for 
obtaining the Commission's prior approval of foreign ownership in 
common carrier (but not broadcast, aeronautical en route or 
aeronautical fixed) radio station licensees and spectrum lessees that 
would exceed the 20 percent limit in

[[Page 86602]]

section 310(b)(3) of the Act. These rules also establish the 
methodology applicable to eligible U.S. public companies for purposes 
of determining and ensuring their compliance with the foreign ownership 
limitations set forth in sections 310(b)(3) and 310(b)(4) of the Act.
    (a)(1) A broadcast, common carrier, aeronautical en route or 
aeronautical fixed radio station licensee or common carrier spectrum 
lessee shall file a petition for declaratory ruling to obtain 
Commission approval under section 310(b)(4) of the Act, and obtain such 
approval, before the aggregate foreign ownership of any controlling, 
U.S.-organized parent company exceeds, directly and/or indirectly, 25 
percent of the U.S. parent's equity interests and/or 25 percent of its 
voting interests. An applicant for a broadcast, common carrier, 
aeronautical en route or aeronautical fixed radio station license or 
common carrier spectrum leasing arrangement shall file the petition for 
declaratory ruling required by this paragraph at the same time that it 
files its application.
    (2) A common carrier radio station licensee or spectrum lessee 
shall file a petition for declaratory ruling to obtain approval under 
the Commission's section 310(b)(3) forbearance approach, and obtain 
such approval, before aggregate foreign ownership, held through one or 
more intervening U.S.-organized entities that hold non-controlling 
equity and/or voting interests in the licensee, along with any foreign 
interests held directly in the licensee or spectrum lessee, exceeds 20 
percent of its equity interests and/or 20 percent of its voting 
interests. An applicant for a common carrier radio station license or 
spectrum leasing arrangement shall file the petition for declaratory 
ruling required by this paragraph at the same time that it files its 
application. Foreign interests held directly in a licensee or spectrum 
lessee, or other than through U.S.-organized entities that hold non-
controlling equity and/or voting interests in the licensee or spectrum 
lessee, shall not be permitted to exceed 20 percent.

    Note 1 to paragraph (a): Paragraph (a)(1) of this section 
implements the Commission's foreign ownership policies under section 
310(b)(4) of the Act, 47 U.S.C. 310(b)(4), for broadcast, common 
carrier, aeronautical en route, and aeronautical fixed radio station 
licensees and common carrier spectrum lessees. It applies to foreign 
equity and/or voting interests that are held, or would be held, 
directly and/or indirectly in a U.S.-organized entity that itself 
directly or indirectly controls a broadcast, common carrier, 
aeronautical en route, or aeronautical fixed radio station licensee 
or common carrier spectrum lessee. A foreign individual or entity 
that seeks to hold a controlling interest in such a licensee or 
spectrum lessee must hold its controlling interest indirectly, in a 
U.S.-organized entity that itself directly or indirectly controls 
the licensee or spectrum lessee. Such controlling interests are 
subject to section 310(b)(4) and the requirements of paragraph 
(a)(1) of this section. The Commission assesses foreign ownership 
interests subject to section 310(b)(4) separately from foreign 
ownership interests subject to section 310(b)(3).


    Note 2 to paragraph (a):  Paragraph (a)(2) of this section 
implements the Commission's section 310(b)(3) forbearance approach 
adopted in the First Report and Order in IB Docket No. 11-133, FCC 
12-93 (released Aug. 17, 2012), 77 FR 50628 (Aug. 22, 2012). The 
section 310(b)(3) forbearance approach applies only to foreign 
equity and voting interests that are held, or would be held, in a 
common carrier licensee or spectrum lessee through one or more 
intervening U.S.-organized entities that do not control the licensee 
or spectrum lessee. Foreign equity and/or voting interests that are 
held, or would be held, directly in a licensee or spectrum lessee, 
or indirectly other than through an intervening U.S.-organized 
entity, are not subject to the Commission's section 310(b)(3) 
forbearance approach and shall not be permitted to exceed the 20 
percent limit in section 310(b)(3) of the Act, 47 U.S.C. 310(b)(3). 
The Commission's forbearance approach does not apply to broadcast, 
aeronautical en route or aeronautical fixed radio station licenses.

    Example 1.  U.S.-organized Corporation A is preparing an 
application to acquire a common carrier radio license by assignment 
from another licensee. U.S.-organized Corporation A is wholly owned 
and controlled by U.S.-organized Corporation B. U.S.-organized 
Corporation B is 51 percent owned and controlled by U.S.-organized 
Corporation C, which is, in turn, wholly owned and controlled by 
foreign-organized Corporation D. The remaining non-controlling 49 
percent equity and voting interests in U.S.-organized Corporation B 
are held by U.S.-organized Corporation X, which is, in turn, wholly 
owned and controlled by U.S. citizens. Paragraph (a)(1) of this 
section requires that U.S.-organized Corporation A file a petition 
for declaratory ruling to obtain Commission approval of the 51 
percent foreign ownership of its controlling, U.S.-organized parent, 
Corporation B, by foreign-organized Corporation D, which exceeds the 
25 percent benchmark in section 310(b)(4) of the Act for both equity 
interests and voting interests. Corporation A is also required to 
identify and request specific approval in its petition for any 
foreign individual or entity, or ``group,'' as defined in paragraph 
(d) of this section, that holds directly and/or indirectly more than 
5 percent of Corporation B's total outstanding capital stock 
(equity) and/or voting stock, or a controlling interest in 
Corporation B, unless the foreign investment is exempt under Sec.  
1.5001(i)(3).
    Example 2.  U.S.-organized Corporation A is preparing an 
application to acquire a common carrier radio license by assignment 
from another licensee. U.S.-organized Corporation A is 51 percent 
owned and controlled by U.S.-organized Corporation B, which is, in 
turn, wholly owned and controlled by U.S. citizens. The remaining 
non-controlling 49 percent equity and voting interests in U.S.-
organized Corporation A are held by U.S.-organized Corporation X, 
which is, in turn, wholly owned and controlled by foreign-organized 
Corporation Y. Paragraph (a)(2) of this section requires that U.S.-
organized Corporation A file a petition for declaratory ruling to 
obtain Commission approval of the non-controlling 49 percent foreign 
ownership of U.S.-organized Corporation A by foreign-organized 
Corporation Y through U.S.-organized Corporation X, which exceeds 
the 20 percent limit in section 310(b)(3) of the Act for both equity 
interests and voting interests. U.S.-organized Corporation A is also 
required to identify and request specific approval in its petition 
for any foreign individual or entity, or ``group,'' as defined in 
paragraph (d) of this section, that holds an equity and/or voting 
interest in foreign-organized Corporation Y that, when multiplied by 
49 percent, would exceed 5 percent of U.S.-organized Corporation A's 
equity and/or voting interests, unless the foreign investment is 
exempt under Sec.  1.5001(i)(3).
    Example 3.  U.S.-organized Corporation A is preparing an 
application to acquire a common carrier radio license by assignment 
from another licensee. U.S.-organized Corporation A is 51 percent 
owned and controlled by U.S.-organized Corporation B, which is, in 
turn, wholly owned and controlled by foreign-organized Corporation 
C. The remaining non-controlling 49 percent equity and voting 
interests in U.S.-organized Corporation A are held by U.S.-organized 
Corporation X, which is, in turn, wholly owned and controlled by 
foreign-organized Corporation Y. Paragraphs (a)(1) and (a)(2) of 
this section require that U.S.-organized Corporation A file a 
petition for declaratory ruling to obtain Commission approval of 
foreign-organized Corporation C's 100 percent ownership interest in 
U.S.-organized parent, Corporation B, and of foreign-organized 
Corporation Y's non-controlling, 49 percent foreign ownership 
interest in U.S.-organized Corporation A through U.S-organized 
Corporation X, which exceed the 25 percent benchmark and 20 percent 
limit in sections 310(b)(4) and 310(b)(3) of the Act, respectively, 
for both equity interests and voting interests. U.S-organized 
Corporation A's petition also must identify and request specific 
approval for ownership interests held by any foreign individual, 
entity, or ``group,'' as defined in paragraph (d) of this section, 
to the extent required by Sec.  1.5001(i).

    (b) Except for petitions involving broadcast stations only, the 
petition for declaratory ruling required by paragraph (a) of this 
section shall be filed electronically through the International Bureau 
Filing System (IBFS) or any successor system thereto. For information 
on filing a petition through IBFS, see part 1, subpart Y and the IBFS 
homepage at http://www.fcc.gov/ib. Petitions for declaratory ruling 
required

[[Page 86603]]

by paragraph (a) of this section involving broadcast stations only 
shall be filed electronically on the Internet through the Media 
Bureau's Consolidated Database System (CDBS) or any successor system 
thereto when submitted to the Commission as part of an application for 
a construction permit, assignment, or transfer of control of a 
broadcast license; if there is no associated construction permit, 
assignment or transfer of control application, petitions for 
declaratory ruling should be filed with the Office of the Secretary via 
the Commission's Electronic Comment Filing System (ECFS).
    (c)(1) Each applicant, licensee, or spectrum lessee filing a 
petition for declaratory ruling required by paragraph (a) of this 
section shall certify to the information contained in the petition in 
accordance with the provisions of Sec.  1.16 and the requirements of 
this paragraph. The certification shall include a statement that the 
applicant, licensee and/or spectrum lessee has calculated the ownership 
interests disclosed in its petition based upon its review of the 
Commission's rules and that the interests disclosed satisfy each of the 
pertinent standards and criteria set forth in the rules.
    (2) Multiple applicants and/or licensees shall file jointly the 
petition for declaratory ruling required by paragraph (a) of this 
section where the entities are under common control and 
contemporaneously hold, or are contemporaneously filing applications 
for, broadcast, common carrier licenses, common carrier spectrum 
leasing arrangements, or aeronautical en route or aeronautical fixed 
radio station licenses. Where joint petitioners have different 
responses to the information required by Sec.  1.5001, such information 
should be set out separately for each joint petitioner, except as 
otherwise permitted in Sec.  1.5001(h)(2).
    (i) Each joint petitioner shall certify to the information 
contained in the petition in accordance with the provisions of Sec.  
1.16 with respect to the information that is pertinent to that 
petitioner. Alternatively, the controlling parent of the joint 
petitioners may certify to the information contained in the petition.
    (ii) Where the petition is being filed in connection with an 
application for consent to transfer control of licenses or spectrum 
leasing arrangements, the transferee or its ultimate controlling parent 
may file the petition on behalf of the licensees or spectrum lessees 
that would be acquired as a result of the proposed transfer of control 
and certify to the information contained in the petition.
    (3) Multiple applicants and licensees shall not be permitted to 
file a petition for declaratory ruling jointly unless they are under 
common control.
    (d) The following definitions shall apply to this section and 
Sec. Sec.  1.5001 through 1.5004.
    (1) Aeronautical radio licenses refers to aeronautical en route and 
aeronautical fixed radio station licenses only. It does not refer to 
other types of aeronautical radio station licenses.
    (2) Affiliate refers to any entity that is under common control 
with a licensee, defined by reference to the holder, directly and/or 
indirectly, of more than 50 percent of total voting power, where no 
other individual or entity has de facto control.
    (3) Control includes actual working control in whatever manner 
exercised and is not limited to majority stock ownership. Control also 
includes direct or indirect control, such as through intervening 
subsidiaries.
    (4) Entity includes a partnership, association, estate, trust, 
corporation, limited liability company, governmental authority or other 
organization.
    (5) Group refers to two or more individuals or entities that have 
agreed to act together for the purpose of acquiring, holding, voting, 
or disposing of their equity and/or voting interests in the relevant 
licensee, controlling U.S. parent, or entity holding a direct and/or 
indirect equity and/or voting interest in the licensee or U.S. parent.
    (6) Individual refers to a natural person as distinguished from a 
partnership, association, corporation, or other organization.
    (7) Licensee as used in Sec. Sec.  1.5000 through 1.5004 includes a 
spectrum lessee as defined in Sec.  1.9003.
    (8) Privately held company refers to a U.S.- or foreign-organized 
company that has not issued a class of equity securities for which 
beneficial ownership reporting is required by security holders and 
other beneficial owners under sections 13(d) or 13(g) of the Securities 
Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act), 
and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a 
substantially comparable foreign law or regulation.
    (9) Public company refers to a U.S.- or foreign-organized company 
that has issued a class of equity securities for which beneficial 
ownership reporting is required by security holders and other 
beneficial owners under sections 13(d) or 13(g) of the Securities 
Exchange Act of 1934, as amended, 15 U.S.C. 78a et seq. (Exchange Act) 
and corresponding Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a 
substantially comparable foreign law or regulation.
    (10) Subsidiary refers to any entity in which a licensee owns or 
controls, directly and/or indirectly, more than 50 percent of the total 
voting power of the outstanding voting stock of the entity, where no 
other individual or entity has de facto control.
    (11) Voting stock refers to an entity's corporate stock, 
partnership or membership interests, or other equivalents of corporate 
stock that, under ordinary circumstances, entitles the holders thereof 
to elect the entity's board of directors, management committee, or 
other equivalent of a corporate board of directors.
    (12) Would hold as used in Sec. Sec.  1.5000 through 1.5004 
includes interests that an individual or entity proposes to hold in an 
applicant, licensee, or spectrum lessee, or their controlling U.S. 
parent, upon consummation of any transactions described in the petition 
for declaratory ruling filed under paragraphs (a)(1) or (2) of this 
section.
    (e)(1) This section sets forth the methodology applicable to 
broadcast, common carrier, aeronautical en route, and aeronautical 
fixed radio station licensees and common carrier spectrum lessees that 
are, or are directly or indirectly controlled by, an eligible U.S. 
public company for purposes of monitoring the licensee's or spectrum 
lessee's compliance with the foreign ownership limits set forth in 
sections 310(b)(3) and 310(b)(4) of the Act and with the terms and 
conditions of a licensee's or spectrum lessee's foreign ownership 
ruling issued pursuant to paragraph (a)(1) or (2) of this section. For 
purposes of this section:
    (i) An ``eligible U.S. public company'' is a company that is 
organized in the United States; whose stock is traded on a stock 
exchange in the United States; and that has issued a class of equity 
securities for which beneficial ownership reporting is required by 
security holders and other beneficial owners under sections 13(d) or 
13(g) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a 
et seq. (Exchange Act) and corresponding Exchange Act Rule 13d-1, 17 
CFR 240.13d-1;
    (ii) A ``beneficial owner'' of a security refers to any person who, 
directly or indirectly, through any contract, arrangement, 
understanding, relationship, or otherwise has or shares voting power, 
which includes the power to vote, or to direct the voting of, such 
security; and
    (iii) An ``equity interest holder'' refers to any person or entity 
that has the right

[[Page 86604]]

to receive or the power to direct the receipt of dividends from, or the 
proceeds from the sale of, a share.
    (2) An eligible U.S. public company shall use information that is 
known or reasonably should be known by the company in the ordinary 
course of business, as described in this paragraph, to identify the 
beneficial owners and equity interest holders of its voting and non-
voting stock:
    (i) Information recorded in the company's share register;
    (ii) Information as to shares held by officers, directors, and 
employees;
    (iii) Information reported to the Securities and Exchange 
Commission (SEC) in Schedule 13D (17 CFR 240.13d-101) and in Schedule 
13G (17 CFR 240.13d-102), including amendments filed by or on behalf of 
a reporting person, and company-specific information derived from SEC 
Form 13F (17 CFR 249.325);
    (iv) Information as to beneficial owners of shares required to be 
identified in a company's annual reports (or proxy statements) and 
quarterly reports;
    (v) Information as to the identify and citizenship of a beneficial 
owner and/or equity interest holder where such information is actually 
known to the public company as a result of shareholder litigation, 
financing transactions, and proxies voted at annual or other meetings; 
and
    (vi) Information as to the identity and citizenship of a beneficial 
owner and/or equity interest holder where such information is actually 
known to the company by whatever source.
    (3) An eligible U.S. public company shall use information that is 
known or reasonably should be known by the company in the ordinary 
course of business to determine the citizenship of the beneficial 
owners and equity interest holders, identified pursuant to paragraph 
(e)(2) of this section, including information recorded in the company's 
shareholder register, information required to be disclosed pursuant to 
rules of the Securities and Exchange Commission, other information that 
is publicly available to the company, and information received by the 
company through direct inquiries with the beneficial owners and equity 
interest holders where the company determines that direct inquiries are 
necessary to its compliance efforts.
    (4) A licensee or spectrum lessee that is, or is directly or 
indirectly controlled by, an eligible U.S. public company, shall 
exercise due diligence in identifying and determining the citizenship 
of such public company's beneficial owners and equity interest holders.
    (5) To calculate aggregate levels of foreign ownership, a licensee 
or spectrum lessee that is, or is directly or indirectly controlled by, 
an eligible U.S. public company, shall base its foreign ownership 
calculations on such public company's known or reasonably should be 
known foreign equity and voting interests as described in paragraphs 
(e)(2) and (3) of this section. The licensee shall aggregate the public 
company's known or reasonably should be known foreign voting interests 
and separately aggregate the public company's known or reasonably 
should be known foreign equity interests. If the public company's known 
or reasonably should be known foreign voting interests and its known or 
reasonably should be known foreign equity interests do not exceed 25 
percent (20 percent in the case of an eligible publicly traded licensee 
subject to section 310(b)(3)) of the company's total outstanding voting 
shares or 25 percent (20 percent in the case of an eligible publicly 
traded licensee subject to Section 310(b)(3)) of the company's total 
outstanding shares (whether voting or non-voting), respectively, the 
company shall be deemed compliant, under this section, with the 
applicable statutory limit.

    Example.  Assume that a licensee's controlling U.S. parent is an 
eligible U.S. public company. The publicly traded U.S. parent has 
one class of stock consisting of 100 total outstanding shares of 
common voting stock. The licensee (and/or the U.S. parent on its 
behalf) has exercised the required due diligence in following the 
above-described methodology for identifying and determining the 
citizenship of the U.S. parent's ``known or reasonably should be 
known'' interest holders and has identified one foreign shareholder 
that owns 6 shares (i.e., 6 percent of the total outstanding shares) 
and another foreign shareholder that owns 4 shares (i.e., 4 percent 
of the total outstanding shares). The licensee would add the U.S. 
parent's known foreign shares and divide the sum by the number of 
the U.S. parent's total outstanding shares. In this example, the 
licensee's U.S. parent would be calculated as having an aggregate 10 
percent foreign equity interests and 10 percent foreign voting 
interests (6 + 4 foreign shares = 10 foreign shares; 10 foreign 
shares divided by 100 total outstanding shares = 10 percent). Thus, 
in this example, the licensee would be deemed compliant with Section 
310(b)(4).


Sec.  1.5001  Contents of petitions for declaratory ruling under 
section 310(b) of the Communications Act of 1934, as amended.

    The petition for declaratory ruling required by Sec.  1.5000(a)(1) 
and/or (2) shall contain the following information:
    (a) With respect to each petitioning applicant or licensee, provide 
its name; FCC Registration Number (FRN); mailing address; place of 
organization; telephone number; facsimile number (if available); 
electronic mail address (if available); type of business organization 
(e.g., corporation, unincorporated association, trust, general 
partnership, limited partnership, limited liability company, trust, 
other (include description of legal entity)); name and title of officer 
certifying to the information contained in the petition.
    (b) If the petitioning applicant or licensee is represented by a 
third party (e.g., legal counsel), specify that individual's name, the 
name of the firm or company, mailing address and telephone number/
electronic mail address.
    (c)(1) For each named licensee, list the type(s) of radio service 
authorized (e.g., broadcast service, cellular radio telephone service; 
microwave radio service; mobile satellite service; aeronautical fixed 
service). In the case of broadcast licensees, also list the call sign, 
facility identification number (if applicable), and community of 
license or transmit site for each authorization covered by the 
petition.
    (2) If the petition is filed in connection with an application for 
a radio station license or a spectrum leasing arrangement, or an 
application to acquire a license or spectrum leasing arrangement by 
assignment or transfer of control, specify for each named applicant:
    (i) The File No(s). of the associated application(s), if available 
at the time the petition is filed; otherwise, specify the anticipated 
filing date for each application; and
    (ii) The type(s) of radio services covered by each application 
(e.g., broadcast service, cellular radio telephone service; microwave 
radio service; mobile satellite service; aeronautical fixed service).
    (d) With respect to each petitioner, include a statement as to 
whether the petitioner is requesting a declaratory ruling under Sec.  
1.5000(a)(1) and/or (2).
    (e) Disclosable interest holders--direct U.S. or foreign interests 
in the controlling U.S. parent. Paragraphs (e)(1) through (4) of this 
section apply only to petitions filed under Sec.  1.5000(a)(1) and/or 
(2) for common carrier, aeronautical en route, and aeronautical fixed 
radio station applicants or licensees, as applicable. Petitions filed 
under Sec.  1.5000(a)(1) for broadcast licensees shall provide the name 
of any individual or entity that holds, or would hold, directly, an 
attributable interest in the controlling

[[Page 86605]]

U.S. parent of the petitioning broadcast station applicant(s) or 
licensee(s), as defined in the Notes to Sec.  73.3555 of this chapter. 
Where no individual or entity holds, or would hold, directly, an 
attributable interest in the controlling U.S. parent (for petitions 
filed under Sec.  1.5000(a)(1)), the petition shall specify that no 
individual or entity holds, or would hold, directly, an attributable 
interest in the U.S. parent, applicant(s), or licensee(s).
    (1) Direct U.S. or foreign interests of ten percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.5000(a)(1), provide the name of any individual or entity that holds, 
or would hold, directly 10 percent or more of the equity interests and/
or voting interests, or a controlling interest, in the controlling U.S. 
parent of the petitioning common carrier or aeronautical radio station 
applicant(s) or licensee(s) as specified in paragraphs (e)(4)(i) 
through (iv) of this section.
    (2) Direct U.S. or foreign interests of ten percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.5000(a)(2), provide the name of any individual or entity that holds, 
or would hold, directly 10 percent or more of the equity interests and/
or voting interests, or a controlling interest, in each petitioning 
common carrier applicant or licensee as specified in paragraphs 
(e)(4)(i) through (iv) of this section.
    (3) Where no individual or entity holds, or would hold, directly 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the controlling U.S. parent (for petitions 
filed under Sec.  1.5000(a)(1)) or in the applicant or licensee (for 
petitions filed under Sec.  1.5000(a)(2)), the petition shall state 
that no individual or entity holds or would hold directly 10 percent or 
more of the equity interests and/or voting interests, or a controlling 
interest, in the U.S. parent, applicant or licensee.
    (4)(i) Where a named U.S. parent, applicant, or licensee is 
organized as a corporation, provide the name of any individual or 
entity that holds, or would hold, 10 percent or more of the outstanding 
capital stock and/or voting stock, or a controlling interest.
    (ii) Where a named U.S. parent, applicant, or licensee is organized 
as a general partnership, provide the names of the partnership's 
constituent general partners.
    (iii) Where a named U.S. parent, applicant, or licensee is 
organized as a limited partnership or limited liability partnership, 
provide the name(s) of the general partner(s) (in the case of a limited 
partnership), any uninsulated partner, regardless of its equity 
interest, and any insulated partner with an equity interest in the 
partnership of at least 10 percent (calculated according to the 
percentage of the partner's capital contribution). With respect to each 
named partner (other than a named general partner), the petitioner 
shall state whether the partnership interest is insulated or 
uninsulated, based on the insulation criteria specified in Sec.  
1.5003.
    (iv) Where a named U.S. parent, applicant, or licensee is organized 
as a limited liability company, provide the name(s) of each uninsulated 
member, regardless of its equity interest, any insulated member with an 
equity interest of at least 10 percent (calculated according to the 
percentage of its capital contribution), and any non-equity manager(s). 
With respect to each named member, the petitioner shall state whether 
the interest is insulated or uninsulated, based on the insulation 
criteria specified in Sec.  1.5003, and whether the member is a 
manager.

    Note to paragraph (e): The Commission presumes that a general 
partner of a general partnership or limited partnership has a 
controlling (100 percent) voting interest in the partnership. A 
general partner shall in all cases be deemed to hold an uninsulated 
interest in the partnership.

    (f) Disclosable interest holders--indirect U.S. or foreign 
interests in the controlling U.S. parent. Paragraphs (f)(1) through (3) 
of this section apply only to petitions filed under Sec.  1.5000(a)(1) 
and/or Sec.  1.5000(a)(2) for common carrier, aeronautical en route, 
and aeronautical fixed radio station applicants or licensees, as 
applicable. Petitions filed under Sec.  1.5000(a)(1) for broadcast 
licensees shall provide the name of any individual or entity that 
holds, or would hold, indirectly, an attributable interest in the 
controlling U.S. parent of the petitioning broadcast station 
applicant(s) or licensee(s), as defined in the Notes to Sec.  73.3555 
of this chapter. Where no individual or entity holds, or would hold, 
indirectly, an attributable interest in the controlling U.S. parent 
(for petitions filed under Sec.  1.5000(a)(1)), the petition shall 
specify that no individual or entity holds, or would hold, indirectly, 
an attributable interest in the U.S. parent, applicant(s), or 
licensee(s).
    (1) Indirect U.S. or foreign interests of 10 percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.5000(a)(1), provide the name of any individual or entity that holds, 
or would hold, indirectly, through one or more intervening entities, 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the controlling U.S. parent of the petitioning 
common carrier or aeronautical radio station applicant(s) or 
licensee(s). Equity interests and voting interests held indirectly 
shall be calculated in accordance with the principles set forth in 
Sec.  1.5002.
    (2) Indirect U.S. or foreign interests of 10 percent or more or a 
controlling interest. With respect to petitions filed under Sec.  
1.5000(a)(2), provide the name of any individual or entity that holds, 
or would hold, indirectly, through one or more intervening entities, 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the petitioning common carrier radio station 
applicant(s) or licensee(s). Equity interests and voting interests held 
indirectly shall be calculated in accordance with the principles set 
forth in Sec.  1.5002.
    (3) Where no individual or entity holds, or would hold, indirectly 
10 percent or more of the equity interests and/or voting interests, or 
a controlling interest, in the controlling U.S. parent (for petitions 
filed under Sec.  1.5000(a)(1)) or in the petitioning applicant(s) or 
licensee(s) (for petitions filed under Sec.  1.5000(a)(2)), the 
petition shall specify that no individual or entity holds indirectly 10 
percent or more of the equity interests and/or voting interests, or a 
controlling interest, in the U.S. parent, applicant(s), or licensee(s).

    Note to paragraph (f):  The Commission presumes that a general 
partner of a general partnership or limited partnership has a 
controlling interest in the partnership. A general partner shall in 
all cases be deemed to hold an uninsulated interest in the 
partnership.

    (g)(1) Citizenship and other information for disclosable interests 
in common carrier, aeronautical en route, and aeronautical fixed radio 
station applicants and licensees. For each 10 percent interest holder 
named in response to paragraphs (e) and (f) of this section, specify 
the equity interest held and the voting interest held (each to the 
nearest one percent); in the case of an individual, his or her 
citizenship; and in the case of a business organization, its place of 
organization, type of business organization (e.g., corporation, 
unincorporated association, trust, general partnership, limited 
partnership, limited liability company, trust, other (include 
description of legal entity)), and principal business(es).
    (2) Citizenship and other information for disclosable interests in 
broadcast station applicants and licensees. For each attributable 
interest holder named in response to paragraphs (e) and (f) of this 
section, describe the nature of the attributable interest and, if 
applicable, specify the equity interest held and the

[[Page 86606]]

voting interest held (each to the nearest one percent); in the case of 
an individual, his or her citizenship; and in the case of a business 
organization, its place of organization, type of business organization 
(e.g., corporation, unincorporated association, trust, general 
partnership, limited partnership, limited liability company, trust, 
other (include description of legal entity)), and principal 
business(es).
    (h)(1) Estimate of aggregate foreign ownership. For petitions filed 
under Sec.  1.5000(a)(1), attach an exhibit that provides a percentage 
estimate of the controlling U.S. parent's aggregate direct and/or 
indirect foreign equity interests and its aggregate direct and/or 
indirect foreign voting interests. For petitions filed under Sec.  
1.5000(a)(2), attach an exhibit that provides a percentage estimate of 
the aggregate foreign equity interests and aggregate foreign voting 
interests held directly in the petitioning applicant(s) and/or 
licensee(s), if any, and the aggregate foreign equity interests and 
aggregate foreign voting interests held indirectly in the petitioning 
applicant(s) and/or licensee(s). The exhibit required by this paragraph 
must also provide a general description of the methods used to 
determine the percentages, and a statement addressing the circumstances 
that prompted the filing of the petition and demonstrating that the 
public interest would be served by grant of the petition.
    (2) Ownership and control structure. Attach an exhibit that 
describes the ownership and control structure of the applicant(s) and/
or licensee(s) that are the subject of the petition, including an 
ownership diagram and identification of the real party-in-interest 
disclosed in any companion applications. The ownership diagram should 
illustrate the petitioner's vertical ownership structure, including the 
controlling U.S. parent named in the petition (for petitions filed 
under Sec.  1.5000(a)(1)) and either:
    (i) For common carrier, aeronautical en route, and aeronautical 
fixed radio station applicants and licensees, the direct and indirect 
ownership (equity and voting) interests held by the individual(s) and/
or entity(ies) named in response to paragraphs (e) and (f) of this 
section; or
    (ii) For broadcast station applicants and licensees, the 
attributable interest holders named in response to paragraphs (e) and 
(f) of this section. Each such individual or entity shall be depicted 
in the ownership diagram and all controlling interests labeled as such. 
Where the petition includes multiple petitioners, the ownership of all 
petitioners may be depicted in a single ownership diagram or in 
multiple diagrams.
    (i) Requests for specific approval. Provide, as required or 
permitted by this paragraph, the name of each foreign individual and/or 
entity for which each petitioner requests specific approval, if any, 
and the respective percentages of equity and/or voting interests (to 
the nearest one percent) that each such foreign individual or entity 
holds, or would hold, directly and/or indirectly, in the controlling 
U.S. parent of the petitioning broadcast, common carrier or 
aeronautical radio station applicant(s) or licensee(s) for petitions 
filed under Sec.  1.5000(a)(1), and in each petitioning common carrier 
applicant or licensee for petitions filed under Sec.  1.5000(a)(2).
    (1) Each petitioning broadcast, common carrier or aeronautical 
radio station applicant or licensee filing under Sec.  1.5000(a)(1) 
shall identify and request specific approval for any foreign 
individual, entity, or group of such individuals or entities that 
holds, or would hold, directly and/or indirectly, more than 5 percent 
of the equity and/or voting interests, or a controlling interest, in 
the petitioner's controlling U.S. parent unless the foreign investment 
is exempt under paragraph (i)(3) of this section. Equity and voting 
interests held indirectly in the petitioner's controlling U.S. parent 
shall be calculated in accordance with the principles set forth in 
Sec. Sec.  1.5002 and 1.5003. Equity and voting interests held directly 
in a petitioner's controlling U.S. parent that is organized as a 
partnership or limited liability company shall be calculated in 
accordance with Note 1 to paragraph (i)(3)(ii)(C) of this section.

    Note to paragraph (i)(1): Solely for the purpose of identifying 
foreign interests that require specific approval under this 
paragraph (i), broadcast station applicants and licensees filing 
petitions under Sec.  1.5000(a)(1) should calculate equity and 
voting interests in accordance with the principles set forth in 
Sec. Sec.  1.5002 and 1.5003 and not as set forth in the Notes to 
Sec.  73.3555 of this chapter, to the extent that there are any 
differences in such calculation methods. Notwithstanding the 
foregoing, the insulation of limited partnership, limited liability 
partnership, and limited liability company interests for broadcast 
applicants and licensees shall be determined in accordance with Note 
2(f) of Sec.  73.3555 of this chapter.

    (2) Each petitioning common carrier radio station applicant or 
licensee filing under Sec.  1.5000(a)(2) shall identify and request 
specific approval for any foreign individual, entity, or group of such 
individuals or entities that holds, or would hold, directly, and/or 
indirectly through one or more intervening U.S.-organized entities that 
do not control the applicant or licensee, more than 5 percent of the 
equity and/or voting interests in the applicant or licensee unless the 
foreign investment is exempt under paragraph (i)(3) of this section. 
Equity and voting interests held indirectly in the applicant or 
licensee shall be calculated in accordance with the principles set 
forth in Sec. Sec.  1.5002 and 1.5003. Equity and voting interests held 
directly in an applicant or licensee that is organized as a partnership 
or limited liability company shall be calculated in accordance with 
Note 1 to paragraph (i)(3)(ii)(C) of this section.

    Note 1 to paragraphs (i)(1) and (2): Certain foreign interests 
of 5 percent or less may require specific approval under paragraphs 
(i)(1) and (2). See Note 2 to paragraph (i)(3)(ii)(C) of this 
section.


    Note 2 to paragraphs (i)(1) and (2): Two or more individuals or 
entities will be treated as a ``group'' when they have agreed to act 
together for the purpose of acquiring, holding, voting, or disposing 
of their equity and/or voting interests in the licensee and/or 
controlling U.S. parent of the licensee or in any intermediate 
company(ies) through which any of the individuals or entities holds 
its interests in the licensee and/or controlling U.S. parent of the 
licensee.

    (3) A foreign investment is exempt from the specific approval 
requirements of paragraphs (i)(1) and (2) of this section where:
    (i) The foreign individual or entity holds, or would hold, directly 
and/or indirectly, no more than 10 percent of the equity and/or voting 
interests of the U.S. parent (for petitions filed under Sec.  
1.5000(a)(1)) or the petitioning applicant or licensee (for petitions 
filed under Sec.  1.5000(a)(2)); and
    (ii) The foreign individual or entity does not hold, and would not 
hold, a controlling interest in the petitioner or any controlling 
parent company, does not plan or intend to change or influence control 
of the petitioner or any controlling parent company, does not possess 
or develop any such purpose, and does not take any action having such 
purpose or effect. The Commission will presume, in the absence of 
evidence to the contrary, that the following interests satisfy this 
criterion for exemption from the specific approval requirements in 
paragraphs (i)(1) and (2) of this section:
    (A) Where the petitioning applicant or licensee, controlling U.S. 
parent, or entity holding a direct or indirect equity and/or voting 
interest in the applicant/licensee or U.S. parent is a ``public 
company,'' as defined in Sec.  1.5000(d)(9), provided that the foreign 
holder is an institutional investor that is eligible to report its 
beneficial ownership interests in the company's voting, equity

[[Page 86607]]

securities in excess of 5 percent (not to exceed 10 percent) pursuant 
to Exchange Act Rule 13d-1(b), 17 CFR 240.13d-1(b), or a substantially 
comparable foreign law or regulation. This presumption shall not apply 
if the foreign individual, entity or group holding such interests is 
obligated to report its holdings in the company pursuant to Exchange 
Act Rule 13d-1(a), 17 CFR 240.13d-1(a), or a substantially comparable 
foreign law or regulation.

    Example. Common carrier applicant (``Applicant'') is preparing a 
petition for declaratory ruling to request Commission approval for 
foreign ownership of its controlling, U.S.-organized parent (``U.S. 
Parent'') to exceed the 25 percent benchmark in section 310(b)(4) of 
the Act. Applicant does not currently hold any FCC licenses. Shares 
of U.S. Parent trade publicly on the New York Stock Exchange. Based 
on a review of its shareholder records, U.S. Parent has determined 
that its aggregate foreign ownership on any given day may exceed an 
aggregate 25 percent, including a 6 percent common stock interest 
held by a foreign-organized mutual fund (``Foreign Fund''). U.S. 
Parent has confirmed that Foreign Fund is not currently required to 
report its interest pursuant to Exchange Act Rule 13d-1(a) and 
instead is eligible to report its interest pursuant to Exchange Act 
Rule 13d-1(b). U.S. Parent also has confirmed that Foreign Fund does 
not hold any other interests in U.S. Parent's equity securities, 
whether of a class of voting or non-voting securities. Applicant 
may, but is not required to, request specific approval of Foreign 
Fund's 6 percent interest in U.S. Parent.

    Note to paragraph (i)(3)(ii)(A):  Where an institutional 
investor holds voting, equity securities that are subject to 
reporting under Exchange Act Rule 13d-1, 17 CFR 240.13d-1, or a 
substantially comparable foreign law or regulation, in addition to 
equity securities that are not subject to such reporting, the 
investor's total capital stock interests may be aggregated and 
treated as exempt from the 5 percent specific approval requirement 
in paragraphs (i)(1) and (2) of this section so long as the 
aggregate amount of the institutional investor's holdings does not 
exceed 10 percent of the company's total capital stock or voting 
rights and the investor is eligible to certify under Exchange Act 
Rule 13d-1(b), 17 CFR 240.13d-1(b), or a substantially comparable 
foreign law or regulation that it has acquired its capital stock 
interests in the ordinary course of business and not with the 
purpose nor with the effect of changing or influencing the control 
of the company. In calculating foreign equity and voting interests, 
the Commission does not consider convertible interests such as 
options, warrants and convertible debentures until converted, unless 
specifically requested by the petitioner, i.e., where the petitioner 
is requesting approval so those rights can be exercised in a 
particular case without further Commission approval.

    (B) Where the petitioning applicant or licensee, controlling U.S. 
parent, or entity holding a direct and/or indirect equity and/or voting 
interest in the applicant/licensee or U.S. parent is a ``privately 
held'' corporation, as defined in Sec.  1.5000(d)(8), provided that a 
shareholders' agreement, or similar voting agreement, prohibits the 
foreign holder from becoming actively involved in the management or 
operation of the corporation and limits the foreign holder's voting and 
consent rights, if any, to the minority shareholder protections listed 
in paragraph (i)(5) of this section.
    (C) Where the petitioning applicant or licensee, controlling U.S. 
parent, or entity holding a direct and/or indirect equity and/or voting 
interest in the licensee or U.S. parent is ``privately held,'' as 
defined in Sec.  1.5000(d)(8), and is organized as a limited 
partnership, limited liability company (``LLC''), or limited liability 
partnership (``LLP''), provided that the foreign holder is 
``insulated'' in accordance with the criteria specified in Sec.  
1.5003.

    Note 1 to paragraph (i)(3)(ii)(C):  For purposes of identifying 
foreign interests that require specific approval, where the 
petitioning applicant, licensee, or controlling U.S. parent is 
itself organized as a partnership or LLC, a general partner, 
uninsulated limited partner, uninsulated LLC member, and non-member 
LLC manager shall be deemed to hold a controlling (100 percent) 
voting interest in the applicant, licensee, or controlling U.S. 
parent.


    Note 2 to paragraph (i)(3)(ii)(C): For purposes of identifying 
foreign interests that require specific approval, where interests 
are held indirectly in the petitioning applicant, licensee, or 
controlling U.S. parent through one or more intervening partnerships 
or LLCs, a general partner, uninsulated limited partner, uninsulated 
LLC members, and non-member LLC managers shall be deemed to hold the 
same voting interest as the partnership or LLC holds in the company 
situated in the next lower tier of the petitioner's vertical 
ownership chain and, ultimately, the same voting interest as the 
partnership or LLC is calculated as holding in the controlling U.S. 
parent (for petitions filed under Sec.  1.5000(a)(1)) or in the 
applicant or licensee (for petitions filed under Sec.  
1.5000(a)(2)). See Sec.  1.5002(b)(2)(ii)(A) and (b)(2)(iii)(A). 
Where a limited partner or LLC member is insulated, the limited 
partner's or LLC member's voting interest in the controlling U.S. 
parent (for petitions filed under Sec.  1.5000(a)(1)), or in the 
applicant or licensee (for petitions filed under Sec.  1.5000(a)(2)) 
is calculated as equal to the limited partner's or LLC member's 
equity interest in the U.S. parent or in the applicant or licensee, 
respectively. See Sec.  1.5002(b)(2)(ii)(B) and (b)(2)(iii)(B). 
Thus, depending on the particular ownership structure presented in 
the petition, a foreign general partner, uninsulated limited 
partner, LLC member, or non-member LLC manager of an intervening 
partnership or LLC may be deemed to hold an indirect voting interest 
in the controlling U.S. parent or in the petitioning applicant or 
licensee that requires specific approval because the voting interest 
exceeds the 5 percent amount specified in paragraphs (i)(1) and (2) 
of this section and, unless the voting interest is otherwise 
insulated at a lower tier of the petitioner's vertical ownership 
chain, the voting interest would not qualify as exempt from specific 
approval under this paragraph (i)(3)(ii)(C) even in circumstances 
where the voting interest does not exceed 10 percent.

    (4) A petitioner may, but is not required to, request specific 
approval for any other foreign individual or entity that holds, or 
would hold, a direct and/or indirect equity and/or voting interest in 
the controlling U.S. parent (for petitions filed under Sec.  
1.5000(a)(1)) or in the petitioning applicant or licensee (for 
petitions filed under Sec.  1.5000(a)(2)).
    (5) The minority shareholder protections referenced in paragraph 
(i)(3)(ii)(B) of this section consist of the following rights:
    (i) The power to prevent the sale or pledge of all or substantially 
all of the assets of the corporation or a voluntary filing for 
bankruptcy or liquidation;
    (ii) The power to prevent the corporation from entering into 
contracts with majority shareholders or their affiliates;
    (iii) The power to prevent the corporation from guaranteeing the 
obligations of majority shareholders or their affiliates;
    (iv) The power to purchase an additional interest in the 
corporation to prevent the dilution of the shareholder's pro rata 
interest in the event that the corporation issues additional 
instruments conveying shares in the company;
    (v) The power to prevent the change of existing legal rights or 
preferences of the shareholders, as provided in the charter, by-laws or 
other operative governance documents;
    (vi) The power to prevent the amendment of the charter, by-laws or 
other operative governance documents of the company with respect to the 
matters described in paragraph (i)(5)(i) through (v) of this section.
    (6) The Commission reserves the right to consider, on a case-by-
case basis, whether voting or consent rights over matters other than 
those listed in paragraph (i)(5) of this section shall be considered 
permissible minority shareholder protections in a particular case.
    (j) For each foreign individual or entity named in response to 
paragraph (i) of this section, provide the following information:

[[Page 86608]]

    (1) In the case of an individual, his or her citizenship and 
principal business(es);
    (2) In the case of a business organization:
    (i) Its place of organization, type of business organization (e.g., 
corporation, unincorporated association, trust, general partnership, 
limited partnership, limited liability company, trust, other (include 
description of legal entity)), and principal business(es);
    (ii)(A) For common carrier, aeronautical en route, and aeronautical 
fixed radio station applicants and licensees, the name of any 
individual or entity that holds, or would hold, directly and/or 
indirectly, through one or more intervening entities, 10 percent or 
more of the equity interests and/or voting interests, or a controlling 
interest, in the foreign entity for which the petitioner requests 
specific approval. Specify for each such interest holder, his or her 
citizenship (for individuals) or place of legal organization (for 
entities). Equity interests and voting interests held indirectly shall 
be calculated in accordance with the principles set forth in Sec.  
1.5002.
    (B) For broadcast applicants and licensees, the name of any 
individual or entity that holds, or would hold, directly and/or 
indirectly, through one or more intervening entities, an attributable 
interest in the foreign entity for which the petitioner requests 
specific approval. Specify for each such interest holder, his or her 
citizenship (for individuals) or place of legal organization (for 
entities). Attributable interests shall be calculated in accordance 
with the principles set forth in the Notes to Sec.  73.3555 of this 
chapter.
    (iii)(A) For common carrier, aeronautical en route, and 
aeronautical fixed radio station applicants and licensees, where no 
individual or entity holds, or would hold, directly and/or indirectly, 
10 percent or more of the equity interests and/or voting interests, or 
a controlling interest, the petition shall specify that no individual 
or entity holds, or would hold, directly and/or indirectly, 10 percent 
or more of the equity interests and/or voting interests, or a 
controlling interest, in the foreign entity for which the petitioner 
requests specific approval.
    (B) For broadcast applicants and licensees, where no individual or 
entity holds, or would hold, directly and/or indirectly, an 
attributable interest in the foreign entity, the petition shall specify 
that no individual or entity holds, or would hold, directly and/or 
indirectly, an attributable interest in the foreign entity for which 
the petitioner requests specific approval.
    (k) Requests for advance approval. The petitioner may, but is not 
required to, request advance approval in its petition for any foreign 
individual or entity named in response to paragraph (i) of this section 
to increase its direct and/or indirect equity and/or voting interests 
in the controlling U.S. parent of the broadcast, common carrier or 
aeronautical radio station licensee, for petitions filed under Sec.  
1.5000(a)(1), and/or in the common carrier licensee, for petitions 
filed under Sec.  1.5000(a)(2), above the percentages specified in 
response to paragraph (i) of this section. Requests for advance 
approval shall be made as follows:
    (1) Petitions filed under Sec.  1.5000(a)(1). Where a foreign 
individual or entity named in response to paragraph (i) of this section 
holds, or would hold upon consummation of any transactions described in 
the petition, a de jure or de facto controlling interest in the 
controlling U.S. parent, the petitioner may request advance approval in 
its petition for the foreign individual or entity to increase its 
interests, at some future time, up to any amount, including 100 percent 
of the direct and/or indirect equity and/or voting interests in the 
U.S. parent. The petitioner shall specify for the named controlling 
foreign individual(s) or entity(ies) the maximum percentages of equity 
and/or voting interests for which advance approval is sought or, in 
lieu of a specific amount, state that the petitioner requests advance 
approval for the named controlling foreign individual or entity to 
increase its interests up to and including 100 percent of the U.S. 
parent's direct and/or indirect equity and/or voting interests.
    (2) Petitions filed under Sec.  1.5000(a)(1) and/or (2). Where a 
foreign individual or entity named in response to paragraph (i) of this 
section holds, or would hold upon consummation of any transactions 
described in the petition, a non-controlling interest in the 
controlling U.S. parent of the licensee, for petitions filed under 
Sec.  1.5000(a)(1), or in the licensee, for petitions filed under Sec.  
1.5000(a)(2), the petitioner may request advance approval in its 
petition for the foreign individual or entity to increase its 
interests, at some future time, up to any non-controlling amount not to 
exceed 49.99 percent. The petitioner shall specify for the named 
foreign individual(s) or entity(ies) the maximum percentages of equity 
and/or voting interests for which advance approval is sought or, in 
lieu of a specific amount, shall state that the petitioner requests 
advance approval for the named foreign individual(s) or entity(ies) to 
increase their interests up to and including a non-controlling 49.99 
percent equity and/or voting interest in the licensee, for petitions 
filed under Sec.  1.5000(a)(2), or in the controlling U.S. parent of 
the licensee, for petitions filed under Sec.  1.5000(a)(1).
    (l) Each applicant, licensee, or spectrum lessee filing a petition 
for declaratory ruling shall certify to the information contained in 
the petition in accordance with the provisions of Sec.  1.16 and the 
requirements of Sec.  1.5000(c)(1).


Sec.  1.5002  How to calculate indirect equity and voting interests.

    (a) The criteria specified in this section shall be used for 
purposes of calculating indirect equity and voting interests under 
Sec.  1.5001.
    (b)(1) Equity interests held indirectly in the licensee and/or 
controlling U.S. parent. Equity interests that are held by an 
individual or entity indirectly through one or more intervening 
entities shall be calculated by successive multiplication of the equity 
percentages for each link in the vertical ownership chain, regardless 
of whether any particular link in the chain represents a controlling 
interest in the company positioned in the next lower tier.

    Example (for rulings issued under Sec.  1.5000(a)(1)). Assume 
that a foreign individual holds a non-controlling 30 percent equity 
and voting interest in U.S.-organized Corporation A which, in turn, 
holds a non-controlling 40 percent equity and voting interest in 
U.S.-organized Parent Corporation B. The foreign individual's equity 
interest in U.S.-organized Parent Corporation B would be calculated 
by multiplying the foreign individual's equity interest in U.S.-
organized Corporation A by that entity's equity interest in U.S.-
organized Parent Corporation B. The foreign individual's equity 
interest in U.S.-organized Parent Corporation B would be calculated 
as 12 percent (30% x 40% = 12%). The result would be the same even 
if U.S.-organized Corporation A held a de facto controlling interest 
in U.S.-organized Parent Corporation B.

    (2) Voting interests held indirectly in the licensee and/or 
controlling U.S. parent. Voting interests that are held by any 
individual or entity indirectly through one or more intervening 
entities will be determined depending upon the type of business 
organization(s) in which the individual or entity holds a voting 
interest as follows:
    (i) Voting interests that are held through one or more intervening 
corporations shall be calculated by successive multiplication of the 
voting percentages for each link in the vertical ownership chain, 
except that wherever the voting interest for any link in the chain is 
equal to or exceeds 50 percent or represents actual control, it shall 
be

[[Page 86609]]

treated as if it were a 100 percent interest.

    Example (for rulings issued under Sec.  1.5000(a)(1)). Assume 
that a foreign individual holds a non-controlling 30 percent equity 
and voting interest in U.S.-organized Corporation A which, in turn, 
holds a controlling 70 percent equity and voting interest in U.S.-
organized Parent Corporation B. Because U.S.-organized Corporation 
A's 70 percent voting interest in U.S.-organized Parent Corporation 
B constitutes a controlling interest, it is treated as a 100 percent 
interest. The foreign individual's 30 percent voting interest in 
U.S.-organized Corporation A would flow through in its entirety to 
U.S. Parent Corporation B and thus be calculated as 30 percent (30% 
x 100% = 30%).

    (ii) Voting interests that are held through one or more intervening 
partnerships shall be calculated depending upon whether the individual 
or entity holds a general partnership interest, an uninsulated 
partnership interest, or an insulated partnership interest as specified 
in paragraphs (b)(2)(ii)(A) and (B) of this section.
    (A) General partnership and other uninsulated partnership 
interests. A general partner and uninsulated partner shall be deemed to 
hold the same voting interest as the partnership holds in the company 
situated in the next lower tier of the vertical ownership chain. A 
partner shall be treated as uninsulated unless the limited partnership 
agreement, limited liability partnership agreement, or other operative 
agreement satisfies the insulation criteria specified in Sec.  1.5003.
    (B) Insulated partnership interests. A partner of a limited 
partnership (other than a general partner) or partner of a limited 
liability partnership that satisfies the insulation criteria specified 
in Sec.  1.5003 shall be treated as an insulated partner and shall be 
deemed to hold a voting interest in the partnership that is equal to 
the partner's equity interest.

    Note to paragraph (b)(2)(ii): The Commission presumes that a 
general partner of a general partnership or limited partnership has 
a controlling interest in the partnership. A general partner shall 
in all cases be deemed to hold an uninsulated interest in the 
partnership.

    (iii) Voting interests that are held through one or more 
intervening limited liability companies shall be calculated depending 
upon whether the individual or entity is a non-member manager, an 
uninsulated member or an insulated member as specified in paragraphs 
(b)(2)(iii)(A) and (B) of this section.
    (A) Non-member managers and uninsulated membership interests. A 
non-member manager and an uninsulated member of a limited liability 
company shall be deemed to hold the same voting interest as the limited 
liability company holds in the company situated in the next lower tier 
of the vertical ownership chain. A member shall be treated as 
uninsulated unless the limited liability company agreement satisfies 
the insulation criteria specified in Sec.  1.5003.
    (B) Insulated membership interests. A member of a limited liability 
company that satisfies the insulation criteria specified in Sec.  
1.5003 shall be treated as an insulated member and shall be deemed to 
hold a voting interest in the limited liability company that is equal 
to the member's equity interest.


Sec.  1.5003   Insulation criteria for interests in limited 
partnerships, limited liability partnerships, and limited liability 
companies.

    (a) A limited partner of a limited partnership and a partner of a 
limited liability partnership shall be treated as uninsulated within 
the meaning of Sec.  1.5002(b)(2)(ii)(A) unless the partner is 
prohibited by the limited partnership agreement, limited liability 
partnership agreement, or other operative agreement from, and in fact 
is not engaged in, active involvement in the management or operation of 
the partnership and only the usual and customary investor protections 
are contained in the partnership agreement or other operative 
agreement. These criteria apply to any relevant limited partnership or 
limited liability partnership, whether it is the licensee, a 
controlling U.S.-organized parent, or any partnership situated above 
them in the vertical chain of ownership. Notwithstanding the foregoing, 
the insulation of limited partnership and limited liability partnership 
interests for broadcast applicants and licensees shall be determined in 
accordance with Note 2(f) of Sec.  73.3555 of this chapter.
    (b) A member of a limited liability company shall be treated as 
uninsulated for purposes of Sec.  1.5002(b)(2)(iii)(A) unless the 
member is prohibited by the limited liability company agreement from, 
and in fact is not engaged in, active involvement in the management or 
operation of the company and only the usual and customary investor 
protections are contained in the agreement. These criteria apply to any 
relevant limited liability company, whether it is the licensee, a 
controlling U.S.-organized parent, or any limited liability company 
situated above them in the vertical chain of ownership. Notwithstanding 
the foregoing, the insulation of limited liability company interests 
for broadcast applicants and licensees shall be determined in 
accordance with Note 2(f) of Sec.  73.3555 of this chapter.
    (c) The usual and customary investor protections referred to in 
paragraphs (a) and (b) of this section shall consist of:
    (1) The power to prevent the sale or pledge of all or substantially 
all of the assets of the limited partnership, limited liability 
partnership, or limited liability company or a voluntary filing for 
bankruptcy or liquidation;
    (2) The power to prevent the limited partnership, limited liability 
partnership, or limited liability company from entering into contracts 
with majority investors or their affiliates;
    (3) The power to prevent the limited partnership, limited liability 
partnership, or limited liability company from guaranteeing the 
obligations of majority investors or their affiliates;
    (4) The power to purchase an additional interest in the limited 
partnership, limited liability partnership, or limited liability 
company to prevent the dilution of the partner's or member's pro rata 
interest in the event that the limited partnership, limited liability 
partnership, or limited liability company issues additional instruments 
conveying interests in the partnership or company;
    (5) The power to prevent the change of existing legal rights or 
preferences of the partners, members, or managers as provided in the 
limited partnership agreement, limited liability partnership agreement, 
or limited liability company agreement, or other operative agreement;
    (6) The power to vote on the removal of a general partner, managing 
partner, managing member, or other manager in situations where such 
individual or entity is subject to bankruptcy, insolvency, 
reorganization, or other proceedings relating to the relief of debtors; 
adjudicated insane or incompetent by a court of competent jurisdiction 
(in the case of a natural person); convicted of a felony; or otherwise 
removed for cause, as determined by an independent party;
    (7) The power to prevent the amendment of the limited partnership 
agreement, limited liability partnership agreement, or limited 
liability company agreement, or other organizational documents of the 
partnership or limited liability company with respect to the matters 
described in paragraph (c)(1) through (c)(6) of this section.
    (d) The Commission reserves the right to consider, on a case-by-
case basis, whether voting or consent rights over matters other than 
those listed in

[[Page 86610]]

paragraph (c) of this section shall be considered usual and customary 
investor protections in a particular case.


Sec.  1.5004   Routine terms and conditions.

    Foreign ownership rulings issued pursuant to Sec. Sec.  1.5000 
through 1.5004 shall be subject to the following terms and conditions, 
except as otherwise specified in a particular ruling:
    (a)(1) Aggregate allowance for rulings issued under Sec.  
1.5000(a)(1). In addition to the foreign ownership interests approved 
specifically in a licensee's declaratory ruling issued pursuant to 
Sec.  1.5000(a)(1), the controlling U.S.-organized parent named in the 
ruling (or a U.S.-organized successor-in-interest formed as part of a 
pro forma reorganization) may be 100 percent owned, directly and/or 
indirectly through one or more U.S- or foreign-organized entities, on a 
going-forward basis (i.e., after issuance of the ruling) by other 
foreign investors without prior Commission approval. This ``100 percent 
aggregate allowance'' is subject to the requirement that the licensee 
seek and obtain Commission approval before any foreign individual, 
entity, or ``group'' not previously approved acquires, directly and/or 
indirectly, more than 5 percent of the U.S. parent's outstanding 
capital stock (equity) and/or voting stock, or a controlling interest, 
with the exception of any foreign individual, entity, or ``group'' that 
acquires an equity and/or voting interest of 10 percent or less, 
provided that the interest is exempt under Sec.  1.5001(i)(3).
    (2) Aggregate allowance for rulings issued under Sec.  
1.5000(a)(2). In addition to the foreign ownership interests approved 
specifically in a licensee's declaratory ruling issued pursuant to 
Sec.  1.5000(a)(2), the licensee(s) named in the ruling (or a U.S.-
organized successor-in-interest formed as part of a pro forma 
reorganization) may be 100 percent owned on a going forward basis 
(i.e., after issuance of the ruling) by other foreign investors holding 
interests in the licensee indirectly through U.S.-organized entities 
that do not control the licensee, without prior Commission approval. 
This ``100 percent aggregate allowance'' is subject to the requirement 
that the licensee seek and obtain Commission approval before any 
foreign individual, entity, or ``group'' not previously approved 
acquires directly and/or indirectly, through one or more U.S.-organized 
entities that do not control the licensee, more than 5 percent of the 
licensee's outstanding capital stock (equity) and/or voting stock, with 
the exception of any foreign individual, entity, or ``group'' that 
acquires an equity and/or voting interest of 10 percent or less, 
provided that the interest is exempt under Sec.  1.5001(i)(3). Foreign 
ownership interests held directly in a licensee shall not be permitted 
to exceed an aggregate 20 percent of the licensee's equity and/or 
voting interests.

    Note to paragraph (a): Licensees have an obligation to monitor 
and stay ahead of changes in foreign ownership of their controlling 
U.S.-organized parent companies (for rulings issued pursuant to 
Sec.  1.5000(a)(1)) and/or in the licensee itself (for rulings 
issued pursuant to Sec.  1.5000(a)(2)), to ensure that the licensee 
obtains Commission approval before a change in foreign ownership 
renders the licensee out of compliance with the terms and conditions 
of its declaratory ruling(s) or the Commission's rules. Licensees, 
their controlling parent companies, and other entities in the 
licensee's vertical ownership chain may need to place restrictions 
in their bylaws or other organizational documents to enable the 
licensee to ensure compliance with the terms and conditions of its 
declaratory ruling(s) and the Commission's rules.

    Example 1 (for rulings issued under Sec.  1.5000(a)(1)). U.S. 
Corp. files an application for a common carrier license. U.S. Corp. 
is wholly owned and controlled by U.S. Parent, which is a newly 
formed, privately held Delaware Corporation in which no single 
shareholder has de jure or de facto control. A shareholder's 
agreement provides that a five-member board of directors shall 
govern the affairs of the company; five named shareholders shall be 
entitled to one seat and one vote on the board; and all decisions of 
the board shall be determined by majority vote. The five named 
shareholders and their respective equity interests are as follows: 
Foreign Entity A, which is wholly owned and controlled by a foreign 
citizen (5 percent); Foreign Entity B, which is wholly owned and 
controlled by a foreign citizen (10 percent); Foreign Entity C, a 
foreign public company with no controlling shareholder (20 percent); 
Foreign Entity D, a foreign pension fund that is controlled by a 
foreign citizen and in which no individual or entity has a pecuniary 
interest exceeding one percent (21 percent); and U.S. Entity E, a 
U.S. public company with no controlling shareholder (25 percent). 
The remaining 19 percent of U.S. Parent's shares are held by three 
foreign-organized entities as follows: F (4 percent), G (6 percent), 
and H (9 percent). Under the shareholders' agreement, voting rights 
of F, G, and H are limited to the minority shareholder protections 
listed in Sec.  1.5001(i)(5). Further, the agreement expressly 
prohibits G and H from becoming actively involved in the management 
or operation of U.S. Parent and U.S. Corp.
    As required by the rules, U.S. Corp. files a section 310(b)(4) 
petition concurrently with its application. The petition identifies 
and requests specific approval for the ownership interests held in 
U.S. Parent by Foreign Entity A and its sole shareholder (5 percent 
equity and 20 percent voting interest); Foreign Entity B and its 
sole shareholder (10 percent equity and 20 percent voting interest), 
Foreign Entity C (20 percent equity and 20 percent voting interest), 
and Foreign Entity D (21 percent equity and 20 percent voting 
interest) and its fund manager (20 percent voting interest). The 
Commission's ruling specifically approves these foreign interests. 
The ruling also provides that, on a going-forward basis, U.S. Parent 
may be 100 percent owned in the aggregate, directly and/or 
indirectly, by other foreign investors, subject to the requirement 
that U.S. Corp. seek and obtain Commission approval before any 
previously unapproved foreign investor acquires more than 5 percent 
of U.S. Parent's equity and/or voting interests, or a controlling 
interest, with the exception of any foreign investor that acquires 
an equity and/or voting interest of ten percent or less, provided 
that the interest is exempt under Sec.  1.991(i)(3).
    In this case, foreign entities F, G, and H would each be 
considered a previously unapproved foreign investor (along with any 
new foreign investors). However, prior approval for F, G and H would 
only apply to an increase of F's interest above 5 percent (because 
the ten percent exemption under Sec.  1.5001(i)(3) does not apply to 
F) or to an increase of G's or H's interest above 10 percent 
(because G and H do qualify for this exemption). U.S. Corp. would 
also need Commission approval before Foreign Entity D appoints a new 
fund manager that is a non-U.S. citizen and before Foreign Entities 
A, B, C, or D increase their respective equity and/or voting 
interests in U.S. Parent, unless the petition previously sought and 
obtained Commission approval for such increases (up to non-
controlling 49.99 percent interests). (See Sec.  1.5001(k)(2).) 
Foreign shareholders of Foreign Entity C and U.S. Entity E would 
also be considered previously unapproved foreign investors. Thus, 
Commission approval would be required before any foreign shareholder 
of Foreign Entity C or U.S. Entity E acquires (1) a controlling 
interest in either company; or (2) a non-controlling equity and/or 
voting interest in either company that, when multiplied by the 
company's equity and/or voting interests in U.S. Parent, would 
exceed 5 percent of U.S. Parent's equity and/or voting interests, 
unless the interest is exempt under Sec.  1.5001(i)(3).
    Example 2 (for rulings issued under Sec.  1.5000(a)(2)). Assume 
that the following three U.S.-organized entities hold non-
controlling equity and voting interests in common carrier Licensee, 
which is a privately held corporation organized in Delaware: U.S. 
corporation A (30 percent); U.S. corporation B (30 percent); and 
U.S. corporation C (40 percent). Licensee's shareholders are wholly 
owned by foreign individuals X, Y, and Z, respectively. Licensee has 
received a declaratory ruling under Sec.  1.5000(a)(2) specifically 
approving the 30 percent foreign ownership interests held in 
Licensee by each of X and Y (through U.S. corporation A and U.S. 
corporation B, respectively) and the 40 percent foreign ownership 
interest held in Licensee by Z (through U.S. corporation C). On a 
going-forward basis, Licensee may be 100 percent owned in the 
aggregate by X, Y, Z, and other foreign investors holding interests 
in Licensee indirectly, through U.S.-organized entities that do not 
control Licensee, subject

[[Page 86611]]

to the requirement that Licensee obtain Commission approval before 
any previously unapproved foreign investor acquires more than 5 
percent of Licensee's equity and/or voting interests, with the 
exception of any foreign investor that acquires an equity and/or 
voting interest of 10 percent or less, provided that the interest is 
exempt under Sec.  1.5001(i)(3). In this case, any foreign investor 
other than X, Y, and Z would be considered a previously unapproved 
foreign investor. Licensee would also need Commission approval 
before X, Y, or Z increases its equity and/or voting interests in 
Licensee unless the petition previously sought and obtained 
Commission approval for such increases (up to non-controlling 49.99 
percent interests). (See Sec.  1.5001(k)(2).)

    (b) Subsidiaries and affiliates. A foreign ownership ruling issued 
to a licensee shall cover it and any U.S.-organized subsidiary or 
affiliate, as defined in Sec.  1.5000(d), whether the subsidiary or 
affiliate existed at the time the ruling was issued or was formed or 
acquired subsequently, provided that the foreign ownership of the 
licensee named in the ruling, and of the subsidiary and/or affiliate, 
remains in compliance with the terms and conditions of the licensee's 
ruling and the Commission's rules.
    (1) The subsidiary or affiliate of a licensee named in a foreign 
ownership ruling issued under Sec.  1.5000(a)(1) may rely on that 
ruling for purposes of filing its own application for an initial 
broadcast, common carrier or aeronautical license or spectrum leasing 
arrangement, or an application to acquire such license or spectrum 
leasing arrangement by assignment or transfer of control provided that 
the subsidiary or affiliate, and the licensee named in the ruling, each 
certifies in the application that its foreign ownership is in 
compliance with the terms and conditions of the foreign ownership 
ruling and the Commission's rules.
    (2) The subsidiary or affiliate of a licensee named in a foreign 
ownership ruling issued under Sec.  1.5000(a)(2) may rely on that 
ruling for purposes of filing its own application for an initial common 
carrier radio station license or spectrum leasing arrangement, or an 
application to acquire such license or spectrum leasing arrangement by 
assignment or transfer of control provided that the subsidiary or 
affiliate, and the licensee named in the ruling, each certifies in the 
application that its foreign ownership is in compliance with the terms 
and conditions of the foreign ownership ruling and the Commission's 
rules.
    (3) The certifications required by paragraphs (b)(1) and (2) of 
this section shall also include the citation(s) of the relevant 
ruling(s) (i.e., the DA or FCC Number, FCC Record citation when 
available, and release date).
    (c) Insertion of new controlling foreign-organized companies. (1) 
Where a licensee's foreign ownership ruling specifically authorizes a 
named, foreign investor to hold a controlling interest in the 
licensee's controlling U.S.-organized parent, for rulings issued under 
Sec.  1.5000(a)(1), or in an intervening U.S.-organized entity that 
does not control the licensee, for rulings issued under Sec.  
1.5000(a)(2), the ruling shall permit the insertion of new, controlling 
foreign-organized companies in the vertical ownership chain above the 
controlling U.S. parent, for rulings issued under Sec.  1.5000(a)(1), 
or above an intervening U.S.-organized entity that does not control the 
licensee, for rulings issued under Sec.  1.5000(a)(2), without prior 
Commission approval provided that any new foreign-organized 
company(ies) are under 100 percent common ownership and control with 
the foreign investor approved in the ruling.
    (2) Where a previously unapproved foreign-organized entity is 
inserted into the vertical ownership chain of a licensee, or its 
controlling U.S.-organized parent, without prior Commission approval 
pursuant to paragraph (c)(1) of this section, the licensee shall file a 
letter to the attention of the Chief, International Bureau, within 30 
days after the insertion of the new, foreign-organized entity. The 
letter must include the name of the new, foreign-organized entity and a 
certification by the licensee that the entity complies with the 100 
percent common ownership and control requirement in paragraph (c)(1) of 
this section. The letter must also reference the licensee's foreign 
ownership ruling(s) by IBFS File No. and FCC Record citation, if 
available. This letter notification need not be filed if the ownership 
change is instead the subject of a pro forma application or pro forma 
notification already filed with the Commission pursuant to the relevant 
broadcast service rules, wireless radio service rules or satellite 
radio service rules applicable to the licensee.

    Note to paragraph (c)(2): For broadcast stations, in order to 
insert a previously unapproved foreign-organized entity that is 
under 100 percent common ownership and control with the foreign 
investor approved in the ruling into the vertical ownership chain of 
the licensee's controlling U.S.-organized parent, as described in 
paragraph (c)(1) of this section, the licensee must always file a 
pro forma application requesting prior consent of the FCC pursuant 
to section 73.3540(f) of this chapter.

    (3) Nothing in this section is intended to affect any requirements 
for prior approval under 47 U.S.C. 310(d) or conditions for forbearance 
from the requirements of 47 U.S.C. 310(d) pursuant to 47 U.S.C. 160.

    Example (for rulings issued under Sec.  1.5000(a)(1)). Licensee 
of a common carrier license receives a foreign ownership ruling 
under Sec.  1.5000(a)(1) that authorizes its controlling, U.S.-
organized parent (``U.S. Parent A'') to be wholly owned and 
controlled by a foreign-organized company (``Foreign Company''). 
Foreign Company is minority owned (20 percent) by U.S.-organized 
Corporation B, with the remaining 80 percent controlling interest 
held by Foreign Citizen C. After issuance of the ruling, Foreign 
Company forms a wholly-owned, foreign-organized subsidiary 
(``Foreign Subsidiary'') to hold all of Foreign Company's shares in 
U.S. Parent A. There are no other changes in the direct or indirect 
foreign ownership of U.S. Parent A. The insertion of Foreign 
Subsidiary into the vertical ownership chain between Foreign Company 
and U.S. Parent A would not require prior Commission approval, 
except for any approval otherwise required pursuant to section 
310(d) of the Communications Act and not exempt therefrom as a pro 
forma transfer of control under Sec.  1.948(c)(1).
    Example (for rulings issued under Sec.  1.5000(a)(2)). An 
applicant for a common carrier license receives a foreign ownership 
ruling under Sec.  1.5000(a)(2) that authorizes a foreign-organized 
company (``Foreign Company'') to hold a non-controlling 44 percent 
equity and voting interest in the applicant through Foreign 
Company's wholly-owned, U.S.-organized subsidiary, U.S. Corporation 
A, which holds the non-controlling 44 percent interest directly in 
the applicant. The remaining 56 percent of the applicant's equity 
and voting interests are held by its controlling U.S.-organized 
parent, which has no foreign ownership. After issuance of the 
ruling, Foreign Company forms a wholly-owned, foreign-organized 
subsidiary to hold all of Foreign Company's shares in U.S. 
Corporation A. There are no other changes in the direct or indirect 
foreign ownership of U.S. Corporation A. The insertion of the 
foreign-organized subsidiary into the vertical ownership chain 
between Foreign Company and U.S. Corporation A would not require 
prior Commission approval.

    (d) Insertion of new non-controlling foreign-organized companies. 
(1) Where a licensee's foreign ownership ruling specifically authorizes 
a named, foreign investor to hold a non-controlling interest in the 
licensee's controlling U.S.-organized parent, for rulings issued under 
Sec.  1.5000(a)(1), or in an intervening U.S.-organized entity that 
does not control the licensee, for rulings issued under Sec.  
1.5000(a)(2), the ruling shall permit the insertion of new, foreign-
organized companies in the vertical ownership chain above the 
controlling U.S. parent, for rulings issued under Sec.  1.5000(a)(1), 
or above an intervening U.S.-organized entity that

[[Page 86612]]

does not control the licensee, for rulings issued under Sec.  
1.5000(a)(2), without prior Commission approval provided that any new 
foreign-organized company(ies) are under 100 percent common ownership 
and control with the foreign investor approved in the ruling.

    Note to paragraph (d)(1): Where a licensee has received a 
foreign ownership ruling under Sec.  1.5000(a)(2) and the ruling 
specifically authorizes a named, foreign investor to hold a non-
controlling interest directly in the licensee (subject to the 20 
percent aggregate limit on direct foreign investment), the ruling 
shall permit the insertion of new, foreign-organized companies in 
the vertical ownership chain of the approved foreign investor 
without prior Commission approval provided that any new foreign-
organized companies are under 100 percent common ownership and 
control with the approved foreign investor.

    Example (for rulings issued under Sec.  1.5000(a)(1)). Licensee 
receives a foreign ownership ruling under Sec.  1.5000(a)(1) that 
authorizes a foreign-organized company (``Foreign Company'') to hold 
a non-controlling 30 percent equity and voting interest in 
Licensee's controlling, U.S.-organized parent (``U.S. Parent A''). 
The remaining 70 percent equity and voting interests in U.S. Parent 
A are held by U.S.-organized entities which have no foreign 
ownership. After issuance of the ruling, Foreign Company forms a 
wholly-owned, foreign-organized subsidiary (``Foreign Subsidiary'') 
to hold all of Foreign Company's shares in U.S. Parent A. There are 
no other changes in the direct or indirect foreign ownership of U.S. 
Parent A. The insertion of Foreign Subsidiary into the vertical 
ownership chain between Foreign Company and U.S. Parent A would not 
require prior Commission approval.
    Example (for rulings issued under Sec.  1.5000(a)(2)).  Licensee 
receives a foreign ownership ruling under Sec.  1.5000(a)(2) that 
authorizes a foreign-organized entity (``Foreign Company'') to hold 
approximately 24 percent of Licensee's equity and voting interests, 
through Foreign Company's non-controlling 48 percent equity and 
voting interest in a U.S.-organized entity, U.S. Corporation A, 
which holds a non-controlling 49 percent equity and voting interest 
directly in Licensee. (A U.S. citizen holds the remaining 52 percent 
equity and voting interests in U.S. Corporation A, and the remaining 
51 percent equity and voting interests in Licensee are held by its 
U.S.-organized parent, which has no foreign ownership. After 
issuance of the ruling, Foreign Company forms a wholly-owned, 
foreign-organized subsidiary (``Foreign Subsidiary'') to hold all of 
Foreign Company's shares in U.S. Corporation A. There are no other 
changes in the direct or indirect foreign ownership of U.S. 
Corporation A. The insertion of Foreign Subsidiary into the vertical 
ownership chain between Foreign Company and U.S. Corporation A would 
not require prior Commission approval.

    (2) Where a previously unapproved foreign-organized entity is 
inserted into the vertical ownership chain of a licensee, or its 
controlling U.S.-organized parent, without prior Commission approval 
pursuant to paragraph (d)(1) of this section, the licensee shall file a 
letter to the attention of the Chief, International Bureau, within 30 
days after the insertion of the new, foreign-organized entity; or in 
the case of a broadcast licensee, the licensee shall file a letter to 
the attention of the Chief, Media Bureau, within 30 days after the 
insertion of the new, foreign-organized entity. The letter must include 
the name of the new, foreign-organized entity and a certification by 
the licensee that the entity complies with the 100 percent common 
ownership and control requirement in paragraph (d)(1) of this section. 
The letter must also reference the licensee's foreign ownership 
ruling(s) by IBFS File No. and FCC Record citation, if available; or, 
if a broadcast licensee, the letter must reference the licensee's 
foreign ownership ruling(s) by CDBS File No., Docket No., call sign(s), 
facility identification number(s), and FCC Record citation, if 
available. This letter notification need not be filed if the ownership 
change is instead the subject of a pro forma application or pro forma 
notification already filed with the Commission pursuant to the relevant 
broadcast service, wireless radio service rules or satellite radio 
service rules applicable to the licensee.
    (e) New petition for declaratory ruling required. A licensee that 
has received a foreign ownership ruling, including a U.S.-organized 
successor-in-interest to such licensee formed as part of a pro forma 
reorganization, or any subsidiary or affiliate relying on such 
licensee's ruling pursuant to paragraph (b) of this section, shall file 
a new petition for declaratory ruling under Sec.  1.5000 to obtain 
Commission approval before its foreign ownership exceeds the routine 
terms and conditions of this section, and/or any specific terms or 
conditions of its ruling.
    (f) Continuing compliance. (1) Except as specified in paragraph 
(f)(3) of this section, if at any time the licensee, including any 
successor-in-interest and any subsidiary or affiliate as described in 
paragraph (b) of this section, knows, or has reason to know, that it is 
no longer in compliance with its foreign ownership ruling or the 
Commission's rules relating to foreign ownership, it shall file a 
statement with the Commission explaining the circumstances within 30 
days of the date it knew, or had reason to know, that it was no longer 
in compliance therewith. Subsequent actions taken by or on behalf of 
the licensee to remedy its non-compliance shall not relieve it of the 
obligation to notify the Commission of the circumstances (including 
duration) of non-compliance. Such licensee and any controlling 
companies, whether U.S.- or foreign-organized, shall be subject to 
enforcement action by the Commission for such non-compliance, including 
an order requiring divestiture of the investor's direct and/or indirect 
interests in such entities.
    (2) Any individual or entity that, directly or indirectly, creates 
or uses a trust, proxy, power of attorney, or any other contract, 
arrangement, or device with the purpose or effect of divesting itself, 
or preventing the vesting, of an equity interest or voting interest in 
the licensee, or in a controlling U.S. parent company, as part of a 
plan or scheme to evade the application of the Commission's rules or 
policies under section 310(b) shall be subject to enforcement action by 
the Commission, including an order requiring divestiture of the 
investor's direct and/or indirect interests in such entities.
    (3) Where the controlling U.S. parent of a broadcast, common 
carrier, aeronautical en route, or aeronautical fixed radio station 
licensee or common carrier spectrum lessee is an eligible U.S. public 
company within the meaning of Sec.  1.5000(e), the licensee may file a 
remedial petition for declaratory ruling under Sec.  1.5000(a)(1) 
seeking approval of particular foreign equity and/or voting interests 
that are non-compliant with the licensee's foreign ownership ruling or 
the Commission's rules relating to foreign ownership; or, 
alternatively, the licensee may remedy the non-compliance by, for 
example, redeeming the foreign interest(s) that rendered the licensee 
non-compliant with the licensee's existing foreign ownership ruling. In 
either case, the Commission does not expect to take enforcement action 
related to the non-compliance subject to the requirements specified in 
paragraphs (f)(3)(i) and (ii) of this section and except as otherwise 
provided in paragraph (f)(3)(iii) of this section.
    (i) The licensee shall notify the relevant Bureau by letter no 
later than 10 days after learning of the investment(s) that rendered 
the licensee non-compliant with its foreign ownership ruling or the 
Commission's rules relating to foreign ownership and specify in the 
letter that it will file a petition for declaratory ruling under Sec.  
1.5000(a)(1) or, alternatively, take remedial action to come into 
compliance within 30 days of the date

[[Page 86613]]

it learned of the non-compliant foreign interest(s).
    (ii) The licensee shall demonstrate in its petition for declaratory 
ruling (or in a letter notifying the relevant Bureau that the non-
compliance has been timely remedied) that the licensee's non-compliance 
with the terms of the licensee's existing foreign ownership ruling or 
the foreign ownership rules was due solely to circumstances beyond the 
licensee's control that were not reasonably foreseeable to or known by 
the licensee with the exercise of the required due diligence.
    (iii) Where the licensee has opted to file a petition for 
declaratory ruling under Sec.  1.5000(a)(1), the Commission will not 
require that the licensee's U.S. parent redeem the non-compliant 
foreign interest(s) or take other action to remedy the non-compliance 
during the pendency of the licensee's petition. If the Commission 
ultimately declines to approve the petition, however, the licensee must 
have a mechanism available to come into compliance with the terms of 
its existing ruling within 30 days following the Commission's decision. 
The Commission reserves the right to require immediate remedial action 
by the licensee where the Commission finds in a particular case that 
the public interest requires such action--for example, where, after 
consultation with the relevant Executive Branch agencies, the 
Commission finds that the non-compliant foreign interest presents 
national security or other significant concerns that require immediate 
mitigation.
    (4) Where a publicly traded common carrier licensee is an eligible 
U.S. public company within the meaning of Sec.  1.5000(e), the licensee 
may file a remedial petition for declaratory ruling under Sec.  
1.5000(a)(2) seeking approval of particular foreign equity and/or 
voting interests that are non-compliant with the licensee's foreign 
ownership ruling or the Commission's rules relating to foreign 
ownership; or, alternatively, the licensee may remedy the non-
compliance by, for example, redeeming the foreign interest(s) that 
rendered the licensee non-compliant with the licensee's existing 
foreign ownership ruling. In either case, the Commission does not, as a 
general rule, expect to take enforcement action related to the non-
compliance subject to the requirements specified in paragraphs 
(f)(3)(i) and (f)(3)(ii) of this section and except as otherwise 
provided in paragraph (f)(3)(iii) of this section.

    Note 1 to paragraph (f)(4): For purposes of this paragraph, the 
provisions in paragraphs (f)(3)(i) through (f)(3)(iii) that refer to 
petitions for declaratory ruling under Sec.  1.5000(a)(1) shall be 
read as referring to petitions for declaratory ruling under Sec.  
1.5000(a)(2).

PART 25--SATELLITE COMMUNICATIONS

0
4. The authority citation for part 25 is revised to read as follows:

    Authority: Interprets or applies 47 U.S.C. 154, 301, 302, 303, 
307, 309, 310, 319, 332, 605, and 721. unless otherwise noted.


0
5. Section 25.105 is revised to read as follows:


Sec.  25.105  Citizenship.

    The rules that establish the requirements and conditions for 
obtaining the Commission's prior approval of foreign ownership in 
common carrier licensees that would exceed the 20 percent limit in 
section 310(b)(3) of the Communications Act (47 U.S.C. 310(b)(3)) and/
or the 25 percent benchmark in section 310(b)(4) of the Act (47 U.S.C. 
310(b)(4)) are set forth in Sec. Sec.  1.5000 through 1.5004 of this 
chapter.

PART 73--RADIO BROADCAST SERVICES

0
6. The authority citation for part 73 is revised to read as follows:

    Authority: 47 U.S.C. 154, 303, 309, 310, 334, 336, and 339.


0
7. Section 73.1010 is amended by revising paragraph (a)(9) and adding 
paragraph (a)(10) to read as follows:


Sec.  73.1010  Cross reference to rules in other parts.

* * * * *
    (a) * * *
    (9) Subpart T, ``Foreign Ownership of Broadcast, Common Carrier, 
Aeronautical En Route, and Aeronautical Fixed Radio Station 
Licensees''. (Sec. Sec.  1.5000 to 1.5004).
    (10) Part 1, Subpart W of this chapter, ``FCC Registration 
Number''. (Sec. Sec.  1.8001-1.8005).
* * * * *

PART 74--EXPERIMENTAL RADIO, AUXILIARY, SPECIAL BROADCAST AND OTHER 
PROGRAM DISTRIBUTIONAL SERVICES

0
8. The authority citation for part 74 is revised to read as follows:

    Authority: 47 U.S.C. 154, 302a, 303, 307, 309, 310, 336 and 554.


0
9. Section 74.5 is amended by revising paragraph (a)(8) and adding 
paragraph (a)(9) to read as follows:


Sec.  74.5  Cross reference to rules in other parts.

* * * * *
    (a) * * *
    (8) Subpart T, ``Foreign Ownership of Broadcast, Common Carrier, 
Aeronautical En Route, and Aeronautical Fixed Radio Station 
Licensees''. (Sec. Sec.  1.5000 to 1.5004).
    (9) Part 1, Subpart W of the chapter, ``FCC Registration Number''. 
(Sec. Sec.  1.8001-1.8005).
* * * * *
[FR Doc. 2016-28198 Filed 11-30-16; 8:45 am]
 BILLING CODE 6712-01-P